SUDHA AGARWAL vs. INCOME TAX OFFICER, WARD NO. 1 (1), KOLKATA AND ORS

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WPA/5778/2022HC CalcuttaWBCHCA012138202225 April 2022Author: HON'BLE JUSTICE MD. NIZAMUDDIN4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, in compliance with the Supreme Court's judgment in Union of India & Ors. v. Ashish Agarwal, held that the impugned notices under Section 148 of the Income Tax Act, 1961, which were issued under the unamended Section 148 and were the subject of writ petitions, shall be deemed to have been issued under Section 148A of the Act as substituted by the Finance Act, 2021. These notices are to be construed as show-cause notices in terms of Section 148A(b). The assessing officer is directed to provide the assessees with the information and material relied upon by the Revenue within thirty days, allowing the assessees two weeks thereafter to reply. The requirement of conducting an enquiry under Section 148A(a) with prior approval of a specified authority is dispensed with as a one-time measure for these notices. The assessing officers shall thereafter pass orders under Section 148A(d) and, if necessary, issue notices under Section 148 as substituted. All defenses available to the assessees, including those under Section 149, and all rights and contentions of both parties under the Finance Act, 2021, and in law, shall remain available. The order is applicable PAN India and governs pending writ petitions.

What were the facts?

The petitioners filed multiple writ petitions before the High Court at Calcutta challenging notices issued under Section 148 of the Income Tax Act, 1961. The High Court had previously quashed these notices with liberty to the assessing officer to proceed in accordance with law. However, following a Supreme Court judgment in Union of India & Ors. v. Ashish Agarwal, dated May 4, 2022, the High Court clarified that the quashed notices and proceedings would now be governed by the law and guidelines laid down in the Supreme Court's decision. The Supreme Court's order provided a framework for dealing with Section 148 notices issued under the unamended Act from April 1, 2021, onwards.

What were the issues?

1. Whether the impugned notices under Section 148 of the Income Tax Act, 1961, issued to the assessees, which were subject to writ petitions before the High Court and had been quashed, shall be deemed to have been issued under Section 148A of the Act as substituted by the Finance Act, 2021, and treated as show-cause notices in terms of Section 148A(b)? - Assessee: The petitioners, by filing writ petitions and challenging the notices, implicitly argued for their invalidity. The Supreme Court's order, as applied by the High Court, addresses this by deeming the notices under a new framework. - Revenue: The Revenue, by seeking to uphold the notices, would have argued for their validity. The Supreme Court's order provides a mechanism for the Revenue to proceed. 2. Whether the requirement of conducting an enquiry under Section 148A(a) with prior approval of a specified authority is mandatory for notices issued under the unamended Section 148 from April 1, 2021, till the date of the Supreme Court's order, including those quashed by High Courts? - Assessee: Would argue for the mandatory nature of enquiry to protect their rights. - Revenue: Would argue that the enquiry is not mandatory, as per the Supreme Court's interpretation.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 148A,Section 149

AI-generated summary — verify with the full judgment below

05-05-2022 Item No.3-12 Subrata IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction Appellate Side WPA No.5778 of 2022 Sudha Agarwal -vs- Income Tax Officer, Ward No.1(1), Kolkata & Ors. with WPA No.6025 of 2022 with WPA No.6585 of 2022 with WPA No.6651 of 2022 with WPA No.6662 of 2022 with WPA No.7000 of 2022 with WPA No.7112 of 2022 with WPA No.7233 of 2022 with WPA No.7235 of 2022 and WPA No.7237 of 2022 Mr. Avra Mazumder Sk. Md. Bilwal Hossain Mr. Binayak Gupta Mr. K. Roy Mr. Rites Goel Ms. Amami Kayan Mr. Zubeen Pandey Mr. Vevek Murarka Mr. D.N. Dey …for the petitioners (in all WPAs) Mr. Om Narayan Rai Mr. Prithu Dudhoria Mr. Somen Bhattacharjee …for the respondents (in all WPAs) In compliance of my earlier orders, petitioners in these writ petitions have paid the costs and filed receipts,

2 which are taken on record. Taking note of a judgement of the Hon’ble Supreme Court dated May 4, 2022 in the case of Union of India & Ors. v. Ashish Agarwal in Civil Appeal No.3005 of 2022, it is clarified that by the earlier orders of this court, the impugned notices under section 148 of the Income Tax Act, 1961 and all proceedings under section 147 of the old Act, which were quashed with liberty to the assessing officer concerned to proceed in accordance with law, would now mean as per the law and guidelines laid down in the aforesaid judgement of the Hon’ble Supreme Court. Paragraphs 10, 11 and 12 of the aforesaid judgement of the Hon’ble Supreme Court, which, according to me, have much relevance, are quoted below:– “10. In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgements and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under:– (i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assessees can reply to the show-cause notices within two weeks thereafter; (ii) The requirement of conducting any enquiry, if required, with the prior approval of specified

3 authority under section 148A(a) is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required; (iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue under section 148 (as substituted); (iv) All defences which may be available to the assessees including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.

11.

The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge.

12.

The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.”

4 Accordingly, the respondent-assessing authorities concerned will now proceed with those quashed notices and proceedings in accordance with the law laid down and guidance as per aforesaid order of the Hon’ble Supreme Court. The Registrar General of this court shall forward a copy of this order to the Principal Chief Commissioner of Income Tax, West Bengal and Sikkim who will circulate the same to all the concerned subordinate authorities. [Md. Nizamuddin, J]

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