M/S MITTAL PIGMENTS PVT. LTD. vs. COMMISSIONER OF INCOME TAX(APPEALS)

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CW/8626/2023HC RajasthanRJHC02039657202310 July 2023Bench: MANINDRA MOHAN SHRIVASTAVA,PRAVEER BHATNAGAR4 pages
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What did the High Court hold?

The Tribunal held that the assessment order dated March 24, 2022, and the demand notice of the same date were rendered ineffective and inoperative in law. The reasoning was that the notice under Section 148 of the Act, issued on March 31, 2021, and served on April 1, 2021, had to be treated as a notice under Section 148A(b) of the Act, in accordance with the Supreme Court's decision in Union of India Vs. Ashish Agarwal. Consequently, further proceedings were required to comply with Section 148A. The order passed under Section 148A(d) on July 26, 2022, explicitly stated that no scrutiny assessment could be made on the basis of the show cause notice, rendering the earlier scrutiny assessment order passed by the Assessing Officer infructuous. The Tribunal emphasized that the assessment order dated March 24, 2022, was in direct contravention of the Supreme Court's judgment and therefore did not survive in the eye of law. All subsequently issued demand notices were also rendered ineffective. The Tribunal did not interfere with the order dated July 26, 2022, passed under Section 148A(d). The pre-deposit amount, if any, made by the petitioner was ordered to be refunded forthwith.

What were the facts?

The petitioner, M/s Mittal Pigments Pvt. Ltd., challenged an assessment order dated March 24, 2022, and a demand notice of the same date, issued under Section 147 of the Income Tax Act, 1961. The petitioner also challenged a notice under Section 148 of the Act issued on July 26, 2022, reopening the assessment. The petitioner argued that an earlier notice under Section 148, issued on March 31, 2021, and served on April 1, 2021, was treated as a notice under Section 148A(b) in light of the Supreme Court's decision in Union of India Vs. Ashish Agarwal. This led to an order under Section 148A(d) on July 26, 2022, and subsequently another notice under Section 148, which the petitioner contended was impermissible.

What were the issues?

1. Whether the assessment order dated March 24, 2022, passed under Section 147 of the Income Tax Act, 1961, and the demand notice dated March 24, 2022, are rendered ineffective and inoperative in law in view of the subsequent order passed under Section 148A(d) of the Act. Assessee's Contention: The petitioner argued that the earlier notice under Section 148 was treated as a notice under Section 148A(b) based on the Supreme Court's ruling in Union of India Vs. Ashish Agarwal. This, they contended, resulted in an order under Section 148A(d) and a subsequent notice under Section 148, which is impermissible in law. They relied on the Supreme Court's decision in Union of India Vs. Ashish Agarwal. Revenue's Contention: The revenue argued that in view of the decision in Union of India Vs. Ashish Agarwal, notices under Section 148 issued and served on or after April 1, 2021, must be treated as notices under Section 148A(b). They stated that the earlier notice dated March 31, 2021, served on April 1, 2021, was correctly treated as a notice under Section 148A(b), and after providing an opportunity of hearing, an order under Section 148A(d) was passed. They further submitted that the reassessment order passed on March 24, 2022, which was an outcome of the earlier Section 148 notice, no longer survives in law as per Section 148A(d).

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A

AI-generated summary — verify with the full judgment below

[2023:RJ-JP:13756-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 8626/2023 M/s Mittal Pigments Pvt. Ltd., through its Director and Authorized Signatory Shri Ramesh Agarwal S/o Late Shri Gulabchand Agarwal aged about 67 Years Old, Registered Office at 217, Gali No. 2, Gururam Das Nagar, Delhi, Laxmi Nagar, S.O. East Delhi, Delhi, India 110092. ----Petitioner Versus 1. Commissioner Of Income Tax(Appeals), Room No. 202, C R Building, Rawat Bhata Road, Kota, Rajasthan 2. Additional/joint/deputy/assesstant/ Commissioner of Income Tax/income Tax Officer, National Faceless Assessment Center, Mayur Bhawan, Connaught Lane, Barakhamba, New Delhi, Delhi 110001 3. Deputy Commissioner of Income Tax, Circle -2 Kota, Income Tax Office, Dainik Navjyoti Bhawan, Rawatbhata Road, Kota, Rajasthan- 324001. ----Respondents For Petitioner(s) : Ms. Mahi Yadav For Respondent(s) : Mr. Shantanu Sharma (on advance copy) with Ms. Bavana Lodha HON'BLE MR. JUSTICE MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE PRAVEER BHATNAGAR Order 10/07/2023 1. Heard learned counsel for the petitioner and also learned counsel for the respondents on advance copy. 2. This petition arises out of assessment order dated 24.03.2022 issued under Section 147 of the Income Tax Act (hereinafter ‘the Act’ in short) as also demand notice dated 24.03.2022. The petitioner has also challenged the notice under Section 148 of the Act issued on 26.07.2022 reopening the assessment. 3. Learned counsel for the petitioner would submit that the respondent issued a notice under Section 148 of the Act reopening (Uploaded on 11/07/2023 at 10:16:58 AM) (Downloaded on 30/10/2026 at 09:44:13 AM)

[2023:RJ-JP:13756-DB] (2 of 4) [CW-8626/2023] assessment and passed reassessment order on 24.03.2022, which is under challenge in the appeal and the appeal is still pending. 4. Now in the garb of order passed by the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal, the earlier notice under Section 148 of the Act has been treated as notice under Section 148A(b) of the Act, which eventually resulted in passing of the impugned order on 26.07.2022 followed by another notice under Section 148 of the Act which is impermissible in law. 5. Though, on advance copy, learned counsel appearing for revenue has drawn attention of this Court to order dated 26.07.2022 passed in exercise of powers under Section 148A (d) of the Act and submits that in view of the decision in the case of Union of India Vs. Ashish Agarwal, all those notices under Section 148 of the Act, which were issued and served on or after 01.04.2021, have to be treated as notice under Section 148A (b) of the Act. Therefore, the authority treated earlier notice dated 31.03.2021, issued and served on 01.04.2021, as notice under Section 148A (b) of the Act and after giving an opportunity of hearing, passed order under Section 148A (d) of the Act. He would further submit that as the reassessment order passed on 24.03.2022 is outcome of the notice under Section 148 of the Act issued earlier, the said order no longer survives in the eye of law, which is clearly stated in Section 148A (d) of the Act passed on 26.07.2022 therefore, the petitioner should not have any apprehension. 6. We find that earlier notice under Section 148 of the Act was generated on 31.03.2021 through ITBA system with the prior (Uploaded on 11/07/2023 at 10:16:58 AM) (Downloaded on 30/10/2026 at 09:44:13 AM)

[2023:RJ-JP:13756-DB] (3 of 4) [CW-8626/2023] approval of the competent authority but the same could be issued and served upon the assessee only on 01.04.2021 through ITBA system. As the notice was actually issued and served on 01.04.2021, in view of the decision of Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal 2022 SCC 543: dated 04.05.2022, the notice under Section 148 of the Act was required to be treated as notice under Section 148A (b) of the Act and further further proceedings were required to be drawn complying with the mandate of Section 148A of the Act, introduced after the amendment effective from 01.04.2021. The order under Section 148A (d) of the Act dated 26.07.2022 clearly records that in view of the judgment of Hon’ble Supreme Court, no scrutiny assessment could be made on the basis of show cause notice hence scrutiny assessment order passed by AO has become infructuous. In Para 6 (ii) of the order passed under Section 148A(d) of the Act, it has been clearly stated as under: - “(ii) Further, the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal directed that notice u/s 148 of the Act may be treated as show cause notice u/s 148A(b) of the Income Tax Act. As a result of said judgment of Hon’ble Apex Court notice u/s 148 is treated as show cause notice u/s 148A (b) of the Act and no scrutiny assessment can be made on the basis of said show cause notice, hence scrutiny assessment order so passed by the AO has been infructuous as a result of said judgment. Hence, argument of the assesses is no genuine on this issue.” 7. It is therefore, vividly clear that the assessment order which has been passed on 24.03.2022 is in the teeth of the judgment of Hon’ble the Supreme Court in the case of Union of India Vs. Ashish Agarwal. The order does not survive in the eye of law. (Uploaded on 11/07/2023 at 10:16:58 AM) (Downloaded on 30/10/2026 at 09:44:13 AM)

[2023:RJ-JP:13756-DB] (4 of 4) [CW-8626/2023] Consequently, all subsequently demand notices, which have been issued also are rendered ineffective and inoperative in law. What survives is an order passed under Section 148A (d) on 26.07.2022 under the new regime of law after amendment in the Income Tax Act with effect from 01.04.2021. 8. Therefore, in view of the above, the appeal which has been filed by the petitioner assailing legality and validity of scrutiny assessment order dated 24.03.2022 is also rendered infructuous. It goes without saying that the pre deposit amount, if any, made by the petitioner while filing appeal against the order dated 24.03.2022 is required to be refunded forthwith to the petitioner. The impugned demand notice dated 24.03.2022 is also rendered ineffective and inoperative in law. 9. This petition is accordingly partly allowed declaring the scrutiny assessment order dated 24.03.2022 as also demand notice dated 24.03.2022 ineffective and inoperative in law. The pre deposit amount, if any, shall be refunded to the petitioner. 10. We may, however, hasten to add that we have not interfered with the order dated 26.07.2022 passed in exercise of powers under Section 148A (d) of the Act. In case the petitioner is aggrieved by fresh order of reassessment, which may be passed in future, the petitioner would be at liberty to work out such remedy as may be available to him under the law. 11. All pending applications also stand disposed of. (PRAVEER BHATNAGAR),J (MANINDRA MOHAN SHRIVASTAVA),J 14/- DHARMEDNRA RAKHECH Powered by TCPDF (www.tcpdf.org) (Uploaded on 11/07/2023 at 10:16:58 AM) (Downloaded on 30/10/2026 at 09:44:13 AM)

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