UNION OF INDIA & ORS.versusASHISH AGARWAL

638                      [2022]REPORTS
               SUPREME COURT    3 S.C.R. 638              [2022] 3 S.C.R.


A                         UNION OF INDIA & ORS.
                                       v.
                             ASHISH AGARWAL
                        (Civil Appeal No. 3005 of 2022)
B                                MAY 04, 2022
              [M. R. SHAH AND B. V. NAGARATHNA, JJ.]
             Income Tax Act, 1961: ss.148 to 151, ss. 147 to 151(as
      amended by the Finance Act, 2021) – Issuance of notice where
      income has escaped assesssment – On facts, substituted ss.147 to
C
      151 of the 1961 Act by the Finance Act, 2021 came into force on
      01.04.2021 – However, after 01.04.2021, the Revenue issued
      reassessment notices under the erstwhile ss. 148 to 151 of the
      unamended IT Act – Quashed by the High Court on the ground that
      the same are bad in law in view of new provisions-ss. 147 to 151 –
D     On appeal, held: Amended provisions prescribe the procedure
      governing initiation of reassessment proceedings – No notice u/s.
      148 can be issued without following the procedure prescribed u/s.
      148A – Ss 148A-151 was introduced with the object of simplifying
      the tax administration, ease compliance and reduce litigation – New
      provisions being remedial and benevolent in nature, were substituted
E
      with a specific aim and object to protect the rights and interest of
      the assessee as well as the same being the public interest – Thus,
      the High Courts rightly held that the benefit of new provisions to be
      made available even in respect of the proceedings relating to past
      assessment years if the notices u/s. 148 has been issued on or after
F     01.04.2021 – Revenue cannot be made remediless and the object
      and purpose of reassessment proceedings cannot be frustrated –
      However, it is true that the Revenue issued impugned notices under
      the unamended section due to bonafide mistake and in view of
      subsequent extension of time vide various notifications – Some
      leeway must be shown in that regard which the High Courts could
G
      have done so – Thus, instead of quashing and setting aside the
      notices issued under unamended provisions, order passed by the
      High Courts ought to construe the notices to deemed to have been
      issued u/s. 148A and Revenue ought to be permitted to proceed
      further with the reassessment as per the substituted provisions –
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                                      638
       UNION OF INDIA & ORS. v. ASHISH AGARWAL                          639


Thus, the judgments and orders of the respective High Courts stands     A
modified – Finance Act, 2021.
      Partly allowing the appeals, the Court
       HELD: 1.1 By substitution of Sections 147 to 151 of the
Income Tax Act, 1961 by the Finance Act, 2021, radical and
reformative changes are made governing the procedure for                B
reassessment proceedings. Amended sections 147 to 149 and
section 151 of the IT Act prescribe the procedure governing
initiation of reassessment proceedings. However, for several
reasons, the same gave rise to numerous litigations and the
reopening were challenged inter alia, on the grounds such as no         C
valid “reason to believe”, no tangible/reliable material/information
in possession of the assessing officer leading to formation of belief
that income has escaped assessment, no enquiry being conducted
by the assessing officer prior to the issuance of notice; and
reopening is based on change of opinion of the assessing officer
and lastly the mandatory procedure laid down by this Court in           D
the GKN Driveshafts (India) Ltd.’s case, has not been followed.
[Para 6][657-A-D]
      1.2 The pre-Finance Act, 2021, the reopening was
permissible for a maximum period up to six years and in some
cases beyond even six years leading to uncertainty for a                E
considerable time. Therefore, Parliament thought it fit to amend
the Income Tax Act to simplify the tax administration, ease
compliances and reduce litigation. Therefore, with a view to
achieve the said object, by the Finance Act, 2021, sections 147
to 149 and section 151 have been substituted. Under the                 F
substituted provisions of the IT Act vide Finance Act, 2021, no
notice under section 148 of the IT Act can be issued without
following the procedure prescribed under section 148A of the IT
Act. Along with the notice under section 148 of the IT Act, the
assessing officer (AO) is required to serve the order passed
under section 148A of the IT Act. Section 148A is a new provision       G
which is in the nature of a condition precedent. Introduction of
section 148A of the IT Act can thus be said to be a game changer
with an aim to achieve the ultimate object of simplifying the tax
administration, ease compliance and reduce litigation. [Para 6.1,
6.2][657-D-G]                                                           H
640            SUPREME COURT REPORTS                      [2022] 3 S.C.R.


A            1.3 By way of section 148A, the procedure has now been
      streamlined and simplified. It provides that before issuing any
      notice under section 148, the assessing officer shall (i) conduct
      any enquiry, if required, with the approval of specified authority,
      with respect to the information which suggests that the income
      chargeable to tax has escaped assessment; (ii) provide an
B
      opportunity of being heard to the assessee, with the prior approval
      of specified authority; (iii) consider the reply of the assessee
      furnished, if any, in response to the show-cause notice referred
      to in clause (b); and (iv) decide, on the basis of material available
      on record including reply of the assessee, as to whether or not it
C     is a fit case to issue a notice under section 148 of the IT Act and
      (v) the AO is required to pass a specific order within the time
      stipulated. Therefore, all safeguards are provided before notice
      under section 148 of the IT Act is issued. At every stage, the
      prior approval of the specified authority is required, even for
      conducting the enquiry as per section 148A(a). Only in a case
D
      where, the assessing officer is of the opinion that before any notice
      is issued under section 148A(b) and an opportunity is to be given
      to the assessee, there is a requirement of conducting any enquiry,
      the assessing officer may do so and conduct any enquiry. Thus if
      the assessing officer is of the opinion that any enquiry is required,
E     the assessing officer can do so, however, with the prior approval
      of the specified authority, with respect to the information which
      suggests that the income chargeable to tax has escaped
      assessment. Substituted section 149 is the provision governing
      the time limit for issuance of notice under section 148 of the IT
      Act. The substituted section 149 of the IT Act has reduced the
F
      permissible time limit for issuance of such a notice to three years
      and only in exceptional cases ten years. It also provides further
      additional safeguards which were absent under the earlier regime
      pre-Finance Act, 2021. [Paras 6.4-6.6][658-A-H]
            1.4 The new provisions substituted by the Finance Act,
G     2021 being remedial and benevolent in nature and substituted
      with a specific aim and object to protect the rights and interest of
      the assessee as well as and the same being in public interest, the
      respective High Courts have rightly held that the benefit of new
      provisions shall be made available even in respect of the
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       UNION OF INDIA & ORS. v. ASHISH AGARWAL                       641


proceedings relating to past assessment years, provided section      A
148 notice has been issued on or after 1st April, 2021. The view
taken by the various High Courts is upheld. [Para 7][658-H; 659-
A-B]
      1.5 However, at the same time, the judgments of the several
High Courts would result in no reassessment proceedings at all,      B
even if the same are permissible under the Finance Act, 2021
and as per substituted sections 147 to 151 of the IT Act. The
Revenue cannot be made remediless and the object and purpose
of reassessment proceedings cannot be frustrated. It is true that
due to a bonafide mistake and in view of subsequent extension of
time vide various notifications, the Revenue issued the impugned     C
notices under section 148 after the amendment was enforced w.e.f.
01.04.2021, under the unamended section 148. The same ought
not to have been issued under the unamended Act and ought to
have been issued under the substituted provisions of sections
147 to 151 of the IT Act as per the Finance Act, 2021. There         D
appears to be genuine non-application of the amendments as the
officers of the Revenue may have been under a bonafide belief
that the amendments may not yet have been enforced. Therefore,
some leeway must be shown in that regard which the High Courts
could have done so. Therefore, instead of quashing and setting
aside the reassessment notices issued under the unamended            E
provision of IT Act, the High Courts ought to have passed an
order construing the notices issued under unamended Act/
unamended provision of the IT Act as those deemed to have
been issued under section 148A of the IT Act as per the new
provision section 148A and the Revenue ought to have been            F
permitted to proceed further with the reassessment proceedings
as per the substituted provisions of sections 147 to 151 of the IT
Act as per the Finance Act, 2021, subject to compliance of all the
procedural requirements and the defences, which may be available
to the assessee under the substituted provisions of sections 147
to 151 of the IT Act and which may be available under the Finance    G
Act, 2021 and in law. Therefore, the judgments and orders passed
by the respective High Courts is modifed as under:-
     (i) The respective impugned section 148 notices issued to
     the respective assessees shall be deemed to have been
                                                                     H
642           SUPREME COURT REPORTS                      [2022] 3 S.C.R.


A          issued under section 148A of the IT Act as substituted by
           the Finance Act, 2021 and treated to be show-cause notices
           in terms of section 148A(b). The respective assessing
           officers shall within thirty days from today provide to the
           assessees the information and material relied upon by the
           Revenue so that the assessees can reply to the notices
B
           within two weeks thereafter;
           (ii) The requirement of conducting any enquiry with the prior
           approval of the specified authority under section 148A(a)
           be dispensed with as a one-time measure vis-à-vis those
           notices which have been issued under Section 148 of the
C          unamended Act from 01.04.2021 till date, including those
           which have been quashed by the High Courts;
           (iii) The assessing officers shall thereafter pass an order in
           terms of section 148A(d) after following the due procedure
           as required under section 148A(b) in respect of each of the
D          concerned assessees;
           (iv) All the defences which may be available to the assessee
           under section 149 and/or which may be available under the
           Finance Act, 2021 and in law and whatever rights are
           available to the Assessing Officer under the Finance Act,
E          2021 are kept open and/or shall continue to be available
           and;
           (v) The present order shall substitute/modify respective
           judgments and orders passed by the respective High Courts
           quashing the similar notices issued under unamended
F          section 148 of the IT Act irrespective of whether they have
           been assailed before this Court or not. [Para 8][659-B-H;
           660-A-G]
            1.6 If the said order is passed, the Revenue may not suffer
      as ultimately it is the public exchequer which would suffer.
G     Therefore, the present order is passed with a view avoiding filing
      of further appeals before this Court and burden this Court with
      approximately 9000 appeals against the similar judgments and
      orders passed by the various High Courts. The said order is
      passed in exercise of powers under Article 142 of the Constitution
      of India by holding that the present order shall govern, not only
H
        UNION OF INDIA & ORS. v. ASHISH AGARWAL                           643


the impugned judgments and orders passed by the High Court of             A
Judicature at Allahabad, but shall also be made applicable in
respect of the similar judgments and orders passed by various
High Courts across the country and therefore the present order
shall be applicable to PAN INDIA. The impugned common
judgments and orders passed by the High Court of Allahabad
                                                                          B
and other allied tax appeals/petitions, is/are modified and
substituted accordingly. [Para 9, 10][660-G-H; 661-A-D]
      GKN Driveshafts (India) Ltd. v. Income Tax Officer and
      Ors. (2003) 1 SCC 72 : [2002] 4 Suppl. SCR 359 –
      referred to.
                                                                          C
                       Case Law Reference
[2002] 4 Suppl. SCR 359         referred to              Para 6
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3005
of 2022.
                                                                          D
      From the Judgment and Order dated 30.09.2021 of the High Court
of Judicature at Allahabad in Writ Tax No. 742 of 2021.
      With
      Civil Appeal Nos. 3006, 3009, 3007, 3008, 3010, 3013, 3011, 3012,
3014, 3015, 3016, 3017, 3019, 3020, 3610, 3604, 3603, 3607, 3602, 3608,   E
3609, 3605, 3611 and 3606 of 2022.
      N. Venkataraman, ASG, B. K. Satija, Vikas Bansal, Ms. Rashmi
Malhotra, V. Chandrashekhara Bharathi, Chandra Kant Sharma, Manish
Pushkarna, Shashank Bajpai, Santosh Kumar, Sanjay Kumar Yadav, Amit
Sharma, Ms. Megha Karanwal, Raj Bahadur Yadav, Advs. for the              F
Appellants.
       C. A. Sundaram, S. Ganesh, Sr. Advs., Ms. Kavita Jha, Vaibhav
Kulkarni, Anant Mann, Ms. Archana Sahadeva, Ms. Pragati Agrawal,
Gaurav Jain, Ms. Akshita Goyal, Abhinav Agrawal, Shubham Gupta,
Rajiv K. Virmani, Atul Malhotra, Kapil Goel, Dhananjay Garg, Sandeep      G
Goel, D. K. Garg, Abhishek Garg, Nishit Agrawal, Harsh Mishra,
Dr. Rakesh Gupta, Ambhoj Kumar Sinha, Somil Agarwal, Ved Kumar
Jain, Rich Mishra, Subodh S. Patil, Kush Chaturvedi, Ms. Priyashree
Sharma P. H., Abhinav Mehrotra, Syed Faroz Alam, Venketesh Chaurasia,
Divyanshu Agrawal, Vaibhav Niti, Ms. Madhavi Agrawal, Advs. for the
Respondent.                                                               H
644            SUPREME COURT REPORTS                          [2022] 3 S.C.R.


A           The Judgment of the Court was delivered by
            M. R. SHAH, J.
            Leave granted in SLP (C) Nos. 6448/2022, 5381/2022, 5079/2022,
      6092/2022, 6534/2022, 6158/2022, 6316/2022, 6281/2022, 6545/2022,
      6038/2022.
B
             1. Feeling aggrieved and dissatisfied with the impugned common
      judgment and order passed by the High Court of Judicature at Allahabad
      in Writ Tax No. 524/2021 and other allied writ tax petitions, by which the
      High Court has allowed the said writ petitions and has quashed several
      reassessment notices issued by the Revenue, issued under section 148
C     of the Income Tax Act, 1961, on the ground that the same are bad in law
      in view of the amendment by the Finance Act, 2021 which has amended
      Income Tax Act by introducing new provisions i.e. sections 147 to 151
      w.e.f. 1st April, 2021, the Revenue has preferred the present appeals.
            2. Similar judgments and orders are passed by various other High
D     Courts including High Court of Delhi; High Court of Rajasthan; High
      Court of Calcutta; High Court of Madras; High Court of Bombay, the
      particulars of which are as under: -


E




F




G




H
        UNION OF INDIA & ORS. v. ASHISH AGARWAL                              645
                     [M. R. SHAH, J.]

      At this stage, it is required to be noted that approximately 90,000    A
such reassessment notices under section 148 of the unamended Income
Tax Act were issued by the Revenue after 01.04.2021, which were the
subject matter of more than 9000 writ petitions before various High
Courts across the country and by different judgments and orders, the
particulars of which are as above, the High Courts have taken a similar
                                                                             B
view and have set aside the respective reassessment notices issued under
section 148 on similar grounds.
       2.1 The common judgment and order passed by the Allahabad
High Court is the subject matter of the present appeals. Shri
N. Venkataraman, learned ASG, stated at the bar that the Revenue is
contemplating to prefer appeals against the similar judgments and orders     C
passed by various High Courts. However, as the issue is common and
there will be multiplicity of the proceedings and to lessen the burden of
this Court and for the reasons stated hereinbelow, as we propose to pass
an order in exercise of powers under Article 142 of the Constitution of
India the present order shall govern all the other judgments and orders      D
passed by various High Courts on the similar issue. Hence, we observe
that the Revenue need not file separate individual appeals which may be
more than 9000 in numbers.
      2.2 In fact, we have heard Shri C.A. Sundaram, learned Senior
Advocate, appearing on behalf of the respective assessee, who were           E
before the Delhi High Court also.
       3. While appreciating the controversy, a few facts and the relevant
statutory provisions applicable pre 01.04.2021 and post 01.04.2021 are
required to be referred to.
      The procedure governing initiation of reassessment proceedings         F
      prior to coming into force of the Finance Act, 2021 was governed
      by the following provisions: -
      “Income escaping assessment-
      147. If the Assessing Officer has reason to believe that any income
                                                                             G
      chargeable to tax has escaped assessment for any assessment
      year, he may, subject to the provisions of sections 148 to 153,
      assess or reassess such income and also any other income
      chargeable to tax which has escaped assessment and which comes
      to his notice subsequently in the course of the proceedings under
                                                                             H
646      SUPREME COURT REPORTS                           [2022] 3 S.C.R.


A     this section, or recomputed the loss or the depreciation allowance
      or any other allowance, as the case may be, for the assessment
      year concerned (hereafter in this section and in sections 148 to
      153 referred to as the relevant assessment year):
      Provided that where an assessment under sub-section (3) of section
B     143 or this section has been made for the relevant assessment
      year, no action shall be taken under this section after the expiry of
      four years from the end of the relevant assessment year, unless
      any income chargeable to tax has escaped assessment for such
      assessment year by reason of the failure on the part of the assessee
      to make a return under section 139 or in response to a notice
C     issued under sub-section (1) of section 142 or section 148 or to
      disclose fully and truly all material facts necessary for his
      assessment, for that assessment year:
      Provided further that nothing contained in the first proviso shall
      apply in a case where any income in relation to any asset (including
D     financial interest in any entity) located outside India, chargeable
      to tax, has escaped assessment for any assessment year:
      Provided also that the Assessing Officer may assess or reassess
      such income, other than the income involving matters which are
      the subject matters of any appeal, reference or revision, which is
E     chargeable to tax and has escaped assessment.
      Explanation 1.—Production before the Assessing Officer of
      account books or other evidence from which material evidence
      could with due diligence have been discovered by the Assessing
      Officer will not necessarily amount to disclosure within the meaning
F     of the foregoing proviso.
      Explanation 2.—For the purposes of this section, the following
      shall also be deemed to be cases where income chargeable to tax
      has escaped assessment, namely :—
      (a) where no return of income has been furnished by the assessee
G
      although his total income or the total income of any other person
      in respect of which he is assessable under this Act during the
      previous year exceeded the maximum amount which is not
      chargeable to income-tax;

H
 UNION OF INDIA & ORS. v. ASHISH AGARWAL                                647
              [M. R. SHAH, J.]

(b) where a return of income has been furnished by the assessee         A
but no assessment has been made and it is noticed by the Assessing
Officer that the assessee has understated the income or has
claimed excessive loss, deduction, allowance or relief in the return;
(ba) where the assessee has failed to furnish a report in respect
of any international transaction which he was so required under         B
section 92E;
(c) where an assessment has been made, but—
   (i) income chargeable to tax has been underassessed; or
   (ii) such income has been assessed at too low a rate; or             C
   (iii) such income has been made the subject of excessive relief
   under this Act; or
   (iv) excessive loss or depreciation allowance or any other
   allowance under this Act has been computed;
                                                                        D
(ca) where a return of income has not been furnished by the
assessee or a return of income has been furnished by him and on
the basis of information or document received from the prescribed
income-tax authority, under sub-section (2) of section 133C, it is
noticed by the Assessing Officer that the income of the assessee
exceeds the maximum amount not chargeable to tax, or as the             E
case may be, the assessee has understated the income or has
claimed excessive loss, deduction, allowance or relief in the return;
(d) where a person is found to have any asset (including financial
interest in any entity) located outside India.
Explanation 3.—For the purpose of assessment or reassessment            F
under this section, the Assessing Officer may assess or reassess
the income in respect of any issue, which has escaped assessment,
and such issue comes to his notice subsequently in the course of
the proceedings under this section, notwithstanding that the reasons
for such issue have not been included in the reasons recorded           G
under sub-section (2) of section 148.
Explanation 4.—For the removal of doubts, it is hereby clarified
that the provisions of this section, as amended by the Finance
Act, 2012, shall also be applicable for any assessment year
beginning on or before the 1st day of April, 2012.                      H
648      SUPREME COURT REPORTS                           [2022] 3 S.C.R.


A     Issue of notice where income has escaped assessment-
      148.(1) Before making the assessment, reassessment or
      recomputation under section 147, the Assessing Officer shall serve
      on the assessee a notice requiring him to furnish within such period,
      as may be specified in the notice, a return of his income or the
B     income of any other person in respect of which he is assessable
      under this Act during the previous year corresponding to the
      relevant assessment year, in the prescribed form and verified in
      the prescribed manner and setting forth such other particulars as
      may be prescribed; and the provisions of this Act shall, so far as
      may be, apply accordingly as if such return were a return required
C     to be furnished under section 139:
      Provided that in a case—
      (a) where a return has been furnished during the period
      commencing on the 1st day of October, 1991 and ending on the
D     30th day of September, 2005 in response to a notice served under
      this section, and
      (b) subsequently a notice has been served under sub-section (2)
      of section 143 after the expiry of twelve months specified in the
      proviso to subsection (2) of section 143, as it stood immediately
E     before the amendment of said sub-section by the Finance Act,
      2002 (20 of 2002) but before the expiry of the time limit for making
      the assessment, re-assessment or recomputation as specified in
      sub-section (2) of section 153, every such notice referred to in
      this clause shall be deemed to be a valid notice:

F     Provided further that in a case—
      (a) where a return has been furnished during the period
      commencing on the 1st day of October, 1991 and ending on the
      30th day of September, 2005, in response to a notice served under
      this section, and
G     (b) subsequently a notice has been served under clause (ii) of
      sub-section (2) of section 143 after the expiry of twelve months
      specified in the proviso to clause (ii) of sub-section (2) of section
      143, but before the expiry of the time limit for making the
      assessment, reassessment or recomputation as specified in sub-
      section (2) of section 153, every such notice referred to in this
H     clause shall be deemed to be a valid notice.
 UNION OF INDIA & ORS. v. ASHISH AGARWAL                                   649
              [M. R. SHAH, J.]

Explanation.—For the removal of doubts, it is hereby declared              A
that nothing contained in the first proviso or the second proviso
shall apply to any return which has been furnished on or after the
1st day of October, 2005 in response to a notice served under this
section.
(2) The Assessing Officer shall, before issuing any notice under           B
this section, record his reasons for doing so.
Time limit for notice-
149. (1) No notice under section 148 shall be issued for the relevant
assessment year,—
                                                                           C
   (a) if four years have elapsed from the end of the relevant
   assessment year, unless the case falls under clause (b) or clause
   (c);
   (b) if four years, but not more than six years, have elapsed
   from the end of the relevant assessment year unless the income          D
   chargeable to tax which has escaped assessment amounts to
   or is likely to amount to one lakh rupees or more for that year;
   (c) if four years, but not more than sixteen years, have elapsed
   from the end of the relevant assessment year unless the income
   in relation to any asset (including financial interest in any entity)
                                                                           E
   located outside India, chargeable to tax, has escaped
   assessment.
Explanation.—In determining income chargeable to tax which has
escaped assessment for the purposes of this sub-section, the
provisions of Explanation 2 of section 147 shall apply as they apply
                                                                           F
for the purposes of that section.
(2) The provisions of sub-section (1) as to the issue of notice shall
be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be
served is a person treated as the agent of a nonresident under             G
section 163 and the assessment, reassessment or recomputation
to be made in pursuance of the notice is to be made on him as the
agent of such non-resident, the notice shall not be issued after the
expiry of a period of six years from the end of the relevant
assessment year.
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650             SUPREME COURT REPORTS                                [2022] 3 S.C.R.


A            Explanation.—For the removal of doubts, it is hereby clarified
             that the provisions of sub-sections (1) and (3), as amended by the
             Finance Act, 2012, shall also be applicable for any assessment
             year beginning on or before the 1st day of April, 2012.
             Sanction for issue of notice-
B            151. (1) No notice shall be issued under section 148 by an Assessing
             Officer, after the expiry of a period of four years from the end of
             the relevant assessment year, unless the Principal Chief
             Commissioner or Chief Commissioner or Principal Commissioner
             or Commissioner is satisfied, on the reasons recorded by the
C            Assessing Officer, that it is a fit case for the issue of such notice.
             (2) In a case other than a case falling under sub-section (1), no
             notice shall be issued under section 148 by an Assessing Officer,
             who is below the rank of Joint Commissioner, unless the Joint
             Commissioner is satisfied, on the reasons recorded by such
D            Assessing Officer, that it is a fit case for the issue of such notice.
             (3) For the purposes of sub-section (1) and sub-section (2), the
             Principal Chief Commissioner or the Chief Commissioner or the
             Principal Commissioner or the Commissioner or the Joint
             Commissioner, as the case may be, being satisfied on the reasons
E            recorded by the Assessing Officer about fitness of a case for the
             issue of notice under section 148, need not issue such notice
             himself.”
              3.1 In pursuance to the power vested under section 3 of the
             Relaxation Act, 2020, the Central Government issued following
F            Notifications inter-alia extending the time lines prescribed under
             section 149 for issuance of reassessment notices under section
             148 of the Income Tax Act, 1961:
               Date      of   Original limitation for issuance of notice   Extended
               Notification   under Section 148 of the Act                 Limitation
               31.03.2020     20.03.2020 to 29.06.2020                     30.06.2020
G              24.06.2020     20.03.2020 to 31.12.2020                     31.03.2021
               31.03.2021     31.03.2021                                   30.04.2021
               27.04.2021     30.04.2021                                   30.06.2021

             The Explanations to the Notifications dated 31 st March, 2021 and
        th
      27 April, 2021 issued under section 3 of the Relaxation Act, 2020 also
      stipulated that the provisions, as they existed prior to the amendment by
H
       UNION OF INDIA & ORS. v. ASHISH AGARWAL                                651
                    [M. R. SHAH, J.]

the Finance Act, 2021, shall apply to the reassessment proceedings            A
initiated thereunder.
      3.2 The Parliament introduced reformative changes to Sections
147 to 151 of the Income Tax Act, 1961 governing reassessment
proceedings by way of the Finance Act, 2021, which was passed on 28th
March, 2021. The substituted sections 147 to 149 and section 151              B
applicable w.e.f. 01.04.2021, passed in the Finance Act, 2021, are as
under:-
      Income escaping assessment-
      “147. If any income chargeable to tax, in the case of an assessee,
      has escaped assessment for any assessment year, the Assessing           C
      Officer may, subject to the provisions of sections 148 to 153, assess
      or reassess such income or recompute the loss or the depreciation
      allowance or any other allowance or deduction for such
      assessment year (hereafter in this section and in sections 148 to
      153 referred to as the relevant assessment year).                       D
      Explanation.—For the purposes of assessment or reassessment
      or recomputation under this section, the Assessing Officer may
      assess or reassess the income in respect of any issue, which has
      escaped assessment, and such issue comes to his notice
      subsequently in the course of the proceedings under this section,       E
      irrespective of the fact that the provisions of section 148A have
      not been complied with.”.
      Issue of notice where income has escaped assessment-
      148. Before making the assessment, reassessment or
      recomputation under section 147, and subject to the provisions of       F
      section 148A, the Assessing Officer shall serve on the assessee a
      notice, along with a copy of the order passed, if required, under
      clause (d) of section 148A, requiring him to furnish within such
      period, as may be specified in such notice, a return of his income
      or the income of any other person in respect of which he is
                                                                              G
      assessable under this Act during the previous year corresponding
      to the relevant assessment year, in the prescribed form and verified
      in the prescribed manner and setting forth such other particulars
      as may be prescribed; and the provisions of this Act shall, so far
      as may be, apply accordingly as if such return were a return
      required to be furnished under section 139:                             H
652      SUPREME COURT REPORTS                          [2022] 3 S.C.R.


A     Provided that no notice under this section shall be issued unless
      there is information with the Assessing Officer which suggests
      that the income chargeable to tax has escaped assessment in the
      case of the assessee for the relevant assessment year and the
      Assessing Officer has obtained prior approval of the specified
      authority to issue such notice.
B
      Explanation 1.—For the purposes of this section and section 148A,
      the information with the Assessing Officer which suggests that
      the income chargeable to tax has escaped assessment means,—
      (i) any information flagged in the case of the assessee for the
C     relevant assessment year in accordance with the risk management
      strategy formulated by the Board from time to time;
      (ii) any final objection raised by the Comptroller and Auditor-
      General of India to the effect that the assessment in the case of
      the assessee for the relevant assessment year has not been made
D     in accordance with the provisions of this Act.
      Explanation 2.—For the purposes of this section, where,—
      (i) a search is initiated under section 132 or books of account,
      other documents or any assets are requisitioned under section
      132A, on or after the 1st day of April, 2021, in the case of the
E     assessee; or
      (ii) a survey is conducted under section 133A, other than under
      sub-section (2A) or sub-section (5) of that section, on or after the
      1st day of April, 2021, in the case of the assessee; or
      (iii) the Assessing Officer is satisfied, with the prior approval of
F
      the Principal Commissioner or Commissioner, that any money,
      bullion, jewellery or other valuable article or thing, seized or
      requisitioned under section 132 or under section 132A in case of
      any other person on or after the 1st day of April, 2021, belongs to
      the assessee; or
G     (iv) the Assessing Officer is satisfied, with the prior approval of
      Principal Commissioner or Commissioner, that any books of
      account or documents, seized or requisitioned under section 132
      or section 132A in case of any other person on or after the 1st
      day of April, 2021, pertains or pertain to, or any information
H     contained therein, relate to, the assessee, the Assessing Officer
 UNION OF INDIA & ORS. v. ASHISH AGARWAL                               653
              [M. R. SHAH, J.]

shall be deemed to have information which suggests that the income     A
chargeable to tax has escaped assessment in the case of the
assessee for the three assessment years immediately preceding
the assessment year relevant to the previous year in which the
search is initiated or books of account, other documents or any
assets are requisitioned or survey is conducted in the case of the
                                                                       B
assessee or money, bullion, jewellery or other valuable article or
thing or books of account or documents are seized or requisitioned
in case of any other person.
Explanation 3.—For the purposes of this section, specified authority
means the specified authority referred to in section 151.”
                                                                       C
Conducting inquiry, providing opportunity before issue of
notice under section 148 -
“148A. The Assessing Officer shall, before issuing any notice
under section 148,—
(a) conduct any enquiry, if required, with the prior approval of       D
specified authority, with respect to the information which suggests
that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with
the prior approval of specified authority, by serving upon him a
notice to show cause within such time, as may be specified in the      E
notice, being not less than seven days and but not exceeding thirty
days from the date on which such notice is issued, or such time,
as may be extended by him on the basis of an application in this
behalf, as to why a notice under section 148 should not be issued
on the basis of information which suggests that income chargeable      F
to tax has escaped assessment in his case for the relevant
assessment year and results of enquiry conducted, if any, as per
clause (a);
(c) consider the reply of assessee furnished, if any, in response to
the show-cause notice referred to in clause (b);
                                                                       G
(d) decide, on the basis of material available on record including
reply of the assessee, whether or not it is a fit case to issue a
notice under section 148, by passing an order, with the prior
approval of specified authority, within one month from the end of
the month in which the reply referred to in clause (c) is received
                                                                       H
654      SUPREME COURT REPORTS                            [2022] 3 S.C.R.


A     by him, or where no such reply is furnished, within one month
      from the end of the month in which time or extended time allowed
      to furnish a reply as per clause (b) expires:
      Provided that the provisions of this section shall not apply in a
      case where,—
B        (a) a search is initiated under section 132 or books of account,
         other documents or any assets are requisitioned under section
         132A in the case of the assessee on or after the 1st day of
         April, 2021; or
         (b) the Assessing Officer is satisfied, with the prior approval
C        of the Principal Commissioner or Commissioner that any
         money, bullion, jewellery or other valuable article or thing, seized
         in a search under section 132 or requisitioned under section
         132A, in the case of any other person on or after the 1st day of
         April, 2021, belongs to the assessee; or
D        (c) the Assessing Officer is satisfied, with the prior approval
         of the Principal Commissioner or Commissioner that any books
         of account or documents, seized in a search under section 132
         or requisitioned under section 132A, in case of any other person
         on or after the 1st day of April, 2021, pertains or pertain to, or
E        any information contained therein, relate to, the assessee.
      Explanation.—For the purposes of this section, specified authority
      means the specified authority referred to in section 151.”
      Time limit for notice-
      “149. (1) No notice under section 148 shall be issued for the
F
      relevant assessment year,—
      (a) if three years have elapsed from the end of the relevant
      assessment year, unless the case falls under clause (b);
      (b) if three years, but not more than ten years, have elapsed from
G     the end of the relevant assessment year unless the Assessing
      Officer has in his possession books of account or other documents
      or evidence which reveal that the income chargeable to tax,
      represented in the form of asset, which has escaped assessment
      amounts to or is likely to amount to fifty lakh rupees or more for
      that year:
H
 UNION OF INDIA & ORS. v. ASHISH AGARWAL                                655
              [M. R. SHAH, J.]

       Provided that no notice under section 148 shall be issued at     A
any time in a case for the relevant assessment year beginning on
or before 1st day of April, 2021, if such notice could not have
been issued at that time on account of being beyond the time limit
specified under the provisions of clause (b) of sub-section (1) of
this section, as they stood immediately before the commencement
                                                                        B
of the Finance Act, 2021:
       Provided further that the provisions of this sub-section shall
not apply in a case, where a notice under section 153A, or section
153C read with section 153A, is required to be issued in relation
to a search initiated under section 132 or books of account, other
documents or any assets requisitioned under section 132A, on or         C
before the 31st day of March, 2021:
       Provided also that for the purposes of computing the period
of limitation as per this section, the time or extended time allowed
to the assessee, as per show-cause notice issued under clause (b)
of section 148A or the period during which the proceeding under         D
section 148A is stayed by an order or injunction of any court, shall
be excluded:
       Provided also that where immediately after the exclusion
of the period referred to in the immediately preceding proviso, the
period of limitation available to the Assessing Officer for passing     E
an order under clause (d) of section 148A is less than seven days,
such remaining period shall be extended to seven days and the
period of limitation under this sub-section shall be deemed to be
extended accordingly.
Explanation.—For the purposes of clause (b) of this subsection,         F
“asset” shall include immovable property, being land or building or
both, shares and securities, loans and advances, deposits in bank
account.
(2) The provisions of sub-section (1) as to the issue of notice shall
be subject to the provisions of section 151.’                           G
Sanction for issue of notice-
“151. Specified authority for the purposes of section 148 and
section 148A shall be—
                                                                        H
656            SUPREME COURT REPORTS                           [2022] 3 S.C.R.


A               (i) Principal Commissioner or Principal Director or
                Commissioner or Director, if three years or less than three
                years have elapsed from the end of the relevant assessment
                year;
                (ii) Principal Chief Commissioner or Principal Director General
B               or where there is no Principal Chief Commissioner or Principal
                Director General, Chief Commissioner or Director General, if
                more than three years have elapsed from the end of the relevant
                assessment year.”
            3.3 In sub-section (1) of section 151A of the Income Tax Act, in
C           the opening portion, after the words and figures “issuance of notice
            under section 148”, the words, figures and letter “or conducting
            of enquiries or issuance of show-cause notice or passing of order
            under section 148A” are inserted.
             4. Despite the substituted sections 147 to 151 of the Income Tax
D     Act, 1961 by the Finance Act, 2021 coming into force on 1 st April, 2021,
      according to learned ASG, the Revenue issued approximately 90,000
      reassessment notices to the respective assessees under the erstwhile
      sections 148 to 151 thereof by relying on explanations in the Notifications
      dated 31st March, 2021 and 27th April, 2021. The said reassessment
      notices were the subject matter of writ petitions before the various High
E     Courts. The respective High Courts have held that all the respective
      reassessment notices issued under the erstwhile sections 148 to 151 of
      the Income Tax Act, 1961, are bad in law as the reassessment notices
      issued after 01.04.2021 are governed by the substituted sections 147 to
      151 of the Income Tax Act, 1961, substituted by the Finance Act, 2021.
F     Consequently, the respective High Courts have set aside all the
      reassessment notices issued under section 148 of the Income Tax Act,
      1961 wherever assailed. The common judgment and order passed by
      the High Court of Allahabad is the subject matter of the present appeals.
      However, the High Court of Delhi in its common judgment and order
      dated 15.12.2021 while quashing the respective reassessment notices
G     has also observed that if the law permits the revenue to take further
      steps in the matter they shall be at liberty to do so.
            5. We have heard Shri N. Venkataraman, learned ASG appearing
      on behalf of the Revenue and Shri C.A. Sundaram and Shri S. Ganesh,
      learned Senior Advocates and other learned counsel appearing on behalf
H     of the respective assessee.
        UNION OF INDIA & ORS. v. ASHISH AGARWAL                                657
                     [M. R. SHAH, J.]

       6. It cannot be disputed that by substitution of sections 147 to 151    A
of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and
reformative changes are made governing the procedure for reassessment
proceedings. Amended sections 147 to 149 and section 151 of the IT
Act prescribe the procedure governing initiation of reassessment
proceedings. However, for several reasons, the same gave rise to
                                                                               B
numerous litigations and the reopening were challenged inter alia, on
the grounds such as (1) no valid “reason to believe” (2) no tangible/
reliable material/information in possession of the assessing officer leading
to formation of belief that income has escaped assessment, (3) no enquiry
being conducted by the assessing officer prior to the issuance of notice;
and reopening is based on change of opinion of the assessing officer and       C
(4) lastly the mandatory procedure laid down by this Court in the case of
GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and ors;
(2003) 1 SCC 72, has not been followed.
      6.1 Further pre-Finance Act, 2021, the reopening was permissible
          for a maximum period up to six years and in some cases beyond        D
          even six years leading to uncertainty for a considerable time.
          Therefore, Parliament thought it fit to amend the Income Tax
          Act to simplify the tax administration, ease compliances and
          reduce litigation. Therefore, with a view to achieve the said
          object, by the Finance Act, 2021, sections 147 to 149 and
          section 151 have been substituted.                                   E

      6.2 Under the substituted provisions of the IT Act vide Finance
          Act, 2021, no notice under section 148 of the IT Act can be
          issued without following the procedure prescribed under section
          148A of the IT Act. Along with the notice under section 148
          of the IT Act, the assessing officer (AO) is required to serve       F
          the order passed under section 148A of the IT Act. section
          148A of the IT Act is a new provision which is in the nature of
          a condition precedent. Introduction of section 148A of the IT
          Act can thus be said to be a game changer with an aim to
          achieve the ultimate object of simplifying the tax administration,   G
          ease compliance and reduce litigation.
      6.3 But prior to pre-Finance Act, 2021, while reopening an
          assessment, the procedure of giving the reasons for reopening
          and an opportunity to the assessee and the decision of the
          objectives were required to be followed as per the judgment          H
658            SUPREME COURT REPORTS                           [2022] 3 S.C.R.


A               of this Court in the case of GKN Driveshafts (India) Ltd.
                (supra).
            6.4 However, by way of section 148A, the procedure has now
                been streamlined and simplified. It provides that before issuing
                any notice under section 148, the assessing officer shall (i)
B               conduct any enquiry, if required, with the approval of
                specified authority, with respect to the information which
                suggests that the income chargeable to tax has escaped
                assessment; (ii) provide an opportunity of being heard to the
                assessee, with the prior approval of specified authority; (iii)
                consider the reply of the assessee furnished, if any, in response
C               to the show-cause notice referred to in clause (b); and (iv)
                decide, on the basis of material available on record including
                reply of the assessee, as to whether or not it is a fit case to
                issue a notice under section 148 of the IT Act and (v) the AO
                is required to pass a specific order within the time stipulated.
D           6.5 Therefore, all safeguards are provided before notice under
                section 148 of the IT Act is issued. At every stage, the prior
                approval of the specified authority is required, even for
                conducting the enquiry as per section 148A(a). Only in a case
                where, the assessing officer is of the opinion that before any
E               notice is issued under section 148A(b) and an opportunity is
                to be given to the assessee, there is a requirement of conducting
                any enquiry, the assessing officer may do so and conduct any
                enquiry. Thus if the assessing officer is of the opinion that any
                enquiry is required, the assessing officer can do so, however,
                with the prior approval of the specified authority, with respect
F               to the information which suggests that the income chargeable
                to tax has escaped assessment.
            6.6 Substituted section 149 is the provision governing the time
                limit for issuance of notice under section 148 of the IT Act.
                The substituted section 149 of the IT Act has reduced the
G               permissible time limit for issuance of such a notice to three
                years and only in exceptional cases ten years. It also provides
                further additional safeguards which were absent under the
                earlier regime pre-Finance Act, 2021.
            7. Thus, the new provisions substituted by the Finance Act, 2021
H     being remedial and benevolent in nature and substituted with a specific
        UNION OF INDIA & ORS. v. ASHISH AGARWAL                                659
                     [M. R. SHAH, J.]

aim and object to protect the rights and interest of the assessee as well      A
as and the same being in public interest, the respective High Courts
have rightly held that the benefit of new provisions shall be made available
even in respect of the proceedings relating to past assessment years,
provided section 148 notice has been issued on or after 1st April, 2021.
We are in complete agreement with the view taken by the various High
                                                                               B
Courts in holding so.
       8. However, at the same time, the judgments of the several High
Courts would result in no reassessment proceedings at all, even if the
same are permissible under the Finance Act, 2021 and as per substituted
sections 147 to 151 of the IT Act. The Revenue cannot be made
remediless and the object and purpose of reassessment proceedings              C
cannot be frustrated. It is true that due to a bonafide mistake and in view
of subsequent extension of time vide various notifications, the Revenue
issued the impugned notices under section 148 after the amendment
was enforced w.e.f. 01.04.2021, under the unamended section 148. In
our view the same ought not to have been issued under the unamended            D
Act and ought to have been issued under the substituted provisions of
sections 147 to 151 of the IT Act as per the Finance Act, 2021. There
appears to be genuine non-application of the amendments as the officers
of the Revenue may have been under a bonafide belief that the
amendments may not yet have been enforced. Therefore, we are of the
opinion that some leeway must be shown in that regard which the High           E
Courts could have done so. Therefore, instead of quashing and setting
aside the reassessment notices issued under the unamended provision
of IT Act, the High Courts ought to have passed an order construing the
notices issued under unamended Act/unamended provision of the IT
Act as those deemed to have been issued under section 148A of the IT           F
Act as per the new provision section 148A and the Revenue ought to
have been permitted to proceed further with the reassessment
proceedings as per the substituted provisions of sections 147 to 151 of
the IT Act as per the Finance Act, 2021, subject to compliance of all the
procedural requirements and the defences, which may be available to
the assessee under the substituted provisions of sections 147 to 151 of        G
the IT Act and which may be available under the Finance Act, 2021 and
in law. Therefore, we propose to modify the judgments and orders passed
by the respective High Courts as under: -

                                                                               H
660                SUPREME COURT REPORTS                         [2022] 3 S.C.R.


A           (i)      The respective impugned section 148 notices issued to the
                     respective assessees shall be deemed to have been issued
                     under section 148A of the IT Act as substituted by the
                     Finance Act, 2021 and treated to be show-cause notices in
                     terms of section 148A(b). The respective assessing officers
                     shall within thirty days from today provide to the assessees
B
                     the information and material relied upon by the Revenue so
                     that the assessees can reply to the notices within two weeks
                     thereafter;
            (ii)     The requirement of conducting any enquiry with the prior
                     approval of the specified authority under section 148A(a)
C                    be 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;
            (iii)    The assessing officers shall thereafter pass an order in terms
D                    of section 148A(d) after following the due procedure as
                     required under section 148A(b) in respect of each of the
                     concerned assessees;
            (iv)     All the defences which may be available to the assessee
                     under section 149 and/or which may be available under the
E                    Finance Act, 2021 and in law and whatever rights are
                     available to the Assessing Officer under the Finance Act,
                     2021 are kept open and/or shall continue to be available
                     and;
            (v)      The present order shall substitute/modify respective
F                    judgments and orders passed by the respective High Courts
                     quashing the similar notices issued under unamended section
                     148 of the IT Act irrespective of whether they have been
                     assailed before this Court or not.
              9. There is a broad consensus on the aforesaid aspects amongst
G     the learned ASG appearing on behalf of the Revenue and the learned
      Senior Advocates/learned counsel appearing on behalf of the respective
      assessees. We are also of the opinion that if the aforesaid order is passed,
      it will strike a balance between the rights of the Revenue as well as the
      respective assesses as because of a bonafide belief of the officers of
H
        UNION OF INDIA & ORS. v. ASHISH AGARWAL                               661
                     [M. R. SHAH, J.]

the Revenue in issuing approximately 90000 such notices, the Revenue          A
may not suffer as ultimately it is the public exchequer which would suffer.
       Therefore, we have proposed to pass the present order with a
view avoiding filing of further appeals before this Court and burden this
Court with approximately 9000 appeals against the similar judgments
and orders passed by the various High Courts, the particulars of some of      B
which are referred to hereinabove. We have also proposed to pass the
aforesaid order in exercise of our powers under Article 142 of the
Constitution of India by holding that the present order shall govern, not
only the impugned judgments and orders passed by the High Court of
Judicature at Allahabad, but shall also be made applicable in respect of
the similar judgments and orders passed by various High Courts across         C
the country and therefore the present order shall be applicable to PAN
INDIA.
      10. In view of the above and for the reasons stated above, the
present Appeals are ALLOWED IN PART. The impugned common
judgments and orders passed by the High Court of Judicature at Allahabad      D
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             E
             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    F
             today provide to the respective assessees information and
             material relied upon by the Revenue, so that the assesees
             can reply to the show-cause notices within two weeks
             thereafter;
      (ii)   The requirement of conducting any enquiry, if required, with     G
             the prior approval of specified 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.
                                                                              H
662              SUPREME COURT REPORTS                         [2022] 3 S.C.R.


A                          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
B                   of section 148A(d) in respect of each of the concerned
                    assessees; Thereafter after following the procedure as
                    required under section 148A may issue notice under section
                    148 (as substituted);
             (iv) All defences which may be available to the assesses
                    including those available under section 149 of the IT Act
C                   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
D     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
E     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
F     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.
G            All these appeals are accordingly partly allowed to the aforesaid
      extent.
             In the facts of the case, there shall be no order as to costs.

      Nidhi Jain                                             Appeals partly allowed.
      (Assisted by : Shashwat Jain, LCRA)
H