Section 148

1. The Income Tax Department has been issuing notices under Section 148 of the Income Tax Act, 1961 for initiating re-opening of assessments under Section 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”)to various assessees across the country. However, the jurisdiction of such notices basis landmark judgements passed by the Hon'ble Supreme Court and Hon'ble Gujarat High Court is under serious consideration.
2. The present article delves into the relevant legal provisions of the Income Tax Act, 1961, the present ongoing situation across the country with respect to issuance of Notice for re-opening of assessment pertaining to Assessment Year

2013-14 and 2014-15 and the legal position adopted by various Courts of Law with respect to jurisdiction of Notices issued under section 148.

3. Relevant Legal Provisions of the Income Tax Act, 1961

The relevant legal provisions for analyzing the jurisdiction of the notices issued for re-opening of assessment are as under:

1. 1. Section 147: Income escaping assessment

If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing 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).

1. 2. Section 148: Issue of notice where income has escaped assessment

Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of 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 [a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee], a return of his income or the 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 to be furnished under section 139:

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:

[Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section:]

1. 3. Section 148A: Conducting inquiry, providing opportunity before issue of notice under section 148 [Inserted by Finance Act, 2021]

The Assessing Officer shall, before issuing any notice under section 148,—

1. conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
2. provide an opportunity of being heard to the assessee, 23[***] by serving upon him a notice to show cause within such time, as may be specified in the 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 to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
3. consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
4. 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 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:

BRIEF BACKGROUND AND THE RELEVANT JUDGEMENTS ISSUED BY VARIOUS HIGH COURTS

4. Numerous assessees across the country have received notices from the Department initiating re-opening of assessments for Assessment Year 2013-14 and 2014-15. In the interim, vide Finance Act, 2021, provisions relating to reassessment proceedings of Section 148 of the Income Tax Act, 1961 were substituted with effect from 01st April 2021 whereby a separate mechanism to be followed by tax authority before issuing the notice for reopening assessments was prescribed and the same was materially different from the procedure laid down under the erstwhile reassessment provisions of Section 148 of the Act. The new reassessment provisions provided for a curtailed time limit of 4 years from the end of relevant assessment year.
5. Pursuant thereto, the Hon'ble Supreme Court in the case of Union of India & Others vsAshish Agarwal – [Civil Appeal No. 3005/2022]vide judgement dated 04.05.2022 held that the Revenue be permitted to proceed with reassessment proceedings as per the substituted reassessment law by the Finance Act, 2021 subject to the compliance of all the procedural requirements and defences available to the assessee under the substituted reassessment provisions.
6. Consequent to the said judgement which led to its first round of litigation, a common issue which arose before the Hon'ble Gujarat High Court and the Hon'ble Allahabad High Court was whether to consider the revised reassessment notices which were issued beyond the limitation period under the erstwhile provisions of Section 148 of the Act as invalid.
7. Thereafter, the Hon'ble Gujarat High Court in the case of Keenara Industries Private Limited vs the Income Tax Officer, Ward 1(1)(3), Surat – [SCA No. 17321/2022]held that the Notices issued under Section 148 of the Act between 01st April 2021 to 30th June 2021 are required to fulfill the test of limitation as on 31st March 2021 and thereafter held that the reassessment proceedings relevant to AY 2013-14 and 2014- 15 initiated after 31st March 2021 are required to be quashed and set aside being barred by limitation.

8. Despite the aforementioned judgements passed by the Hon'ble Supreme Court and the Hon'ble Gujarat High Court, the Department has proceeded to issue notices under the provisions of Section 148 of the Act to initiate reassessment proceedings for AY 2013-14 and 2014-15. Numerous writ petitions have been filed before various High Courts challenging the jurisdiction of the said notices whereby the Hon'ble High Courts have been kind enough to grant stay on the reassessment proceedings and simultaneously directing that the Department shall not proceed to issue final assessment order.
9. On the other hand, with the objective that the assessees do not obtain stay of reassessment proceedings from the Hon'ble High Courts, the Department have been quick to frame assessment orders and confirm demand liability upon the assessees. It is pertinent to note that once the assessment order is framed, the assessee is then compelled to follow the hierarchical route of challenging the assessment order by way of an appeal before Commissioner (Appeals).
10. Even in such scenarios, preferring a writ petition before the Hon'ble High Court would be a preferable option as the same is backed by the judgement dated 01st   March 2023 passed by the Hon'ble Madhya Pradesh High Court in case of M/s Space Enclave Private Limited vs Income Tax Department [WP No. 19516 of 2022]wherein it was held that as the jurisdictional issue of notices was raised, even assuming an alternative remedy under section 246 of the Act of preferring an appeal is available, it will not operate as an absolute bar for entertaining the writ petition as jurisdictional issues goes to the root of the matter and it is one of the exceptional factors carved out by the Hon'ble Supreme Court for exercise of jurisdiction under Article 226 of the Constitution of India.
11. Only time will tell the ultimate fate qua the jurisdictional issue of the notices issued under section 148 of the Act however considering all the stakeholders involved and in the interest of the assessee, preferring a writ petition challenging the jurisdiction of the notices issued and obtaining stay on reassessment proceedings looks the only way forward for the time being.