In a major relief for about 1.33 lakh taxpayers, who had got notices for the reassessment of their returns from FY14 till date, Delhi High Court on Wednesday quashed 1,353 such notices issued by the Income Tax Department issued under Section 148.

Share Market Live

NSE

The notices were issued by the tax department under this section for reopening of assessment on the allegation that income has escaped assessment as the taxpayers did not declare correct income in their tax return filed for various assessment years starting from the assessment year 2013-14.

On receipt of such notices, several taxpayers had filed writ petitions in various state high courts across the country challenging these notices. Taxpayers had filed a large number of writ petitions challenging the validity of these reassessment notices issued under the old regime of reassessment without following the new procedure introduced by the Finance Act,2021.

Also Read:

Over 3 crore income tax returns filed for FY21: FinMin

Taxpayers in their petition had pleaded that under the new law effective from April 1, 2021, which states that assessment cannot be reopened after three years from the end of relevant assessment year subject to only certain exceptions and these notices are not part of such exceptions.

Noting this, the Delhi High Court upheld the petitioner's contention. The order, which is in favour of the taxpayers who had approached the court, was issued by a Division Bench, comprising Justices Manmohan and Navin Chawla.

In the new tax regime, it is mandatory for the department to provide a hearing to the taxpayers before issuing reassessment notices to them. Further, the notices can be sent only for reassessing records up to three years or 10 years.

Also Read: Fed up with tax payments? Here are 14 countries with no income tax

On the other hand, the old regime allowed taxmen to issue reassessment notices for a period of four, six, or 16 years. Thus, these notices were in contradiction of the new regime and rather in tandem with the old regime, which has given an upper edge to the taxpayers.

Important to note is that another about 500 similar such petitions are listed before Delhi High Court for tomorrow and the notices issued in these cases are also of the same nature.

Not just this, similar writ petitions were ruled in favour of assesses by Rajasthan and Allahabad High Courts. However, only the petitions filed at Chhattisgarh High Court were decided against the taxpayers.

Also Read: Income Tax department issues refund worth Rs 1.2 lakh crore between April 1-November 15

Similarly, about 3,000 odd similar petitions are also pending before various High Courts at Bombay, Calcutta, Madras etc, where a verdict is yet to be pronounced.

Meanwhile, tax experts have hailed the decision of the Delhi High Court and feel that the judgement will be favourable for other such petitions which are still pending at various other state high courts for a judgement.

Shailesh Kumar, partner, Nangia & Co LLP, said, "The judgment will not only provide relief to thousands of taxpayers, who have filed similar petitions before Delhi High Court but will also have a favourable impact for taxpayers, who have filed similar petitions before other High Courts across the country, viz. Bombay High Court, Gujarat High Court, Karnataka High Court, Calcutta High Court, etc.

Having said that, Shailesh Kumar further said, "It will be interesting to see, whether Income tax department accepts this decision or challenges the same before Supreme Court. If the income tax department proceeds to challenge this decision before Supreme Court, then litigation on this issue can be expected to continue for some more time, until Supreme Court take their view and issue their judgment.

Also Read: Clear launches Clear Pro app for tax professionals; here's how to use it

It is also important to note that this judgment will be binding only on those taxpayers, who have challenged the reassessment notices before the High Court. In case of other taxpayers, who have not challenged the notices and continue to participate in reassessment proceedings initiated by the income tax department, they may have to go through the long process of reassessment proceedings and appellate proceedings (if any adjustment is made by the income tax department after the conclusion of reassessment proceedings)."

Similarly, Ved Jain, past president of ICAI, said, "The Delhi High Court has rightly upheld that executive ( CBDT) can't override the amendment made by Finance Act,2021 by a notification. The law having been amended by Parliament with effect from April 1, 2021, has to be followed.

This judgement will give relief to a large no of taxpayers whose assessments were reopened without following the due process despite such process being mandatorily required to ensure fairness and transparency and avoiding unnecessary hardship which used to be caused when assessments were being reopened without giving any opportunity to explain its stand. Further, the new law of limitation of 3 years will avoid litigation in old matters."

(Edited by : Jomy Jos Pullokaran)

First Published:Dec 15, 2021 5:25 PM IST