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Over 1300 I-T Notices from Old Regime Quashed by Delhi HC

The Delhi High Court on Wednesday Quashed more than 1300 reassessment notices that the income-tax department had issued, saying that the new tax regime did not empower it to reopen cases after March 30 this year.

The court’s verdict may have a bearing on around 133000 reassessment notices issued by the department after March 31, an income tax department official said. The department may challenge the ruling in the Supreme Court and also seek to amend the Income Tax Act in the upcoming budget to proceed with the reassessment cases, the official said.

“Notifications dated March 30, 2021 and April 21, 2021 are declared ultra-virus the Relaxation Act, 2020 and therefore bad in law and null and void,” the high court said, while quashing the notices and allowing the writ petitions.

The tax department had issued these notices under Section 148 of the Income Tax Act between April 1 and June 30, alleging improper disclosures of income for years prior to the last three assessment years. Section 148 deals with the issuance of a notice on an income that has escaped re-computation or assessment. Taxpayers moved the high court contesting the notices no the ground that they were contradictory to the provisions of the new tax regime.

The government had in the budget 2021 amended the provision governing reassessment proceedings under Section 148, capping the period for issue of notice reopening past years’ assessment to three years from six years earlier.

The amendment was to come into effect from April1, 2021, implying that the notices were to be issued by March 31, 2021. But income tax authorities extended the time limit to June 30, 2021, citing the second wave of Covid-19.

The high court ruled that Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), does not empower the revenue department to extend the application of the old reassessment regime beyond March 31 as the Finance Act, 2021 had introduced a new scheme of reassessment with effect April.

Tax experts said the judgement brings relief not just to taxpayers who had filed similar petitions before the Delhi High Court, but will also have a favorable impact for those who have filed similar petitions before other high courts.

“The view taken by one high courts, is not binding on other high.

Courts, but definitely carries persuasive value for other high courts,”

Salish Kumar, partner, Nangana & Co LLP.

Kumar pointed out that on the issue of legal validity of reassessment

notices issued under old Section 148 after April 1, 2021, three high

courts Allahabad, Rajasthan and now Delhi have taken a decision in

favour of the taxpayers, treating the reassessment notices as bad in

law. “Therefore, it will be now difficult for other from this view and

take a decision in favour of the income tax department,” he said.

This judgement will be applicable only on those taxpayers who had

Challenged the reassessment notices before the High Court.

Taxpayers, who have not challenged the notices, may still have to go

through the long process of reassessment proceedings and appellate

proceedings

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