Allahabad High Court Decision on Section 148A(b) of the Income Tax Act
In a significant ruling, the Allahabad High Court addressed the maintainability of proceedings under Section 148A(b) of the Income Tax Act, 1961 (IT Act), initiated prior to September 1, 2024. The main question was whether these proceedings would remain valid following the enforcement of the Finance Act No. 02 of 2024, which came into effect on September 1, 2024. This matter was brought before a division bench comprising Justices Rajan Roy and Brij Raj Singh.
Background
The case stemmed from the Income Tax Department’s attempt to initiate reassessment proceedings against the petitioner based on information about ‘income having escaped assessment,’ which was derived from an audit objection. Initially, the department issued a notice under Section 148A(b) of the IT Act, followed by an order under Section 148A(d), and subsequently a reassessment notice under Section 148. The High Court quashed these notices, determining that they had not adhered to the principles of natural justice.
Following the quashing of the earlier orders, the department reissued a notice under Section 148A(b) and again proceeded with an order under Section 148A(d). However, this occurred just before the Finance Act No. 02 of 2024 came into effect, which repealed Sections 148A and 148 of the IT Act.
The petitioner challenged the proceedings in the High Court, seeking to quash the reissued orders and notices. The petitioner argued that only cases where a notice under Section 148 had been issued or an order under clause (d) of sub-section 148A had been made prior to September 1, 2024, would be governed under the previous provisions of Sections 147 to 151. They contended that if these conditions were not met, the previous provisions would be inoperative, and any actions could only be based on the new regulations post-September 1, 2024.
Furthermore, the petitioner pointed out that a specific saving clause contained in the Finance Act (No. 2) of 2024 should apply, suggesting that Section 6 of the General Clauses Act, 1897 would not govern this situation due to the distinct intention outlined in the saving clause. Since the reassessment order and notice were issued on September 2, 2024, after the new provisions took effect, the petitioner asserted that the amended regulations should apply, thus precluding any actions under Section 148A(d) from being valid.
On December 19, 2024, the High Court issued an interim order that stayed the impugned proceedings, requesting the Revenue to clarify how the proceedings initiated under Section 148A(b) prior to September 1, 2024, would be saved under the new Finance Act.
Analysis and Decision
In their analysis, the Court took note of the written instructions from the Revenue, which conceded that all impugned notices issued under Sections 148, 148A(b), and 148A(d) were incorrectly issued. The Court found alignment with the petitioner’s arguments as documented in previous orders and their written submissions.
Consequently, the Court quashed all the impugned orders and notices. It emphasized that while it remained permissible to issue notices under any other provision of the Income Tax Act or any relevant statute, such actions must be conducted strictly in accordance with the law.
Case Reference: Ravish Rastogi v. Union of India, Writ Tax No. 359 of 2024, decided on January 16, 2025
Advocates Involved
- Counsel for Petitioner: Aakash Prasad, Himanshu Singh
- Counsel for Respondent: A.S.G.I., Kushagra Dikshit