Supreme Court upholds 90,000 tax reassessment notices under old regime, impacting taxpayers

The revenue department issued these notices under Section 148 of the Income Tax Act, alleging under-reporting and misreporting of income for assessment years beyond the three-year limit.

In a significant ruling for taxpayers, the Supreme Court upheld approximately 90,000 tax reassessment notices issued by the revenue department for the assessment years 2013-14 to 2017-18. The notices were issued between April 1 and June 30, 2021, amid ongoing legal challenges.

A bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra delivered the judgment on a batch of 727 appeals filed by the income tax department against various high court orders. These high courts, including the Bombay and Allahabad High Courts, had previously ruled against the revenue department, restricting it from issuing tax notices under the old assessment system. However, the Supreme Court has now set aside those orders.

The revenue department issued these notices under Section 148 of the Income Tax Act, alleging under-reporting and misreporting of income for assessment years beyond the three-year limit.

“The time during which the show-cause notices were deemed to be stayed is from the date of issuance of the deemed notice between April 1, 2021, and June 30, 2021, till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices,” a three-judge Bench led by Chief Justice D Y Chandrachud stated in its judgment.

In its earlier ruling in May 2022, the court had cited the need to prevent losses to the public exchequer as a basis for its decision. Thursday’s judgment also overturned various high court orders that had blocked the revenue department from issuing tax notices under the previous regime.

The new reassessment law introduced a three-year cap for issuing notices related to past cases, a reduction from the previous six-year period. This change was aimed at streamlining the reassessment process.