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B. Raaja Thalapathy – [2024] 167 taxmann.com 209 (Article)

I. Introduction

To understand what the Hon’ble Supreme Court (“SC”), held in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) (“Rajeev Bansal”), it is pertinent to understand Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”) & what was held in Ashish Agarwal v. Union of India [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC) (“Ashish Agarwal”). In Ashish Agrawal, the Hon’ble SC did not deal in depth with the Interpretation of the timelines in TOLA and the substantive procedural requirements under the New Reassessment Regime enacted by the Finance Act, 2021. This lacuna in Ashish Agrawal led to varied interpretations and assumptions leading us to the Second Round of Litigation related to TOLA in Rajeev Bansal.

2. First Round of Litigation – Recap of Ashish Agarwal

The subject matter of litigation in Ashish Agarwal was the conflict between the Notification issued by the Government under the TOLA which was overlapping and in conflict with the amendment made by the Finance Act, of 2021 to the Income Tax Act of 1961 (“ITA”). TOLA was enacted in 2020 as an emergency measure due to COVID-19, Sec 3 of TOLA empowered the Government to extend time limits for any form of assessment made between the period stated in TOLA which was 20th March 2020 to 31st March 2021 for certain specified acts as defined u/s 2(1)(b) of TOLA which included the ITA. Any assessment done till 31st March 2021 falls squarely under TOLA, it is only the reassessment notice issued from 01st April 2021 that falls for completion within 20th March 2020 to 31st March 2021 was in question.

Using the powers u/s 3 of TOLA, the Government had initially notified for an extension of assessments till 31st March 2021, further a 2nd notification superseded the initial notification and extended assessment up to 30th April 2021, later by way of a 3rd Notification which superseded both 1st& 2nd Notification extended the period for assessments upto 30th June 2021.

The trouble lies not in the extension itself, but the conflict it had created when read with the 2021 Finance Act amendment which introduced a new scheme of reassessment in the ITA with effect from 01st April 2021 which replaced the “reasonable to believe” regime to the new “information which suggests” regime clubbed with the decrease in timelines in reassessment proceedings and other substantive changes leading to an overhaul of the reassessment proceedings u/s 147 to 151.

Based on the 2nd and 3rd notifications issued under TOLA, the Department had initiated 90,000 reassessment proceedings from 1st April 2021 to 30th June 2021 under the erstwhile sec 148 leading to a direct conflict with the timelines and proceedings under the new reassessment regime, which came into effect from 1st April 2021.

Comparison Table

Regime	Time limit	Income chargeable to tax which has escaped assessment	AO Issues Notice Based On
Old regime	After Four years but not more than six years, but also up to sixteen years in case of Assets outside India	Rupees One lakh or more	Reason to Believe
New regime	After Three years but not more than ten years for all income	Likely to exceed Rupees Fifty lakhs or more	Information Which Suggests

In the First Round of Litigation in Ashish Agarwal, using its inherent powers under Article 142 of the Constitution, the Reassessment Notice Issued passed under the erstwhile sec 148 based on the Third Notification passed u/s 3 of TOLA from 04.01.2021 until 30.06.2021, was deemed to be notice issued u/s 148-A and show cause notice (“SCN”) u/s 148-A(b) to be issued based on the New Regime enacted by Finance Act, 2021.

While deciding so, SC had also held that it is only the time limit to issue a Reassessment Notice which will be extended under TOLA but all rights & defenses arising from the Finance Act, 2021 amendment to Sec 147-151 will remain for both Taxpayer’s & Revenue’s defense. Further, the Court allowed the Revenue, one month from the date of Ashish Agarwal’s Judgment to issue SCN u/s 148-A and provided the assessee two weeks from the date of receiving the SCN to reply to it, the SC also held that based on the new Sec 148-A the Assessing Officer shall decide whether a reassessment notice is needed to be issued or not.