On January 3, a Supreme Court division bench led by Justices Sanjiv Khanna and MM Sundresh overturned a Punjab and Haryana High Court order dismissing a writ petition filed by an assessee challenging a notice issued under Section 148A of the Income Tax Act 1961 for reopening assessment. The bench also observed "The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in-depth consideration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy, clarify that this issue would be examined in depth by the High Court if and when it arise for consideration. We do deem it open to examine this issue in the present case after having examined the notice under Section 148A (b) including the annexure thereto, the reply filed by the petitioner and the order under Section 148A (d) of the Income Tax Act, 1961.”

The Supreme Court ruled that the provisions for reopening under the Income Tax Act of 1961 had been amended by the Finance Act of 2021, and thus the matter would require a deeper and more in-depth examination.“The special leave petition is disposed of. We clarify that the dismissal of the special leave petition would not be construed as a finding or observations on the merits of the case,” the court said.

The Punjab and Haryana High Court ruled that where the statutory authority has not even completed the proceedings, the writ court should not intervene at such an early stage. Furthermore, based on a cursory reading of the notice, the authority cannot be held axiomatically to have grasped jurisdiction not vested in it. The order under Section 148A (d) is being challenged on the grounds that vested jurisdiction was incorrectly exercised. It is well established that there is a distinction between jurisdictional error and error of law or fact within the jurisdiction. A statutory remedy has been provided for the correction of errors.

The petitioner was served with notice under Section 148A (b). The petitioner was also given the specifics of the information that led to the issuance of a notice under Section 148A (b). The petitioner responded by raising concerns. An order issued under Section 148A resolved the objections (d). In addition to the order, the petitioner was served with notice under Section 148. The petitioner filed an objection to both the order issued under Section 148 A(d) and the notice issued under Section 148 of the even date, alleging that the petitioner's response to the notice under Section 148A(b) was ignored.

Case Details: Red Chilli International Sales versus ITO
Citation: Special Leave to Appeal (C) No(s). 86/2023