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On the sole subject of assumption of jurisdiction for reassessment the Madras High Court decision in IDFC Bank case [2023] 459 ITR 169 (Mad) highlight a case where proceedings for reassessment were initiated under the old scheme by issuing notice u/s 148 and also reasons to believe in April 2021.  The petitioner complied with the notice by filing the return of income and preliminary objections too. It further challenged that the notice issued in April 2021 is not in accordance to the new procedure underlined by section 148A, substituted by the Finance Act, 2021 with effect from April 1, 2021. In the meantime the Supreme Court in Ashish Agarwal case issued mandatory SOPs outlining the new procedure of reassessment.

The AO therefore issued a fresh notice u/s 148A (b) to the assessee. However, he did not supply any reasons to believe this time along with the notice. And later also issued order u/s 148A (d) after taking objections of the assessee.

On the question of jurisdiction for not meeting requirement of supply of reasons at the initial stage of section 148A (b) notice the revenue side argued that the new scheme, with the omission of the phrase “reason to believe” has done away with the requirement that the officer must establish “escapement of tax”, prima facie, at the stage of assumption of jurisdiction to which DR. MS. ANITA SUMANTH J. placed disagreement and held that such requirement continues in the light of the proviso to section 148 that casts a statutory burden upon the officer to be in possession of “information” suggesting that income chargeable to tax has escaped assessment for the concerned year. If the existence of such information is not established even at the initial stage, the foundation of the proceedings stands vitiated in law, as per the Court.

On their conjoint reading of the reassessment provisions newly introduced, the High Court highlighted that the new scheme of reassessment is seen to have incorporated the procedure set out in the judgment of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC), statutorily. The statute now requires the officer to supply the reasons upon which the reassessment is proposed, solicit objections for the proposed reopening and pass an order upon such objections, in terms of section 148A(d). If the aforesaid order is averse to the assessee, it will be followed/accompanied by a notice under section 148.

The Court thus held that the assumption of jurisdiction of the AO in time must be tested in the light of the reasons adduced by him and on the anvil of whether such reasons qualify as information under the proviso to new section 148 defined as any information meaning that given in clause(i) to (v) in the Explanation.

This decision would impose additional responsibility upon the AO to also adduce/supply reasons to believe while issuing notice u/s 148A (b).

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