In a landmark decision, the Supreme Court ruled on Thursday that the Income Tax Act must be interpreted with the amended provisions effective from 1st April 2021. This ruling directly impacts approximately 90,000 reassessment notices, clarifying that the amendments introduced by the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act (TOLA) remain applicable to the Income Tax Act beyond the specified date.
The verdict stems from the case involving Ashish Agarwal and sets aside several high court rulings, including those from the Gujarat, Allahabad, Bombay, Orissa and Delhi High Courts. This marks a significant victory for the tax department, as the legal disputes began during the pandemic when the government extended regulations for reopening old tax assessments, leading to confusion between the old and new laws.
Chief Justice DY Chandrachud noted that the Gujarat High Court's ruling in ITO Surat, the Rajeev Bansal judgment by Allahabad HC, the Siemens vs DCIT ruling by Bombay HC, and other decisions were overruled.
This decision will have broad implications, particularly for the 90,000 taxpayers affected by the reassessment notices. Ved Jain, past president of the Institute of Chartered Accountants of India (ICAI), stated, "It is a landmark ruling regarding the extent of executive powers to extend limitations via executive orders, even after new legislation has been enacted."
The case also resolves the rare scenario where both the old and new reassessment laws were considered valid simultaneously, leading to a flood of over 10,000 writ petitions. Many of these cases were challenged in the Supreme Court, with the final verdict now providing much-needed clarity on the applicability of the new provisions post-April 1, 2021.
This ruling is expected to strengthen the tax department's position in reassessment matters and streamline tax litigation processes across the country.
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