2022 (1) TMI 1261 - HC - Income Tax

Reopening of assessment u/s 147 - Scope of section u/s 148A - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia w.e.f. 1.4.2021 - identity of Section 148 as prevailing prior to amendment and insertion of section 148A - Covid 19 Effect - Validity of re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Scope of Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 - HELD THAT - In view of the ratio propounded in cases MON MOHAN KOHLI VERSUS ASSISTANT COMMISSIONER OF INCOME TAX ANR. 2021 (12) TMI 664 - DELHI HIGH COURT argument of the respondents that the substitution made by the Finance Act, 2021 is not applicable to past Assessment Years, as it is substantial in nature is contradicted by Respondents own Circular 549 of 1989 and its own submission that from 1st July, 2021, the substitution made by the Finance Act, 2021 will be applicable. Revenue cannot rely on Covid-19 for contending that the new provisions Sections 147 to 151 of the Income Tax Act, 1961 should not operate during the period 1st April, 2021 to 30th June, 2021 as Parliament was fully aware of Covid-19 Pandemic when it passed the Finance Act, 2021. Also, the arguments of the respondents qua nonobstante clause in Section 3(1) of the Relaxation Act, legal fiction and stop the clock provision are contrary to facts and untenable in law. This Court is of the view that the Executive/Respondents/Revenue cannot use the administrative power to issue Notifications under Section 3(1) of the Relaxation Act, 2020 to undermine the expression of Parliamentary supremacy in the form of an Act of Parliament, namely, the Finance Act, 2021. This Court is also of the opinion that the Executive/Respondents/Revenue cannot frustrate the purpose of substituted statutory provisions, like Sections 147 to 151 of Income Tax Act, 1961 in the present instance, by emptying it of content or impeding or postponing their effectual operation. Keeping in view the aforesaid, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. The impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 are quashed and the present writ petitions are allowed.

Summary

Issues:
Validity of reassessment notices issued post 31st March, 2021 under Sections 147 to 151 of the Income Tax Act, 1961.

Analysis:
The High Court addressed the issue of the validity of reassessment notices issued post 31st March, 2021 under Sections 147 to 151 of the Income Tax Act, 1961. The Court referred to a previous judgment in the case of Mon Mohan Kohli vs. Assistant Commissioner of Income Tax & Anr., where it was concluded that reassessment notices issued after 31st March, 2021 needed to comply with the substituted Sections introduced by the Finance Act, 2021. The Court highlighted that the power of reassessment existing before 31st March, 2021 continued until 30th June, 2021, but the Finance Act, 2021 changed the procedure effective from 1st April, 2021.

The Court further discussed the Relaxation Act and concluded that it only empowered the Government to extend time limits, not to legislate on provisions for reassessment proceedings. The Court found the Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 to be ultra vires the Relaxation Act, 2020, and hence declared them null and void. Consequently, the Court quashed the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 and allowed the writ petitions. The respondents/revenue were granted liberty to take further steps in accordance with the law, with the petitioners having the right to seek remedies if needed.

In summary, the judgment focused on the procedural requirements for reassessment notices issued post 31st March, 2021 under Sections 147 to 151 of the Income Tax Act, 1961. It emphasized compliance with the substituted Sections introduced by the Finance Act, 2021 and declared Explanations in certain Notifications as ultra vires the Relaxation Act, 2020. The Court's decision resulted in quashing the impugned reassessment notices and granting liberty to the respondents/revenue to take further steps while allowing the petitioners to seek remedies if necessary.