2022 (3) TMI 1435 - HC - Income Tax

Reopening of assessment u/s 147 - scope of mandatory procedure prescribed u/s 148A - relation between Relaxation Act 2020 and Finance Act 2021 - enhanced/reduced time limit specified in Section 149 - initiation of reassessment proceedings prior to coming into force of the Finance Act 2021 - substitution made by the Finance Act 2021 - legality and validity of only the Explanations to the two Notifications being Notification No.20/2021 dated 31st March 2021 and Notification No.38/2021 dated 27th April 2021 issued by Central Government in exercise of powers vested under Section 3(1) of Relaxation Act 2020 - reformative changes to Sections 147 to 151 - income escaping assessment - onset of Covid-19 pandemic followed by nationwide lockdown in March 2020 - Relaxation of certain provision of specified Act - HELD THAT - 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. Consequently the impugned reassessment notices issued u/s 148 of the Income Tax Act 1961 are quashed and the present writ petitions are allowed. If the law permits the respondents/revenue to take further steps in the matter they shall be at liberty to do so.

Summary

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

Analysis:
The High Court examined the legality of reassessment notices issued post 31st March, 2021 under the substituted 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 the new provisions introduced by the Finance Act, 2021 from 1st April, 2021 must be followed for reassessment notices issued after 31st March, 2021. The Court held that the power of reassessment existing before 31st March, 2021 continued until 30th June, 2021, but the procedure was changed by the Finance Act, 2021 effective from 1st April, 2021.

The Court further analyzed the Relaxation Act and concluded that it only empowers the Government to extend time limits and does not delegate the power to legislate on reassessment proceedings' initiation procedures. The Court found that the impugned Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 were beyond the power delegated to the Government and ultra vires the parent statute. The Court disagreed with the view of the Chhattisgarh High Court and aligned with the views of the Allahabad High Court and Rajasthan High Court on this matter.

Based on the above analysis, the Court declared Explanations A(a)(ii)/A(b) to the Notifications as ultra vires the Relaxation Act, 2020, and therefore, null and void. Consequently, the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 were quashed, and the writ petitions were allowed. The respondents/revenue were given the liberty to take further steps in accordance with the law, and the petitioners were granted the right to seek remedies if necessary.