2022 (3) TMI 1454 - HC - Income Tax

Reopening of assessment u/s 147 - procedure prescribed in the substituted Sections 147 to 151 w.e.f. 01st April, 2021 - 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 - 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 under Section 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. If and when such steps are taken and if the petitioners have a grievance, they shall be at liberty to take their remedies in accordance with law.

Summary

Issues:
Challenge to reassessment notices issued post 31st March, 2021 without following prescribed procedure under Sections 147 to 151 of the Income Tax Act, 1961.

Analysis:
The judgment by the High Court addressed the challenge to reassessment notices issued post 31st March, 2021 without adhering to the prescribed procedure 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 the new provisions introduced by the Finance Act, 2021 from 1st April, 2021 necessitated compliance with the substituted Sections for reassessment notices issued after 31st March, 2021. The Court clarified that the power of reassessment existing before 31st March, 2021 continued until the extended period of 30th June, 2021. The judgment emphasized that the Relaxation Act did not empower the Government to extend the erstwhile Sections 147 to 151 beyond 31st March, 2021, making the impugned Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 ultra vires the parent statute. The Court disagreed with a previous ruling by the Chhattisgarh High Court and aligned with the views of the Allahabad High Court and Rajasthan High Court on the matter.

The Court further highlighted that the substitution made by the Finance Act, 2021 applied even to past Assessment Years, contrary to the Revenue's argument. It dismissed the reliance on Covid-19 as a reason to suspend the operation of the new provisions, emphasizing that Parliament was aware of the pandemic when passing the Finance Act, 2021. The judgment emphasized the importance of upholding Parliamentary supremacy and ensuring the effective operation of statutory provisions like Sections 147 to 151 of the Income Tax Act, 1961. Consequently, the Court declared Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 ultra vires the Relaxation Act, 2020, and therefore invalid in law.

As a result of the above findings, the Court quashed the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 and allowed the writ petitions. The judgment clarified that if the law permitted the respondents/revenue to take further steps in the matter, they were free to do so. However, the petitioners were granted the liberty to seek remedies in accordance with the law if they had grievances regarding any subsequent steps taken by the respondents/revenue.