2022 (2) TMI 1314 - HC - Income Tax

Reopening of assessment u/s 147 - Scope of Section 148A as newly inserted - Comparison between old and new provisions for reassessment - Individual identity of Section 148 as prevailing prior to amendment - 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 - HELD THAT - As relying on SUDESH TANEJA WIFE OF SHRI CP TANEJA 2022 (1) TMI 1212 - RAJASTHAN HIGH COURT no notice u/s 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 would be in terms of the substituted Section 149(1) but without breaching the upper time limit provided in the original Section 149(1) which stood substituted. Under no circumstances the extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per the then prevailing provisions would not be revived by virtue of the application of Section 149(1)(b) effective from 01.04.2021. All the notices issued in the present cases are after 01.04.2021 and have been issued without following the procedure contained in Section 148A of the Act and are therefore invalid. By virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021. In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed.

Summary

Issues:
Challenge to reassessment notice dated 22.05.2021 for assessment year 2017-18 based on old provisions of Income Tax Act, 1961; Non-compliance with Section 148A procedure inserted from 01.04.2021; Validity of reassessment notices issued post 01.04.2021; Interpretation of newly introduced provisions under Finance Act, 2021; Effect of notifications dated 31.03.2021 and 27.04.2021 by CBDT on reassessment provisions; Constitutionality of notifications and their impact on reassessment notices.

Issue 1: Challenge to Reassessment Notice:
The petitioner challenged a reassessment notice dated 22.05.2021 for the assessment year 2017-18, arguing that the assessing officer applied old provisions of the Income Tax Act, 1961, and did not follow the procedure under Section 148A inserted from 01.04.2021. The petitioner contended that all notices issued after 01.04.2021 must comply with the newly introduced provisions of the Finance Act, 2021, and failure to do so renders the notices invalid.

Issue 2: Interpretation of Newly Introduced Provisions:
The judgment analyzed the provisions of reassessment under the Finance Act, 2021, highlighting significant changes. It emphasized that the new scheme of reassessment introduced elaborate procedures under Section 148A, enabling Assessing Officers to inquire into material suggesting escaped income, issue notices to assesses, and make decisions based on available material. The judgment clarified that the new provisions were intended to apply to all notices issued after 01.04.2021, emphasizing the importance of complying with the updated statutory framework for reassessment.

Issue 3: Effect of CBDT Notifications on Reassessment Provisions:
The judgment scrutinized the impact of notifications dated 31.03.2021 and 27.04.2021 issued by the CBDT on reassessment provisions. It concluded that the explanations provided in these notifications, attempting to apply pre-amendment provisions of Section 148 for notices issued post 01.04.2021, exceeded the CBDT's jurisdiction. The judgment deemed these explanations as unconstitutional and invalid, emphasizing that subordinate legislation cannot alter the statutory provisions of the parent Act.

Conclusion:
The High Court quashed the impugned reassessment notice challenged by the petitioner, declaring it invalid and bad in law. The judgment aligned with previous decisions by other High Courts and emphasized that all reassessment notices issued post 01.04.2021 must adhere to the updated provisions introduced by the Finance Act, 2021. The court dismissed appeals by the revenue, affirming the invalidity of the notices and upholding the quashing of the reassessment notices.