2021 (9) TMI 166 - HC - Income Tax

Reopening of assessment u/s 147 - 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 - grievance of the petitioner that the notice of like nature could have been issued till the cut off date 30.03.2021 as subsequent thereto the new Section 148A intervened before issuance of notice directly under Section 148 - HELD THAT - The notification is made by the Ministry of Finance, Central Government considering the fact of lock down all over India, it can be always be assumed that the deferment of the application of section 148A was done in a control way. It is settled proposition that any modification of the Executives implies certain amount of discretion and to be exercised with the aid of the legislative policy of the Act and cannot travel beyond it and run counter to it or certainly change the essential features, the identity, structure or the policy of the Act. Therefore, this legislative delegation which is exercised by the Central Government by notification to uphold the mechanism as prevailed prior to March, 2021 is not in conflict with any Act and notification by executive i.e. Ministry of Finance would be the part of legislative function. Under the circumstances by the notifications the operation of Section 148 of the Income Tax Act was extended, thereby deferment of Section 148A was done. It was done by the Ministry of Finance by way of conditional legislation in the peculiar circumstances which arose during the pandemic and lock down and Central Government can not be said to have encroached upon turf of Parliament. Notification would show that it was issued in exercise of power conferred under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and time for issuance of notice under Section 148, the end date was initially extended uptill on 30th day of April 2021 and subsequently again by notification dated 27th April, 2021 the time limit of 30th day of April 2021 was further extended up till 30th day of June, 2021. By effect of such notification, the individual identity of Section 148, which was prevailing prior to amendment and insertion of section 148A was insulated and saved uptill 30.06.2021. The pandemic and lock down prevailed all over India. The people could not file their return or comply with the various mandate of Income Tax Act. Considering such situation for the benefit of the assessee and to facilitate the individual to come out of woods the time limit framed under Income Tax Act was extended - As the provisions of Section 148 which was prevailing prior to the amendment of Finance Act, 2021 was also extended. Here in this case, the power to issue notice under Section 148 which was prior to the amendment was also saved and the time was extended. In a result, the notice issued on 30.06.2021 (Annexure P-1) would also be saved.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Applicability of Section 148A of the Income Tax Act, 1961 post the Finance Act, 2021.
3. Impact of the COVID-19 pandemic and subsequent notifications on the issuance of notice under Section 148.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30.06.2021 issued under Section 148 of the Income Tax Act, 1961, arguing that it was issued without following the procedure under the newly inserted Section 148A, which came into effect on 01.04.2021. The petitioner contended that the notice was illegal as it did not provide an opportunity for a hearing, which is mandatory under Section 148A.

2. Applicability of Section 148A of the Income Tax Act, 1961 Post the Finance Act, 2021:
The petitioner argued that the Finance Act, 2021, which was notified on 28th March 2021, brought Section 148A into force from 01.04.2021. This section mandates that before issuing a notice under Section 148, the Assessing Officer must conduct an enquiry and provide an opportunity for a hearing. The petitioner claimed that since the notice was issued on 30.06.2021, it should have complied with Section 148A.

3. Impact of the COVID-19 Pandemic and Subsequent Notifications on the Issuance of Notice under Section 148:
The respondents argued that due to the COVID-19 pandemic and the resulting lockdowns, the Ministry of Finance issued notifications extending the applicability of the old provisions of Section 148. These notifications extended the time limit for issuing notices under Section 148 until 30.06.2021. The respondents contended that the notice issued on 30.06.2021 was within the extended time frame and was therefore valid.

Judgment Analysis:
The court examined the documents and the timeline of the notices and amendments. It was noted that the Finance Act, 2021, introduced Section 148A, which required an enquiry and an opportunity for a hearing before issuing a notice under Section 148. However, due to the pandemic, the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, allowed the Central Government to extend time limits for various actions under the Income Tax Act.

The court referred to notifications dated 31.03.2021 and 27.04.2021, which extended the time limit for issuing notices under Section 148 until 30.06.2021. These notifications were issued under the delegated powers given to the Ministry of Finance by the Parliament. The court held that this delegation of power was valid and necessary due to the pandemic, and it did not amount to an abdication of legislative power.

The court cited the Supreme Court's decision in A.K. Roy v. Union of India, which upheld the validity of delegating power to the Executive to bring provisions of an amendment into force. Similarly, in this case, the delegation to the Ministry of Finance to extend the time limit for issuing notices under Section 148 was considered valid.

The court concluded that the notifications extending the time limit for issuing notices under Section 148 until 30.06.2021 were valid. Consequently, the notice issued to the petitioner on 30.06.2021 was within the extended time frame and was therefore valid. The petition was dismissed, and no interference was made in the issuance of the notice.

Conclusion:
The court upheld the validity of the notice issued under Section 148 on 30.06.2021, considering the extended time limits provided by the notifications issued due to the COVID-19 pandemic. The requirement of Section 148A was deferred by these notifications, making the notice issued under the old Section 148 provisions valid. The petition challenging the notice was dismissed.