2022 (1) TMI 741 - HC - Income Tax

Validity of reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Notice as barred by limitation - enforcement of the Enabling Act and the Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021 - time limitation existing under the Act had been extended under the Ordinance - relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19 - as argued respondent Income Tax Authority concerned, before issuing the impugned notices under Section 148 of the Income Tax Act, have not observed the statutory formalities under Section 148 A of the Income Tax Act as prescribed by the Finance Act, 2021 which are applicable with effect from 1st April, 2021 before issuance of notices under Section 148 of the Act on or after 1st April, 2021 - HELD THAT - As decided in Ashok Kumar Agarwal vs- Union of India 2021 (10) TMI 697 - ALLAHABAD HIGH COURT , Bpip Infra Private Limited vs- Income Tax Officer, Ward 4 (1), Jaipur 2021 (12) TMI 207 - RAJASTHAN HIGH COURT and Man Mohan Kohli vs- Assistant Commissioner of Income Tax Anr. 2021 (12) TMI 664 - DELHI HIGH COURT Ordinance, the Enabling Act and Sections 2 to 88 of the Finance Act 2021, as enforced w.e.f. 01.04.2021, are not conflicted. Insofar as the Explanation appended to Clause A(a), A(b), and the impugned Notifications dated 31.03.2021 and 27.04.2021 (respectively) are concerned, we declare that the said Explanations must be read, as applicable to reassessment proceedings as may have been in existence on 31.03.2021 i.e. before the substitution of Sections 147, 148, 148A, 149, 151 151A of the Act. Consequently, the reassessment notices in all the writ petitions are quashed. Keeping in view the aforesaid conclusions, 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. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law.

Summary

Issues Involved:
1. Validity of reassessment notices under Section 148 of the Income Tax Act, 1961 issued post 31st March 2021.
2. Applicability of the Finance Act, 2021 and its procedural changes effective from 1st April 2021.
3. Ultra vires nature of Notifications extending old provisions of Sections 147, 148, 149, and 151 beyond 31st March 2021.

Issue-Wise Detailed Analysis:

1. Validity of Reassessment Notices Under Section 148 Post 31st March 2021:
The petitioners challenged the reassessment notices issued under Section 148 of the Income Tax Act, claiming they were barred by limitation and did not comply with the statutory formalities under Section 148A as prescribed by the Finance Act, 2021, effective from 1st April 2021. The court noted that the old provisions were substituted by the Finance Act, 2021, and any reassessment notices issued after 31st March 2021 must comply with the new provisions, including Section 148A. The court held that the reassessment notices issued post 31st March 2021 without following the new procedural requirements were invalid.

2. Applicability of Finance Act, 2021:
The court emphasized that the Finance Act, 2021, introduced new provisions for reassessment proceedings effective from 1st April 2021, replacing the old provisions. The court referred to the decision of the Allahabad High Court in Ashok Kumar Agarwal v. Union of India, which held that the old provisions were obliterated and replaced by new ones effective from 1st April 2021. The court agreed with this reasoning and concluded that any reassessment proceedings initiated after this date must adhere to the new provisions, and the old provisions could not be applied beyond 31st March 2021.

3. Ultra Vires Nature of Notifications:
The petitioners sought a declaration that the Explanations A(a)(ii)/A(b) to Notification No. 20 dated 31st March 2021 and Notification No. 38 dated 27th April 2021, which extended the applicability of the old provisions beyond 31st March 2021, were ultra vires the Relaxation Act, 2020. The court agreed with the petitioners, citing the Allahabad High Court's decision, which held that the Enabling Act did not delegate the power to extend the old provisions beyond their repeal by the Finance Act, 2021. The court found that the Notifications were beyond the power delegated to the Government and were thus invalid.

Conclusion:
The court quashed all the impugned reassessment notices issued under Section 148 post 31st March 2021. It declared the Explanations A(a)(ii)/A(b) to the Notifications dated 31st March 2021 and 27th April 2021 to be ultra vires the Relaxation Act, 2020, and null and void. The Assessing Officers were given liberty to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act as per the Finance Act, 2021, after complying with the required formalities.