2022 (1) TMI 1212 - 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 - Whether after introduction of new provisions for reassessment of income by virtue of the Finance Act, 2021 with effect from 01.04.2021, substituting the then existing provisions, would the substituted provisions survive and could be used for issuing notices for reassessment for the past period? - HELD THAT - As the first proviso to Section 149(1) provides that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. As per this proviso thus no notice under Section 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. This aspect has also been highlighted in the memorandum explaining the proposed provisions in the Finance Bill. If according to the revenue for past period provisions of section 149 before amendment were applicable, this first proviso to section 149(1) was wholly unnecessary. Looked from both angles, namely, no indication of surviving the past provisions after the substitution and in fact an active indication to the contrary, inescapable conclusion that we must arrive at is that for any action of issuance of notice under Section 148 after 01.04.2021 the newly introduced provisions under the Finance Act, 2021 would apply. Mere extension of time limits for issuing notice under section 148 would not change this position that obtains in law. 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. Whether the explanations contained in the CBDT circulars dated 31.03.2021 and 27.04.2021 are legal and valid? - Subordinate legislation does not enjoy same level of immunity as the law framed by the Parliament or the State Legislature. The law framed by the Parliament or the State Legislature can be challenged only on the grounds of being beyond the legislative competence or being contrary to the fundamental rights or any other constitutional provisions. Third ground of challenge which is now recognized in the judgment in case of Shayara Bano Vs Union of India 2017 (9) TMI 1302 - SUPREME COURT is of legislation being manifestly arbitrary. A subordinate legislation can be challenged on all these grounds as well as on the grounds that it does not conform to the statute under which it is made or that it is inconsistent with the provisions of the Act or it is contrary to some of the statutes applicable on the subject matter. As under sub-section (1) of Section 3 of the Relaxation Act, 2020 while extending the time limits for taking action and making compliances in the specified Acts upto 31.12.2020 the power was given to the Central Government to extend the time further by issuing a notification. This was the only power vested in the Central Government. As a piece of delegated legislation the notifications issued in exercise of such powers, had to be within the confines of such powers. In plain terms under sub-section (1) of Section 3 of the Relaxation Act, 2020 the Government of India was authorized to extend the time limits by issuing notifications in this regard. Issuing any explanation touching the provisions of the Income Tax Act was not part of this delegation at all. The CBDT while issuing the notifications dated 31.03.2021 and 27.04.2021 when introduced an explanation which provided by way of clarification that for the purposes of issuance of notice under Section 148 as per the time limits specified in Section 149 or 151, the provisions as they stood as on 31.03.2021 before commencement of the Finance Act, 2021 shall apply, plainly exceeded its jurisdiction as a subordinate legislation. The subordinate legislation could not have travelled beyond the powers vested in the Government of India by the parent Act. Even otherwise it is extremely doubtful whether the explanation in the guise of clarification can change the very basis of the statutory provisions. If the plain meaning of the statutory provision and its interpretation is clear, by adopting a position different in an explanation and describing it to be clarificatory, the subordinate legislature cannot be permitted to amend the provisions of the parent Act. Accordingly, these explanations are unconstitutional and declared as invalid. We are unable to persuade ourselves to accept this analysis of the situation. In our understanding 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 Involved:
1. Validity of notices issued under Section 148 of the Income Tax Act, 1961 after 01.04.2021.
2. Legality of explanations in CBDT notifications dated 31.03.2021 and 27.04.2021.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148 After 01.04.2021:
The petitioners challenged the notices issued by the Assessing Officers under Section 148 of the Income Tax Act, 1961 for reopening assessments for various assessment years. These notices were issued after 01.04.2021, but pertained to periods before this date. The petitioners argued that since the notices were issued after 01.04.2021, they should comply with the provisions effective from 01.04.2021. The notices were issued under the old provisions which have been substituted, making them invalid. The court noted that the Finance Act, 2021 introduced new provisions for reassessment effective from 01.04.2021, which replaced the old provisions. The court emphasized that the new provisions must be followed for any action taken after 01.04.2021. The court concluded that the notices issued after 01.04.2021 under the old provisions were invalid as they did not comply with the new provisions, particularly the procedure under Section 148A.

2. Legality of Explanations in CBDT Notifications Dated 31.03.2021 and 27.04.2021:
The petitioners also challenged portions of two notifications issued by the Central Board of Direct Taxes (CBDT) clarifying that the provisions of Sections 148, 149, and 151 as they stood on 31.03.2021 would apply for issuing notices under Section 148 for the past period. The petitioners argued that this explanation was beyond the jurisdiction of CBDT. The court agreed, stating that the explanations in the notifications exceeded the jurisdiction of the CBDT as a subordinate legislation. The court held that the CBDT could not amend the statutory provisions through explanations and declared the explanations in the notifications as unconstitutional and invalid.

Judgment:
The court quashed and set aside the impugned notices, declaring them invalid and bad in law. The appeals of the revenue were dismissed, and the writ petitions were allowed. The court emphasized that any notice issued after 01.04.2021 must comply with the new provisions introduced by the Finance Act, 2021, and the explanations in the CBDT notifications could not override the statutory provisions.