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2022 (4) TMI 44 - HC - Income TaxInitiation of assessment proceedings u/s 148 - Scope of new Section 148A - validity of the assessment proceedings initiated against assessees after 1st April 2021 under the provisions of the Act, as it existed before 1st April 2021, read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (the Relaxation Act) and the notifications issued thereunder - HELD THAT - On a plain reading of Relaxation Act it is clear that the only powers granted to the Central Government by Relaxation Act is the power to notify the period during which actions are required to be taken that can fall within the ambit of Relaxation Act, and the power to extend the time limit within which those actions are to be taken. A plain reading of the impugned Explanations in Notification Nos.20 of 2021 and 38 of 2021 shows that it purports to clarify that the unamended provisions of Sections 147 to 151 of the Act will apply for the purposes of issue of notices under Section 148 of the Act, which is clearly ultra vires Relaxation Act. Reopening notices issued after 1st April, 2021 are unsustainable and bad in law even if one was to apply the Explanations to the Notification Nos.20 of 2021 and 38 of 2021. The Explanation seeks to extend the applicability of erstwhile Sections 148, 149 and 151. The impugned Explanation does not cover Section 147, which (as amended) empowers the revenue to reopen an assessment subject to Sections 148 to 153, which includes Section 148A. Thus, even if Explanations are valid, the mandatory procedure laid down by Section 148A has not been followed and hence, without anything further, the notices u/s 148 of the Act are invalid and must be struck down for this reason as well. This proposition has also been upheld by the Delhi High Court. As regards Revenue s arguments that Relaxation Act being a beneficial legislation must be given purposive interpretation , the purpose of Section 3(1) of Relaxation Act is to extend limitation periods as provided in a specified Act (including the Income-tax Act). The purpose of Section 3(1) of Relaxation Act is not to postpone the applicability of amended provisions of a Specified Act. Though Relaxation Act was in existence when the Finance Act, 2021 was passed, the Parliament has specifically enacted the new, (amended) provisions of Section 147 to 151 of the Act and made them applicable with effect form 1st April, 2021. Therefore, it is clear that amendment is to be applied from 1st April, 2021. Further, when there is no ambiguity on the applicability of the provision, there is no question of resorting to purpose test. As regards liberty granted by the Allahabad High Court, certainly, if the law permits issuance of notices under Section 148 of the Act (as amended), afresh, then no liberty is required to be granted by the Court, and it would be within the Assessing Officer s powers to initiate proceedings as per the amended law. The Madras High Court has considered this very plea and granted liberty to initiate reassessment proceedings in accordance with the provisions of the amended Act, if limitation for it survives . Section 3 of Relaxation Act falls in Chapter II of the said Act, which is titled Relaxation of Certain Provisions of Specified Act . In contradistinction, Section 4 of Relaxation Act which does amend several provisions of the Act falls in Chapter III, which is titled Amendments to the Income Tax Act, 1961 . It will be apposite to notice that the amendments provided for in Section 4 were made by the Legislature itself in terms of the said Section and no such power to amend the Act was delegated to the Central Government. Therefore, we would agree with Mr. Pardiwalla that it is only Section 4 of Relaxation Act which amended the Act and no such amendments to the substantive provisions of the Act were envisaged under Section 3 of Relaxation Act, which was only a relaxation provision dealing with time limits under various enactments. The explanations to the Notification No.20 of 2021 dated 31st March 2021 and Notification No.38 of 2021 dated 27th April 2021 are declared ultra vires and are, therefore, bad in law and null and void. all these writ petitions listed above are disposed by allowing the same.
Issues Involved:
1. Validity of assessment proceedings initiated under Section 148 of the Income Tax Act, 1961 post 1st April 2021. 2. Applicability of the amended provisions of the Income Tax Act, 1961 introduced by the Finance Act, 2021. 3. Legal validity of the CBDT Notifications No. 20/2021 and 38/2021. Detailed Analysis: Issue 1: Validity of Assessment Proceedings Initiated Post 1st April 2021 The core issue is whether the notices issued under Section 148 of the Income Tax Act, 1961 after 1st April 2021 are valid under the old provisions or the newly amended provisions introduced by the Finance Act, 2021. The court concluded that the old provisions ceased to exist after 31st March 2021 and any notices issued post 1st April 2021 must comply with the new provisions. The court emphasized that the substitution of old provisions by new ones implies that the old provisions are repealed and cannot be applied unless expressly saved by a legislative provision. Issue 2: Applicability of the Amended Provisions The Finance Act, 2021 introduced significant changes to the provisions related to reassessment under Sections 147 to 151 of the Income Tax Act, 1961, effective from 1st April 2021. The court noted that the new provisions, including Section 148A, must be followed for any reassessment proceedings initiated after this date. The court highlighted that the new provisions codify the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer. The court also observed that the new provisions do not contain any saving clause indicating that the old provisions should continue to apply for actions initiated after 1st April 2021. Issue 3: Legal Validity of CBDT Notifications The court examined the CBDT Notifications No. 20/2021 and 38/2021, which extended the time limits for issuing notices under Section 148 and purported to apply the old provisions of the Income Tax Act, 1961. The court declared these notifications ultra vires, stating that the subordinate legislation cannot revive repealed statutory provisions. The court emphasized that the Relaxation Act, 2020, only extended time limits and did not authorize the application of old provisions post their repeal. The court held that the explanations in the notifications were beyond the powers conferred by the Relaxation Act and, therefore, invalid. Conclusion: The court quashed all the impugned notices issued under Section 148 of the Income Tax Act, 1961 after 1st April 2021, declaring them invalid for not complying with the amended provisions. The court allowed the Assessing Officers to initiate fresh reassessment proceedings in accordance with the new provisions introduced by the Finance Act, 2021, after strictly complying with the procedural requirements. Summary of Judgments: The court aligned with the views of the Allahabad High Court, Delhi High Court, Rajasthan High Court, and Madras High Court, which have uniformly held that the notices issued under Section 148 post 1st April 2021 must comply with the new provisions. The court rejected the contrary view taken by the Chhattisgarh High Court. The detailed analysis covered the legislative intent, procedural requirements, and the limitations of subordinate legislation, reinforcing the principle that legislative amendments must be applied as per their effective date unless explicitly saved by the legislature.
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