2024 (3) TMI 888 - HC - Income Tax

Validity of reopening of assessment - Time limit for issuing notice - validity of sanction for issuing the orders under Section 148A(d) - HELD THAT - As gleaned from the proviso to subsection (1) of Section 149 it applies to assessment years commencing prior to 01.04.2021, i.e. assessment years before the amendments came into effect; and the time limits under Section 149(1)(b), Section 153A or 153C, as the case may be, as it stood before the commencement of the Finance Act, 2021, apply to notices u/s 148 in respect of cases pertaining to assessment years beginning on or before 01.04.2021. Since the disputes pertain to assessment years 2016-2017 and 2017-2018, the proviso undoubtedly applies to these cases. What are the implications of the application of the proviso? - In our view, as a consequence of the proviso, the time limit specified in the pre-amended Section 149 (1)(b) becomes applicable and the time limit prescribed therein was four years and not more than six years. Whether the application of the proviso to Section 149 has the effect of incorporating by reference pre-amended Section 151? - In order to substantiate the contention that pre-amended Section 151 gets incorporated by reference, learned standing counsel relied on sub-section 2 to the pre-amended Section 149. It should be noticed that the proviso to sub-section (1) of the amended Section 149 does not even incorporate the whole of pre-amended Section 149. It merely makes the time limit prescribed therein applicable to the issuance of notices for reassessment in respect of any assessment year beginning before 01.04.2021. A fortiori the proviso certainly does not incorporate pre-amended Section 151 by reference and make it applicable. Impact of the TOLA - Undoubtedly, TOLA extended the time limits under specified enactments, including the I-T Act. As per clause (a)(ii) of sub-section(1) of Section 3 thereof, time limits for grant of sanction or approval were also extended. Since the petitioner does not challenge the sanction with respect to the time limit, clause(a) of sub-section(1) of Section 3 is immaterial. Indeed, TOLA, which extends the time limits for completion of specified tasks up to 31.03.2021, itself becomes irrelevant because of the nature of the challenge in these writ petitions. In Siemens Financial Services 2023 (9) TMI 552 - BOMBAY HIGH COURT concluded, in substantially similar facts and circumstances, that the amended Section 151 and not the pre-amended Section 151 would apply. For reasons set out above, we concur with the conclusion in Siemens Financial Services and Ganesh Das Khanna 2023 (9) TMI 552 - BOMBAY HIGH COURT as subsequently followed in Twylight Infrastructure 2024 (1) TMI 759 - DELHI HIGH COURT . Consequently, the validity of sanction for issuing the orders under Section 148A(d) and the notices under Section 148 should be tested with reference to amended Section 151. If so tested, it is evident that sanction was not granted by an authority specified under clause (ii) of Section 151. Hence, the orders u/s 148A(d) and the notices under Section 148 are quashed. As a corollary, the draft assessment orders u/s 144B/144C cannot survive and are also quashed.

Summary

Issues Involved:
1. Validity of orders issued under Section 148A(d) and notices issued under Section 148 of the Income Tax Act, 1961.
2. Validity of draft assessment orders issued under Section 144B of the Income Tax Act, 1961.
3. Requirement of approval from the specified authority under Section 151 of the Income Tax Act, 1961.
4. Applicability and impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Summary:

Issue 1: Validity of Orders and Notices under Sections 148A(d) and 148

Four writ petitions were filed challenging the orders issued under Section 148A(d) and notices issued under Section 148 for the assessment years 2016-2017 and 2017-2018. The petitioner contended that the approval of the specified authority, as mandated by Section 151 of the Income Tax Act, was not obtained. The court noted that the amendments to Sections 148, 148A, 149, and 151 were effected by the Finance Act 2021 with effect from 01.04.2021, and the orders and notices were issued thereafter with the prior approval of the Commissioner of Income Tax (International Taxes) Chennai.

Issue 2: Validity of Draft Assessment Orders under Section 144B

The petitioner also challenged the draft assessment orders issued under Section 144B for the same assessment years. The court held that since the orders under Section 148A(d) and the notices under Section 148 were quashed, the draft assessment orders under Section 144B/144C could not survive and were also quashed.

Issue 3: Requirement of Approval from Specified Authority under Section 151

The petitioner argued that the approval was not obtained from the specified authority as required under Section 151. The court examined the amended Section 151, which specifies that the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General must grant approval if more than three years have elapsed from the end of the relevant assessment year. The court found that the approval was granted by the Commissioner of Income Tax (International Taxes) Chennai, which was not the specified authority under the amended Section 151.

Issue 4: Applicability and Impact of TOLA

The court considered the applicability of TOLA, which extended the time limits for completion of proceedings, issuance of orders, sanctions, or approvals up to 31.03.2021. The court concluded that TOLA was immaterial to the challenge since the petitioner did not contest the sanction concerning the time limit.

Conclusion:

The court quashed the orders under Section 148A(d) and the notices under Section 148 due to the lack of approval from the specified authority under the amended Section 151. Consequently, the draft assessment orders under Section 144B/144C were also quashed. The writ petitions were allowed, and there was no order as to costs.