2022 (1) TMI 1443 - HC - Income Tax

Validity of reassessment proceedings - scope of new provisions/substituted Sections - Scope of Sections 147 to 151 of the Income Tax Act 1961 by way of the Finance Act 2021 with effect from 1st April 2021 - powers u/Section 3(1) of Relaxation Act - as argued notices in the present matters have been issued post 31st March 2021 without following the procedure prescribed in the substituted Sections 147 to 151 w.e.f. 01st April 2021 - HELD THAT - 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. Consequently the impugned reassessment notices issued under Section 148 of the Income Tax Act 1961 are quashed and the present writ petitions are allowed. If the law permits the respondents/revenue to take further steps in the matter they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the petitioners have a grievance they shall be at liberty to take their remedies in accordance with law.

Summary

Issues:
Challenging impugned notices issued post 31st March, 2021 without following prescribed procedure under substituted Sections 147 to 151 w.e.f. 01st April, 2021.

Analysis:

The judgment by the Hon'ble Delhi High Court, delivered by Hon'ble Mr. Justice Manmohan and Hon'ble Mr. Justice Navin Chawla, addresses the issue of notices issued post 31st March, 2021 without adhering to the prescribed procedure under substituted Sections 147 to 151 of the Income Tax Act, 1961. The Court observed that the impugned notices in the present matters were issued after the specified date and were not in compliance with the new provisions introduced by the Finance Act, 2021. The Court referred to its previous judgment in the case of Mon Mohan Kohli vs. Assistant Commissioner of Income Tax & Anr., where it was concluded that reassessment notices issued under Section 148 post 31st March, 2021 had to comply with the substituted Sections introduced by the Finance Act, 2021 effective from 1st April, 2021.

The Court emphasized that the power of reassessment existing prior to 31st March, 2021 continued until the extended period, i.e., 30th June, 2021. However, the Finance Act, 2021 altered the procedure to be followed for issuance of notices from 1st April, 2021. The Court further clarified that the Relaxation Act empowered the Government to extend time limits but did not delegate the power to legislate on provisions for initiating reassessment proceedings. The Court held that the impugned Explanations in the notifications dated 31st March, 2021 and 27th April, 2021 were beyond the power delegated to the Government and ultra vires the parent statute, the Relaxation Act.

Consequently, the Court declared Explanations A(a)(ii)/A(b) to the Notifications as ultra vires the Relaxation Act, 2020, and hence, invalid in law. The impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 were quashed, and the writ petitions were allowed. The respondents/revenue were granted liberty to take further steps in accordance with the law. The judgment highlighted that if the petitioners had grievances with any subsequent actions taken by the respondents, they were entitled to seek remedies as per the law, ensuring the protection of their rights and interests.