2022 (2) TMI 530 - 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 - HELD THAT - As decided in SUDESH TANEJA WIFE OF SHRI CP TANEJA 2022 (1) TMI 1212 - RAJASTHAN HIGH COURT 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. 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.

Summary

Issues:
Challenge to reassessment notice dated 30.06.2021 for assessment year 2013-14 based on old provisions of Income Tax Act, 1961; Non-compliance with Section 148A of the Act; Interpretation of Finance Act, 2021 provisions regarding reassessment; Validity of notifications by CBDT dated 31.03.2021 and 27.04.2021; Constitutionality of subordinate legislation; Conflict in judicial opinions.

Analysis:
The petitioner contested a reassessment notice issued on 30.06.2021 for the assessment year 2013-14, arguing that the assessing officer applied outdated provisions of the Income Tax Act, 1961, failing to follow the procedure outlined in Section 148A inserted from 01.04.2021. Referring to a previous judgment, the Court highlighted the significant changes introduced by the Finance Act, 2021 in reassessment provisions. The new scheme under Section 148A enabled detailed inquiries before issuing notices, emphasizing that the legislative intent was for the new provisions to apply to notices post 01.04.2021. The Court emphasized the importance of adhering to the revised time limits for issuing notices under Section 148, indicating that extended periods could not be used for reassessments predating the substitution. Consequently, all notices issued post 01.04.2021 without following Section 148A were deemed invalid.

Regarding the validity of notifications by CBDT dated 31.03.2021 and 27.04.2021, the Court delved into the principles of constitutionality of statutes and delegated legislation. It noted the presumption of constitutionality but highlighted that subordinate legislation could be challenged on various grounds, including being manifestly arbitrary. Analyzing the Relaxation Act, 2020 and the CBDT notifications, the Court found that the explanations provided exceeded the delegated powers, as they altered the statutory provisions beyond permissible limits. The Court declared these explanations as unconstitutional and invalid, aligning with similar views from other High Courts.

Addressing conflicting judicial opinions, the Court rejected an alternative analysis that sought to defer the application of reassessment provisions through notifications. It emphasized that the amendments introduced by the Finance Act, 2021 were effective from 01.04.2021, dismissing the notion of postponing the new provisions through notifications. Consequently, the Court quashed the impugned notices, affirming their invalidity and upholding the decision of the learned Single Judge. All writ petitions were allowed, and appeals by the revenue were dismissed, concluding the matter with the disposal of pending applications.