2022 (3) TMI 385 - HC - Income Tax

Reopening of assessment u/s 147 - operation of Section 148A - Effect of COVID pandemic and lock down - Extension of provisions of Section 148 which was prevailing prior to the amendment of Finance Act, 2021 - whether notice issued to the petitioner on 30.03.2021 under Section 148 without following the procedure under Section 148A without giving an opportunity of hearing would be illegal and contrary to the provisions of Section 148A and it cannot be sustained? - application of old provisions of Section 148 of the Income Tax Act was extended initially uptill 30th April, 2021 and thereafter was further extended uptill 30th day of June, 2021 - HELD THAT - Under the circumstances by the notifications the operation of Section 148 of the Income Tax Act was extended, thereby deferment of Section 148A was done. It was done by the Ministry of Finance by way of conditional legislation in the peculiar circumstances which arose during the pandemic and lock down and Central Government can not be said to have encroached upon turf of Parliament. Notifications would show that they were issued in exercise of power conferred under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and time for issuance of notice under Section 148, the end date was initially extended uptill on 30th day of April 2021 and subsequently again by notification dated 27th April, 2021 the time limit of 30th day of April 2021 was further extended up till 30th day of June, 2021. By effect of such notification, the individual identity of Section 148, which was prevailing prior to amendment and insertion of section 148A was insulated and saved uptill 30.06.2021. The pandemic and lock down prevailed all over India. The people could not file their returns or comply with the various mandates of Income Tax Act. Considering such situation for the benefit of the assessee and to facilitate the individual to come out of woods the time limit framed under Income Tax Act was extended. Likewise certain right which was reserved in favour of the Income Tax Department was also preserved and was extended at parity. Consequently the provisions of Section 148 which was prevailing prior to the amendment of Finance Act, 2021 was also extended. Here in this case, the power to issue notice under Section 148 which was prior to the amendment was also saved and the time was extended. In a result, the notice issued on 31.03.2021 (Annexure P-1) would also be saved. Therefore, no interference is required to be made in the said issuance of notice and accordingly the petition is dismissed.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Applicability and effect of Section 148A of the Income Tax Act, 1961.
3. Validity of notifications issued by the Ministry of Finance extending the time limit for issuing notices under Section 148.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961, arguing that it was illegal as it did not comply with the newly inserted Section 148A, effective from 01.04.2021. The petitioner contended that the notice was issued without conducting an enquiry or providing an opportunity of hearing, as mandated by Section 148A.

2. Applicability and Effect of Section 148A of the Income Tax Act, 1961:
The petitioner argued that the notice under Section 148 should have adhered to the provisions of Section 148A, which came into force on 01.04.2021. Section 148A requires the Assessing Officer to conduct an enquiry, provide an opportunity of hearing, and obtain prior approval from a specified authority before issuing a notice under Section 148. The petitioner claimed that the notice issued on 31.03.2021 was illegal as it bypassed these requirements.

3. Validity of Notifications Issued by the Ministry of Finance Extending the Time Limit for Issuing Notices Under Section 148:
The respondents countered that due to the COVID-19 pandemic and the resulting lockdown, the Ministry of Finance issued notifications extending the application of the old provisions of Section 148 until 30.06.2021. These notifications were issued under the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, allowing the extension of time limits for various actions under the Income Tax Act. The respondents argued that the notice dated 31.03.2021 was valid as it fell within the extended time limit.

Judgment Analysis:

Legality of the Notice:
The court examined the documents and found that the notice under Section 148 was issued for the Assessment Year 2014-2015 on 31.03.2021. The court noted that the Finance Act, 2021, which introduced Section 148A, was notified on 28th March 2021 and came into force on 01.04.2021. The court considered whether the notice issued on 31.03.2021 was valid despite the introduction of Section 148A.

Applicability of Section 148A:
The court referred to the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, which allowed the Central Government to extend time limits for various actions under the Income Tax Act due to the pandemic. The court noted that the Ministry of Finance issued notifications on 31.03.2021 and 27.04.2021, extending the application of the old provisions of Section 148 until 30.06.2021. These notifications effectively deferred the application of Section 148A.

Validity of Notifications:
The court upheld the validity of the notifications issued by the Ministry of Finance, stating that they were a practical necessity due to the pandemic. The court cited the principle of conditional legislation, where the legislature delegates power to the executive to extend the implementation of certain provisions. The court referenced the Supreme Court's decision in A.K. Roy v. Union of India, which supported the delegation of power to the executive for administrative efficiency.

Conclusion:
The court concluded that the notifications issued by the Ministry of Finance validly extended the application of the old provisions of Section 148 until 30.06.2021. Therefore, the notice issued on 31.03.2021 was valid and did not require interference. The petition was dismissed, and the notice under Section 148 was upheld.

Summary:
The court dismissed the petition challenging the notice issued under Section 148 of the Income Tax Act, 1961, on 31.03.2021. The court held that the notice was valid as it fell within the extended time limit provided by the Ministry of Finance's notifications, which deferred the application of Section 148A until 30.06.2021 due to the COVID-19 pandemic. The court upheld the validity of the notifications and the principle of conditional legislation, allowing the executive to extend the implementation of certain provisions for administrative efficiency.