2022 (3) TMI 1198 - 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 - Whether after introduction of new provisions for reassessment of income by virtue of the Finance Act 2021 with effect from 01.04.2021 substituting the then existing provisions would the substituted provisions survive and could be used for issuing notices for reassessment for the past period? - HELD THAT - As decided in own case 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. 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. Even otherwise it is extremely doubtful whether the explanation in the guise of clarification can change the very basis of the statutory provisions. If the plain meaning of the statutory provision and its interpretation is clear by adopting a position different in an explanation and describing it to be clarificatory the subordinate legislature cannot be permitted to amend the provisions of the parent Act. Accordingly these explanations are unconstitutional and declared as invalid. We are unable to persuade ourselves to accept this analysis of the situation. In our understanding 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. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed.

Summary

Issues Involved:
1. Validity of reassessment notices issued under Section 148 of the Income Tax Act, 1961 after the introduction of new provisions by the Finance Act, 2021.
2. Legality and validity of the explanations contained in the CBDT circulars dated 31.03.2021 and 27.04.2021.

Issue-Wise Detailed Analysis:

1. Validity of Reassessment Notices Issued Under Section 148 Post Finance Act, 2021:
The petitioners challenged the reassessment notices issued by the Assessing Officers under Section 148 of the Income Tax Act, 1961, for reopening assessments for various years. These notices were issued after 01.04.2021 but pertained to periods before this date. The court referred to a previous decision in "Sudesh Taneja Vs. Income Tax Officer," where it was established that the original provisions, upon substitution by the Finance Act, 2021, stood repealed and had no existence post-substitution. The court noted that the new reassessment scheme under the Finance Act, 2021, introduced significant changes, including time limits for issuing notices and procedures under Section 148A. The court found no legislative intent to apply the new scheme only prospectively from 01.04.2021. Consequently, all notices issued after 01.04.2021 had to comply with the new provisions. The court concluded that notices issued without following Section 148A procedures were invalid.

2. Legality and Validity of CBDT Circulars Dated 31.03.2021 and 27.04.2021:
The court examined whether the explanations in the CBDT circulars could validate the impugned notices. It reiterated the presumption of constitutionality for statutes and subordinate legislation but emphasized that subordinate legislation does not enjoy the same immunity as primary legislation. The court found that the CBDT exceeded its jurisdiction by introducing explanations in the circulars, which attempted to alter the statutory provisions of the Income Tax Act. The court held that the explanations were unconstitutional and invalid as they did not conform to the statute under which they were made.

Conclusion:
The court agreed with the judgment in "Sudesh Taneja Vs. Income Tax Officer" and found the impugned notices invalid and bad in law. The notices were quashed, and the writ petitions were allowed. The directions from the "Sudesh Taneja" case were applied mutatis mutandis to the present cases. Pending applications were also disposed of, and the registry was directed to place a copy of the order in other connected petitions.