2022 (4) TMI 39 - HC - Income Tax

Initiation of assessment proceedings u/s 148 - Scope of new Section 148A - validity of the assessment proceedings initiated against assessees after 1st April 2021 under the provisions of the Act, as it existed before 1st April 2021, read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (the Relaxation Act) and the notifications issued thereunder - HELD THAT - As relying on SUDESH TANEJA WIFE OF SHRI CP TANEJA 2022 (1) TMI 1212 - RAJASTHAN HIGH COURT no notice under Section 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 would be in terms of the substituted Section 149(1) but without breaching the upper time limit provided in the original Section 149(1) which stood substituted. 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. The subordinate legislation could not have travelled beyond the powers vested in the Government of India by the parent Act. 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 after 01.04.2021.
2. Applicability of the new reassessment scheme under the Finance Act, 2021.
3. Jurisdiction of CBDT in issuing notifications with explanations.

Detailed Analysis:

1. Validity of Reassessment Notices Issued After 01.04.2021:
The petitioners challenged the reassessment notices issued by the assessing officer after 01.04.2021, arguing that these notices were issued under the provisions for reassessment contained in the Income Tax Act, 1961, which prevailed before 01.04.2021. They contended that the procedure laid down under Section 148-A of the Income Tax Act, inserted with effect from 01.04.2021 by the Finance Act, was not followed. The revenue did not dispute these factual averments. The court concluded that all notices issued after 01.04.2021 must comply with the new provisions under the Finance Act, 2021. In the absence of compliance with Section 148A, the notices were deemed invalid.

2. Applicability of the New Reassessment Scheme Under the Finance Act, 2021:
The court examined the provisions of reassessment under the Finance Act, 2021, noting significant changes, such as the time limits for issuing reassessment notices and the procedures for making enquiries and issuing notices. The court observed that there was no indication that the new scheme of reassessment would apply only to periods post 01.04.2021. The court emphasized that all notices issued after 01.04.2021 had to adhere to the new provisions. The court highlighted that the first proviso to Section 149(1) restricted issuing notices for past assessment years by resorting to the extended limitation period under the new Section 149(1)(b). The court concluded that the new provisions applied to all actions of issuing notices under Section 148 after 01.04.2021.

3. Jurisdiction of CBDT in Issuing Notifications with Explanations:
The court scrutinized the Relaxation Act, 2020, and the two notifications issued by the CBDT on 31.03.2021 and 27.04.2021, which included explanations clarifying that the provisions as they stood on 31.03.2021 would apply for issuing notices under Section 148. The court held that the CBDT exceeded its jurisdiction as a subordinate legislature by introducing such explanations, as the power vested in the Government of India was limited to extending time limits. The court declared these explanations unconstitutional and invalid, emphasizing that subordinate legislation cannot amend the statutory provisions of the parent Act.

Conclusion:
The court quashed all the impugned reassessment notices challenged in the petitions, as they were issued after 01.04.2021 without following the procedure under Section 148A of the Act. The court reaffirmed the applicability of the new reassessment provisions under the Finance Act, 2021, to all notices issued after 01.04.2021. The petitions were disposed of accordingly, and the revenue's appeals were dismissed.