2022 (5) TMI 174 - 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 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. 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. 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:
Validity of notices for reassessment under the Finance Act, 2021 and the applicability of the newly introduced provisions post 01.04.2021. Interpretation and constitutionality of notifications issued by the CBDT dated 31.03.2021 and 27.04.2021 in relation to the Relaxation Act, 2020.

Issue 1: Validity of notices for reassessment under the Finance Act, 2021:
The judgment analyzed the controversy surrounding the validity of notices for reassessment under the Finance Act, 2021. The Court referred to the Sudesh Taneja judgment, which highlighted the significant departure made by the new scheme of reassessment under the Finance Act, 2021. The Court emphasized that the new provisions altered the time limits for issuing reassessment notices and eliminated the concept of income escaping assessment due to the assessee's failure to disclose material facts fully. The judgment clarified that the new scheme applied to notices issued after 01.04.2021, requiring compliance with Section 148A procedures. The Court concluded that all notices issued post 01.04.2021 without following Section 148A procedures were invalid and quashed.

Issue 2: Interpretation and constitutionality of notifications by CBDT:
The judgment delved into the interpretation and constitutionality of notifications issued by the CBDT dated 31.03.2021 and 27.04.2021 in relation to the Relaxation Act, 2020. The Court scrutinized the legality of the explanations provided in these notifications, which sought to clarify the application of Section 148 time limits pre-amendment. The Court held that the explanations exceeded the CBDT's jurisdiction as subordinate legislation, as they went beyond the powers granted by the parent Act. The judgment emphasized that explanations cannot alter the statutory provisions and declared the explanations unconstitutional and invalid. Additionally, the Court highlighted the presumption of constitutionality of statutes and delegated legislation, emphasizing that subordinate legislation could be challenged on various grounds, including being manifestly arbitrary.

In conclusion, the High Court of Rajasthan, in line with the Sudesh Taneja judgment, declared the impugned notices for reassessment under the Finance Act, 2021 as invalid and quashed them. The Court also ruled the explanations in the notifications by the CBDT as unconstitutional and invalid, emphasizing the limitations of subordinate legislation. The judgment provided a detailed analysis of the legal framework and statutory interpretation, ensuring compliance with the newly introduced provisions while upholding the principles of legality and constitutionality in the application of tax laws.