2022 (8) TMI 586 - HC - Income Tax

Reopening of assessment u/s 147 - time limit for issuance of the notice under Section 148 - manner of issuance of notice by electronic mode - manner of service of notice and Section 282 - issuance v/s receipt of notice - HELD THAT - As in Daujee Abhushan Bhandar Pvt Ltd case 2022 (3) TMI 784 - ALLAHABAD HIGH COURT referred to Rule 127A of the Rules of 1962 which deals with communication in the electronic form and after referring to Section 13 of the Information Technology Act, 2000, it was held that despatch of an electronic record occurs when it enters a computer resource outside the control of the originator. Therefore, if a notice is digitally signed by the income tax authority and it is entered by the income tax authority in computer resource outside the control, then that point of time would be the time of issuance of the notice. After recording the aforesaid finding, the Division Bench of the Allahabad High Court further examined the definition of the words issue and issuance of notice which have not been defined under the Act of 1961. The dictionary meaning of both the words were thereafter taken and after considering different judgments, the Division Bench finally came to the conclusion that mere digitally signing the notice is not issuance of notice. The impugned notice under Section 148 of the Act of 1961 in that case was received on 6.4.2021 and, therefore, it was treated to be time barred. As the notice under Section 148 of the Act of 1961 was digitally signed by the authority on 31.3.2021 and was sent to the assessee through email, but email was received by the assessee on 6.4.2021 and thereby taking the date of receipt to be relevant, the judgment was rendered favourable to the assessee. With due respect to the Division bench of the Allahabad High Court, the issue threadbare discussed by it refers to the date of issuance and not of receipt, but after making discussion in reference to all the provisions, conclusions have been drawn referring to the date of receipt, without discussion as to when it enters a computer resource outside the control of the originator Manner of issuance of notice by electronic mode and when it would be taken to have been issued, but then the judgment was rendered in reference to the date of receipt of the notice, without showing that after the notice was digitally signed on 31.3.2021, it was not sent being entered by the income tax authority in computer resource outside his control. Thus, with due respect to the Division Bench of the Allahabad High Court, the conclusions finally drawn on the facts of that case cannot be applied, rather we cannot change the language of the provision by changing the word issuance to that of receipt . Finding that the notice in question was issued on 31.3.2021, we do not find a case in favour of the petitioners and, accordingly, WP are dismissed. However, it is with liberty to the petitioners to challenge the assessment orders, if they so choose, by availing the remedy as provided under law. The dismissal of these writ petitions would not come in the way of the petitioners availing the remedy in accordance with law. Notices were issued before 1.4.2021, W.P. challenging the validity of Explanation to Clause A(a) modified by notifications issued from time to time are not pressed and, accordingly, the said writ petitions are dismissed.

Summary

Issues Involved:
1. Constitutionality of the Explanation to Clause A(a) in the notifications dated 31.3.2021, 27.4.2021, and 25.6.2021.
2. Validity of notices issued under Section 148 of the Income Tax Act, 1961, especially concerning their issuance date.

Issue-wise Detailed Analysis:

1. Constitutionality of the Explanation to Clause A(a):

The petitioner argued that the Explanation to Clause A(a) in the impugned notifications indirectly extends the old provisions of the Income Tax Act, 1961 beyond 31.3.2021, under the guise of a clarification by delegated legislation, and hence should be declared unconstitutional. The petitioner contended that Section 3(1) of the TOLA Act, 2020 allows the Central Government to issue notifications only for extending time limits, not for extending the operation of old provisions.

The court noted that the challenge to the Explanation to Clause A(a) would only be academic if the notices under Section 148 were found to be issued before 1.4.2021. Thus, the court first examined the issuance dates of these notices.

2. Validity of Notices Issued Under Section 148:

The primary contention was whether the notices under Section 148 were issued before or after 1.4.2021. The court referred to Sections 148 and 149 of the Income Tax Act, 1961, as they stood before the amendment by the Finance Act, 2021. Section 149 provides the time limit for issuing notices under Section 148.

The court also examined Sections 282 and 282A of the Income Tax Act, 1961, and Rule 127A of the Income Tax Rules, 1962, which deal with the manner and authentication of notices. It was established that the notice dated 31.3.2021 was electronically generated and sent via email, with the name and office of the income tax authority printed on the attachment, thus meeting the requirements of Rule 127A.

The petitioner argued that although the notice was issued on 31.3.2021, it was served on 1.4.2021, and hence the old provisions should not apply. However, the court emphasized that the relevant factor is the issuance date, not the receipt date. The court referenced the Allahabad High Court's judgment in Daujee Abhushan Bhandar Pvt Ltd v. Union of India, which discussed the issuance of notices in electronic form and concluded that the issuance occurs when the notice enters a computer resource outside the control of the originator.

The court agreed with the Allahabad High Court's interpretation but disagreed with its conclusion that the date of receipt is relevant. The court found that the notice in question was issued on 31.3.2021, thus falling under the old provisions of Section 148.

Conclusion:

The court dismissed the writ petitions challenging the notices issued under Section 148, as the notices were issued before 1.4.2021. Consequently, the petitions challenging the validity of the Explanation to Clause A(a) were also dismissed as not pressed. The court allowed the petitioners the liberty to challenge the assessment orders through available legal remedies.

Orders:

1. W.P.Nos.27998 and 28000 of 2021 and W.P.(MD) No.11312 of 2021 were dismissed.
2. W.P.Nos.27997 and 27999 of 2021 and W.P.(MD) No.16821 of 2021 were dismissed as not pressed.
3. No order as to costs. All connected miscellaneous petitions were closed.