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2022 (10) TMI 83 - HC - Income TaxReopening of assessment u/s 147 - Eligibility of notice u/s 148 - mandatory conditions specified in Section 148A or not? - Scope of amended provisions of Section 147 to 151 - whether a notice issued on or after 01.04.2021 under Section 148, without complying with provisions of Section 148 and Section 148A of the Act is valid? - HELD THAT - On commencement of Finance Act, 2021 w.e.f. 01.04.2021, the 2020 Act was already in force. Even then, Parliament made the amended provisions of Section 147 to 151 of the Act effective from 01.04.2021. The said provisions have been substituted. It is well settled in law that substitution of a provision results in repeal of the earlier provision and its replacement by the new provision. From perusal of 2020 Act, it is evident that Central Government has been empowered to notify the period in which the actions are to be taken and to extend the time limit within which the said actions are to be taken. The conditions prescribed for issue of notice under Section 48 of the 1961 Act cannot be waived. The explanation below clause (A) in the notifications dated 30.03.2021 and 27.04.2021, is clearly beyond the authority delegated to the Central Government under the 2020 Act to issue notifications extending time limit for various actions and compliances. By means of aforesaid explanation, the Central Government has extended the operation of Section 148, 149 and 151 prior to its amendment by Finance Act, 2021 and has sought to revive the non-existent provisions which is clearly beyond its authority. Therefore, the explanation contained in notification dated 30.03.2021 and 27.04.2021 is liable to be struck down as ultra vires 2020 Act. In the instant case, the validity of notice has to be adjudged on the basis of law as existing on the date of notice. The mandatory conditions specified in Section 148A of the Act have not been complied with before issuance of impugned notice and the same has been issued in violation of mandate contained in Section 148 and 148-A of the Act. Therefore the issue with regard to validity of notice has to be answered in the negative. The impugned notice dated 30.06.2021 is invalid and has to be struck down. Submission made by learned counsel for the revenue that the 2020 Act creates a legal fiction and therefore, it pre supposes existence of erstwhile Section of 148 even though it has been repealed with effect from 01.04.2021 is concerned, suffice it to say that legal fiction cannot operate in contravention of a legal provision. The validity of the notice has to be adjudged on the basis of the law in existence at the time of issue of notice. Therefore, the aforesaid contention deserves to be repelled. We are in respectful agreement with the reasons recorded and views expressed by Allahabad, Bombay, Delhi, Madras and Rajasthan High Courts. Therefore, the explanations to notification No.20/2021 dated 31.03.2021 and notification No.38/2021 dated 27.04.2021 are declared ultra vires the provisions of 1961 Act and 2020 Act. The impugned notice dated 30.06.2021 issued under Section 148 of the Act is quashed.
Issues Involved:
1. Validity of the explanation below Clause (A) in notifications dated 31.03.2021 and 27.04.2021 issued by the Central Board of Direct Taxes. 2. Applicability of the 2020 Act's extension of time limits to notices issued under erstwhile Section 148 of the Income Tax Act, 1961, after 01.04.2021. 3. Validity of the notice dated 30.06.2021 issued under Section 148 of the Income Tax Act for the Assessment Year 2016-17. Issue-wise Detailed Analysis: 1. Validity of the Explanation Below Clause (A) in Notifications Dated 31.03.2021 and 27.04.2021: The petitioner challenged the explanations in the notifications as ultra vires the provisions of the Income Tax Act, 1961, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The court noted that the amended provisions of Sections 147 to 151 of the 1961 Act came into effect from 01.04.2021, replacing the earlier provisions. The court held that the Central Government, through the explanations in the notifications, had improperly extended the operation of the pre-amendment provisions of Sections 148, 149, and 151, which was beyond its delegated authority under the 2020 Act. Consequently, the explanations in the notifications were declared ultra vires and struck down. 2. Applicability of the 2020 Act's Extension of Time Limits to Notices Issued Under Erstwhile Section 148 After 01.04.2021: The petitioner argued that the amended provisions should apply to all proceedings initiated after 01.04.2021, and the impugned notices were issued without following the mandatory procedures under Section 148A. The court observed that the 2020 Act extended timelines due to the COVID-19 pandemic but did not amend or modify procedural requirements for reassessment under the 1961 Act. The court emphasized that the amended provisions of Section 148A, which required specific procedural steps before issuing a notice, were mandatory and had to be complied with. Therefore, the extension of timelines did not validate notices issued without following the amended procedures. 3. Validity of the Notice Dated 30.06.2021 Issued Under Section 148 for the Assessment Year 2016-17: The petitioner received a notice dated 30.06.2021 under Section 148 for the assessment year 2016-17. The court examined whether the notice complied with the amended provisions of the 1961 Act. It was found that the mandatory conditions specified in Section 148A, including conducting an enquiry and providing an opportunity of hearing, were not fulfilled before issuing the notice. The court held that the notice was issued in violation of the amended provisions and was therefore invalid. The court quashed the notice but allowed the Assessing Officer to initiate fresh reassessment proceedings in accordance with the amended provisions of the 1961 Act. Conclusion: The explanations in the notifications dated 31.03.2021 and 27.04.2021 were declared ultra vires the provisions of the 1961 Act and the 2020 Act. The notice dated 30.06.2021 issued under Section 148 for the assessment year 2016-17 was quashed due to non-compliance with the mandatory procedures under the amended provisions. The Assessing Officer was permitted to initiate fresh reassessment proceedings in accordance with the relevant provisions of the 1961 Act as amended by the Finance Act, 2021. The writ petition was disposed of accordingly.
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