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2024 (9) TMI 1282 - HC - Income TaxValidity of reassessments - violation of the provisions contained in Section 151 - sanction obtained from the JCIT - Scope of unamended Section 151 - as argued in the absence of sanction being accorded by the competent authority, the entire action for reassessment is liable to be set at nought on this ground alone - effect of Taxation and Other Laws (Relaxation Amendment of Certain Provisions) Act, 2020 (TOLA) HELD THAT - Tested on the principles which were enunciated in Suman Jeet Agarwal 2022 (9) TMI 1384 - DELHI HIGH COURT the petitioners would appear to be correct in their submission of the date liable to be ascribed to the impugned notices and those being viewed as having been issued and dispatched after 01 April 2021. However, and in our considered opinion, the same would be of little relevance or significance when one bears in mind the indubitable fact that all the notices were approved by the JCIT and which was an authority recognised under the unamended Section 151. The answer to the argument based on the provisions of TOLA would also largely remain unimpacted by our finding on this score as would become evident from the discussion which ensues. We thus proceed on the demurrer that it was the unamended Section 151 which would be applicable to the impugned proceedings. However, and before proceeding ahead, it would be appropriate to briefly notice the provisions of TOLA and on which the defence of the respondents is founded. TOLA, being Act No. 38 of 2020, came to be promulgated on 29 September 2020. On a fundamental plane, it was a remedial measure aimed at overcoming a position of irretrievable and irreversible consequences which were likely to befall during the nationwide lockdown. It was principally aimed at enabling authorities to take and commence action within the extended timelines that TOLA introduced. However, it neither altered nor modified or amended the distribution of functions, the command structure or the distribution of powers under a specified Act. It was in that light that we had spoken of the carving or conferral of a new or altered jurisdiction. It would therefore be wholly incorrect to read TOLA as intending to amend the distribution of power or the categorisation envisaged and prescribed by Section 151. The additional time that the said statute provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by Section 151 of the Act. The issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant AY or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant AY or thereafter. The bifurcation of those powers would continue unaltered and unaffected by TOLA. Section 151 distributed the powers of approval amongst a set of specified authorities based upon the lapse of time between the end of the relevant AY and the date when reassessment was proposed. Thus even if the reassessment was proposed to be initiated with the aid of TOLA after the expiry of four years from the end of the relevant AY, the authority statutorily empowered to confer approval would be the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner. It would only be in a case where the reassessment was proposed to be initiated before the expiry of four years from the end of the relevant AY that approval could have been accorded by the JCIT. Similar would be the position which would emerge if the actions were tested on the basis of the amended Section 151 and which divides the power of sanction amongst two sets of authorities based on whether reassessment is commenced within three years or thereafter. What we seek to emphasise is that the TOLA authorisation merely enables the competent authority to take action within the extended time period and irrespective of the closure which would have ordinarily come about by virtue of the provisions contained in the Act. It does not alter or amend the structure for approval and sanction which stands erected by virtue of Section 151. TOLA merely extended the period within which action could have been initiated and which would have otherwise and ordinarily been governed and regulated by Sections 148 and 149 of the Act. If the contention of the respondents were to be accepted it would amount to us virtually ignoring the date when reassessment is proposed to be initiated and the same being indelibly tied to the end of the relevant AY. Once it is conceded that the notice came to be issued four or three years after the end of the relevant assessment year, the approval granted by the JCIT would not be compliant with the scheme of Section 151. We thus find ourselves unable to sustain the grant of approval by the JCIT. The respondents had feebly sought to urge that the use of the expression sanction in Section 3 of TOLA also merits due consideration and is liable to be read as supportive of the contentions that were addressed on their behalf. The argument is however clearly meritless when one bears in consideration the indisputable fact that the set of provisions with which we are concerned nowhere prescribe a timeframe within which sanction is liable to be accorded. Sanction when used in Section 3 of TOLA caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved. That is clearly not the position which obtains here. We thus find ourselves unable to sustain the impugned action of reassessment. The impugned notices which rest on a sanction obtained from the JCIT would thus be liable to be quashed. The impugned notices issued under Section 148 of the Act dated 31 March 2024 are hereby quashed.
Issues Involved:
1. Validity of reassessment action under Section 148 of the Income Tax Act, 1961. 2. Compliance with the provisions of Section 151 of the Income Tax Act, 1961. 3. Applicability of the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA). 4. Determination of the date of issuance of reassessment notices. 5. Impact of amendments introduced by Finance Act 2021 and Finance Act 2023 on the reassessment process. Issue-wise Detailed Analysis: 1. Validity of reassessment action under Section 148 of the Income Tax Act, 1961: The batch of writ petitions challenged the validity of reassessment actions initiated by the respondents under Section 148 of the Income Tax Act, 1961, pertaining to Assessment Year (AY) 2015-16. The primary ground for challenging the reassessments was the alleged violation of Section 151 of the Act. The petitioners argued that the reassessment notices were issued without the necessary sanction from the competent authority as mandated by Section 151. 2. Compliance with the provisions of Section 151 of the Income Tax Act, 1961: The petitioners contended that the sanction for initiating reassessment action was granted by the Joint Commissioner of Income Tax (JCIT) instead of the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner as required by Section 151(1) of the Act. They argued that since the notices were issued after the expiry of four years from the concerned AY, they required mandatory approval from the higher authorities specified in Section 151(1). The petitioners asserted that the entire reassessment action was invalid due to the absence of sanction from the competent authority. 3. Applicability of the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA): The respondents defended the reassessment actions by invoking the provisions of TOLA, which extended the timelines for issuing notices and obtaining sanctions due to the COVID-19 pandemic. They argued that TOLA allowed them to initiate reassessment actions even after the expiry of the ordinary time frames. The respondents claimed that the approval by the JCIT was compliant with the statutory scheme under Section 151(2) of the Act, as extended by TOLA. 4. Determination of the date of issuance of reassessment notices: The court examined the date of issuance of the reassessment notices to determine the applicable version of Section 151. The petitioners argued that the notices, although dated 31 March 2021, were digitally signed and dispatched after 01 April 2021, making the amended regime of reassessment applicable. The court referred to the decision in Suman Jeet Agarwal vs. Income Tax Officer & Ors. and concluded that the notices were issued after 01 April 2021, based on the date of digital signing and dispatch. 5. Impact of amendments introduced by Finance Act 2021 and Finance Act 2023 on the reassessment process: The court analyzed the provisions of Section 151 before and after the amendments introduced by Finance Act 2021 and Finance Act 2023. It noted that the amended Section 151, effective from 01 April 2021, specified different authorities for granting approval based on whether reassessment was proposed within three years or after three years from the end of the relevant AY. The court emphasized that TOLA did not alter the structure for approval and sanction under Section 151. The court concluded that the approval granted by the JCIT was not compliant with the scheme of Section 151, as the reassessment was initiated after the expiry of four years from the end of the relevant AY. Conclusion: The court quashed the impugned reassessment notices issued under Section 148 of the Act dated 31 March 2024, due to the lack of sanction from the competent authority as required by Section 151. The court held that TOLA extended the timelines for initiating reassessment actions but did not amend the distribution of powers for granting approval under Section 151. The court allowed the writ petitions but granted the respondents the liberty to initiate further action as permissible by law.
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