2022 (2) TMI 1387 - HC - Income Tax

Invalidity of Income Tax Act Section 148 notices post 01.04.2021 due to non-compliance with Finance Act, 2021 reassessment provisions

Late Premlata Agarwal, Alok Agarwal Versus Income Tax Officer, Ward 5 (2), Rajasthan, Union Of India, Income Tax Officer

The court held that notices issued under Section 148 of the Income Tax Act after 01.04.2021 were invalid as they did not comply with the new reassessment ... 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 - HELD THAT:- As decided in SUDESH TANEJA WIFE OF SHRI CP TANEJA [2022 (1) TMI 1212 - RAJASTHAN HIGH COURT] 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. Also held 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. Issues Involved:1. Validity of notices issued under Section 148 of the Income Tax Act, 1961, after the introduction of new reassessment provisions by the Finance Act, 2021.2. Legality and validity of the explanations contained in the Central Board of Direct Taxes (CBDT) circulars dated 31.03.2021 and 27.04.2021.Detailed Analysis:Issue 1: Validity of Notices Issued Under Section 148 Post-01.04.2021The petitioners challenged the notices issued by the Assessing Officers under Section 148 of the Income Tax Act, 1961, for reopening assessments for various assessment years, all issued after 01.04.2021. The core issue was whether the substituted provisions introduced by the Finance Act, 2021, effective from 01.04.2021, could be used for issuing reassessment notices for past years.The court referred to a previous judgment in 'Sudesh Taneja Vs. Income Tax Officer,' where it was established that the original provisions were repealed and had no existence after the introduction of the new provisions. The court emphasized that the new scheme under the Finance Act, 2021, significantly changed the time limits for issuing reassessment notices and the procedures under Section 148A, which includes making inquiries and issuing notices to the assessee. There was no indication that the new scheme was intended to apply only post-01.04.2021, and thus, all notices issued after this date had to comply with the new provisions.The court highlighted that the new Section 149 modifies the time limits for issuing notices, reducing the period to three years under normal circumstances and extending it to ten years for cases involving income escaping assessment amounting to or likely to amount to 50 lakhs or more. The first proviso to Section 149(1) clarifies that no notice under Section 148 shall be issued for assessment years before 01.04.2021 if it was time-barred under the previous provisions. Therefore, any notice issued post-01.04.2021 without following the new procedure under Section 148A was invalid.Issue 2: Legality and Validity of CBDT CircularsThe second issue was whether the explanations in the CBDT circulars dated 31.03.2021 and 27.04.2021 could save the situation for the revenue. The court noted that while there is a presumption of constitutionality for statutes and delegated legislation, subordinate legislation does not enjoy the same level of immunity as primary legislation. Subordinate legislation must conform to the statute under which it is made and cannot be inconsistent with it or other applicable statutes.The court found that the CBDT, in issuing the explanations, exceeded its jurisdiction as these explanations attempted to clarify provisions of the Income Tax Act, which was beyond the delegated powers under the Relaxation Act, 2020. The explanations could not alter the statutory provisions, and thus, they were declared unconstitutional and invalid.Conclusion:The court concluded that the notices impugned in the respective petitions were invalid and bad in law, quashing and setting them aside. The judgment of the Co-ordinate Bench in the case of 'Sudesh Taneja Vs. Income Tax Officer' was fully endorsed, and the same directions were applied mutatis mutandis to the present cases. All writ petitions were allowed, and any pending applications were disposed of.