2022 (2) TMI 1413 - HC - Income Tax

Calcutta HC Quashes Re-assessment Notices; Non-compliance with Amended Tax Formalities u/s 148A Cited.

The HC of Calcutta quashed the impugned re-assessment notices issued under Section 148 of the Income Tax Act post 31st March, 2021, citing non-compliance ... Validity of notices issued under Section 148 post 31st March, 2021 - Requirement of compliance with Section 148A before issuance of reassessment notices - Ultra vires challenge to Explanations A(a)(ii)/A(b) to Notifications dated 31st March, 2021 and 27th April, 2021 - Fresh reassessment subject to amended statutory procedure under Finance Act, 2021Validity of notices issued under Section 148 post 31st March, 2021 - Requirement of compliance with Section 148A before issuance of reassessment notices - Impugned reassessment notices issued on or after 1st April, 2021 were liable to be quashed where statutory formalities under Section 148A, as applicable from 1st April, 2021, were not observed. - HELD THAT: - The Court, having heard the parties and relying on earlier decisions of coordinate Benches, held that reassessment notices issued after 31st March, 2021 must comply with the procedural safeguards introduced by the Finance Act, 2021 (viz., the formalities prescribed under Section 148A) before issuance. Where those statutory formalities were not observed, the notices are unsustainable. The Writ Petitions were disposed of in conformity with this principle and the impugned notices issued without compliance were quashed, subject to the Assessing Officers being at liberty to initiate fresh proceedings in accordance with the amended statutory regime.Impugned notices under Section 148 issued post 31st March, 2021 without compliance with Section 148A are quashed; Assessing Officers may initiate fresh reassessment only after observing the statutory formalities under the Finance Act, 2021.Ultra vires challenge to Explanations A(a)(ii)/A(b) to Notifications dated 31st March, 2021 and 27th April, 2021 - Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are ultra vires the Relaxation Act, 2020 and are void. - HELD THAT: - The Court declared that the challenged Explanations which sought to extend the applicability of pre amendment provisions of Section 148, Section 149 and Section 151 beyond 31st March, 2021 were inconsistent with the parent legislation, namely the Relaxation Act, 2020, and therefore ultra vires. The petitions were allowed on that basis. The decision follows and applies the reasoning adopted by this Court in its earlier orders, including those rendered on 17th January, 2022 in Manoj Jain and Bagaria Properties and Investment Private Limited , and by other High Courts referenced by the parties.Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared ultra vires the Relaxation Act, 2020 and are null and void.Final Conclusion: Writ petitions allowed. The challenged Explanations to the Notifications are declared ultra vires and set aside; impugned notices under Section 148 issued without complying with Section 148A are quashed, with liberty to Assessing Officers to initiate fresh reassessment proceedings strictly in accordance with the Finance Act, 2021 and after fulfilling the prescribed statutory formalities. Issues:Challenging impugned notices under Section 148 of the Income Tax Act issued post 31st March, 2021; Seeking quashing of re-assessment notices; Declaration against certain Notifications extending applicability of tax provisions; Legality of statutory formalities under Section 148A of the Income Tax Act.Analysis:The High Court of Calcutta heard multiple Writ Petitions together due to common legal questions and facts. The main contention was the issuance of impugned notices under Section 148 of the Income Tax Act post 31st March, 2021, with allegations of non-compliance with statutory formalities under Section 148A of the Income Tax Act as per the Finance Act, 2021 effective from 1st April, 2021. The petitioners sought relief by challenging the re-assessment notices and declaring certain Notifications extending the applicability of tax provisions as ultra vires the Relaxation Act, 2020.The issues raised in the Writ Petitions were predominantly legal in nature, focusing on quashing the impugned re-assessment notices issued by the Income Tax Authority after 31st March, 2021. The petitioners also sought a declaration against specific Explanations in Notifications dated 31st March, 2021, and 27th April, 2021, extending the applicability of tax provisions beyond the specified period, alleging inconsistency with the parent legislation, the Relaxation Act, 2020.The counsels for all parties collectively acknowledged that the legal matters in these Writ Petitions were addressed in previous judgments by different High Courts, including the Allahabad High Court, Rajasthan High Court, and Delhi High Court. Referring to these precedents, the High Court of Calcutta disposed of the Writ Petitions in favor of the petitioners based on the judgments delivered in similar cases. Consequently, the Explanations in the Notifications were declared ultra vires the Relaxation Act, 2020, rendering them invalid. The impugned notices under Section 148 of the Income Tax Act were quashed, allowing the Assessing Officers to initiate fresh re-assessment proceedings in compliance with the amended provisions of the Act post the Finance Act, 2021.In conclusion, the High Court granted relief to the petitioners by declaring the challenged Notifications as legally invalid and quashing the impugned re-assessment notices. The judgment emphasized adherence to the revised provisions of the Income Tax Act post the Finance Act, 2021 for any future re-assessment proceedings, ensuring compliance with the statutory requirements.