Reopening of income tax assessments: executive notifications cannot extend pre-amendment reassessment procedure, notices quashed.

Reopening of income-tax assessments: HC held that substituted procedural regime for Sections 147151, introduced by the Finance Act, 2021, took effect from 1 April 2021 and governs notices issued on or after that date. Executive notifications under the Relaxation Act, 2020 could only extend timelines and could not revive or prolong the erstwhile reassessment procedure; Explanations purporting to do so were ultra vires and inconsistent with the parent statutes. As a result, reassessment notices issued under Section 148 after 31 March 2021 that did not comply with the substituted procedure were quashed.

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Issues Involved:
1. Whether the Government/Executive can make or change the law of the land by way of Explanations to Notifications without specific Authority from the Legislature.
2. Whether the Government/Executive can impede the implementation of law made by the Legislature.

Issue-wise Detailed Analysis:

1. Authority of Government/Executive to Make or Change Law:
The petitioners challenged the reassessment notices issued post 31st March 2021 under Section 148 of the Income Tax Act, 1961, arguing that the Finance Act, 2021, which substituted the provisions of Sections 147 to 151, came into force on 1st April 2021. They contended that the Government/Executive could not extend the applicability of the old provisions beyond this date through Explanations in Notifications dated 31st March 2021 and 27th April 2021. The Court agreed, stating that the Legislature had introduced the new provisions with effect from 1st April 2021, and any reassessment notices issued after this date must comply with the new provisions. The Court emphasized that the law prevailing on the date of issuance of the notice under Section 148 has to be applied and that the Executive cannot defer the implementation of statutory provisions enacted by the Legislature.

2. Implementation of Law Made by Legislature:
The Court held that Section 3(1) of the Relaxation Act, 2020, extends only the timelines and does not empower the Government to postpone the applicability of new provisions enacted by the Legislature. The Court noted that the Explanations in the Notifications dated 31st March 2021 and 27th April 2021, which extended the applicability of the old provisions, were beyond the power delegated to the Government and in conflict with the new provisions of the Income Tax Act, 1961, as substituted by the Finance Act, 2021. The Court declared these Explanations ultra vires the Relaxation Act, 2020, and null and void. It was emphasized that the Executive cannot make or change the law of the land without specific authority from the Legislature and cannot impede the implementation of law made by the Legislature.

Conclusion:
The Court quashed the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961, post 31st March 2021, and allowed the writ petitions. The Court clarified that the power of reassessment that existed prior to 31st March 2021 continued till the extended period, but the Finance Act, 2021, changed the procedure to be followed for issuing notices from 1st April 2021. The Executive/Respondents/Revenue were directed to comply with the new provisions for any further steps in the matter.

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