Court quashes tax notices, deems explanations ultra vires. Assessing Officers can start new proceedings under amended law.

The court quashed all impugned notices issued under Section 148 of the Income Tax Act and declared Explanations A(a)(ii)/A(b) to the Notifications dated 31st March 2021 and 27th April 2021 as ultra vires the Relaxation Act, 2020. Assessing Officers were granted liberty to initiate fresh reassessment proceedings in compliance with the amended provisions of the Act post-1st April 2021, following necessary formalities.

---

---

Issues Involved
1. Validity of impugned notices under Section 148 of the Income Tax Act, 1961 issued post 31st March 2021.
2. Compliance with statutory formalities under Section 148A of the Income Tax Act as prescribed by the Finance Act, 2021.
3. Ultra vires nature of Explanations A(a)(ii)/A(b) to the Notifications dated 31st March 2021 and 27th April 2021.

Issue-wise Detailed Analysis

1. Validity of Impugned Notices under Section 148 Post 31st March 2021
The petitioners challenged the validity of the impugned notices issued under Section 148 of the Income Tax Act, 1961, arguing that they were barred by limitation and did not comply with the statutory formalities under Section 148A as amended by the Finance Act, 2021. The court observed that the issues involved were covered by the decision of the Division Bench of the Allahabad High Court in 'Ashok Kumar Agarwal vs. Union of India', which held that the old provisions were replaced by the Finance Act, 2021, effective from 1st April 2021. Therefore, any reassessment proceedings initiated after 1st April 2021 must comply with the new provisions.

2. Compliance with Statutory Formalities under Section 148A
The court noted that the Finance Act, 2021 introduced new procedural requirements under Section 148A, which must be adhered to before issuing notices under Section 148. The court emphasized that the revenue authorities could only initiate reassessment proceedings post-1st April 2021 in accordance with the substituted law, not the pre-existing laws. The absence of any saving clause meant that the old provisions could not be applied to notices issued after this date.

3. Ultra Vires Nature of Explanations A(a)(ii)/A(b) to Notifications
The petitioners sought a declaration that Explanations A(a)(ii)/A(b) to the Notifications dated 31st March 2021 and 27th April 2021, which extended the applicability of the old provisions, were ultra vires the parent legislation, the Relaxation Act, 2020. The court agreed, citing the Allahabad High Court's reasoning that the Enabling Act did not delegate any power to legislate with respect to the enforceability of any provision of the Finance Act, 2021. The court further noted that the Notifications could not override the principal legislation and were therefore invalid.

Conclusion
The court quashed all the impugned notices issued under Section 148 of the Income Tax Act and declared Explanations A(a)(ii)/A(b) to the Notifications dated 31st March 2021 and 27th April 2021 as ultra vires the Relaxation Act, 2020. The court granted liberty to the Assessing Officers to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021, after complying with the necessary formalities.

---