Invalid Reassessment Notices Post 01.04.2021 Declared Unconstitutional

The Court declared reassessment notices issued post 01.04.2021 without adherence to Section 148A of the Income Tax Act, 1961 as invalid. It emphasized the necessity of following revised time limits for notices under Section 148 and rejected the application of extended periods for reassessments predating the substitution. Additionally, the Court deemed notifications by the CBDT dated 31.03.2021 and 27.04.2021 unconstitutional, as they exceeded delegated powers. Conflicting judicial opinions were dismissed, affirming the effectiveness of the Finance Act, 2021 amendments from 01.04.2021. The impugned notices were quashed, writ petitions allowed, and revenue appeals dismissed.

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Issues:
Challenge to reassessment notice dated 30.06.2021 for assessment year 2013-14 based on old provisions of Income Tax Act, 1961; Non-compliance with Section 148A of the Act; Interpretation of Finance Act, 2021 provisions regarding reassessment; Validity of notifications by CBDT dated 31.03.2021 and 27.04.2021; Constitutionality of subordinate legislation; Conflict in judicial opinions.

Analysis:
The petitioner contested a reassessment notice issued on 30.06.2021 for the assessment year 2013-14, arguing that the assessing officer applied outdated provisions of the Income Tax Act, 1961, failing to follow the procedure outlined in Section 148A inserted from 01.04.2021. Referring to a previous judgment, the Court highlighted the significant changes introduced by the Finance Act, 2021 in reassessment provisions. The new scheme under Section 148A enabled detailed inquiries before issuing notices, emphasizing that the legislative intent was for the new provisions to apply to notices post 01.04.2021. The Court emphasized the importance of adhering to the revised time limits for issuing notices under Section 148, indicating that extended periods could not be used for reassessments predating the substitution. Consequently, all notices issued post 01.04.2021 without following Section 148A were deemed invalid.

Regarding the validity of notifications by CBDT dated 31.03.2021 and 27.04.2021, the Court delved into the principles of constitutionality of statutes and delegated legislation. It noted the presumption of constitutionality but highlighted that subordinate legislation could be challenged on various grounds, including being manifestly arbitrary. Analyzing the Relaxation Act, 2020 and the CBDT notifications, the Court found that the explanations provided exceeded the delegated powers, as they altered the statutory provisions beyond permissible limits. The Court declared these explanations as unconstitutional and invalid, aligning with similar views from other High Courts.

Addressing conflicting judicial opinions, the Court rejected an alternative analysis that sought to defer the application of reassessment provisions through notifications. It emphasized that the amendments introduced by the Finance Act, 2021 were effective from 01.04.2021, dismissing the notion of postponing the new provisions through notifications. Consequently, the Court quashed the impugned notices, affirming their invalidity and upholding the decision of the learned Single Judge. All writ petitions were allowed, and appeals by the revenue were dismissed, concluding the matter with the disposal of pending applications.

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