2022 (2) TMI 923 - HC - Income Tax

Court sets aside old reassessment notices, new provisions apply from 1.4.2021. Assessing authorities can initiate reassessment under amended Sections.

Vellore Institute of Technology Versus Central Board of Direct Taxes, The Assistant Commissioner of Income Tax (Exemptions)

The court set aside reassessment notices issued under old provisions and held that amended provisions should apply from 1.4.2021. Assessing authorities ... Reopening of assessment u/s 147 - 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 - Validity of re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Validity of the re-assessment proceedings initiated against the individual petitioners, after 01.04.2021, having resort to the provisions of the Income Tax Act, 1961 as they existed, read with the provisions of Act No. 38 of 2020 and the notifications issued thereunder - issuance of notices u/s 148 of the Act and also with respect to completion of reassessment proceedings - HELD THAT:- When according to the petitioners themselves, if the limitation for issuance of notice under Section 148 of the Act of 1961 for reassessment pursuant to the amended provisions under the Finance Act, 2021 survives, the assessing authority would be competent to initiate the proceedings, we do not find any reason to deny the prayer made by learned Additional Solicitor General, because what exists impliedly can be given expressly. Therefore, while accepting the challenge to the reassessment notices under Section 148 of the Act of 1961, we hold that the Explanations A(a)(ii)/A(b) to the Notification No.20, dated 31.3.2021 and Notification No.38, dated 27.4.2021 must be read as applicable to the reassessment proceedings as on 31.3.2021 in view of the judgments of the different High Courts and we would grant liberty to the assessing authorities as prayed by learned Additional Solicitor General. In view of the ratio propounded in cases MON MOHAN KOHLI VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ANR. [2021 (12) TMI 664 - DELHI HIGH COURT] and ASHOK KUMAR AGARWAL VERSUS UNION OF INDIA THROUGH ITS REVENUE SECRETARY NORTH BLOCK AND 2 OTHERS [2021 (10) TMI 517 - ALLAHABAD HIGH COURT] the reassessment notices under Section 148 of the Act of 1961 served on the petitioners on or after 1.4.2021 are set aside having been issued in reference to the unamended provisions and the Explanations are to be read as applicable to reassessment proceedings if initiated on or prior to 31.3.2021, but it would be with liberty to the assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act of 1961, as amended by the Finance Act, 2021, after making all the compliances as required by law, if limitation for it survives. Issues Involved:1. Challenge to Explanations A(a)(ii)/A(b) to Notification No.20, dated 31.3.2021, and Notification No.38, dated 27.4.2021.2. Challenge to reassessment notices issued under Section 148 of the Income Tax Act, 1961.3. Application of the amended provisions of Sections 147 to 151 of the Income Tax Act, 1961, effective from 1.4.2021.4. The impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA Act, 2020) on the reassessment notices.Detailed Analysis:1. Challenge to Explanations A(a)(ii)/A(b) to Notification No.20, dated 31.3.2021, and Notification No.38, dated 27.4.2021:The petitioners challenged these notifications on the grounds that they extended the applicability of the provisions of Sections 148, 149, and 151 of the Income Tax Act, 1961, beyond 31.3.2021. The court examined the provisions of the TOLA Act, 2020, and the amendments brought by the Finance Act, 2021. The court noted that the amended provisions of Sections 147 to 151, which came into effect on 1.4.2021, should have been followed, and the notifications could not save the repealed provisions. The court referred to judgments from various High Courts, including the Allahabad High Court, which held that the notifications could not override the amended provisions.2. Challenge to reassessment notices issued under Section 148 of the Income Tax Act, 1961:The petitioners argued that the reassessment notices issued on or after 1.4.2021 were invalid as they applied the provisions as they stood before the amendment. The court agreed, stating that after the amendment, the reassessment notices should have followed the new procedure outlined in Sections 147 to 151, as amended by the Finance Act, 2021. The court set aside the reassessment notices issued under the old provisions and held that the amended provisions should apply.3. Application of the amended provisions of Sections 147 to 151 of the Income Tax Act, 1961, effective from 1.4.2021:The court emphasized that the amended provisions simplified the procedure for reassessment and added Section 148A, which required compliance before issuing reassessment notices. The court held that the relaxations granted by the TOLA Act, 2020, could not result in the application of the repealed provisions after 1.4.2021. The court referred to the Allahabad High Court's judgment, which stated that the Finance Act, 2021, introduced new provisions that should be applied from 1.4.2021, and the old provisions could not be saved by the notifications.4. The impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA Act, 2020) on the reassessment notices:The court analyzed the TOLA Act, 2020, which extended the period of limitation due to the Covid-19 pandemic but did not save the provisions amended by the Finance Act, 2021. The court held that the TOLA Act, 2020, could not override the amended provisions, and the reassessment notices should follow the new procedure. The court referred to the judgments of the Allahabad and Delhi High Courts, which held that the reassessment notices issued after 1.4.2021 should comply with the amended provisions.Conclusion:The court set aside the reassessment notices issued under the old provisions and held that the amended provisions should apply. The court granted liberty to the assessing authorities to initiate reassessment proceedings in accordance with the amended provisions if the limitation period still subsisted. The court referred to the judgments of the Allahabad and Delhi High Courts, which supported the view that the amended provisions should apply from 1.4.2021, and the old provisions could not be saved by the notifications.