New Finance Act 2021 Procedures Apply to Reassessment Notices

The court ruled that reassessment notices issued after 01.04.2021 must adhere to the new provisions introduced by the Finance Act, 2021, emphasizing the importance of complying with Section 148A procedures. It invalidated notices issued without following the new scheme and declared explanations in CBDT notifications unconstitutional. The court rejected the notion that notifications deferred the application of Section 148 amendments, upholding the quashing of notices and dismissing revenue appeals. The challenged notice was quashed, and the petition was disposed of accordingly.

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Issues:
Challenge to reassessment notice dated 25.06.2021 for the assessment year 2013-2014. Applicability of old provisions of the Income Tax Act, 1961 for issuing notice and non-compliance with the procedure under Section 148A inserted from 01.04.2021.

Analysis:
The judgment highlighted the departure made under the new scheme of reassessment provisions in the Finance Act, 2021. It emphasized the changes in time limits for issuing reassessment notices and the elaborate procedure under Section 148A empowering the Assessing Officer to make inquiries regarding escaped income assessment. The judgment clarified that the new scheme applies to notices issued after 01.04.2021, and all such notices must comply with the provisions introduced by the Finance Act, 2021. It was noted that the extended time limits under Section 149(1) cannot be utilized to reopen assessments for past periods, and any notice issued post 01.04.2021 must adhere to the new provisions. The judgment declared all notices issued without following the procedure under Section 148A after 01.04.2021 as invalid.

The judgment further discussed the validity of explanations provided in notifications by the Central Board of Direct Taxes (CBDT) dated 31.03.2021 and 27.04.2021. It delved into the principles of presumption of constitutionality and the scope of challenging subordinate legislation. The court emphasized that subordinate legislation does not enjoy the same immunity as laws passed by the legislature and can be questioned on various grounds, including being manifestly arbitrary. It concluded that the explanations introduced by the CBDT in the notifications exceeded its jurisdiction as a subordinate legislation and were declared unconstitutional and invalid.

The judgment also addressed the conflicting views of different High Courts on the applicability of notifications issued by the CBDT. It disagreed with the interpretation that the notifications deferred the application of Section 148 before the amendment and insertion of Section 148A. The court maintained that the amendments introduced under the Finance Act, 2021 came into effect on 01.04.2021 and could not have been deferred by the notifications. Consequently, the court quashed the impugned notices in the petitions, ruling them invalid and set aside. The judgment upheld the decision of the learned Single Judge in quashing the notices and dismissed the appeals of the revenue.

In conclusion, the judgment declared the impugned notice challenged in the petition as quashed, disposing of the petition accordingly.

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