2022 (2) TMI 927 - HC - Income Tax

New Finance Act 2021 Procedures Apply to Reassessment Notices

Dr. Keshav Joshi Versus Income Tax Officer, Ward 6 (2) Jaipur, Union Of India

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 ... Reopening of assessment u/s 147 - Scope of Section 148A as newly inserted - Comparison between old and new provisions for reassessment - Individual identity of Section 148 as prevailing prior to amendment - 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 - HELD THAT:- As relying on SUDESH TANEJA WIFE OF SHRI CP TANEJA [2022 (1) TMI 1212 - RAJASTHAN HIGH COURT] extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue, can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per the then prevailing provisions, would not be revived by virtue of the application of Section 149(1)(b) effective from 01.04.2021. All the notices issued in the present cases are after 01.04.2021 and have been issued without following the procedure contained in Section 148A of the Act and are therefore invalid. We are unable to persuade ourselves to accept this analysis of the situation. In our understanding by virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act, 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021. In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed. 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.