Court rules on reassessment proceedings under TOLA 2020

The court held that reassessment proceedings initiated with notices issued between 01.04.2021 and 30.06.2021 cannot benefit from the relaxation/extension under TOLA 2020. Additionally, the court ruled that the benefit of TOLA 2020 would not apply in cases where the first proviso to Section 149(1)(b) is triggered. Reassessment notices issued post-01.04.2021 must adhere to the new provisions, with the first proviso to Section 149(1)(b) preventing the reopening of assessments time-barred under the previous regulations. Consequently, all writ petitions were disposed of in accordance with these findings.

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Issues Involved:

1. Whether the reassessment proceedings initiated with the notice under Section 148 (deemed to be notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, can be conducted by giving benefit of relaxation/extension under the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act' (TOLA) 2020 upto 30.03.2021, and then the time limit prescribed in Section 149 (1) (b) (as substituted w.e.f. 01.04.2021) is to be counted by giving such relaxation, benefit of TOLA from 30.03.2020 onwards to the revenue.
2. Whether in respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, benefit of TOLA' 2020 will be available to the revenue, or in other words the relaxation law under TOLA' 2020 would govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act' 2021, in such cases.

Analysis of Judgment:

Issue 1:

The court examined whether reassessment proceedings initiated with notices under Section 148 (deemed to be under Section 148-A) issued between 01.04.2021 and 30.06.2021 could be conducted by giving the benefit of relaxation/extension under TOLA 2020 up to 30.03.2021. The court noted that the Finance Act, 2021 brought substantial changes to the reassessment procedure, simplifying tax administration, easing compliance, and reducing litigation. The court observed that the Enabling Act (TOLA 2020) was enacted due to the pandemic to extend timelines but did not save the pre-existing provisions of Sections 147 to 151 of the Income Tax Act, which were replaced by the Finance Act, 2021 from 01.04.2021.

The court held that the Enabling Act is an enactment to extend timelines only and, from 01.04.2021 onwards, all references to issuance of notices must be read as references to the substituted provisions. Consequently, reassessment notices issued on or after 01.04.2021 must comply with the new provisions. The court concluded that the reassessment proceedings initiated with notices issued between 01.04.2021 and 30.06.2021 cannot be conducted by giving the benefit of relaxation/extension under TOLA 2020.

Issue 2:

The court examined whether the benefit of TOLA 2020 would be available to the revenue in cases where the first proviso to Section 149(1)(b) is attracted. The first proviso to Section 149(1)(b) prohibits the issuance of notice under Section 148 if it is beyond the time limit specified under the unamended clause (b) of Section 149, i.e., six years from the end of the relevant assessment year. The court noted that the Finance Act, 2021 introduced a higher threshold for reopening assessments after three years and limited the applicability of the Enabling Act to reassessment proceedings initiated till 31.03.2021.

The court held that the benefit of TOLA 2020 would not be available to the revenue in cases where the first proviso to Section 149(1)(b) is attracted. The relaxation law under TOLA 2020 would not govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act, 2021. The court concluded that the reassessment notices issued on or after 01.04.2021 must comply with the new provisions, and the first proviso to Section 149(1)(b) would apply, prohibiting the reopening of assessments that have become time-barred under the unamended provisions.

Conclusion:

The court concluded that the reassessment proceedings initiated with notices issued between 01.04.2021 and 30.06.2021 cannot be conducted by giving the benefit of relaxation/extension under TOLA 2020. The benefit of TOLA 2020 would not be available to the revenue in cases where the first proviso to Section 149(1)(b) is attracted. The reassessment notices issued for different assessment years (A.Y. 2013-14 to 2017-18) must comply with the new provisions, and the first proviso to Section 149(1)(b) would apply, prohibiting the reopening of assessments that have become time-barred under the unamended provisions. The court disposed of all the writ petitions accordingly.

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