2024 (2) TMI 704 - HC - Income Tax

Section 148A(b) notices for assessment years 2013-14 and 2014-15 issued after April 1, 2021 are unauthorized and time-barred

The Calcutta HC held that notices issued under newly inserted Section 148A(b) of the Income Tax Act, 1961 on or after April 1, 2021, relating to ... Validity of reopening of assessment - scope of old unamended law and new inserted section 148A - period of limitation for notices issued on or after 1st April, 2021, by the CBDT, relating to assessment years 2013-14 and 2014-15, under Section 148 (old) of the Income Tax Act, 1961 by converting/treating the same as under newly inserted Section 148A - scope of provisions of TOLA - extending the period of limitation for the purpose of issuance of notice under Section 148 by converting or treating the same as notice under Section 148A(b) of the Income Tax Act, 1961, relating to assessment years 2013-14 and 2014- 15 after 31st March, 2021 for the period 1st April, 2021 to 30th June, 2021 HELD THAT:- As per relevant provisions of law including unamended old Sections 147, 148, 149 and 151 of the Income Tax Act, 1961 as stood on March 31, 2021, prior to enactment of the Finance Act, 2021, and present substituted Sections 147, 148, 149, 151 and newly inserted Section 148A of the Income Tax Act, 1961 as enacted by Finance Act, 2021, without having any savings clause for the old provisions relating to reassessment proceedings, Section 3 of the Taxation and Other Laws (Relaxation and Amendment of certain Provisions) Act, 2020 (TOLA), Notification No. 20/2021 dated 31st March, 2021 and Notification No. 38/2021 dated 27th April, 2021 issued by the CBDT in exercise of alleged delegated power conferred under TOLA, for aiding the old provisions relating to reassessment proceedings which stood and remained in force till 31st March, 2021, various judgments relied upon by the parties referred hereinabove and on reading all together we are inclined to hold that all the impugned notices issued under newly inserted Section 148A(b) of the Income Tax Act, 1961 by Finance Act, 2021, relating to assessment years 2013-14 and 2014-15, which have been issued on or after 1st April, 2021 by extending the time of limitation by the CBDT for issuance of notice under Section 148 of the old Act in exercise of power under Section 3 of TOLA is unauthorised in law and all such impugned notices are barred by limitation and that all subsequent proceedings on the basis of the aforesaid impugned notices are not sustainable in law and accordingly the same are quashed. Revenue Respondent no. 3/Central Board of Direct Taxes (‘CBDT”) has erroneously resorted to Instruction No. 1 dated 11.05.2022 by contending that the Apex Court decision in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] read with TOLA permits the notices to “travel back in time to their original date when such notices were to be issued” i.e., on or before 31.03.2021 and that consequent notices issued from 01.04.2021 to 30.06.2021 are within time permitted it will be contrary to the intention of legislating Finance Act, 2021, coming into effect from 1st April, 2021 subsisting the old law relating to reassessment. The aforesaid interpretation canvassed in the CBDT Instruction is, in fact, is again in direct conflict with the judgments of various Hon’ble High Courts, which have duly been affirmed by the Apex Court in Ashis Agarwal (supra). In view of the aforesaid declaration that the impugned notices issued on or after 1st April, 2021, by the CBDT, relating to assessment years 2013-14 and 2014-15, under Section 148 (old) of the Income Tax Act, 1961 by converting/treating the same as under newly inserted Section 148A of the Income Tax Act, 1961, by Finance Act, 2021 which came into effect from 1st April, 2021, in exercise of power under TOLA being barred by limitation, all subsequent proceedings on the basis of aforesaid impugned notices being not sustainable in law, are quashed and all legal consequences will follow automatically. Issues Involved:1. Validity of impugned notices issued under Section 148A(b) of the Income Tax Act, 1961.2. Application and interpretation of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).3. Conflicts between TOLA and the Finance Act, 2021.4. Legal standing of notifications issued by the Central Board of Direct Taxes (CBDT).Summary:Issue 1: Validity of Impugned NoticesThe petitioners challenged the impugned notices issued on or after April 1, 2021, under Section 148 (old) of the Income Tax Act, 1961, which were treated under Section 148A(b) of the Income Tax Act, 1961, inserted by the Finance Act, 2021. The court found these notices unauthorized and barred by limitation, as they were issued after the old provisions had ceased to exist following the enactment of the Finance Act, 2021.Issue 2: Application and Interpretation of TOLAThe court examined the chronological sequence of notifications and legislation, including the Taxation & Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, and subsequent notifications by CBDT. The court held that TOLA, which was initially enacted to extend the time limits under various statutes, including the Income Tax Act, 1961, applied only to the pre-amended law as applicable till March 31, 2021. Therefore, the application of TOLA to notices issued after April 1, 2021, was deemed arbitrary and unsustainable in law.Issue 3: Conflicts Between TOLA and the Finance Act, 2021The Finance Act, 2021, which came into effect on April 1, 2021, substituted the old Sections 147, 148, 149, and 151 of the Income Tax Act, 1961, with new provisions and did not include any savings clause for the old provisions. The court found that extending the period of limitation under the old, unamended provisions by CBDT notifications under TOLA was in direct conflict with the Finance Act, 2021. The court emphasized that the new provisions should be applied to test the validity of notices issued after April 1, 2021.Issue 4: Legal Standing of CBDT NotificationsThe court held that the notifications issued by CBDT on March 31, 2021, and April 27, 2021, were ultra vires to the extent they sought to extend the time limits for issuing notices under the old provisions beyond March 31, 2021. The court stated that these notifications could not override the parliamentary legislation enacted by the Finance Act, 2021.Conclusion:The court quashed all impugned notices issued under the newly inserted Section 148A(b) of the Income Tax Act, 1961, relating to assessment years 2013-14 and 2014-15, as they were barred by limitation and not sustainable in law. The court emphasized that the Finance Act, 2021, which came into effect from April 1, 2021, should be applied, and the old provisions could not be extended beyond their repeal date. All subsequent proceedings based on these notices were also quashed.