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 assessment years 2013-14 and 2014-15, are unauthorized and barred by limitation. The court quashed all such notices and subsequent proceedings, ruling that CBDT's attempt to extend limitation period through TOLA for converting old Section 148 notices to new Section 148A notices was invalid. The court rejected CBDT's interpretation that notices could travel back to their original intended date, finding it contrary to Finance Act 2021's legislative intent.

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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 Notices
The 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 TOLA
The 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, 2021
The 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 Notifications
The 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.

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