2021 (9) TMI 1580 - HC - Indian Laws

Stay on reassessment notices issued under Section 148 after April 1, 2021 for non-compliance with amended Section 148A procedure

Vipul Nagpal And Ors. Versus Income Tax Officer & Ors.

HC stayed the reassessment proceedings initiated by impugned notices issued under section 148 after 1 April 2021 for failure to comply with the procedure ... Stay of the impugned notices - validity of notices issued u/s 148 of the Income-tax Act after 1 April 2021, without following the procedure introduced by the amended Section 148A of the Act - HELD THAT:- This Court in similar writ petitions MUDRA FINANCE LIMITED, ANSAL COLOURS ENGINEERING SEZ LIMITED, ANSAL LANDMARK TOWNSHIPS PRIVATE LIMITED VERSUS INCOME TAX OFFICER WARD 17 (1), DELHI & ANR., ASSISTANT COMMISSIONER OF INCOME TAX-1 (1), DELHI & ANR. [2021 (8) TMI 197 - DELHI HIGH COURT] had issued notices and granted stay of the impugned notices. Consequently, issue notice. Notice is accepted by the counsel for the respondents as mentioned hereinabove. They pray for and are permitted to file their counter-affidavits within two weeks. Rejoinder affidavits, if any, be filed before the next date of hearing - Till further orders, the respondents are restrained from continuing with the reassessment proceedings, in any manner, pursuant to the impugned notices. List along with WP(C) No. 6442/2021 on 28th September, 2021. ISSUES PRESENTED AND CONSIDERED 1. Whether notices issued under Section 148 of the Income-tax Act after 1 April 2021 are invalid if issued without following the procedure introduced by the amended Section 148A. 2. Whether executive notifications or delegated legislation can extend or vary the date of operation of a statutory amendment so as to revive or preserve pre-amendment procedural provisions for notices issued post-amendment. 3. Whether Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (the easing/extension provision) or Section 6 of the General Clauses Act, 1897 can be invoked to treat time-limits or procedures under the pre-amendment provisions as applicable despite the statutory amendment. 4. Whether reassessment proceedings pursuant to notices alleged to be issued without complying with Section 148A as amended should be stayed pending consideration of the legality of those notices. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of notices issued under Section 148 post-amendment without following Section 148A (as amended) Legal framework: The amendment introduced a new procedural Section 148A prescribing prior notice and procedure to be followed before issuance of a notice under Section 148. The amendment took effect from 1 April 2021. Precedent treatment: The Court relies on earlier interim orders of the same Court and decisions of the Bombay High Court and the predecessor Division Bench in similar writ petitions that granted interim relief where notices were held prima facie liable to be set aside for non-compliance with the amended procedure. Interpretation and reasoning: The Court adopts settled principles of statutory interpretation that procedural changes effected by statute must govern actions taken after the amendment. Where the legislature has prescribed a specific procedure for issuance of notices (Section 148A as amended), any notices issued after the effective date must comply with that procedure; failure to do so renders such notices vulnerable to challenge. The Court expresses a prima facie view that notices issued without following the amended procedures are invalid, observing that the new statutory provision demonstrates an intent to supplant the old procedure. Ratio vs. Obiter: Ratio - The amended procedural requirements in Section 148A govern issuance of notices post-amendment and non-compliance with those requirements renders notices susceptible to invalidation. Obiter - Reliance on comparative interim orders in other matters to support the prima facie conclusion. Conclusion: Prima facie, notices issued post-1 April 2021 without complying with the amended Section 148A are invalid; issue of notice was ordered and the Court restrained respondents from proceeding with reassessment pursuant to such notices until further orders. Issue 2: Validity of delegated legislation/notifications purporting to retain pre-amendment procedure or varying date of operation of the amendment Legal framework: Constitutional and statutory limits on delegated legislation; principle that delegated legislation cannot amend or vary substantive provisions or change the date of operation of a statutory amendment as laid down by the legislature. Precedent treatment: The Court refers to the principle that a notification as delegated legislation cannot alter the statutory scheme or vary the implementation date prescribed by Parliament. The Court also cites earlier interim orders where similar notifications were held to be contrary to principles of statutory interpretation. Interpretation and reasoning: The Court expresses a prima facie view that notifications that purport to continue the operation of pre-amendment procedures after the statutory effective date run counter to the settled rule that delegated legislation cannot be used to alter the legislative intent as expressed in the amended statute. The Court views such notifications as contrary to statutory interpretation because the amendment intended to 'destroy' the old procedure by prescribing a new one; a notification cannot validly resurrect or extend the old procedure beyond the date fixed by statute. Ratio vs. Obiter: Ratio - Delegated notifications cannot be used to vary the date of implementation or to retain pre-amendment procedural regime when the statute prescribes a different procedure from a specific date. Obiter - Application of this proposition to the particular impugned notifications is expressed as a prima facie view pending fuller hearing. Conclusion: Prima facie the impugned notifications attempting to preserve or revive pre-amendment procedure are invalid; they cannot lawfully change the date of operation or procedural regime fixed by the amendment. Issue 3: Applicability of Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and Section 6 of the General Clauses Act, 1897 Legal framework: Section 3(1) of the 2020 Act (enabling limited extensions/relaxations) and Section 6 of the General Clauses Act, 1897 (which addresses references to enactments where amendments or extensions may be construed) as potential bases to treat pre-amendment time-limits/procedures as continuing. Precedent treatment: The Court considers submissions relying on earlier interim orders and decisions but distinguishes them on the ground that the amended Section 148A embodies a substantive procedural change that cannot be circumvented by an enabling provision that merely extends time limits. Interpretation and reasoning: The Court notes that Section 3(1) authorizes the Central Government to extend time-limits but does not confer power to alter or restore procedural requirements replaced by the amendment. Similarly, Section 6 of the General Clauses Act does not assist when the new statutory provision demonstrates an intent to abolish the old procedure; the General Clauses Act cannot be invoked to defeat an express legislative intent to change procedure. The Court is of the prima facie view that these provisions do not validate the attempt to continue pre-amendment procedures for notices issued after the amendment's effective date. Ratio vs. Obiter: Ratio - Extension provisions and the General Clauses Act cannot be used to circumvent a clear legislative intent to introduce a new procedure; they do not empower the executive to revive or continue superseded procedural requirements. Obiter - Discussion of scope of Section 3(1) and Section 6 in context of delegated notifications is expressed as a prima facie view pending full hearing. Conclusion: Section 3(1) of the 2020 Act and Section 6 of the General Clauses Act do not, prima facie, validate notifications or actions that seek to apply pre-amendment procedures to notices issued after the effective date of the amendment. Issue 4: Relief - Stay of reassessment proceedings pending adjudication of legality of notices Legal framework: Power of court to grant interim relief (stay) where prima facie case made out and balance of convenience and irreparable harm favour interim protection pending adjudication. Precedent treatment: The Court follows its prior interim orders and similar interim orders of other benches where notices were stayed pending adjudication on the validity of notices vis-à-vis amended procedure. Interpretation and reasoning: In light of the prima facie view that notices issued post-amendment without compliance with Section 148A are vulnerable to being declared invalid, and given that reassessment proceedings would be consequential and prejudicial, the Court finds that interim restraint on continuing reassessment proceedings is appropriate until the legality of the notices is finally determined. Ratio vs. Obiter: Ratio - Interim stay of reassessment proceedings pursuant to impugned notices is appropriate where a prima facie case exists that notices were issued in violation of the amended statutory procedure. Obiter - Directional matters concerning timelines for filings and exchange of written submissions. Conclusion: The Court restrained respondents from continuing with reassessment proceedings pursuant to the impugned notices until further orders and directed procedural steps for further hearing (filing of counter-affidavits, rejoinders, short written submissions), listing the matters for continued hearing. Cross-references and procedural directions 1. Cross-reference: The Court expressly follows and relies on the prima facie reasoning and interim relief given in earlier related writ petitions; those orders are treated as guiding authority for interim disposition in these matters. 2. Procedural directions: Parties permitted to file counter-affidavits and rejoinders within specified short timelines; parties to file short written submissions (five pages each) with authorities; strict directions against adjournment on the next date; order to be uploaded and served electronically.