TaxTMI 
TaxTMI 
2022 (1) TMI 1212
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....2, 14603, 14664, 14693, 14694, 14695, 14698, 14699, 14700, 14701, 14702, 14703, 14741, 14742, 14743, 14783, 14791, 14792, 14794, 14795, 14799, 14800, 14805, 14806, 14808, 14810, 14811, 14812, 14813, 14816, 14840, 14843, 14852, 14854, 14857, 14858, 14859, 14881, 14887, 14889, 14892, 14893, 14900, 14919, 14928, 14929, 14981, 15025, 15055, 15087, 15091, 15117, 15132, 15135, 15137, 15140, 15142, 15145, 15146, 15147, 15164, 15166, 15168, 15183, 15185, 15186, 15187, 15189, 15191, 15196, 15197, 15198, 15201, 15203, 15204, 15205, 15206, 15207, 15208, 15216, 15217, 15218, 15219, 15229, 15232, 15281, 15314, 15316, 15350, 15352, 15362, 15368, 15370, 15373, 15374, 15388, 15393, 15397, 15431, 11818, 9443, 9536, 9538, 9549, 9656, 9660, 9948, 11955, 12984, 13471, 14142, 14143, 17116, 17519, 17520, 10601 and 18034 of 2021 and 969, 181, 301, 419, 508, 527, 561, 575, 590, 595, 597, 600, 611, 627, 651, 685, 888, 909, 918, 953, 996, 5, 76, 180, 182, 183, 212, 230, 239, 275, 306, 307, 308, 309, 310, 325, 327, 328, 338, 369, 389, 390, 417, 427, 428, 432, 433, 441, 442, 455, 456, 458, 499, 503, 506, 509, 510, 517, 520, 525, 539, 541, 557, 560, 570, 571, 574, 582, 583, 607, 610, 612, 614, 621, 622, 623, 6....
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....oup of cases involves writ petitions and D.B. Special Appeals against the judgment of the learned Single Judge. Central issues arising in all these proceedings are common with little different in material facts. They were heard on different dates but due to commonality of issues required to be considered, they were clubbed together for disposal through common judgment. 2. In the writ petitions the petitioners have challenged respective notices issued by the Assessing Officers under Section 148 of the Income Tax Act, 1961 ('the Act' for short) for reopening assessments for various assessment years. All these notices have been issued after 01.04.2021 and pertain to relevant period which is prior to the said date. The petitioners contend that since the notices are issued after 01.04.2021, the same could be done only as per the provisions contained in the Act effective from 01.04.2021. Since in the present cases the notices are issued under the old provisions which have already been substituted, the notices are invalid. The petitioners have also challenged portions of two notifications issued by the Central Board of Direct Taxes (for short 'CBDT') clarifying that provisions of Secti....
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..... In the present case the notice was time barred as per the amended section 149 and procedure under Section 148A was not followed. As an extension of this argument, the petitioner contends that this defect could not be cured through an explanation issued by the CBDT under purported exercise of power of delegated legislation. We would elaborate on these aspects of the matter once we take note of the existing and the substituted provisions for reassessment. Provisions for reassessment prior to 01.04.2021: 6. As is well known, Chapter XIV of the Act pertains to procedure for assessment. This Chapter also contains provisions for reassessment which permits the department to reopen the assessments under certain circumstances. As per Section 147 as it stood prior to substitution by the Finance Act, 2021, if the Assessing Officer had reason to believe that any income chargeable to tax had escaped assessment for any assessment year he could subject to the provisions of Sections 148 to 153 of the Act assess or reassess such income and also any other income chargeable to tax which had escaped assessment. As per Section 148 of the Act before making any such assessment, reassessment or re....
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....has escaped assessment for any assessment year, the Assessing Officer may subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or any other allowance or deduction for such assessment year. The distinction between the cases where income chargeable to tax has escaped assessment for the failure of the assessee to disclose truly or fully all material facts and the rest is done away with. 8. As per Section 148 of the Act before making assessment, reassessment or recomputation under Section 147 and subject to the provisions of Section 148A, the Assessing Officer has to serve on the assessee a notice along with a copy of the order passed if required under clause (d) of Section 148A requiring him to furnish the return within the specified time and in prescribed form. The proviso to Section 148 provides that no notice shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified au....
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....or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee. Explanation.-For the purposes of this section, specified authority means the specified authority referred to in section 151." 10. As per this newly introduced provision thus before issuing notice under Section 148, the Assessing Officer may conduct any enquiry if required; with the prior approval of the specified authority with respect to the information which suggests that the income chargeab....
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....count of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per showcause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining pe....
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....shortened. Comparison between old and new provisions for reassessment 16. A comparison of the existing and the substituted reassessment proceedings contained in the Act would show that earlier distinction of time limit of four years for issuing notice under Section 148 in normal cases and six years in cases where income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose truly and fully all material facts, has been done away with and time limits are revised. New time limits provided are three years unless income chargeable to tax which has escaped assessment amounts to or is likely to amount Rs. 50 lacs or more and in which case the time limit for issuing notice under Section 148 applicable would be ten years from the end of relevant assessment year. Section 147 previously referred to term "the Assessing Officer has reason to believe" that income chargeable to tax has escaped assessment. Under proviso to Section 148 as it stands now, no notice for the reassessment would be issued unless there is information with the Assessing Officer which suggests that income chargeable to tax has escaped assessment. This shift from the Assessing O....
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.... has escaped assessment. Though clause (b) of Section 148A does not so specify, since the notice calls upon the assessee why assessment should not be reopened on the basis of information which suggests that income chargeable to tax has escaped assessment, the requirement of furnishing such information to the assessee is inbuilt in the said provision. The assessee thus has an opportunity to oppose even issuance of notice under Section 148 and he could legitimately expect that the Assessing Officer provides him the information which according to him suggests that income chargeable to tax has escaped assessment. The Assessing Officer has a duty to decide whether it is a fit case for issuing notice under Section 148 of the Act. Such decision has to be taken on the basis of material available on record and the reply of the assessee, if any filed. The decision has to be taken within the time prescribed. 19. While the Finance Act, 2021 was not yet in horizon, around third week of March, 2020 the country was hit by spread of corona virus which led to nationwide strict lockdowns which put the lives of citizens and even the Government machinery totally out of gear. It became virtually imp....
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....ntained an explanation which is under challenge. The notification reads as under:- "S.O. 1432(E).-In exercise of the powers conferred by sub-section (1) of section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) (hereinafter referred to as the said Act), and in partial modification of the notification of the Government of India in the Ministry of Finance, (Department of Revenue) No.93/2020 dated the 31st December, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 4805(E), dated the 31st December, 2020, the Central Government hereby specifies that,-- (A) where the specified Act is the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and, - (a) the completion of any action referred to in clause (a) of sub- section (1) of section 3 of the Act relates to passing of an order under sub-section (13) of section 144C or issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, - (i) the 31st day of March, 2021 shall be the end date o....
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....oses of issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, under this sub-clause, the provisions of section 148, section 149 and section 151 of the Income-tax Act, as the case may be, as they stood as on the 31st day of March 2021, before the commencement of the Finance Act, 2021, shall apply." 23. In background of such facts and statutory provisions applicable the learned counsel for the assessee had raised following contentions:- (i) Upon enactment of the Finance Act, 2021 the provisions contained in the Act pertaining to reassessment of income stood substituted by new set of provisions. Upon such substitution the old provisions ceased to exist. There is no indication either in express terms or implied in the newly introduced provisions that the legislature desired to retain the old provisions for the past period. In that view of the matter any action of issuance of notice for reassessment which is taken after 01.04.2021, must be in accordance with the amended provisions. (ii) Insertion of new provisions and substitution of the old would have the effect of repealing the old prov....
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.... for any period prior to 01.04.2021, the provisions as they stood at the relevant time would apply. In such a case there was no requirement of following the procedure laid down under Section 148A of the Act before issuing notice under Section 148. They would point out that present situation is unprecedented and has arisen on account on account of spread of corona virus. This unprecedented situation required taking extraordinary measures. The Relaxation Ordinance, 2020 and Relaxation Act, 2020 were therefore framed giving extension of time limits for taking actions and making compliances. These extensions were for the benefit of both, actions that had to be taken by the revenue as well as compliances which had to be made by the assessees. The assessees cannot take advantage of the unusual circumstances prevailing on account of spread of corona virus. The CBDT therefore in exercise of powers conferred in sub-section (1) of Section 3 of the Relaxation Act, 2020, has issued necessary explanation which merely clarifies which statutory provisions any way provide. This explanation makes explicit what is otherwise implicit under the Act. The same is well within the power of the Government.....
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....ence on 01.04.2021. In the Enabling Act and the Finance Act, 2021, there is absence, both of any express provision in itself or to delegate the function - to save applicability of the provisions of sections 147, 148, 149 or 151 of the Act, as they existed up to 31.03.2021. Plainly, the Enabling Act is an enactment to extend timelines only. Consequently, it flows from the above - 01.04.2021 onwards, all references to issuance of notice contained in the Enabling Act must be read as reference to the substituted provisions only. Equally there is no difficulty in applying the preexisting provisions to pending proceedings. Looked in that manner, the laws are harmonized. 67. It may also be not forgotten, a reassessment proceeding is not just another proceeding emanating from a simple show cause notice. Both, under the preexisting law as also under the law enforced from 01.04.2021, that proceeding must arise only upon jurisdiction being validly assumed by the assessing authority. Till such time jurisdiction is validly assumed by assessing authority - evidenced by issuance of the jurisdictional notice under Section 148, no reassessment proceeding may ever be said to be pending befo....
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....e Enabling Act, further extension of time has been granted till 31.03.2022. In absence of any specific delegation made, to allow the delegate of the Parliament, to indefinitely extend such limitation, would be to allow the validity of an enacted law i.e. the Finance Act, 2021 to be defeated by a purely colourable exercise of power, by the delegate of the Parliament. 71. Here, it may also be clarified, Section 3(1) of the Enabling Act does not itself speak of reassessment proceeding or of Section 147 or Section 148 of the Act as it existed prior to 01.04.2021. It only provides a general relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19. After enforcement of the Finance Act, 2021, it applies to the substituted provisions and not the pre-existing provisions. 72. Reference to reassessment proceedings with respect to pre-existing and now substituted provisions of Sections 147 and 148 of the Act has been introduced only by the later Notifications issued under the Act. Therefore, the validity of those provisions is also required to be examined. We have concluded as above, that the provisions of Sections 147, 14....
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....t, 2021 which includes the substituted Sections 147 to 151 of the Income Tax Act, 1961. 43. It is settled law that the law prevailing on the date of issuance of the notice under Section 148 has to be applied. [See: Foramer Vs. CIT (2001) 247 ITR 436 (All.), affirmed by the Supreme Court in (2003) 264 ITR 566 (SC), Varkey Jacob Co. Vs. CIT and Anr. (2002) 257 ITR 231 (Ker), Smt. N. Illamathy vs. ITO (2020) 275 taxman 25/195 CTR 543 (Mad)(HC), RK Upadhyay v Shanabhai, (1987) 166 ITR 163 (SC); CIT v Rameshwar Prasad, (1991) 188 ITR 291 (All HC); Dr. Onkar Dutt Sharma v CIT, (1967) 65ITR 359 (All HC)]. 44. This Court is of the view that had the intention of the Legislature been to keep the erstwhile provisions alive, it would have introduced the new provisions with effect from 1st July, 2021, which has not been done. Accordingly, the notices relating to any assessment year issued under Section 148 on or after 1st April, 2021 have to comply with the provisions of Sections 147, 148, 148A, 149 and 151 of the Income Tax Act, 1961 as specifically substituted by the Finance Act, 2021 with effect from 1st April, 2021. 46. Upon perusal of Section 3(1) of Relaxation A....
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....annot legislate, it cannot impede the implementation of law made by the Legislature." 28. The learned Single Judge of this Court in case of BPIP Infra Private Limited (supra) 2021( 12) TMI 207 has noted the said decision of the Allahabad High Court in case of Ashok Kumar Agarwal (supra) 2021(10) TMI 517 and allowed the writ petitions of the assessees in similar circumstances. This judgment is of course in appeal before us. 29. A learned Single Judge of the Calcutta High Court in a recent judgment in case of Bagaria Properties and Investments Pvt. Ltd. Vs. Union of India (WPO No.244/2021) decided on 17.01.2022, has adopted the same view as of Allahabad and Delhi High Court and allowed the writ petition. 30. The sole dissenting view adopted is of a learned Single Judge of Chhattisgarh High Court in case of Palak Khatuja and Ors. Vs. Union of India and Ors., reported in (2021) 438 ITR 622. It was a case in which the learned Single Judge upheld the validity of the notice of reassessment on the ground that by virtue of notifications dated 31.03.2021 and 27.04.2021 the application of Section 148 of the Act which was originally existing before amendment was deferred, meaning the rea....
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....ntion that, as observed in Surendra Cotton Oil Mills Case, in the matter of interpretation of charging Section of a taxation statute, strict Rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favourable to the Assessee need to be applied. There is, however, confusion in the matter of interpretation of exemption notification published under taxation statutes and in this area also, the decisions are galore. 24. In construing penal statutes and taxation statutes, the Court has to apply strict Rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision making. Insofar as taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law. In other words, when the competent Legislature mandates taxing cert....
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....f the reason given by him only elucidates what is also deducible from the words used in the amended provision, we do not see why we should refuse to take it into consideration as an aid to a correct interpretation. It harmonises with and clarifies the real intent of the words used. Must we, in such circumstances, ignore it?" In case of K.P. Varghese Vs. Income Tax Officer, reported in (1981) 131 ITR 597 it was observed as under:- "Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant s....
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....he consideration declared in respect of the transfer is shown at a lesser figure than that actually received." (iv) It is well accepted that reopening a completed assessment causes great hardship to the assessee and also brings uncertainty. In a judgment in case of Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, reported in [2013] 350 ITR 266(Guj), a Division Bench of Gujarat High Court had observed as under:- "41. The powers under Section 147 of the Act are special powers and peculiar in nature where a quasi-judicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds. Ordinarily, a judicial or quasi-judicial order is subject to appeal, revision or even review if statute so permits but not liable to be reopened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving a large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interests of the Revenue, therefore, such specia....
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....ssued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit prescribed under the provisions of clause (b), as they stood immediately before the proposed amendment. Since the assessment or reassessment or recomputation in search or requisition cases (where such search or requisition is initiated or made on or before 31st March 2021) are to be carried out as per the provision of section 153A, 153B, 153C and 153D of the Act, the aforesaid time limitation shall not apply to such cases." 33. In case of Government of India and Others Vs. Indian Tobacco Association, reported in (2005) 7 SCC 396, the Supreme Court considered the effect of substitution of a statutory provision by new one. It was observed as under:- "15. The word "substitute" ordinarily would mean "to put (one) in place of another"; or "to replace". In Black's Law Dictionary, 5th Edition, at page 1281, the word "substitute" has been defined to mean "to put in the place of another person or thing". or "to exchange". In Collins English Dictionary, the word "su....
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.... that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case a three-Judge Bench of this Court emphasized the distinction between 'supersession' of a rule arid 'substitution' of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place." 34. In case of State of M.P. Vs. Kedia Leather & Liquor Ltd. and Others, reported in (2003) 7 SCC 389, the Supreme Court held as under:- "13. There is presumption against a repeal by implication; and the reason of this rule is based on the theory that the Legislature while enacting a law has a complete knowledge of the existing laws on the same subject matter, and therefore, when it does not provide a repealing provisions, the intention is clear not to repeal the existing legislation. (See: Municipal Council, Palai v. T.J. Joseph, Northern India Caterers (Private) Ltd. and Anr. v. State of Punjab and Anr., Municipal Corporation of Delhi v. Shiv Shanker and Ratan Lal Adukia and Anr. v. Union of India.) When the new Act cont....
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....irst place, an outright repeal will destroy the effectiveness of the repealed act in futuro and operate to destroy inchoate rights dependent on it, as a general rule. In many cases, however, where statutes are repealed, they continue to be the law of the period during which they were in force with reference to numerous matters." [pp.640-641] 11. The observations of Lord Tenterden and Tindal, C.J. referred in the abovementioned passages in Craies on Statute Law also indicate that the principle that on repeal a statute is obliterated is subject to the exception that it exists in respect of transactions past and closed. To the same effect is the Jaw laid down by this Court. [See :Qudrat Ullah v. Municipal Board. Bareilly, SCR at p. 539] 12. This means that as a result of repeal of a statute the statute as repealed ceases to exist with effect from the date of such repeal but the repeal does not affect the previous operation of the law which has been repealed during the period it was operative prior to the date of such repeal.........." 36. It can thus be seen that original provisions upon their substitution stood repealed for all purposes and had no existence after....
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....o three years instead of originally prevailing four years under normal circumstances. Clause (b) extends the upper limit of six years previously prevailing to ten years in cases where income chargeable to tax which has escaped assessment amounts to or is likely to amount to 50 lacs or more. Sub-section (1) of Section 149 thus contracts as well as expands the time limit for issuing notice under Section 148 depending on the question whether the case falls under clause (a) or clause (b). In this context the first proviso to Section 149(1) provides that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. As per this proviso thus no notice under Section 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be ....
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....t is well settled in considering the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the courts must adopt that construction which makes it valid. However it is equally well settled that the subordinate legislation does not enjoy same level of immunity as the law framed by the Parliament or the State Legislature. The law framed by the Parliament or the State Legislature can be challenged only on the grounds of being beyond the legislative competence or being contrary to the fundamental rights or any other constitutional provisions. Third ground of challenge which is now recognized in the judgment in case of Shayara Bano Vs Union of India reported in 2017 9 SCC 1 is of legislation being manifestly arbitrary. A subordinate legislation can be challenged on all these grounds as well as on the grounds that it does not conform to the statute under which it is made or that it is inconsistent with the provisions of the Act or it is contrary to some of the statutes applicable on the subject matter. In case of J.K. Industries Ltd. and Ors. Vs. Union of Ind....
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.... Act was not part of this delegation at all. The CBDT while issuing the notifications dated 31.03.2021 and 27.04.2021 when introduced an explanation which provided by way of clarification that for the purposes of issuance of notice under Section 148 as per the time limits specified in Section 149 or 151, the provisions as they stood as on 31.03.2021 before commencement of the Finance Act, 2021 shall apply, plainly exceeded its jurisdiction as a subordinate legislation. The subordinate legislation could not have travelled beyond the powers vested in the Government of India by the parent Act. Even otherwise it is extremely doubtful whether the explanation in the guise of clarification can change the very basis of the statutory provisions. If the plain meaning of the statutory provision and its interpretation is clear, by adopting a position different in an explanation and describing it to be clarificatory, the subordinate legislature cannot be permitted to amend the provisions of the parent Act. Accordingly, these explanations are unconstitutional and declared as invalid. 41. As noted, two Division Benches of Allahabad and Delhi High Courts have taken similar view. Two learned Sin....