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2025 (1) TMI 827
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....e as introduced by virtue of Finance Act, 2021 which would have been applicable. This according to the writ petitioner would have required the respondents to follow the procedure as prescribed by Section 148A of the Act which had come to be introduced by virtue of Finance Act, 2021. It is these aspects which came to be noticed by the Court originally when it entertained the writ petition on 15 February 2022 and led to the passing of an interim order providing that while it would be open for the Assessing Officer [AO] to frame an order of assessment, the same would not be given effect to. 2. When the matter was heard finally by us, Mr. Aggarwal, learned senior counsel appearing for the writ petitioner, had contended that since the notice had been digitally signed on 09 April 2021, it would be that date which would be liable to be viewed as the date of issuance of notice. It was his contention that this issue in any case stands conclusively settled in light of the judgment of the Court in Suman Jeet Agarwal vs. Income Tax Officer and Ors 2022 SCC OnLine Del 3141 and where the Court had held as follows:- "25.24. With respect to impugned notices falling in category "A", the....
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....rtificate was affixed. Since the date of affixation of digital signature certificate on the impugned notices is April 1, 2021 and thereafter they were sent and delivered through the Income Tax Business Application portal on or after April 1, 2021, the impugned notices falling under category "A" can only be said to have been issued on or after April 1, 2021" xxxx xxxx xxxx 31. For the reasons and principles that we have laid down, we dispose of these writ petitions with the following directions : 31.1. Category "A" : The notices falling under category "A", which were digitally signed on or after April 1, 2021, are held to bear the date on which the said notices were digitally signed and not March 31, 2021. The said petitions are disposed of with the direction that the said notices are to be considered as show-cause notices under section 148A (b) of the Act as per the directions of the apex court in the Ashish Agarwal, (supra) judgment" 3. It was further submitted that from the reasons which had been supplied it is apparent that the income which is alleged to have escaped assessment was spelt out as INR 46,17,000/- and thus falling below the threshold of....
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....rt when the writ petition was originally entertained a final assessment order has come to be passed, there was no obligation upon the respondents to either follow the Section 148A route or undertake a course correction pursuant to the judgment rendered by the Supreme Court in Union of India and Ors. vs. Ashish Agarwal (2023) 1 SCC 617. Learned counsel sought to draw sustenance and support for the aforenoted submission from the judgment handed down by this Court in Anindita Sengupta vs. Assistant Commissioner of Income Tax and Ors 2024 SCC OnLine Del 2296. 8. Having broadly noticed the rival submissions which were addressed, we proceed to examine the challenge on merits hereinafter. 9. From the case as set up in the writ petition as well as the various decisions which were cited for our consideration, it becomes apparent that the challenge originally appears to have been addressed on grounds which ultimately found favour with this Court in Mon Mohan Kohli vs. Assistant Commissioner of Income Tax and Anr. 2021 SCC OnLine Del 5250. Mon Mohan Kohli was a decision which was concerned with the validity of reassessment notices issued after the promulgation of Finance Act, 2021 and t....
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....ction 148-A(d) in respect of each of the assessees concerned; Thereafter after following the procedure as required under Section 148-A may issue notice under Section 148 (as substituted). 28.5. All defences which may be available to the assessees including those available under Section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available." 11. As is manifest from the above, the Supreme Court in order to strike a just balance between the interest of the assessee and the Revenue, provided that all notices issued pan India after 01 April 2021, albeit in accordance with the procedure contemplated under the earlier regime of reassessment, would be deemed to be notices referable to Section 148A (b) and the procedure as prescribed in that provision being thereafter liable to be followed. 12. It would be relevant to note that the judgment of the Supreme Court in Ashish Agarwal came to be pronounced in May 2022 and by which time the reassessment proceedings drawn against the writ petitioner pursuant to liberty accorded by us came to be complete....
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....ere yet to have attained finality. This clearly flows from the impugned notices being ordained to be treated as show-cause notices under section 148A (b) and the concomitant liberty being accorded to Assessing Officers to proceed further in accordance with section 148A (d). As we read that decision, we find ourselves unable to construe those directions as either warranting or mandating a reopening of proceedings which had come to be rendered a quietus in the meanwhile. The judgment was primarily concerned with the validity of various notices which had been promulgated and proceedings drawn in accordance with the statutory procedure which stood in place prior to April 1, 2021. It also becomes pertinent to note that the decision rendered by our court in Mon Mohan Kohli v. Asst. CIT [(2022) 441 ITR 207 (Delhi); 2021 SCC OnLine Del 5250.] perhaps constituted the solitary exception in the sense of having left a window open to the respondents to draw proceedings afresh. A majority of the High Courts, however, do not appear to have made such a provision or provide the Revenue with a right of recourse. The Supreme Court was thus faced with a peculiar and an unprecedented situation where th....
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....rred in proceeding on the basis of the unamended family of provisions relating to reassessment. They had essentially held that it was the procedure constructed in terms of the amendments introduced by the Finance Act, 2021 which would apply. None of those judgments were primarily concerned with concluded assessments. It is this indubitable position which constrained the Supreme Court to frame directions requiring those notices to be treated as being under section 148A (b) and for the Assessing Officer proceeding thereafter to frame an order as contemplated by section 148A (d) of the Act. The Supreme Court significantly observed that the High Courts instead of quashing the impugned notices should have framed directions for those notices being construed and deemed to have been issued under section 148A. Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] proceeded further to observe that the Revenue should have been "permitted to proceed further with the reassessment proceedings as per the substituted provisions...." Our view of the judgement being confined to proceedings at the stage of notice is further fortified from the Supreme Court providing in paragraph....
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....nion that even paragraph 25.5 of Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] would not sustain the stand taken by the respondent since the same clearly confines itself to decisions or judgments rendered by a High Court invalidating a notice under section 148 and the manifest intent of the Supreme Court being that its judgment would apply and govern irrespective of whether an appeal had been laid before it. 28. It is in the aforesaid context that we also bear in mind the pertinent observations rendered by the Constitution Bench in High Court Bar Association v. Uttar Pradesh [(2024) 6 SCC 267.] when it held that a direction under article 142 of the Constitution should not impact the substantive rights of those litigants who are not even parties to the lis. The Constitution Bench while acknowledging the amplitude of the article 142 power placed a significant caveat when it observed that benefits derived by a litigant based on a judicial order validly passed cannot be annulled especially when they may not even have been parties to the cause. This too convinces us to hold in favour of the petitioner and come to the inevitable conclusion that the ....
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....tion and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; (e) The Finance Act, 2021 ((2021) 432 ITR (Stat) 52) substituted the old regime for reassessment with a new regime. The first proviso to section 149 does not expressly bar the application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-tax Act, including sections 149 and 151 of the new regime. Once the first proviso to section 149 (1) (b) is read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment Year Within Years Expiry of Limitation read with TOLA for (2) (3) Wi....
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....ppreciated bearing in mind the completion of the three and six year period for AY 2015-16 which would have come to an end on 31 March 2019 and 31 March 2022, respectively. Since both those terminal dates did not fall within the period 20 March 2020 to 30 June 2021 (the period contemplated under Section 3 of TOLA), it appears to have been urged that the provisions of that statute would not apply. 17. The question which, however, still survives is whether the impugned notice issued on 09 April 2021 can be said to be barred by time or lacking in jurisdiction. Undisputedly, AY 2015-16 pertains to a period prior to 01 April 2021 and would thus be governed by the First Proviso to Section 149. Section 149 as amended by Finance Act, 2021 reads as under: - "149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of accounts or other documents or evidenc....
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....ice could have been issued within a maximum period of six years from the end of the relevant AY. Tested on that basis, it is apparent that the terminal date for issuance of notice would be 31 March 2022. 19. As was noticed in the preceding parts of this decision, the decision of the Supreme Court in Ashish Agarwal which came to be pronounced in May 2022 had introduced a legal fiction in terms of which all notices under Section 148 were liable to be viewed and treated as being referable to Section 148A (b) of the Act. The formulation of this legal fiction in Ashish Agarwal stands lucidly explained by the Supreme Court in Rajeev Bansal the relevant extracts whereof are reproduced hereinbelow: - "94. Before we proceed, we need to bear in mind three important periods: (i) The period up to June 30, 2021 - this period is covered by the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020; (ii) The period from July 1, 2021 to May 3, 2022 - the period before the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.]; and (iii) ....
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....flow from that state of facts. Such consequences have got to be worked out only to their logical extent having due regard to the purpose for which the legal fiction has been created. Stretching the consequences beyond what logically flows amounts to an illegitimate extension of the purpose of the legal fiction." 98. A legal fiction is created for a definite purpose and it should be limited to the purpose for which it is enacted or applied. It is a well-established principle of interpretation that the courts must give full effect to a legal fiction by having due regard to the purpose for which the legal fiction is created. (State of Maharashtra v. Laljit Rajshi Shah [(2000) 2 SCC 699; 2000 SCC (Cri) 533.]) The consequences that follow the creation of the legal fiction "have got to be worked out to their logical extent". (Bengal Immunity Comany Ltd. v. State of Bihar [(1955) 6 STC 446 (SC); 1955 SCC OnLine SC 2.]) The court has to assume all the facts and consequences that are incidental or inevitable corollaries to giving effect to the fiction. (Industrial Supplies Pvt. Ltd. v. Union of India [(1980) 4 SCC 341.]) 99. In Union of India v. Ashish Agarwal [(2022) 444 ....
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.... the relevant material and information allows the assessee to respond to the show-cause notice. The deemed notices were effectively incomplete because the other requirement of supplying the relevant material or information to the assessees was not fulfilled. The second requirement could only have been fulfilled by the Revenue by an actual supply of the relevant material or information that formed the basis of the deemed notice. 102. While creating the legal fiction in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court was cognizant of the fact that the Assessing Officers were effectively inhibited from performing their responsibility under section 148A until the requirement of supply of relevant material and information to the assessees was fulfilled. This court lifted the inhibition by directing the Assessing Officers to supply the assessees with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. Thus, during the period between the issuance of the deemed notices and the date of judgment in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], the Ass....
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....evelopment Corporation v. Mahesh [(2022) 2 SCC 772.]) Therefore, any order of a court that prevents or prohibits an authority from passing an order can be treated as a stay order. 105. A direction issued by this court in exercise of its jurisdiction under article 142 is an order of a court. The third proviso to section 149 of the new regime provides that the period during which the proceedings under section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under section 148A (b) and the date of the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], the Assessing Officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show-cause notices were deemed to have been stayed by order of this court from the date of their issuance (somewhere from April 1, 2021 till June 30, 2021) till the date of decision in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , that is, May 4, 2022. 106. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (....
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...., 2021 till the supply of relevant information or material by the Assessing Officers to the assessees in terms of the directions in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.]; and (ii) two weeks allowed to the assessees to respond to the show-cause notices. (b) Interplay of Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 108. The Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extended the time limit for issuing reassessment notices under section 148, which fell for completion from March 20, 2020 to March 31, 2021, till June 30, 2021. All the reassessment notices under challenge in the present appeals were issued from April 1, 2021 to June 30, 2021 under the old regime. Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] deemed these reassessment notices under the old regime as show-cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is ....
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.... the legal fiction in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] was that it stopped the clock of limitation with effect from the date of issuance of section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assessees to reply to the show-cause notices must also be excluded in terms of the third proviso to section 149. 111. The clock started ticking for the Revenue only after it received the response of the assessees to the show-causes notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities : (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d....
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....egime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. A reassessment notice issued beyond the surviving time limit will be time-barred." 20. Although in the facts of the present case, the respondents failed to clarify that the notice originally issued on 09 April 2021 should be treated as being one referable to Section 148A (b) of the Act, admittedly they did adhere to the procedure which had been formulated by the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors. (2003) 1 SCC 72. In GKN Driveshafts, the Supreme Court had made the following pertinent observations: - "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file....
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....ent Old regime Four years but not more than six years Rupees one lakh or more New regime Three years but not more than ten years Rupees fifty lakhs or more 51. Given section 149 (1) (b) of the new regime, reassessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than rupees fifty lakhs. The proviso to section 149 (1) (b) limits the retrospectivity of that provision with respect to the time limits specified under section 149 (1) (b) of the old regime. 52. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court held that the benefit of the new regime must be provided for the reassessment conducted for the past periods. The increase of the monetary threshold from rupees one lakh to rupees fifty lakhs is beneficial for the assessees. Mr. Venkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six-year time limit prescribed under section 149 (1) (b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than rupees fifty lakhs. 53. The position ....
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....pinion and the quantum of income which was alleged to have escaped assessment. Additions ultimately made in the course of reassessment would not validate the initiation of proceedings if founded on income of INR 46,17,000/- having escaped assessment and thus evidently below the threshold of INR 50 lakhs. 27. Insofar as the submission of Mr. Panda resting on Anindita Sengupta is concerned, we find ourselves unable to sustain the same bearing in mind the undisputed position which emerges from the record, namely, of the assessment order having been framed pursuant to the liberty granted by this Court in the interim, as distinct from what prevailed in Anindita Sengupta. The present is thus not a case where an order of assessment had come to be independently framed and thus obviating the requirement of issuance of a Section 148A (b) notice but being one made solely on the basis of the liberty accorded by this Court in the interim. The distinction that thus needs to be acknowledged, and one which we seek to underline, is Anindita Sengupta being a case where a final order of assessment had already come to be framed even before the Supreme Court had pronounced its verdict in Ashish Agar....
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....oint Commissioner of Income-tax and which was an authority recognised under the unamended section 151. The answer to the argument based on the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act would also largely remain unimpacted by our finding on this score as would become evident from the discussion which ensues. xxxx xxxx xxxx 33. A plain reading of section 3 establishes that where the time limit for the completion or compliance of any action under a specified Act were to fall between March 20, 2020 to December 31, 2020, the period for completion and compliance would stand extended up to March 31, 2021 or such other date thereafter as may be specified by the Union Government by way of a notification. Undisputedly, the date of March 31, 2021 came to be extended thereafter up to April 30, 2021 and lastly up to June 30, 2021. 34. Concededly, the Finance Act, 2021 was enacted thereafter and came into effect from April 1, 2021. It is admitted by the respondents that the terminal point for initiation of reassessment for the assessment year 2015-2016 in ordinary circumstances would have been March 31, 2020 and that....
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....the distribution of powers under a specified Act. It was in that light that we had spoken of the carving or conferral of a new or altered jurisdiction. 38. It would therefore be wholly incorrect to read the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act as intending to amend the distribution of power or the categorisation envisaged and prescribed by section 151. The additional time that the said statute provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by section 151 of the Act. The issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant assessment year or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant assessment year or thereafter. The bifurcation of those powers would continue unaltered and unaffected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 39. The fallacy of the submission addressed by the respondents becomes even more evident whe....
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....ted and the same being indelibly tied to the end of the relevant assessment year. Once it is conceded that the notice came to be issued four or three years after the end of the relevant assessment year, the approval granted by the Joint Commissioner of Income-tax would not be compliant with the scheme of section 151. We thus find ourselves unable to sustain the grant of approval by the Joint Commissioner of Income-tax. 41. It is pertinent to note that the respondents had feebly sought to urge that the use of the expression "sanction" in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act also merits due consideration and is liable to be read as supportive of the contentions that were addressed on their behalf. The argument is however clearly meritless when one bears in consideration the indisputable fact that the set of provisions with which we are concerned nowhere prescribe a timeframe within which sanction is liable to be accorded. "Sanction" when used in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act caters to those contingencies where a specified Act may have prescribed a particul....
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....caping assessment was less than rupees one lakh : (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than rupees one lakh : (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 75. After April 1, 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], after April 1, 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of section 151 of the ne....
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....the new regime is this : if the time limit of three years from the end of an assessment year falls between March 20, 2020 and March 31, 2021, then the specified authority under section 151(i) has an extended time till June 30, 2021 to grant approval. In the case of section 151 of the old regime, the test is : if the time limit of four years from the end of an assessment year falls between March 20, 2020 and March 31, 2021, then the specified authority under section 151 (2) has time till March 31, 2021 to grant approval. The time limit for section 151 of the old regime expires on March 31, 2021 because the new regime comes into effect on April 1, 2021. xxxx xxxx xxxx 81. This court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] directed the Assessing Officers to "pass orders in terms of section 148A (d) in respect of each of the assessees concerned". Further, it directed the Assessing Officers to issue a notice under section 148 of the new regime "after following the procedure as required under section 148A". Although this court waived off the requirement of obtaining prior approval under section 148A(a) and section 148A (b), it did ....