Validity of Section 148 Notices Issued After 31st March 2021

1. Introduction: –

The Finance Bill, 2021 after being passed by the Parliament and getting the assent of the President on 28th March 2021 has become the final law very much in force from 01 April 2021 of which each & every section is legally enforceable and applicable in toto.

The Finance Act, 2021 has Substituted the provisions relating to Reassessment and a new set of reassessment proceedings have been introduced from 1st April 2021.After such substitution, the Old provisions relating to Reassessment, do not survive.

The Landmark decision in the case of GKN Driveshafts (India) Ltd. v. ITO 259 ITR 19 (SC) which laid down the procedure for re-assessment  is now integrated in the act itself. The Assessing Officer will now have to follow the procedure laid down under section 148A of the Act before issuance of Notice under section 148 of the Act.

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020  referred as “Relaxation Act” hereafter was passed by the Parliament for extension of various time limits, but whether It has extended the power to substitute any provision of the enacted Bill. Whether the proceedings are to be carried out as per the old provisions or the new substituted provisions.

The debatable questions are:

1. Whether two parallel reassessment proceedings under the same statute can be used for same purpose of initiating proceedings for reopening of assessments during the period from 1st April, 2021 to 30th June, 2021?

2. What is the validity of the notice(s) issued under section 148 of the Act during the period from 01.04.21 to 30.06.21which are still issued as per the old regime?

3. Does the Govt. have powers to choose which Finance Act shall be applicable?

The article strives to take these issues to a logical conclusion.

2. Sequence of Events: For a better understanding of the matter, it is worthwhile to mention the relevant sequence of events:

Event No. 1: On 29^th September, 2020, The Relaxation Act was passed by the Parliament, which provided for extension of various time limits for completion or compliance of actions under the specified Acts and reduction in interest, waiver of penalty and prosecution for delay in payment of certain taxes or levies during the specified period. The said Act was applicable in case of “specified Act” and Income Tax Act, 1961 was included in the same as one of the specified Act.

Event No. 2: On 27thFebruary, 2021, the CBDT issued notification S.O. 966(E). As per which the time limit for completion the action which inter alia included the reassessment proceedings was due to expire on 31^st March, 2021 was extended to 30^th April, 2021. This was done by the Govt. as per the power conferred to it u/s 3(1) of the Relaxation Act.

Event No. 3: On 31st March, 2021, the CBDT issued notification S.O. 1432(E)  the notification clarified that the reassessment orders, which were earlier to be passed on 31^st March, 2021 can now be passed to 30^th April, 2021. Further that the notice U/s 148 of the Act which were to be issued on or before 31^st March, 2021, can now be issued on or before 30^th April, 2021. It was explicitly clarified that the reassessment mechanism as per the old system, i.e., which was prevalent before 31^st March, 2021, shall be applicable. This was done by the Government as per the power conferred to it U/s 3(1) of the Relaxation Act.

Event No. 4: On 27th April, 2021, the CBDT issued notification S.O. 1703(E) which clarified that the reassessment order, which were earlier to be passed on 30^th April, 2021 can now be passed up to 30^th June, 2021. Further that the notice U/s 148 of the Act which were to be issued on or before 30^th April, 2021, can now be issued on or before 30^th June, 2021. It was further reiterated that the reassessment mechanism as per the old system, i.e., which was prevalent before 31^st March, 2021, shall be applicable. This was again done by the Government as per the power conferred to it U/s 3(1) of the Relaxation Act.

From the above events, it shall be clear that the aforesaid notifications have been issued by the Government under section 3 (1) of the Relaxation Act. For better understanding the same is reproduced as under:

RELAXATION OF CERTAIN PROVISIONS OF SPECIFIED ACT

3. (1) Where, any time-limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2020 to the 31st day of December, 2020, or such other date after the 31st day of December, 2020, as the Central Government may, by notification, specify in this behalf, for the completion or compliance of such action as—

(a)	completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval, or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the specified Act; or
(b)	filing of any appeal, reply or application or furnishing of any report, document, return or statement or such other record, by whatever name called, under the provisions of the specified Act.

Obviously the Government has the power to extend the time as per the Relaxation Act. The situation here is absolutely different. In the present case where a specific provision has been passed and made Finance Act, 2021, it cannot be said that the Relaxation Act gives power to government  to temporarily suspend the provisions of some sections viz. pertaining to reassessment. This appears to be incongruous and not in conformity of the objectives of the Relaxation Act. The provisions of section 3(1) of the Relaxation Act gives specific power to the Government to relax the rigours of the timelines of some of the sections including the reassessment, but does not says that a provision which has been discussed in the parliament and made an Act with the assent of the President, will not continue to be in operation or shall be operated for a limited time frame as per the old regime.

3. Time Zones:- As mentioned above, the Finance Act, 2021 and the Relaxation Act have given rise to two parallel laws and three scenarios, which are as under:

1. Notice issued up to March 31, 2021;

2. Notice issued between April 01, 2021 to June 30, 2021;(Grey Area)

3. Notice issued on or after July 01, 2021.

The applicability of law is different for each period. A summary of which is as under:

Sno.	Particulars	Status of Notice(s) issued Up to  31.03.21	Notice(s) issued between  01.04.21 to 30.06.21	Notice(s) issued on or after 01.07. 21
1.	Prior AY’s for which  Notice can be issued	AY 2013-14 &  subsequent years	A.Y 2013-14 & subsequent years (acc. to the Dept.)	For A.Y 2011-12 and subsequent years
2.	Legality of Notice	Valid	Disputed	Valid
3.	Applicable assessment regime	Old Regime	Disputed	New Regime

With respect to the time zones, the validity of Notices issued under section 148 of the Act between April 01, 2021 to June 30, 2021 which is under dispute can only be settled by the judicial pronouncements in times to come.

However, assessee-Petitioners have challenged the non-applicability and non-adherence to the new provisions of law. The Hon. Bombay High Court in Armada D1 Pvt. Ltd. v. DCIT WP(L) No. 11766 of 2021 dated  03.06.2021 has stayed the proceedings of reassessment on account of non-adherence to the new procedure laid down under section 148A of the Act.

Similarly, The Hon. Bombay High Court in Tata Communications Transformation Services Limited v. ACIT WP No. 1334 of 2021 dated 05 July, 2021 wherein the Petitioner has contended that section 3 of the Ordinance and Explanation in Notification No. 20 of 2021 and Explanation in Notification No. 30 of 2021 dated April 27, 2021 (2021) 434 ITR (St) 11 are ultra-vires the Income Tax Act, 1961 and the Finance Act, 2020 and are unconstitutional, posing challenge to them urges for striking them down. The Court has stayed the proceedings in this case as well.

The finality of the Petitions cannot be decided at this stage. However, it can be inferred that the Courts are likely to grant a stay on Notices issued under section 148 of the Act between April 01, 2021 to June 30, 2021, without following the procedure laid now under the new law i.e., 148A of the Act.

The Hon. Apex Court in  Bhagat Ram Sharma vs. Union of India and Ors observed that It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. Such a law may also provide for the introduction of a new provision. There is no real distinction between ‘repeal’ and an ‘amendment’

Secondly, the CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963. The issuance of Notification extending the due date for issuance of Notice under the Act beyond the existence of relevant provisions of such act would amount to excessive delegation.

The Hon’ble Supreme Court in the case of Addl. District Magistrate (Rev.) Delhi Admn. vs. Siri Ram held that it is a well-recognised principle of interpretation of a statute that conferment of rulemaking power by an Act does not enable the rule making authority to make rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto.

Further, the Hon’ble Supreme Court in the case of State of Tamil Nadu and Ors. vs. P. Krishnamurthy and Ors. wherein it was held that there is a presumption in favour of constitutionality or validity of a sub-ordinate Legislation and the burden is upon him who attacks it to show that it is invalid. Further, the court considering the validity of a sub-ordinate Legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate Legislation conforms to the parent Statute. It was also observed that, where a Rule is directly inconsistent with a mandatory provision of the Statute, then, of course, the task of the court is simple and easy.

4. Conclusion:

It is trite law that the dominant purpose in construing a statute is to ascertain the intention of the Parliament. One of the well-recognized  canons of construction is that the legislature speaks its mind by use of correct expression. The object of bringing the Relaxation Act, inter alia, provides for extension of various time limits for completion or compliance of actions under the specified Acts and reduction in interest, waiver of penalty and prosecution for delay in payment of certain taxes or levies during the specified period. The Relaxation Act does not, in plain language or even on extracting the intention of the Legislature, gives an interpretation that it can suspend the operations of the Finance Act. It must be noted the proper course in interpreting a statute in the first instance is to examine its language and then ask what is the natural meaning uninfluenced by the considerations derived from previous state of law and then assume that it was property intended to leave unaltered.

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Compiled By: – CA Milind Wadhwani  | DISA(ICAI), FAFD(ICAI), Research (Ph.D.) Scholar | Mobile +91 9826273333 | Mail ID: – MILIND.WADHWANI20@GMAIL.COM

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