Allahabad HC on Section 148 Notices issued after 01.04.2021 for AY 2013-14 to 2017-18

Rajeev Bansal Vs Union of India (Allahabad High Court)

Allahabad high court in lead case of Rajeev bansal vs UOI (Writ Tax of 1086/2022) and others by division bench presided by justice sunita agarwal on issue of time barred notices u/s 149 first proviso under amended law (judgment reserved on 15 Dec 2022) has rejected income tax deptt  ‘controversial’ stand based on TOLA provisions to upheld tax payers plea qua validity of impugned Notices for ay 13-14 etc.

Questions Raised before High Court

(i) Whether the reassessment proceedings initiated with the notice under Section 148 (deemed to be notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, can be conducted by giving benefit of relaxation/extension under the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act’ (TOLA)’ 2020 upto 30.03.2021, and then the time limit prescribed in Section 149 (1) (b) (as substituted w.e.f. 01.04.2021) is to be counted by giving such relaxation, benefit of TOLA from 30.03.2020 onwards to the revenue.

(ii) Whether in respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, benefit of TOLA’ 2020 will be available to the revenue, or in other words the relaxation law under TOLA’ 2020 would govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act’ 2021, in such cases?

Held by High Court

(i) The reassessment proceedings initiated with the notice under Section 148 (deemed to be notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, cannot be conducted by giving benefit of relaxation/extension under the Taxation and Other Laws (Relaxation And Amendment of Certain Provisions) Act’ (TOLA) 2020 upto 30.03.2021, and the time limit prescribed in Section 149 (1)(b) (as substituted w.e.f. 01.04.2021) cannot be counted by giving such relaxation from 30.03.2020 onwards to the revenue.

(ii) In respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, benefit of TOLA’ 2020 will not be available to the revenue, or in other words, the relaxation law under TOLA’ 2020 would not govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act’ 2021, in such cases.

(iii) The reassessment notices issued to the petitioners in this bunch of writ petitions, on or after 1.4.2021 for different assessment years (A.Y. 2013-14 to 2017-18), are to be dealt with, accordingly, by the revenue.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Sri Abhinav Mehrotra, Sri Rahul Agarwal, Sri Ashish Bansal, Sri Shubham Agarwal, Sri Ankur Agarwal, Sri Suyash Agarwal, Sri V.K. Sabarwal, Sri R.B. Gupta and Sri Krishna Vyas learned counsels for the petitioners in the bunch cases; Sri Gaurav Mahajan, Sri Krishna Agarwal, Sri Ashish Agarwal, Sri Manu Ghildyal, learned counsels appearing for the respondent-Revenue, Sri Anant Kumar Tiwari, Sri Gopal Verma and Sri N.C. Gupta, learned counsels for the Union of India.

Introduction:-

2. The writ petitions in this bunch are directed against the orders passed by the Assessing Authority under Section 148-A(d) of the Income Tax Act’ 1961 (hereinafter referred as Act’ 1961) and the consequential notices issued under Section 148 of the Act’ 1961. The dispute pertains to the assessment years 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18. The disputed notices having been issued on or after 01.04.2021, the period concerned is between 01.04.2021 to 30.06.2021.

3. At the outset, learned counsels for the parties had agreed to address the Court on two questions framed and discussed jointly, answer to which would decide the fate of the individual notices under challenge, on factual aspects.

4. We have, therefore, not entered into the merits of the individual notices under challenge and heard the learned counsels for the parties on the following two legal issues:-

(i) Whether the reassessment proceedings initiated with the notice under Section 148 (deemed to be notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, can be conducted by giving benefit of relaxation/extension under the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act’ (TOLA)’ 2020 upto 30.03.2021, and then the time limit prescribed in Section 149 (1) (b) (as substituted w.e.f. 01.04.2021) is to be counted by giving such relaxation, benefit of TOLA from 30.03.2020 onwards to the revenue.

(ii) Whether in respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, benefit of TOLA’ 2020 will be available to the revenue, or in other words the relaxation law under TOLA’ 2020 would govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act’ 2021, in such cases?

5. As noted above, the impugned notices have been issued between 01.04.2021 and 30.06.2021. For the assessment year 2013­14 and 2014-15, it was argued by the learned counsels for the assessees that the assessment for these years cannot be reopened, in as much as, maximum period of six years prescribed in pre-amendment provision of Section 149(1)(b) had expired on 31.03.2021. No notice under Section 148 could be issued in a case for the assessment year 2013-14 and 2014-15 on or after 01.04.2021 being time barred, on account of being beyond the time limit specified under the provisions of Section 149(1)(b) as they stood immediately before the commencement of the Finance Act’ 2021. For the assessment year 2015-16, 2016-17, 2017-18, the contention is that the monetary threshold and other requirements of the Income Tax Act in the post-amendment regime, i.e. after the commencement of the Finance Act’ 2021 have to be followed. The validity of the jurisdictional notice under Section 148 is, thus, to be tested on the touchstone of compliances or fulfillment of requirements by the revenue as per Section 149(1)(b) and the first proviso to Section 149(1) inserted by the amendment under the Finance Act’ 2021, wef 01.04.2021.

6. Before proceeding further, it may be noticed as a clarification at this stage itself, that there is no dispute about the fact that the notices issued under Section 148 after the amendment brought by the Finance Act’ 2021 i.e. on or after 01.04.2021 be treated as notices under Section 148-A as per the amended provisions. It has also been agreed by the counsel for the parties that the date of issuance of notice under Section 148 of the Income Tax Act (as per pre-amended provisions) shall be treated as the date of issuance of notice under Section 148-A (post amendment) and all notices issued under Section 148 of the Income Tax Act after 01.04.2021 shall be treated to be the notices under Section 148-A of the Income Tax Act, inserted by the Finance Act 2021, w.e.f. 01.04.2021. The jurisdictional notice under Section 148 after the amendment brought by the Finance Act 2021 will have to be issued after conclusion of the preliminary enquiry required under Section 148-A.

Legislative Scheme:-

7. To deal with the above noted issues, at the outset, we are required to note the legislative scheme of Section 148 of reopening of assessment pre and post amendment by the Finance Act 2021. The relevant provisions of TOLA 2020 are also to be noted herein:-

8. The pre-amendment Section 148 is quoted as under:-

148. Before making the assessment, reassessment or re­computation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall 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 within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other be, apply accordingly as if such return were a return required to be furnished under section 139

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income charge. able to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Explanation 1. For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,­

(i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act.

Explanation 2.­For the purposes of this section, where,

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 1324, on or after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section 133A, other than under sub­ section (2A) or sub­section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or

(iii) 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 or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or 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, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.­For the purposes of this section, specified authority means the specified authority referred to in Section 151.

9. Post Amendment Section 148 is quoted as under:-

“148. Issue of notice where income has escaped assessment. — ­­Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall 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 within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Explanation 1.­- For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,­­

(i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act.

Explanation 2.­- For the purposes of this section, where,­­

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section 133A, other than under sub­section (2A) or sub­section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or

(iii) 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 or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 orsection 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, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.­- For the purposes of this section, specified authority means the specified authority referred to in section 151.”

10. Relevant extract of Section 3(1) of TOLA 2020 is to be noted hereunder:-

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; or

(c) in case where the specified Act is the Income­tax Act, 1961,—

(i) making of investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purposes of claiming any deduction, exemption or allowance under the provisions contained in—

(I) sections 54 to 54GB, or under any provisions of Chapter VI­A under the heading “B.­Deductions in respect of certain payments” thereof; or

(II) such other provisions of that Act, subject to fulfillment of such conditions, as the Central Government may, by notification, specify; or

(ii) beginning of manufacture or production of articles or things or providing any services referred to in section 10AA of that Act, in a case where the letter of approval, required to be issued in accordance with the provisions of the Special Economic Zones Act, 2005, has been issued on or before the 31st day of March, 2020, and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 31st day of March, 2021, or such other date after the 31st day of March, 2021, as the Central Government may, by notification, specify in this behalf:

Provided that the Central Government may specify different dates for completion or compliance of different actions:

11. The relevant notifications issued by Central Government dated 31.03.2021 and 27.04.2021 are quoted hereunder:-

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 31st March, 2021

“S.O. 1432(E).—In exercise of the powers conferred by sub­section (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, Sub­section (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 Income­tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income­tax Act) and, —

(a) the completion of any action referred to in clause (a) of sub­section (1) of section 3 of the Act relates to passing of an order under sub­section (13) of section 144C or issuance of notice under section 148 as per time­limit specified in section 149 or sanction under section 151 of the Income­tax Act, —

(i) the 31 day of March, 2021 shall be the end date of the period during which the time­ limit, specified in, or prescribed or notified under, the Income­tax Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time­limit for the completion of such action shall stand extended..

Explanation.­ For the removal of doubts, it is hereby clarified that for the purposes of issuance of notice under section 148 as per time­limit specified in section 149 or sanction under section 151 of the Income­tax Act, under this sub­clause, the provisions of section 148, section 149 and section ­151 of the Income­tax 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.

(b) the compliance of any action referred to in clause (b) of sub­section (1) of section 3 of the said Act relates to intimation of Aadhaar number to the prescribed authority under sub­section (2) of section 139AA of the Income­tax Act, the time­limit for compliance of such action shall stand extended to the 30th day of June, 2021.

(B) where the specified Act is the Chapter VIII of the Finance Act, 2016 (28 of 2016) (hereinafter referred to as the Finance Act) and the completion of any action referred to in clause (a) of sub­section (1) of section 3 of the said Act relates to sending an intimation under sub­section (1) of section 168 of the Finance Act.

(1) the 31 day of March, 2021 shall be the end date of the period during which the time­ limit, specified in, or prescribed or notified under, the Finance Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time ­limit for the completion of such action shall stand extended.

[Notification No. 20/2021/F. No. 370142/35/2020­TPL]

SHEFALI SINGH, Under Secy., Tax Policy and Legislation Division

Note: The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub­section (ii) vide S.O. No. 4805 dated 31″ December, 2020.”

………………………………………..

“MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 27th April, 2021

S.O. 1703(E).­ In exercise of the powers conferred by sub­section (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 notifications of the Government of India in the Ministry of Finance, (Department of Revenue) No. 93/2020 dated the 31″ December, 2020, No. 10/2021 dated the 27th February, 2021 and No. 20/2021 dated the 31 March, 2021, published in the Gazette of India, Extraordinary, Part­II, Section 3, Sub­ section (ii), vide number S.O. 4805(E), dated the 31″ December, 2020, vide number S.O. 966(E) dated the 27thFebruary, 2021 and vide number S.O. 1432(E) dated the 31″ March, 2021, respectively (hereinafter referred to as the said notifications), the Central Government hereby specifies for the purpose of sub­section (1) of section 3 of the said Act 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 sub­section (1) of section 3 of the said Act, relates to passing of any order for assessment or reassessment under the Income­ tax Act, and the time limit for completion of such action under section 153 or section 153B thereof, expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021;

(b) the completion of any action, referred to in clause (a) of sub­section (1) of section 3 of the said Act, relates to passing of an order under sub­section (13) of section 144C of the Income­ tax Act 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, and the time limit for completion of such action expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021.

Explanation. For the removal of doubts, it is hereby clarified that for the purposes 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 sub­clause, 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 31″ day of March 2021, before the commencement of the Finance Act, 2021, shall apply.

(B) where the specified Act is the Chapter VIII of the Finance Act, 2016 (28 of 2016) (hereinafter referred to as the Finance Act) and the completion of any action, referred to in clause (a) of sub­section (1) of section 3 of the said Act, relates to sending an intimation under sub­section (1) of section 168 of the Finance Act, and the time limit for completion of such action expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021.

[Notification No. 38/2021/ F. No. 370142/35/2020­TPL]

RAJESH KUMAR BHOOT, Jt. Secy. Tax Policy & Legislation Division

Note: The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub­section (ii) vide S.O. No. 4805 dated 31st December, 2020”

12. These petitions are offshoot of the decision of the Coordinate Bench of this High Court in Writ Tax No.524 of 2021 Ashok Kumar Agarwal Vs. Union of India, affirmed by the Apex Court in the judgement and order dated 04.05.2022 in Civil Appeal No.3005 to 3017, 3019-3020 of 2022 Union of India Vs. Ashish Agarwal.

13. Before proceeding further, we are, thus, require to note the history of litigation inter-se parties.

History of Litigation:-

(i) Coordinate Bench Decision in Ashish Agarwal (supra)

14. Upon enforcement of the Finance Act’ 2021, the pre­existing Sections 147 to 151 had been repealed and replaced by new provisions, bringing changes in the entire statutory scheme of initiating, enquiring, conducting and concluding the reassessment proceedings. The validity of the reassessment proceeding initiated against individual assessees, after 01.04.2021, came up for consideration before this Court in Ashok Kumar Agarwal (Supra). The provisions of the Income Tax Act’ 1961, as they existed prior to the amendment by Finance Act’ 2021, read with the provisions of TOLA/Relaxation Act No.38 of 2020 were applied in the reassessment proceedings initiated against the assessees while issuing notices under Section 148 of the Income Tax Act on or after 01.04.2021. The challenge to the notices therein was made on the ground that the pre-existing Sections 147 to 151 of the Act’ 1961 stood repealed and replaced by the Finance Act 2021 and upon enforcement of the amendment, the entire statutory scheme of conducting reassessment proceedings underwent a sea change. With the substitution of old provisions, pre-existing provisions pertaining to reassessment under the Act could not be applied to conduct the proceedings after enforcement of the Finance Act’ 2021.

15. The Relaxation Act/Enabling Act/TOLA, 2020 was enacted in March 2020 on account of unforeseen circumstances faced by the country due to onset of the pandemic Covid 19 which has led to enforcement of intermittent lock downs. Normal functioning of the government and its institutions had been put to halt. Because of the obstructions due to spread of the Pandemic Covid-19, the Enabling Act’ 2020 was enacted solely to extend the limitation under the provisions of the IT Act’ 1961.

16. It was argued therein that the Finance Act 2021, which is a latter Act does not contain any saving clause as may allow the pre­existing provisions an extended life. After the enforcement of the amendment, the pre-existing provisions, thus, could not be pressed into service by the revenue. The Enabling Act does not and could not save the pre-existing Sections 147, 148 to 151 of the IT Act, pertaining to reassessment nor overriding effect can arise or be given to the pre-existing reassessment legislative regime by the Enabling Act, since on the date of enactment of the Enabling Act, the Finance Act 2021 was not born. In absence of any saving clause in the Finance Act’ 2021, there exists no power either under Section 3(1) of the Enabling Act or any other law as may validate the issuance of the impugned notification by the Central Government to apply pre­existing provisions in the reassessment proceeding initiated on or after 01.04.2021. The Enabling Act, therefore, became wholly unenforceable or unacceptable to the proceedings that would arise under the latter Act, i.e. the substituted provisions of Section 147 to 151 of the Income Tax Act’ 1961, upon enactment of the Finance Act’ 2021 on or after 01.04.2021.

17. The submissions advanced by the learned counsel for the petitioners therein to challenge the validity of the notice under Section 148 of the Act’ 1961 after 01.04.2021, have been extracted pointwise in paragraph No.’63’ as under:-

“(i) By substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021. Relying on the principle substitution omits and thus obliterates the pre­existing provision, it has been further submitted, in absence of any saving clause shown to exist either under the Ordinance or the Enabling Act or the Finance Act 2021, there exists no presumption in favour of the old provision continuing to operate for any purpose, beyond 31.03.2021.

(ii) The Act is a dynamic enactment that sustains through enactment of the Finance Act every year. Therefore, on 1st April every year, it is the Act as amended by the Finance Act, for that year which is applied. In the present case, it is the Act as amended by the Finance Act 2021, that confronted the Enabling Act as was pre­existing. In absence of any legislative intent expressed either under the Finance Act, 2021 or under the Enabling Act, to preserve any part of the pre­existing Act, plainly, reference to provisions of Sections 147 and 148 of the Act and the words ‘assessment’ and ‘reassessment’ appearing in the Notifications issued under the Enabling Act may be read to be indicating only at proceedings already commenced prior to 01.04.2021, under the Act (before amendment by the Finance Act, 2021). The delegated action performed under the Enabling Act cannot, itself create an overriding effect in favour of the Enabling Act.

(iii) The Enabling Act read with its Notifications does not validate the initiation of any proceeding that may otherwise be incompetent under the law. That law only affects the time limitation to conduct or conclude any proceeding that may have been or may be validly instituted under the Act, whether prior to or after its amendment by Finance Act, 2021. Insofar as, Section 1(2)(a) unequivocally enforced Sections 2 to 88 of the Finance Act, 2021, w.e.f. 01.04.2021, there can be no dispute if any valid proceeding could be initiated under the pre­existing Section 148 read with Section 147, after 01.04.2021. In support thereof other submission also appear to exist based upon the enactment of Section 148A (w.e.f. 01.04.2021).

(iv) The delegation made could be exercised within the four corners of the principal legislation and not to overreach it. Insofar as the Enabling Act does not delegate any power to legislate with respect to enforceability of any provision of the Finance Act, 2021 and those provisions (Sections 2 to 88) had come into force, on their own, on 01.04.2021, any exercise of the delegate under the Enabling Act, to defeat the plain enforcement of that law would be wholly unconstitutional.

(v) It also appears to be the submission of learned counsel for the petitioners that the Parliament being aware of all realities, both as to the fact situation and the laws that were existing, it had consciously enacted the Enabling Act, to extend certain time limitations and to enforce only a partial change to the reassessment procedure, by enacting section 151­A to the Act. It then enacted the Finance Act, 2021 to change the substantive and procedural law governing the reassessment proceedings. That having been done, together with introduction of section 148­A to the Act, legislative field stood occupied, leaving the delegate with no room to manipulate the law except as to the time lines with respect to proceedings that may have been initiated under the Act (both prior to and after enforcement of the Finance Act, 2021). To bolster their submission, learned counsel for the petitioners also rely on the principle ­the delegated legislation can never defeat the principal legislation.

(vi) Last, it has also been asserted, the non­-obstante clause created under section 3(1) of the Enabling Act must be read in the context and for the purpose or intent for which it is created. It cannot be given a wider meaning or application as may defeat the other laws.”

18. On the effect of amendment brought by the Finance Act 2021, it was observed therein that undeniably on 01.04.2021 by virtue of plain/unexpected effect of Section 1(2)(a) of the Finance Act’ 2021, the provisions of Sections 147, 148, 149, 151 (as they existed upto 31.03.2021), stood substituted and a new provision by way of Section 148-A was inserted. In absence of any saving clause, to save the pre-existing (and now substituted) provisions, the revenue authority could only initiate reassessment proceeding on or after 01.04.2021, in accordance with the substituted law and not the pre­existing laws. It was noted that the Enabling provisions, that was pre­existing, is an enactment to extend timelines only. In absence of any express provisions in the latter statute the Finance Act’ 2021, to save applicability of the provisions of Section 147 to 151, as they existed upto 31.03.2021, all references to issuance of notice contained in the Enabling Act must be read as reference to the substituted provisions only, from 01.04.2021 onwards. However, there is no difficulty in applying the pre-existing provisions to pending proceeding.

19. The submission of the revenue that the provision of Section 3(1) of the Enabling Act gave overriding effect to that Act and, therefore, saved the provisions as existed under the unamended law has been turned down with the finding that the saving could arise only if jurisdiction had been validly assumed before 01.04.2021. It was observed that reassessment proceeding can be said to be pending before the Assessing Authority only upon jurisdiction being validly assumed by the Assessing Authority. All reassessment notices issued on or after 01.04.2021 cannot be dealt with by applying the pre­existing provisions, as applicable to pending proceedings. No time extension could be given under Section 3(1) of the Enabling Act, read with the Notifications issued thereunder.

20. It was held that the Section 3(1) of the Enabling Act only speaks of saving or protecting certain proceedings from being hit by the rule of limitation. The Enabling Act and the notifications issued thereunder only protected certain proceedings that may have become time barred on 20.03.2020, upto the date 30.06.2021 or till 31.03.2022, in accordance with the Notification No.3814 dated 17.09.2021 issued under Section 3(1) of the Enabling Act. But to allow the Central Government to extend such limitation by virtue of the notifications after 31.03.2021 indefinitely, would be to allow the validity of an enacted law i.e. Finance Act’ 2021 to be defeated by a purely colourable exercise of power, by the delegates of the Parliament (Central Government). Hence, no extension could be made under Section 3(1) of the Enabling Act read with the notifications thereunder.

21. It was, thus, concluded in paragraph Nos.72, 73, 75, 76, 79 and 80 by this Court as under:-

72. Reference to reassessment proceedings with respect to pre­existing 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, 148, 148A, 149, 150 and 151 substituted the old/pre­existing provisions of the Act w.e.f. 01.04.2021. We have further concluded, in absence of any proceeding of reassessment having been initiated prior to the date 01.04.2021, it is the amended law alone that would apply. We do not see how the delegate i.e. Central Government or the CBDT could have issued the Notifications, plainly to over reach the principal legislation. Unless harmonized as above, those Notifications would remain invalid.

73. Unless specifically enabled under any law and unless that burden had been discharged by the respondents, we are unable to accept the further submission advanced by the learned Additional Solicitor General of India that practicality dictates that the reassessment proceedings be protected. Practicality, if any, may lead to legislation. Once the matter reaches Court, it is the legislation and its language, and the interpretation offered to that language as may primarily be decisive to govern the outcome of the proceeding. To read practicality into enacted law is dangerous. Also, it would involve legislation by the Court, an idea and exercise we carefully tread away from.

75. As we see there is no conflict in the application and enforcement of the Enabling Act and the Finance Act, 2021. Juxtaposed, if the Finance Act, 2021 had not made the substitution to the reassessment procedure, the revenue authorities would have been within their rights to claim extension of time, under the Enabling Act. However, upon that sweeping amendment made the Parliament, by necessary implication or implied force, it limited the applicability of the Enabling Act and the power to grant time extensions thereunder, to only such reassessment proceedings as had been initiated till 31.03.2021. Consequently, the impugned Notifications have no applicability to the reassessment proceedings initiated from 01.04.2021 onwards.

76. Upon the Finance Act 2021 enforced w.e.f. 1.4.2021 without any saving of the provisions substituted, there is no room to reach a conclusion as to conflict of laws. It was for the assessing authority to act according to the law as existed on and after 1.4.2021. If the rule of limitation permitted, it could initiate, reassessment proceedings in accordance with the new law, after making adequate compliance of the same. That not done, the reassessment proceedings initiated against the petitioners are without jurisdiction.

79. As to the decision of the Chhattisgarh High Court, with all respect, we are unable to persuade ourselves to that view. According to us, it would be incorrect to look at the delegation legislation i.e. Notification dated 31.03.2021 issued under the Enabling Act, to interpret the principal legislation made by Parliament, being the Finance Act, 2021. A delegated legislation can never overreach any Act of the principal legislature. Second, it would be over simplistic to ignore the provisions of, either the Enabling Act or the Finance Act, 2021 and to read and interpret the provisions of Finance Act, 2021 as inoperative in view of the fact circumstances arising from the spread of the pandemic COVID­19. Practicality of life de hors statutory provisions, may never be a good guiding principle to interpret any taxation law. In absence of any specific clause in Finance Act, 2021, either to save the provisions of the Enabling Act or the Notifications issued thereunder, by no interpretative process can those Notifications be given an extended run of life, beyond 31 March 2020. They may also not infuse any life into a provision that stood obliterated from the statute with effect from 31.03.2021. Inasmuch as the Finance Act, 2021 does not enable the Central Government to issue any notification to reactivate the pre­existing law (which that principal legislature had substituted), the exercise made by the delegate/Central Government would be de hors any statutory basis. In absence of any express saving of the pre­existing laws, the presumption drawn in favour of that saving, is plainly impermissible. Also, no presumption exists that by Notification issued under the Enabling Act, the operation of the pre­existing provision of the Act had been extended and thereby provisions of Section 148A of the Act (introduced by Finance Act 2021) and other provisions had been deferred. Such Notifications did not insulate or save, the pre­existing provisions pertaining to reassessment under the Act.

80. In view of the above, all the writ petitions must succeed and are allowed. It is declared that the Ordinance, the Enabling Act and Sections 2 to 88 of the Finance Act 2021, as enforced w.e.f. 01.04.2021, are not conflicted. Insofar as the Explanation appended to Clause A(a), A(b), and the impugned Notifications dated 31.03.2021 and 27.04.2021 (respectively) are concerned, we declare that the said Explanations must be read, as applicable to reassessment proceedings as may have been in existence on 31.03.2021 i.e. before the substitution of Sections 147, 148, 148A, 149, 151 & 151A of the Act. Consequently, the reassessment notices in all the writ petitions are quashed. It is left open to the respective assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act as amended by Finance Act, 2021, after making all compliances, as required by law.

22. By applying the rule of harmonious construction of Statutes, it was held therein that the Explanation appended to Clauses A(a), A(b) of the impugned notifications dated 31.03.2021 and 27.04.2021; respectively, issued under Section 3(1) of the Enabling Act, must be read as applicable to reassessment proceedings as may have been in existence on 31.03.2021, i.e. before the substitution of Sections 147 to 151A of the I.T. Act’ 1961. The reassessment notices issued on or after 01.04.2021 under the pre-existing provisions by applying extension of time with the help of the Enabling Act (TOLA 2020) were quashed leaving it open to the respective Assessing Authorities to initiate assessment proceedings in accordance with the provisions of the Act’ 1961 as amended by the Finance Act’ 2021 after making all compliances, as required by law.

(ii) The Apex Court decision:-

23. The order passed by this Court in Writ Tax No.524 of 2021 connected with other writ petitions was challenged by the revenue before the Apex Court. The Apex Court had taken note of the fact that similar decisions and orders had been passed by various High Courts quashing the reassessment notices issued by the revenue under Section 148 of the Act’ 1961, in view of the amendment by the Finance Act’ 2021, and that approximately 90,000/- such reassessment notices were issued by the revenue under Section 148 of the unamended Income Tax Act’ 1961 after 01.04.2021. It was held therein that the order passed in the said appeal, arising out of the common judgement and order passed by this High Court shall govern all other judgements and orders passed by various High Court on the similar issue. The revenue need not to file separate individual appeals which may be more than 90,000/- in number.

24. On the merits of the challenge, the Apex Court had taken note of pre and post amendment regime of Sections 147 to 151 of the Income Tax Act and also the Enabling Act/TOLA 2020. It was observed in paragraph Nos. ‘6, 6.1 to 6.6’ of the judgement as under:-

“6. It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended sections 147 to 149 and section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as (1) no valid “reason to believe” (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and ors; (2003) 1 SCC 72, has not been followed.

6.1 Further pre ­Finance Act, 2021, the reopening was permissible for a maximum period up to six years and in some cases beyond even six years leading to uncertainty for a considerable time. Therefore, Parliament thought it fit to amend the Income Tax Act to simplify the tax administration, ease compliances and reduce litigation. Therefore, with a view to achieve the said object, by the Finance Act, 2021, sections 147 to 149 and section 151 have been substituted.

6.2 Under the substituted provisions of the IT Act vide Finance Act, 2021, no notice under section 148 of the IT Act can be issued without following the procedure prescribed under section 148A of the IT Act. Along with the notice under section 148 of the IT Act, the assessing officer (AO) is required to serve the order passed under section 148A of the IT Act. section 148A of the IT Act is a new provision which is in the nature of a condition precedent. Introduction of section 148A of the IT Act can thus be said to be a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation.

6.3 But prior to pre Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in the case of GKN Driveshafts (India) Ltd. (supra).

6.4 However, by way of section 148A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under section 148, the assessing officer shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under section 148 of the IT Act and (v) the AO is required to pass a specific order within the time stipulated.

6.5 Therefore, all safeguards are provided before notice under section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per section 148A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment.

6.6 Substituted section 149 is the provision governing the time limit for issuance of notice under section 148 of the IT Act. The substituted section 149 of the IT Act has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime pre Finance Act, 2021.”

25. It was held that the revenue ought not to have issued notices under Section 148 after the amendment was enforced, w.e.f 01.04.2021 under the unamended Act and the notices ought to have been issued under the substituted proceedings of Section 147 to 151 of the Income Tax Act as per the Finance Act 2021. However, in order to strike a balance, noticing that the judgements of the High Courts would result in no reassessment proceeding at all, even if the same are permissible under the Finance Act’ 2021 as per substituted Sections 147 to 151 of the Income Tax Act, it was directed that the notices issued under the unamended act/provisions of the Income Tax Act shall be deemed to have been issued under Section 148A of the I.T. Act as per the substituted provisions. The act of the revenue in issuing notices under the unamended Section 148 of the Income Tax Act after 01.04.2021 was considered to be a bonafide mistake in view of the subsequent extension of time vide notifications issued by the Central Government. The judgement and order dated 30.09.2021 passed by this Court was, thus, modified and substituted as under:-

26. It was, thus, observed in paragraph ‘9’ and ’10’ by the Apex Court as under:-

9. There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessees.

We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer……………………..

…………………………..

10. In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under:

(i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be showcause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the showcause notices within two weeks thereafter;

(ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a onetime measure visàvis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required;

(iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);

(iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available

27. While exercising the power under Article 142 of the Constitution of India, it was directed by the Apex Court that the above directions shall be applicable PAN INDIA and would govern all such orders passed by different High Courts on the issue where similar notices under Section 148 of the Act issued after 01.04.2021, were quashed. It was observed that the directions issued therein shall govern all the pending matters before various High Courts wherein similar notices were under challenge. It was, thus, concluded in paragraph No.’12’ as under:-

“12. The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.”

The CBDT Instructions:-

28. It has been placed before us that Instructions regarding implementation of the judgement of the Apex Court dated 04.05.2022 (Union of India Vs. Ashish Agarwal) (supra), was issued in exercise of the power under Section 119 of the I.T. Act’ 1961 by the Central Board of Direct Taxes, namely Instruction No. 1/2022 dated 11.05.2022 issued by the DCIT (OSD), ITJ-1. The Instructions purported to have been issued for implementation of the judgement of the Apex Court provided that the decision of the Apex Court would apply to all such cases where “extended reassessment notices” have been issued, irrespective of the fact whether such notices have been challenged or not.

29. In the opening paragraph of the said Instruction, it is noted that the reassessment notices issued by the Assessing Officers during the period beginning on 01.04.2021 and ending with 30.06.2021, within the time extended by TOLA 2020 and various notification issued thereunder, shall be referred as “extended reassessment notices”. It was then directed in paragraph ‘6’ of the Instruction that the operation of the new Section 149 of the Act where fresh notices under Section 148 of the Act can be issued, may be seen as under:-

“6. Operation of the new section 149 of the Act to identify cases where fresh notice under section 148 of the Act can be issued.

6.1 With respect of operation of new section 149 of the Act, the following may be seen: