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Fate of section 148 Notices for AY 2013-14 and AY 2014-15 still hanging

Yogesh S. Limaye 06 Mar 2023 11,499 Views 1 comment Print Income Tax | Articles

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Objective

The Author in this article discusses the differing views taken by two high courts (exactly opposing views) on the question of limitation as to whether proceedings for AY 2013-14 and AY 2014-15 can be re-opened by issuing notice u/s 148 (deemed to be 148(b) of the Income Tax Act, 1961 [the ITA] from 01-Apr-2021 to 30-Jun-2021. (the Specified Period)).

It was a perception that Supreme Court’s decision in Ashish Agarwal AIR 2022 SC 2781 has settled the issue where Supreme Court exercised its extra-ordinary power under article 142 of the constitution of India.

Understanding Ashish Agarwal

All the three judgements as mentioned herein-below, have relied upon the Supreme Court judgement in the case of Ashish Agarwal. It is important to understand this judgement. A few relevant Paragraphs are as follows;

3.1 In pursuance to the power vested under section 3 of the TOLA, 2020, the Central Government issued following Notifications inter-alia extending the time lines prescribed under section 149 for issuance of reassessment notices under section 148 of the Income-tax Act, 1961 :

Date of Notification	Original limitation for issuance of notice under section 148 of the Act	Extended Limitation
31-3-2020	20-3-2020 to 29-6-2020	30-6-2020
24-6-2020	20-3-2020 to 31-12-2020	31-3-2021
31-3-2021	31-3-2021	30-4-2021
27-4-2021	30-4-2021	30-6-2021

…

7. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.

8. However, at the same time, the judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 of the IT Act. The Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 1-4-2021, under the unamended section 148. In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021. There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law. Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under : –

….

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 show-cause 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 show-cause 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 one-time measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 1-4-2021 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.

11. The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 1-4-2021 issued under section 148 of the Act are set aside(Sic) and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under section 148 of the Act issued after 1-4-2021 are under challenge.

Core of controversy

As per the little that the author has, the core issue is the observation in para (iv) of SC as re-produced hereinbelow

(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.

To put in different words, the controversy maintly revolves around various features of the section 149 as amended by the FA, 2021 like

1. What are the rights that are still protected by the SC in Ashish Agarwal?

2. Whether section 3 of TOLA, 2020 has any impact on section 149?

3. and such related matters.

It will be relevant to make a comparative analysis of section 149 before and after amendment by the Finance act, 2021

Section 149 of IT Act,1961		Section149 (Substituted by the Finance Act 2021) of IT Act,1961
*Time limit for notice-* No notice under section 148 shall be issued for the relevant assessment year,-		*Time limit for notice-* No notice under section 148 shall be issued for the relevant assessment year,-
(a)	if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub- clause (b) or clause (c);	(a)	if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause
(b)	if four years, but not more than six years, have elapsed from the end of the relevant assessment year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;	(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 account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
(c)	if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

–

………..

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01/04/2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

………..

Provided further that the provisions of this sub- section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before 31/03/2021:

–

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee , as per show- cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.

–

Explanation-

In determining income chargeable to tax which has escaped assessment for the purpose of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purpose of that section.

Explanation-

For the purpose of clause (b) of this sub-section, “asset” shall include Immovable Property, being land or building or both, shares and securities, loans and advances, deposits in bank account.

The provisions of Sub-section (1) as to the issue of notice shall be subjected to the provision of Section 151.

The provision of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.

–

If the person on whom a notice under Section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non- resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year.	………..
Explanation- For the removal of doubts, it is hereby clarified that the provisions of sub-section (1) and (3), as amended by the Finance Act, 2012 shall also be applicable for any assessment year beginning on or before the 1.4.2012.	……….
Explanation- 1. For the purpose of clause (b) of this sub-section, “asset” shall include Immovable Property, being land or building or both shares and securities, loans and advances, deposits in bank account.	……………
2. The provision of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151	……………….

PART – I Case in brief

Citation of the case

Sr. No.	Name of the case	Citation	High Court	Date

01	Touchstone Holdings Pvt. Ltd Vs. ITO	13102 of 2022	Delhi	09-Sep-2022
02	Keenara Industries Pvt Ltd. Vs ITO	17321 of 2022	Guj	07- Feb-2023
03	UOI Vs. Rajeev Bansal	1086 of 2022	All	22-Feb-2023

1) Decision of Delhi HC in the case of Touchstone Holdings Pvt. Ltd has been considered by both other high courts i.a. Allahabad and Gujarat.

2) But (may be due to paucity of time) the judgement of Keenara Industries Pvt Ltd by Gujarat High Court has not been considered in the judgement of Rajeev Bansal by Allahabad High Court.

Issues and Answer

Simplified Question

Del.

All.

Guj.

Whether revenue can validly re-open the assessments purely from view point of limitation period for the Assessment years given in next Column by issuing notice(s) u/s 148 of the ITA during the specified period

2013-14

2014-15

PART – II – case explained elaborately

Facts of the case

Let’s take the questions framed by the Allahabad High Court in the case of Rajiv Bansal.

Question

(i)

Whether the reassessment proceedings initiated with the notice under Section 148 (deemed to be notice under Section 148-A), issued between the specified period, can be conducted by giving benefit of relaxation/extension under the (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 FA’ 2021, in such cases?

Delhi HC – Touchstone Holdings

The Delhi HC has rather followed a simplistic and straight forward approach. Reproducing the relevant paragraphs

15. Consequently, since the time period for issuance of reassessment notice for assessment year 2013-14 stood extended until 30th June, 2021, the first proviso of Section 149 (as amended by the Finance Act, 2021) is not attracted in the facts of this case. It would be relevant to refer to the said proviso, which reads as under:

“Time Limit for notice. Section 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 account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:;

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: ….” (Emphasis Supplied)

As noted above, the time limit for initiating assessment proceedings for AY 2013-14 stood extended till 30th June, 2021. The petitioner does not dispute the said facts, consequently, the reassessment notice dated 29th June, 2021, which has been issued within the extended period of limitation is not time barred.

16. The petitioner’s challenge to the paragraph 6.2. (i) of the CBDT Instruction No. 1/2022 dated 11th May, 2022 is not maintainable. The contention of the petitioner that assessment for AY 2013-14 became time barred on 31st March, 2020 is incorrect. The time period for assessment stood extended till 30th June, 2021. The initial reassessment notice for AY 2013-14 has been issued to the petitioner within the said extended period of limitation. The Supreme Court has declared that the said reassessment notice be deemed as a notice issued under section 148A of the Act and permitted Revenue to complete the said proceedings. In this case, the income alleged to have escaped assessment is more than 50 lakhs and therefore, the rigour of Section 149(1)(b) of the Act (as amended by the Finance Act, 2021) has been satisfied.

Allahabad HC and Gujarat High Court has delivered a detailed judgement with extensive analysis of the judgement of Ashish Agarwal (supra) and has also commented on the judgement of Delhi HC (supra)

Allahabad High Court – Rajiv Bansal

The relevant portion is re-produced herein below

57. Before analyzing the arguments of counsel for the parties in the light of the decisions of the Division Bench of this Court and the Apex Court in the previous rounds of litigation, interse parties, we may note at this juncture, that we find inherent fallacy in the arguments of the learned counsels for the revenue, in so far as the interpretation / implementation of the first proviso to sub-section (1) of Section 149 inserted by the FA’ 2021 which prohibits initiation of reassessment proceedings in cases which have became time barred under the unamended clause (b) of sub-section (1) of Section 149, where six years have elapsed from the end of the relevant assessment year on 01.04.2021.

58. However, to deal with the arguments of the learned counsel for the parties in detail, we deem it fit to make a comparative table of Section 149 pre and post amendment by the FA 2020, to have a glance to the said provisions:-

For brevity – skipped – re-produced supra

59. We are further required to go through the Division Bench judgement of this Court in Ashok Kumar Agarwal ( supra) about the effect and applicability of the TOLA 2020 (TOLA 2020) on the amended provisions of the ITA’ brought on the statute book by the FA 2021, to understand the legal position with regard to the effect of the TOLA 2020′ 2020 on the pre and post amended provisions of the ITA’ .

60. Detailed observations of the Division Bench in Ashok Kumar Agarwal (supra) have been noted/extracted in the preceding part of this judgment. It was held, in the crux, as follows:-

(i) By its very nature, once new provision has been put in place of the pre-existing provision, earlier provision cannot survive, except for the things done or already undertaken to be done or things expressly saved to be done.

(ii) In absence of any saving clause to save pre-existing provisions, the revenue authorities could only initiate proceeding on or after 01.04.2021, in accordance with the substituted laws and not the pre- existing laws. The TOLA 2020, that was pre-existing, confronted the ITA as amended by the FA, 2021, as it came into existence on 01.04.2021. In both the provisions, i.e the TOLA 2020 and the FA, 2021, there is absence, both of any express provision in its effort to delegate the function, to save the applicability of provisions of pre-existing Sections 147 to 151, as they existed upto 31.03.2021.\

(iii) Plainly, the TOLA 2020 is an enactment to extend timelines only from 01.04.2021 onwards. Consequently, from 01.04.2021 onwards all references to issuance of notice contained in the TOLA 2020 must be read as reference to the substituted provisions only.

(iv) There is no difficulty in applying pre-existing provisions to pending proceedings and, this is how, the laws were harmonized.

(v) For all reassessment notices which had been issued after 01.04.2021, after the enforcement of amendment by the FA, 2021, no jurisdiction has been assumed by the assessing authority against the assesses under the unamended law. No time extension could, thus, be made under Section 3(1) of the TOLA 2020 read with the Notifications issued thereunder.

(vi) Section 3 of the TOLA 2020 only speaks of saving or protecting certain proceedings from being hit by the rule of limitation. That provision also does not speak of saving any proceeding from any law that may be enacted by the Parliament, in future. The non obstante clause of Section 3(1) of the Enabling Clause Act does not govern the entire scope of the said provision. It is confined to and may be employed only with reference to the second part of Section 3(1) of the TOLA 2020, i.e to protect the proceedings already underway.

The Act, thus, only protected certain proceedings that may have become time barred on 20.03.2021 upto the date 30.06.2021. Correspondingly, by delegated limitation incorporated by the Central Government (notifications), it may extend that time limit. That timeline alone stood extended upto 30.06.2021.

(vii) Section 3(1) of the TOLA 2020 does not itself speak of reassessment proceeding or of Section 147 or Section 148 of the Act as it existed prior to 01.04.2021. It only provides a general relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID-19. After enforcement of the FA, 2021, it applies to the substituted provisions and not the pre- existing provisions.

The reference to reassessment proceedings with respect to pre-existing and new substituted provisions of Sections 147 and 148 of the Act has been introduced only by the later notifications issued under the TOLA 2020. It was concluded that in absence of any proceedings of reassessment having been initiated prior to the date 01.04.2021, it is the amended law alone that would apply. The notifications issued by the Central Government or the CBDT Instructions could not have been issued plainly to overreach the principal legislation. Unless harmonised as such, those notifications would remain invalid.

(viii) On the submission of the revenue that practical difficulties faced by the revenue in initiation of reassessment proceedings due to onset of pandemic COVID-19 dictates that the reassessment proceedings be protected, it was noted that practicality, if any, may lead to legislation. Once the matter reaches the 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 proceedings. To read practicality into enacted law is dangerous.

(ix) It would be over simplistic to ignore the provisions of, either the TOLA 2020 or the FA 2021 and to read and interpret the provisions of FA 2021 as inoperative in view of the facts and circumstances arising from the spread of the pandemic Covid-19.

(x) In absence of any specific clause in the FA 2021 either to save the provisions of the TOLA 2020 or the notifications issued thereunder, by no interpretative process can those notifications be given an extended run of life, beyond 31.03.2021.

(xi) The notifications issued under the TOLA 2020 (TOLA 2020) may also not infuse any life into a provision that stood obliterated from the statute book w.e.f 31.03.2021, in as much as, the FA’ 2021 does not enable the Central Government to issue any notification to reactivate the pre-existing law, which has been substituted by the principal legislature. Any such exercise made by the delegate/Central government would be dehors any statutory basis.

(xii) In absence of any express saving of the pre-existing laws, the presumption drawn in favour of that saving, is plainly impermissible.

(xiii) No presumption exists by the notifications issued under the TOLA 2020 that the operation of the pre-existing provisions of the Act had been extended and thereby provisions of Section 148A of the I.T. Act (introduced by the FA’ 2021) and other provisions had been deferred.

61. It was, thus, declared that the Explanations appended to Clauses A(a), A(b) of the impugned notifications dated 31.03.2021, and 27.4.2021; respectively, must be read applicable to reassessment proceedings as may have been in existence on 31.03.2021 or had been initiated till that date, i.e. before the substitution of Sections 147 to 151A of the Act.

The Notifications have no applicability to the reassessment proceedings initiated from 01.04.2021 onwards.

62. With the above observations, all reassessment notices, subject matter of challenge therein were quashed. It was, however, left open to the respective assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act as amended by the FA, 2021 after making all compliances, as required by law.

63 In the challenge to the aforesaid decision of the Division Bench in Ashok Kumar Agarwal , the Apex Court in Ashish Agarwal (supra) has observed that:-

(I) By substitution of Sections 147 to 151 of the Income Tax by the FA, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Under pre- FA, 2021, the reopening was permissible for a maximum period upto 6 years and in some cases beyond even 6 years leading to uncertainty for considerable time. Therefore, Parliament thought it fit to amend the ITA to simplify the Tax Administration, ease compliances and reduce litigation. With a view to achieve the said object, by the FA, 2021, Sections 147 to 149 and Section 151 have been substituted.

(II) Section 148(A) of the I.T. Act is a new provision, which is in the nature of a condition precedent. Introduction of Section 148A to the ITA can, thus, be said to be a game changer with an aim to achieve ultimate object of simplifying the tax administration. By way of Section 148A, the procedure has now been streamlined and simplified. All safeguards are, thus, provided before issuing notice under Section 148 of the ITA. At every stage, the prior approval of the specified authority is required, even for conducting the inquiry as per Section 148(A)(a).

(III) Substituted Section 149 is the provision governing the time limit for issuance of notice under Section 148 of the I.T. Act. The substituted Section 149 has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases in ten years. It also provides further additional safeguards which were absent under the earlier regime pre-FA, 2021.

(IV) The new provisions substituted by the FA, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assesses as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made applicable even in respect of the proceedings related to past assessment years, provided Section 148 notice has been issued after 01.04.2021.

64. The Apex Court has, thus, expressed complete agreement with the view taken by the various High Courts in holding so.

65. The reasoning given by the Division Bench of this Court in Ashok Agarwal (supra) which was subject matter of challenge therein, thus, has been upheld.

66. However, it was further noticed that :-

I) The judgments of several High Courts would result in no assessment proceedings at all, even if the same are permissible under the FA, 2021 as per substituted Sections 147 to 151 of the ITA.

To remedy the situation where revenue became remediless, in order to achieve the object and purpose of reassessment proceedings, it was observed that the notices under Section 148 after the amendment was enforced w.e.f 01.04.2021, were issued under the unamended Section 148, due to bonafide mistake in view of the subsequent extension of time by various notifications under the TOLA 2020 (TOLA 2020).

(II) The notices ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of Sections 147 to 151 of the ITA as per the FA, 2021.

(III) There appears to be a genuine non application of the amendments as the officers of the revenue may have been under a bonafide belief that the amendments may not yet have been enforced.

67. It was, thus, concluded that:-

68. Instead of quashing and setting aside the reassessment notices issued under the unamended provisions of ITA, the High Courts ought to have passed order construing the notices issued under the unamended Act / unamended provision of the ITA as those deemed to have been issued under Section 148(A) of the ITA, as per the new provision of Section 148(A). In that case, the revenue ought to have been permitted to proceed with the reassessment proceedings as per the substituted provisions of Sections 147 to 151 of the ITA as per the FA, 2021, subject to compliance of all the procedural requirements and the defences which may be available to the assessee under the substituted provisions of Section 147 to 151 of the ITA, and which may be available under the FA, 2021 and in law.

69. While modifying the judgment and orders passed by the High Courts in view of the observations noted hereinabove, it was noted by the Apex Court that there was a broad consensus on the proposed modification on behalf of the revenue and the counsels appearing on behalf of respective assessees.

70. From a careful reading of the judgment of the Apex Court, there remain no doubt that the view taken by the Division Bench of this Court in Ashok Agarwal on the legal principles and the reasoning for quashing the notices under Section 148 of the unamended ITA, issued after 01.04.2021 adopted by the Division Bench had been affirmed in toto.

71. The result is that all notices issued under the unamended ITA were deemed to have been issued under Section 148A of the ITA as substituted by the FA, 2021 and construed to be show cause notices in terms of Section 148 A(b) of the ITA. The inquiry as required under Section 148(B) was to be completed by the officers and after passing orders in terms of Section 148A(d) in respect of the assessee, notice under Section 148 could be issued after following the procedure as required under Section 148A. As one time measure, the requirement of conducting an inquiry with the approval of specified authority at the stage of Section 148 A(a) has been dispensed with.

72. In view of the above discussion, the question raised before us is as to what would be the effect and scope of the TOLA 2020 (TOLA’ 2020) on the notices issued under Section 148 after completion of the inquiry and passing of orders in terms of Section 148 A(d). The question is as to whether the timeline provided in the unamended Section 149 would extend uptil 31.03.2021 under the TOLA 2020, 2021, with further extensions by the notifications dated 31.03.2021 and 27.04.2021 issued under TOLA, in the timeline provided under the amended Section 149 of the FA, 2021. The arguments of the learned counsels for the revenue is that the TOLA 2020 (TOLA’ 2020) granted extension in the time limit provided in the pre-existing provisions of the ITA. The period of four years and six years provided in Clause (a) and (b) of the unamended Section 149 of the ITA stood extended uptil 31.03.2021 by the extensions granted under TOLA 2020, as the reassessment notices, could have been issued, within the extended period of time uptil 31.03.2021. The amendment by the FA, 2021 though have substituted the substantive and procedural amendment in the ITA and old provisions have been recasted and made applicable w.e.f 01.04.2021, but extensions already granted by the TOLA 2020 in the limitation prescribed under the unamended provisions of the ITA have not been curtailed. Further extensions in the limitation for issuance of reassessment notices have been made by the notifications dated 31.03.2021 and 27.04.2021 issued by the Central Government, in exercise of power conferred by Section 3(1) of the TOLA 2020. The result is that the time limit for initiation of reassessment proceedings by issuance of notice under Section 148 of the ITA stood extended uptil 31.06.2021. The limitation of three years in clause (a) and (b) of sub Section (1) of Section 149, therefore, has to be extended by the extensions granted by the TOLA 2020 i.e 30.06.2021.

73. With the support of the observations of the Delhi High Court in para-’98’ in Mon Mohan Kohli (supra), it was argued that the power of reassessment that existed prior to 31.03.2021 continued to exist till the end of the extended period, i.e 30.06.2021 and the FA, 2021 has merely changed the procedure to be followed prior to issuance of notice w.e.f 01.04.2021. It was argued that the first proviso to Section 149 (brought by the FA, 2021) will have no application in such a situation.

74. To test this submission of the learned counsels for the revenue, we required to reiterate some of the reasoning of the Division Bench of this Court in Ashok Kumar Agarwal in paras-’75’ and ’76’ (as extracted above), herein. We may reiterate that the Division Bench of this Court while considering the scope of application and enforcement of the TOLA 2020 and the FA, 2021, juxtaposed, has held that if the FA, 2021 had not made the substitution of the reassessment procedure, revenue authorities would have been within their rights to claim extension of time, under the TOLA 2020. The sweeping amendments made by the Parliament by necessary implication or implied force limited applicability of the TOLA 2020. The power to grant time extension thereunder was limited to only such reassessment proceedings as had been initiated till 31.03.2021. It was, thus, held that amended notifications have no applicability to the reassessment proceedings initiated from 01.04.2021 without any saving of the provisions substituted, the extensions granted under the TOLA 2020 (TOLA’ 2020). It was incumbent for the assessing officer to act according to law as existed on and after 01.04.2021.

75. It is noted at the cost of repetition that the Division Bench has observed that it would be oversimplistic to ignore the provisions of either the TOLA 2020 or the FA, 2021 and to read and interpret the provisions of FA, 2021 as inoperative in view of the facts and circumstances arising from the spread of the pandemic COVID-19. Practicality of life dehors statutory provisions, may never be a good guiding principle to interpret any taxation law. It was, thus, held that in absence of any specific clause in the FA, 2021 either to save the provisions of the TOLA 2020 or the Notifications issued thereunder, by no interpretative process, the notifications can be said to infuse life into a provision that stood obliterated from the Statute book w.e.f 31.03.2021. It was held that the FA, 2021 does not enable the Central Government to issue any notification to reactivate the pre-existing law, the exercises made by the delegate/Central Government would be dehors any statutory basis. It was, thus, categorically held by the Division Bench that the notifications did not insulate or save the pre-existing provisions pertaining to reassessment under the Act or the operation of the pre-existing provisions of the Act cannot be extended.

76. Adopting the above reasoning given by the Coordinate Bench of this Court, which is binding on us, we may further note that the contention of the revenue, if accepted, it will create conflict of laws. The limitation under the pre-existing provisions will have to be kept alive till 30.06.2021 with the aid of the extensions granted by the notifications issued by the Central Government, which have been read down by the Coordinate Bench. The time limit provided in unamended Section 149 of the ITA, as per the Division Bench judgment, cannot be extended beyond 31.03.2021, so as to render the amended provisions of Section 149 ineffective. The stand of the revenue that the TOLA 2020 simply extended the period of limitation uptil 31.06.2021, due to the disturbances from the spread of pandemic COVID-19, has been categorically turned down by the Division Bench with the observations noted above.

77. It was held therein that the notifications issued under the TOLA 2020 2020 may extend time limit provided in the substituted provisions after enforcement of the FA, 2021 but it will not extend or defer the applicability of the pre-existing provisions in view of general relaxation of limitation granted under Section 3(1) of the TOLA 2020, on account of general hardship existing upon the spread of the pandemic COVID-19.

78. As noted above, sweeping amendments have been made in Sections 147 to 151 of the ITA by the FA, 2021. As held by the Apex Court, the radical and reformative changes governing the procedure for reassessment proceedings in the substituted provisions are remedial and benevolent in nature.

79. To understand the nature of amendments, a comparison of pre and post amendment Section 149 has been noted in the table given above. A perusal thereof indicates that the period of notice for reassessment proceedings in pre-amended Section 149 was four years and six years. Whereas in the post-amendment sub-section (1) of Section 149, the time limit when notice for reassessment under Section 148 can be issued is three years in clause (a) and can be extended upto ten years after elapse of three years as per clause (b), but there is a substantial change in the threshold/requirements which have to be met by the revenue before issuance of reassessment notice after elapse of three years under clause (b) of sub-section (1). Not only monetary threshold has been substituted but the requirement of evidence to arrive at the opinion that the income escaped assessment has also been changed substantially. A heavy burden is cast upon the revenue to meet the requirements of clause (b) of sub-section (1) of Section 149 for initiation of reassessment proceedings after lapse of three years. Further four provisos have been inserted to sub-section (1) of Section 149.

80. The first proviso to sub-section (1) of Section 149 is relevant for our purposes, which provides that notice under Section 148, in a case for the relevant assessment year beginning on or before 1.4.2021, cannot be issued, if such notice could not have been issued at the relevant point of time, on account of being beyond the time limit specified under the unamended provisions of clause (b) of sub- section (1) of Section 149, i.e., pre-amended Section 149 prior to the commencement of FA, 2021. The time limit in clause (b) of sub-section (1) of unamended Section 149 of six years, thus, cannot be extended upto ten years under clause (b) of sub-section (1) of amended Section 149, to initiate reassessment proceeding in view of the first proviso to Section (1) of Section 149. In other words, the case for the relevant assessment year where six years period has elapsed as per unamended clause (b) of Section 149 cannot be reopened, after commencement of the FA, 2021 w.e.f. 1.4.2021. The view taken by the Coordinate Bench of this Court in Ashok Kumar Agarwal (supra) that the FA, 2021 had limited the applicability of the TOLA 2020 and the power to grant extensions thereunder, was applicable to only such reassessment proceedings as had been initiated till 31.3.2021, has been affirmed by the Apex Court in Ashish Agarwal (supra). It was held by the Coordinate Bench that the impugned notifications granting extensions in time limit provided under the unamended provisions of the ITA have no applicability to the reassessment proceedings initiated from 1.4.2021 onwards. It was held that after 1.4.2021, if the rule of limitation permitted, the revenue could initiate reassessment proceedings in accordance with the new law, after making adequate compliances has also been upheld by the Apex Court.

81. As noted above, there is no specific clause in the FA, 2021 to save the provisions of the TOLA 2020 granting extensions in the time limit under the unamended Act, or the notifications issued thereunder on or before 31.3.2021. The TOLA 2020, 2020 and FA, 2021 are both parliamentary legislations. On the one hand, the TOLA 2020, 2020 was enacted to tide over the hardships being faced both by the assessees and the statutory authorities or their functionaries due to spread of pandemic Covid-19 but, on the other, FA, 2021 has been enacted to bring reformative changes to Sections 147 to 151 of the ITA, governing reassessment proceedings, with an aim to simplify the tax administration. The amendments brought to Section 149 of the ITA, by insertion of the first proviso to sub-section (1) of Section 149 and clause (b) of said sub-section are substantive amendments which confer right upon the assessee to seek immunity from reopening of the assessment proceedings after the maximum period prescribed in the unamended Section 149, six years from the end of the relevant assessment year having elapsed on or before 1.4.2021. In a case where three years period have elapsed from the end of the relevant assessment year, as noted above, higher threshold to meet the requirement of reopening assessment proceedings by the revenue has been provided under clause (b) of sub-section (1) of Section 149 (amended by the FA, 2021).

82. In case the arguments of the learned counsels for the revenue are accepted, the benefits provided to the assessee in the substantive provisions of clause (b) of sub-section (1) of Section 149 and the first proviso to Section 149 have to be ignored or deferred. The defences which may be available to the assessee under Section 149 and/or which may be available under FA, 2021 have to be denied. The crux of the submission of the learned counsels for the revenue is that the applicability of the amended provisions of FA, 2021 will have to be postponed uptill 31.6.2021 because of the extensions granted by the TOLA 2020, 2020 upto 31.3.2021 and further extensions in the time limit by the Notifications dated 31.3.2021 and 27.4.2021 thereunder.

83. The submission is that the extensions in the time limit provided under the unamended Section 149(1)(b) upto 31.3.2021, will be applicable even in those cases where reassessment notices were issued under the amended Section 148 on or after 1.4.2021, by extending the time limit provided in the unamended Section 149 by plain and simple application of the TOLA 2020 (TOLA)’ 2020.

84. At the first blush, this argument of the learned counsels for the revenue seemed convincing by simplistic application of the TOLA 2020, treating it as a statute for extension in the limitation provided under the ITA, , but on a deeper scrutiny, in view of the discussion noted above, if the argument of the learned counsels for the revenue is accepted, it would render the first proviso to sub-section (1) of Section 149 ineffective until 30.6.2021. In essence, it would render the first proviso to sub-section (1) of Section 149 otiose. This view, if accepted, it would result in granting extension of time limit under the unamended clause (b) of Section 149, in cases where reassessment proceedings have not been initiated during the lifetime of the unamended provisions, i.e. on or before 31.3.2021. It would infuse life in the obliterated unamended provisions of clause (b) of sub-section (1) of Section 149, which is dead and removed from the Statute book w.e.f. 1.4.2021, by extending timeline for actions therein.

85. In absence of any express saving clause, in a case where reassessment proceedings had not been initiated prior to the legislative substitution by the FA 2021, the extended time limit of unamended provisions by virtue of TOLA 2020 cannot apply. In other words, the obligations upon the revenue under clause (b) of sub-section (1) of amended Section 149 cannot be relaxed. The defences available to the assessee in view of the first proviso to sub- section (1) of Section 149 cannot be taken away. The notifications issued by the delegates/Central Government in exercise of powers under sub-section (1) of Section 3 of the TOLA 2020 cannot infuse life in the unamended provisions of Section 149 by this way.

86. As held by the Apex Court, all defences which may be available to the assessee including those available under Section 149 of the ITA and all rights and contentions which may be available to the assessee and revenue under FA, 2021 shall continue to be available to reassessment proceedings initiated from 1.4.2021 onwards.

87. The contention of the learned counsels for the revenue that if such interpretation is given to the applicability of the TOLA 2020, 2020, which has not been declared invalid by any Court of law, it would be rendered otiose is found misconceived, inasmuch as, the extensions in the time limit under the unamended Sections of the ITA prior to the amendment by the FA, 2021, would still be applicable to the reassessment proceedings as may have been in existence on 31.3.2021. By harmonious construction of two parliamentary legislation, the TOLA 2020, 2020 and FA, 2021, the Coordinate Bench has explained the scope and limit of the TOLA 2020, the FA, 2021 and the Notifications issued under the TOLA 2020. We are bound by the decision of the Coordinate Bench as affirmed by the Apex Court in Ashish Agarwal (supra).

88. As noted above, the view taken by the Coordinate Bench in Ashok Kumar Agarwal (supra) of this Court has been upheld by the Apex Court with the only modification that the notices issued on or after 1.4.2021 under Section 148 shall be treated as notices under Section 148-A of the ITA as substituted by the FA, 2021, treating them to be show cause notices in terms of Section 148(A)(b) of the ITA.

89. At the cost of repetition, it may be noted here that the Apex Court has permitted the revenue to proceed further with the reassessment proceedings under the substituted provisions of Sections 147 to 151 of the ITA as per the FA, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of the ITA and which may be available under the FA, 2021 and in laws.

90. Now coming to the CBDT Instructions dated 11.5.2022 is concerned, we find that the third bullet to clause (6.1) which states that the Apex Court has allowed time extension provided by TOLA and the “extended reassessment notices” will travel back in time to their original date when such notices were to be issued and then Section 149 of the Act is to be applied at that point, is a surreptitious attempt to circumvent the decision of the Apex Court. The observations in paragraph ‘7’ of the judgment in Ashish Agarwal (supra) of the Apex court has been noted in piecemeal in the said bullet point to clause (6.1) of the CBDT instructions dated 11.5.2022 to give it a distorted picture.

91. The directions issued in clause 6.2 to deal with the cases of the assessment years 2013-14 to 2017-18 are based on the misreading of the judgment of the Apex Court in Para 6.1 of the Instructions. Terming reassessment notices issued on or after 1.4.2021 and ending with 30.6.2021 as “extended reassessment notices”, within the time extended by the TOLA 2020 (TOLA 2020) and various notifications issued thereunder, in Para 6.1 is an effort of the revenue to overreach the judgment of this Court in Ashok Kumar Agarwal (supra) as affirmed by the Apex court in Ashish Agarwal (supra).

92. In any case, the CBDT Instruction No. 1/2022 dated 11.5.2022, issued in exercise of its power under Section 119 of the ITA, as per own stand of the revenue, is only a guiding instruction issued for effective implementation of the judgment of the Apex Court in Ashish Agarwal (supra). The instructions issued in the offending clauses (third bullet to clause 6.1) and clause 6.2 (i) and (ii), being in teeth of the decision of the Apex Court have no binding force.

93. As regards the judgment of the Delhi High Court in Touchstone Holding Pvt. Ltd. (supra) wherein it is held that because of the extension in time granted under the TOLA 2020 and further extensions by the notifications issued thereunder, the first proviso to Section 149 (as amended by the FA, 2021) is not attracted for the assessment year 2013-14, with all due respect to the Judges holding the Bench, suffice it to say that the said view is in direct conflict with the view taken by this Court in Ashok Kumar Agarwal (supra) affirmed by the Apex Court in Ashish Agarwal (supra). In fact, the observation in Mon Mohan Kohli (supra) by the Delhi High Court in paragraph ‘98’ that the power of reassessment that existed prior to 31.3.2021 continue to exist till the extended period, i.e. till 30.6.2021, and the FA, 2021 has merely changed the procedure to be followed prior to issuance of notice w.e.f. 1.4.2021, has been misread and misapplied in Touchstone (supra) by the Division Bench of the Delhi High Court.

94. Relevant is to note that even in Mon Mohan Kohli (supra), the Delhi High Court had quashed the reassessment notices issued on or after 1.4.2021 on the ground that the Relaxation Act (TOLA 2020) does not give power to the Central Government to extend the erstwhile Sections 147 to 151 beyond 31.3.2021 and/or differ the operation of substituted provisions enacted by the FA, 2021. The Delhi High Court therein concurring with the view of this Court in Ashok Kumar Agarwal (supra) has held the Explanation A(a) and A(b) to the notifications dated 31.3.2021 and 27.4.2021 as ultra vires the TOLA 2020, 2020 and declared them as bad in law and null and void. The observations in paragraph ’99’ in Mon Mohan Kohli (supra) are relevant to be extracted hereinunder:-

“99. This Court is of the opinion that Section 3(1) of Relaxation Act empowers the Government / Executive to extend only the time limits and it does not delegate the power to legislate on provisions to be followed for initiation of reassessment proceedings. In fact, the Relaxation Act does not give power to Government to extend the erstwhile Sections 147 to 151 beyond 31st March, 2021 and/or defer the operation of substituted provisions enacted by the FA, 2021. Consequently, the impugned Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 are not conditional legislation and are beyond the power delegated to the Government as well as ultra vires the parent statute i.e. the Relaxation Act. Accordingly, this Court is respectfully not in agreement with the view of the Chhattisgarh High Court in Palak Khatuja (supra), but with the views of the Allahabad High Court and Rajasthan High Court in Ashok Kumar Agarwal (supra) and Bpip Infra Private Limited (supra) respectively.”

95. Learned counsels for the revenue further submitted that the Apex Court has invoked its power under Article 142 of the Constitution of India to save all reassessment notices issued on or after 1.4.2021 PAN INDIA, noticing that the revenue cannot be rendered remediless and cannot be put in a situation where it is prohibited from initiating reassessment proceedings, even if the same are permissible under FA, 2021 as per the substituted Sections 147 to 151 of the ITA and the object and purpose of reassessment proceedings cannot be frustrated. The direction was, thus, issued to treat all reassessment notices under Section 148 of the amended provision as deemed notices under Section 148A of ITA (new provision brought by amendment) as a one time measure. The result is that all assessment notices issued on or after 1.4.2021 till the decision of the Apex Court dated 4.5.2022 [in Ashish Agarwal (supra)] will have to be saved.

96. To strike a balance, the Apex Court kept all the defences available to the assessee under the amended provision open, while rights available to the assessing officer/revenue under the FA, 2021 have been kept alive. The defect in the reassessment notices issued on or after 1.4.2021 had, thus, been removed. The directions issued by the Apex Court under Article 142 of the Constitution of India having a binding force PAN INDIA, will be violated if the extension in time for issuance of reassessment notices under Section 149 of the pre and post amended ITA, is not granted with the aid of the TOLA 2020 (TOLA 2020).

97. To deal with the said submission, we may note the decision of the Apex Court in Assistant Commissioner (CT) LTU, Kakinada & others vs. Glaxo Smith Kline Consumer Health Care Limited16, wherein the Apex Court was confronted with the exercise of writ jurisdiction under Article 226 of the Constitution of India in a case where the statutory remedy of appeal stood foreclosed by the law of limitation. While making comparison of the powers of the High Court under Article 226 of the Constitution and that of the Apex Court under Article 142, it was observed that though the powers of the High Court under Article 226 of the Constitution are wide, but certainly not wider than the plenary powers bestowed on the Apex Court under Article 142 of the Constitution of India which is a conglomeration and repository of the entire judicial powers under the Constitution, to do complete justice to the parties. But even while exercising that power, the Apex Court is required to bear in mind the legislative intent and not to render the statutory provision otiose. The decision of the Constitution Bench in Union Carbide Corporation and others vs. Union of India and others (1991) 4 SCC 584 was relied to note therein that in exercising powers under Article 142 and in assessing the needs of ‘complete justice’ of a cause or matter, the Apex Court will take note of the express prohibitions in any substantive statutory provisions based on some fundamental principles of public policy and regulate the exercise of its power and discretion, accordingly.

98. Moreover, in Ashish Agarwal (supra), the Apex Court has invoked the power under Article 142 of the Constitution of India to the limited extent to direct that the order passed in Ashish Agarwal (supra) shall govern and be made applicable to similar judgments and orders passed by the various High Courts across the country, as in the impugned judgments and orders passed by the High Court of Judicature at Allahabad. The order passed by the Apex Court in Ashish Agarwal (supra) has been applied to all similar matters in exercise of powers under Article 142 of the Constitution of India. The reassessment notices issued under the unamended Section 148 on or after 1.4.2021, were treated to be show cause notices in terms of Section 148-A(b) and the revenue was required to conduct enquiry in accordance with the amended provisions under the FA, 2021, enforced w.e.f. 1.4.2021. The assessing officers are required to pass orders in accordance with the amended provisions after following the procedure as required under Section 148A to issue notice under Section 148 (as amended). All defences available to the assessee including those available under Section 149 of the ITA and all rights and contentions available to the assessee have been made available. The right and contentions to the revenue under the FA, 2021 and in law are also continued to be available.

99. The said observations of the Apex Court cannot be read to me that extensions in time under the unamended Section 149 has been granted by the Apex court by applying TOLA, 2020 to the reassessment notices in respect of the proceedings relating to the past assessment years, where such notices were not issued uptill 31.3.2021 and they can be treated as “extended reassessment notices” and allowed to travel back in time to their original date when such notices were to be issued and then to apply amended Section 149 as interpreted by the revenue in Para 6.1 of the CBDT Instructions dated 11.5.2022.

100. In case, this argument of the learned counsels for the revenue is accepted it will result in permitting the revenue to initiate reassessment proceedings in a manner which cannot otherwise be done under the Statute.

101. The last submission of the learned counsels for the revenue is based on the observations of the Division Bench in Ashok Kumar Agarwal (supra) in paragraph ‘71’ as under:-

“71. Here, it may also be clarified, Section 3(1) of the TOLA 2020 does not itself speak of reassessment proceeding or of Section 147 or Section 148 of the Act as it existed prior to 01.04.2021. It only provides a general relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19. After enforcement of the FA, 2021, it applies to the substituted provisions and not the pre-existing provisions.”

102. Placing the said observation, it was argued that even the Division Bench therein has held that after enforcement of the FA, 2021, the general relaxation of limitation granted on account of general hardship existing upon the spread of pandemic Covid-19 applies to the substituted provisions. The extension of time, thus, can be granted even after amendment by the FA, 2021 under Section 3(1) of the TOLA 2020 (TOLA 2020).

103. To deal with this submission, suffice it to say that extension in time uptill 30.6.2021 can be granted to the time limit provided in the amended Section 149 of the ITA brought by the FA, 2021 by plain provisions of clause (A)(a) of the Notification No. 20 of 2021 dated 31.3.2021 ignoring Explanation to the same (quashed by this Court). Similarly extension in time as per the plain provision of clause (A)(a)(b) of the Notification No. 38 dated 27.4.2021 ignoring Explanation to it, may be granted as and when the said extensions are applicable for issuance of notice under Section 148 as per the time limit specified in Section 149 or sanctions under Section 151 of the ITA as amended by the FA, 2021, after making all compliances, as required under the ITA, (amended provisions).

104. It may profitably be noted, at this stage, that it is settled law that a taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In interpreting a taxing statute, equitable considerations are out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them; Interpreting taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed. Before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section, and if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly. (Reference Union of India & others Ind-Swift Laboratories Ltd 2011 (4) SCC 635; CIT Vs. Modi Sugar Mills Ltd AIR SC 1047; State of West Bengal Vs. Kesoram Industries Ltd 2004 (10) SCC 201

Conclusions:

Our answer to the two questions posed to us are, thus, as under:-

(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 FA’ 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.

Gujarat High Court – Keenara Industries Pvt Ltd. ITO

The decision has been rendered by a bench of (Sonia Gokani, J) and (Mauna M. Bhatt,J). Mauna M. Bhatt,J has given a separate but “Supplementing View:” agreeing in totality with the judgement of Ms. Justice SONIA GOKANI, J

Reproducing the relevant portion of the judgement

Particulars of Provisions pertaining to reopening under the new regime:	AY 2013-14	AY 2014-15

Date of expiry of the Assessment Year	31-03-2014	30-03-2015
Date of expiry of six years from the end of the Assessment year	31-03-2020	31-03-2021
Date of new provisions introduced by Finance Act, 2021 coming into force	01-04-2021	01-04-2021
Whether limitation for issuing notice under section 148 prescribed under old regime of reopening expired?	Yes	Yes
Whether notice under section 148 of the Act can be issued under new regime in view of first proviso to section 149(1) of the Act?	No	No

Revenue put forth the following tables to put forth their views

AY	No. of AY	A.Y.	AY	No. of AY	A.Y.	Notes
						# – Limitation expired on 31.03.2020, which was extended upto 30.06.2021 under TOLA.
2013-14	1	2014-2015	2014-15	1	2015-2016
	2	2015-2016		2	2016-2017
ending on	3	2016-2017	ending on	3	2017-2018
31-03-2014	4	2017-2018	31-03-2015	4	2018-2019
	5	2018-2019		5	2019-2020 #
	6	2019-2020 #		6	2020-2021

21. Concurring View:

21.1. Having heard learned Advocates for the respective parties, I deem it appropriate to first consider the issues, which are common and argued by Counsel for the petitioners:

(a) It was contended that decision in the case of Ashish Agarwal (supra) shall apply only to those notices, which were challenged before different high courts:

The Hon’ble Supreme Court in the case of Ashish Agarwal (supra) has adjudicated on the validity of reassessment notices issued by the Assessing Officers during the period 01.04.2021 to 30.06.2021 i.e.; the time extended by TOLA and various notifications issued thereunder. As new law came in to force w.e.f 01.04.2021, it has held that these notices issued under Section 148 (between 01.04.2021 to 30.06.2021) shall be deemed to be the show cause notices issued under Section 148A(b) of section 148A of the Act of new provision and further directed Assessing Officer to follow the procedure with respect to such notices. Thus, it has created a fiction by directing to treat the notices issued under Section 148 (unamended law) of the Act, as notices issued under Section 148A(b) (substituted provision) with a clear intention to save about 90,000/- proceedings, being conscious of the fact that there were approximately 90,000 such notices, which have been issued on a bonafide belief that old provisions would be applicable. Therefore, to strike a balance between rights of the revenue as well as respective assessees, keeping in mind that the revenue may not suffer as ultimately it is a public exchequer, the Hon’ble Supreme Court in exercise of its power under Article 142 of the Constitution of India, has made the order, which shall be applicable PAN India. Therefore, I am not in agreement with submissions of petitioners that the decision in the case of Ashish Agarwal (supra) would be applicable to the cases, where such notices have been challenged before different High Courts. In view of the fact recorded by Hon’ble Supreme Court that about 90,000 reassessment notices were issued after 01.04.2021, which were subject matter of more than 9,000 petitions/ appeals and further permitting the revenue to deal with about 90,000 notices, with clear direction to make the said decision applicable PAN India, in my opinion, the decision of Hon’ble Supreme Court in the case of Ashish Agarwal (supra) would apply to all the cases, where notices were issued between 01.04.2021 to 30.06.2021.

21.2. (a) It was contended that there cannot be any Notification when the provision itself was repealed. Further, by issuing notification, the executive cannot expand legislative power because it would amount to re-writing the law. By Notification, the subordinate legislation cannot override any statute enacted by Parliament.

On the aforesaid issue it is submitted by all counsel that by virtue of notification Nos. 20 of 2021 and 38 of 2021 dated 31.03.2021 and 27.04.2021 respectively, the time limit for issuing notice under Section 148 has been extended up to 30.6.2021. By Notification Nos. 20 of 2021 dated 31.03.2021, the time limit to issue notice was extended up to 31.04.2021. When the Notification Nos. 20 of 2021, was issued on 31.03.2021, the old law was in existence, and it ceases to exist w.e.f 01.04.2021. When the law itself ceases to exist w.e.f.01.04.2021, the Notification will die a natural death and therefore there cannot be any Notification in respect of the repealed Act. Moreover, as the Notification No. 38 of 2021 dated 27.04.2021, was in continuation of the earlier Notification dated 31.03.2021 and once earlier notification ceases to apply, the consequential second Notification also ceases to apply. Various High Courts for the precise reason have held the said Notifications to be bad in Law and these findings have been upheld by the Hon’ble Supreme Court. It was further submitted that the two Notifications issued by the CBDT, dated 31.03.2021 and 27.04.2021, respectively amounts to extension of legislation or rewriting of legislation, not permitted under Law. Learned counsel have relied upon a series of decisions referred in their submissions.

In the case of Vasu Dev Singh and Ors. vs. Union of India and Ors. reported in (2006) 12 SCC 753, the Hon’ble Supreme Court while examining the powers vested unto administrator of Chandigarh by virtue of notification dated 7.11.2002 under Section 3 of East Punjab Urban Rent Restriction Act, 1949 has held as under:

“118. A statute can be amended, partially repealed or wholly repealed by the legislature only. The philosophy underlying a statute or the legislative policy, with the passage of time, may be altered but therefore only the legislature has the requisite power and not the executive.

The delegated legislation must be exercised, it is trite, within the parameters of essential legislative policy. The question must be considered from another angle.

Delegation of essential legislative function is impermissible. It is essential for the legislature to declare its legislative policy which can be gathered from the express words used in the statute or by necessary implication, having regard to the attending circumstances.

It is impermissible for the legislature to abdicate its essential legislative functions. The legislature cannot delegate its power to repeal the law or modify its essential features.”

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“147. The legislative objection and policy indisputably must be considered having regard to the Preamble and other core provisions of the Act. Section 3 although is a part of the Act, but the same cannot be said to contain an inbuilt policy so as to empower the Administrator to do all such things which can be done by the legislature itself.”

In one another decision in the case of Assam Co. Ltd. and another Vs. State of Assam and others reported in (2001)4 SCC 202 the Hon’ble Supreme Court, while examining the powers of State Officers under The Assam Agricultural Income Tax Act, 1939, for the purpose to ascertain agricultural income with regard to tea, to call for any papers before the authority administering the Central Act has held as under :

“10. We see force in the above contention. A perusal of Section 50 of the Act shows that the State Government has been empowered to make such Rules as are necessary for the purpose of carrying out the purposes of the Act. We have already noticed that the object and the scheme of the Act do not contemplate the State authorities being empowered to recompute the agricultural income contrary to the computation made by the Central Officers, nor do the subjects specified in sub-sections 2(a) to (m) of Section 50 provide for making such rules empowering the State Officers to make computation of agricultural income contrary to what is computed by the Central Officers under the Central Act. We have noticed that by virtue of the provisions made by the legislature in explanation to Section 2(a)(2), proviso to Section 8 and Section 20D, it is clear that the State Legislature intended to adopt the computation of agricultural income made under the provisions of the Central Act. Having specifically said so in the above Sections of the Act, if the Legislature wanted to deviate from that scheme of the Act, it could have in clear terms provided for a power being vested with its officers in any given case to recompute the income keeping in mind the revenue of the State but the Legislature has not thought it necessary to do so. Even under Section 50, we do not see any provision which specifically authorises the State Government to make any such rules in the nature of the proviso to Rule 5 of the State Rules.

It is an established principle that the power to make rules under an Act is derived from the enabling provision found in such Act. Therefore, it is fundamental that a delegate on whom such power is conferred has to act within the limits of the authority conferred by the Act and it cannot enlarge the scope of the Act. A delegate cannot override the Act either by exceeding the authority or by making provision which is inconsistent with the Act. Any Rule made in exercise of such delegated power has to be in consonance with the provisions of the Act, and if the Rule goes beyond what the Act contemplates, the Rule becomes in excess of the power delegated under the Act, and if it does any of the above, the Rule becomes ultra vires of the Act. We have already noticed that none of the provisions of the Act has contemplated any power to be vested in the State officers to recompute the agricultural income from tea while proviso to Rule 5 of the Rules in specific terms empowers the State officers to recompute the agricultural income from tea different from that which is computed by the Central officers under the Central Act. Thus, it is seen that this Rule is not only made beyond the rule-making power of the State under Section 50 of the Act but also runs counter to the object of the Act itself, and enlarges the scope of the Act. The same also suffers from the other vices pointed out by us hereinabove, hence such a Rule, in our opinion, is ultra vires of the Act. Therefore, proviso to Rule 5 of the State Rules to the extent it empowers the State Officers to recompute the agricultural income already computed by the Central Officers is ultra vires of the State Act.”

(b) It is true that the executives / delegates cannot go beyond the Law enacted by the Parliament. However, one cannot be ignorant about the world wide pandemic situation on account of Covid-19 virus, and enactment of TOLA-2020, which came in to force on 31.03.2020. Under section 3(1) of TOLA -2020, the Legislature has permitted the Government to issue notification extending the time limit for issuance of notice under section 148. Hence, the power of the CBDT to issue the two notifications dated 31.03.2021 and 27.04.2021 pursuant to TOLA-2020 cannot be questioned. However, in my opinion the said two notifications extending the time limit prescribed under first proviso to section 149(1), cannot be read so as to enlarge the scope of the amended first proviso to section 149(1). Therefore, I am not in agreement with the submission of the revenue that as time limit to issue notice under Section 148 was extended by TOLA up to 30.06.2021, the proviso to amended section 149(1) would not be applicable. Therefore, though two Notifications dated 31.03.2021 and 27.04.2021 came to be issued by the CBDT, in pursuance to the power vested under section 3 of TOLA 2020, which came into force on 31.03.2020, they cannot be treated to have extended the time limit provided under the amended first proviso to section 149(1).

21.3. (a) In relation to the CBDT instruction No 1 of 2022, which was issued to implement the decision of Hon’ble Supreme Court in case of Ashish Agarwal (surpa), it is submitted that the Board circular issued is binding to the departmental authority and not to the assessee. In support of above submissions, learned counsel relied upon the decision of Hon’ble Supreme Court in the case of Keshavji Ravji and Co. and others Vs. Commissioner of Income Tax reported in 1990(2) SCC 231, in which, Hon’ble Supreme Court has held as under:

“32. This contention and the proposition on which it rests, namely, that all circulars issued by the Board have a binding legal quality incurs, quite obviously, the criticism of being too broadly stated.

The Board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the ‘Act’ by issuing circulars on the subject. This is too obvious a proposition to require any argument for it. A circular cannot even impose on the tax prayer a burden higher than what the Act itself on a true interpretation envisages. The task of interpretation of the laws is the exclusive domain of the courts.

However, – this is what Sri Ramachandran really has in mind- circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under Section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal, much less the High Court, is an authority under the Act.

The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, support of certain judicial observations for the view that such circulars constitute external aids to construction.”

In the decision of the Hon’ble Supreme Court in the case of State Bank of Travancore Vs. Commissioner of Income Tax, Kerala reported in 1982(6) SCC 11, Hon’ble Supreme Court held as under:

“43. Several financial institutions sought to intervene as the question involved herein is of some importance to them. We have allowed them to make their submissions and taken them into consideration. It was urged that the instructions contained in these circulars noted before were in consonance with the accepted principles of accountancy and these instructions have held the field for over 53 years. It was also submitted that as such claims have been allowed to be exempted for more than half a century, and the practice had transformed itself into law, this position should not have been deviated from. This submission, of course, cannot be accepted. The question of how far the concept or real income enters into the question of taxability in the facts and circumstances of this case and how far and to what extent the concept of real income should intermingle with the accrual of income will have to be judged in the light of the provisions of the Act, the principles of accountancy recognised and followed and the feasibility. The earlier circulars being executive in character cannot alter the provisions of the Act. These were in the nature of concessions and could always be prospectively withdrawn. However, on what lines the rights of the parties should be adjusted in consonance with justice in view of these circulars is not a subject matter to be adjudicated by us and as rightly contended by counsel for the revenue, the circulars cannot detract from the Act.”

(b) The settled legal position is to the effect that board circular/ instructions are binding to the departmental authorities and not to the court or to the assessee.

21.4. (a) To consider the submission that in view of express language of proviso to section 149(1), the Notices issued between 01.04.2021 to 30.06.2021 under section 148 of the Act, are barred by limitation, following aspects are to be noticed.

(i) The substituted provisions of Sections 147 to 151 of the Act introduced w.e.f. 01.04.2021, have been elaborately discussed by Hon’ble Supreme Court in paragraphs 6.2 to 6.6 of the decision in case of Ashish Agarwal (supra), and therefore, do not dilate on the same.

(ii) The Hon’ble Supreme Court, for the reasons stated, passed an order construing notices issued under section 148, as those deemed to have been issued under Section 148A as substituted by the Finance Act 2021 and treated to be show-cause notices in terms of section 148A(b) of the Act. The requirement of conducting any inquiry, if any, with the prior approval of specified authority under section 148A(a) has been dispensed with as a one- time measure. The assessing officer has been directed thereafter to pass an order under section 148A(d) in respect of each of the concerned assessee and the revenue is also permitted to proceed further with the reassessment proceedings as per the provisions of Section 148A, subject to compliance of all the procedural requirements. The defenses, which may be available to the assessee including those available under section 149 of the Act and all rights and contentions available to concerned assessee and Revenue under Finance Act 2021 and law shall continue to be available.

(iii) Section 149 of the Act, substituted by Finance Act 2021 w.e.f 01.04.2021, provides for a time limit for issuance of notice. Section 149 of the Act reads as under:

“149. Time limit for notice

(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 account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of-

(i) an asset;

(ii) expenditure in respect of a transaction or in relation to an event or occasions; or

(iii) an entry or entries in the books of account, Which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:]”

Provided that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021.

xxxx

(b) Therefore, substituted provisions of sections 147 to 151 shall be applicable w.e.f. 01.04.2021, and as per First Proviso to Section 149, limitation as specified under unamended provision as it stood prior to 01.04.2021, shall be applicable. As per unamended provision prescribing limitation, no notice can be issued under section 148, if six years have elapsed from the end of the relevant assessment year. For assessment year 2013-14, six years had ended on 31.03.2020 and for assessment year 2014-15, six years had ended on 31.03.2021. Had there been no amendment in Section 149, TOLA and through its delegated legislation by way of Notifications could have extended the time for ‘issuance of notice’. However in view of express language of 1st proviso to Section 149(1), legislative mandate required that no notice could be issued under the new provision, if such notice could not be issued at that time on account of being beyond the time specified under the said section as it stood before the commencement of the Finance Act 2021, i.e a period of six years. Moreover, in view of decision of Hon’ble Supreme Court in case of Ashish Agarwal (Supra), the notices issued to the respective assessees under section 148 shall be deemed to be notices under section 148A(b) of the Act as substituted by Finance Act 2021. In all the petitions of batch I and batch II, the notices under Section 148A (by deeming fiction) was issued, between the period 01.04.2021 to 30.06.2021 (i.e after 31.03.2021), wherein six years had elapsed from end of the relevant assessment year and therefore they are time barred and the petitions of Batch I- for A.Y. 2013-2014 and Batch-II for A.Y.2014-2015 deserves to be allowed.

22. It is made clear that other grounds raised in the petition are not gone into since subject petitions are decided only on the ground of limitation.

Author’s Opinion

The Delhi Court has taken a very simplistic view that Supreme Court in Ashish Agarwal has given an unbridled power

It is made clear that other grounds raised in the petition are not gone into since subject petitions are decided only on the ground of limitation.

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Name: Yogesh S. Limaye

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Sushil Jain says:

Very Nice Article CA Yogesh.
I am CA sushil Jain in practice in New Delhi.
I am in practice for about 35 years now.
I shall be happy to connect with you.
Pls share your mobile number on whatsapp.

CA Sushil Jain
Phone : 98 102 37 500

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June 9, 2023 at 9:43 am

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