Division Bench of Rajasthan HC Quashes Section 148 notices in 472 cases

Introduction: –

The Division Bench of Hon. Rajasthan High Court consisting of Chief Justice Akil kureshi and Justice Sameer Jain. in Sudesh Taneja vs. ITO DB W.P No.969/2022. Order dated 27.01.22 quashed the reassessment notices issued after 31.03.21.

Earlier the Ld. Single judge of Hon. Rajasthan HC had quashed reassessment notices u/s 148 of the Income tax Act issued after 31^st March 21 in BPIP Infra Pvt. Ltd. vs ITO, W.P 13297/2021 which was challenged by the revenue before this division bench.

Questions of Law Before the Hon. Court:-

“1. Whether after introduction of new provisions for reassessment by the Finance Act, 2021, would the substituted (old) provisions survive and could they be used for issuing reassessment notices for the past period?

2. Whether the explanations contained in the CBDT circulars dated 31.03.2021 and 27.04.2021 are legal and valid?”

Legal Contentions Raised by the Assessee(s) before The Division Bench:

i) Old Reassessment Provisions were substituted by New Provisions w.e.f. 01.04.21;

ii) After substitution old provisions have been repealed so extension of time is not possible.

iii) The Relaxation Act only authorised C.G to extend time limits & not to issue any explanation.

iv) The subordinate legislature cannot revive the statutory provisions which have already lapsed;

v) The CBDT notifications to extend time limits are ultra vires the powers of the subordinate legislation and therefore unconstitutional.

vi) Under taxing statutes, If two views are possible, one favouring the assessee should be taken.

vii) The Divisions Benches of Allahabad and Delhi High Court have decided in assessee’s favour.

Contentions raised by the Revenue:

i) Because the notice u/s 148 was issued for period prior to 01.04.21, the old provisions would apply, Therefore no requirement of following the procedure laid down u/s 148A.

ii) Covid-19 situation is unprecedented and it required taking extraordinary measures;

iii) The assessee cannot take advantage of the unusual circumstances.

iv) CBDT has issued explanation under powers conferred to it by the Relaxation Act only to clarify the statutory provisions which is well within the Government’s power.

Observations of Hon. High Court:

i) A taxing statute can’t imply anything which is not expressed.

ii) Through The Finance Act, 21 the Old reassessment provisions were substituted and replaced by new provision. A provision which does not exist can’t be extended.

iii) There is no indication that the old provisions would apply even after their substitution.

iv) for issuance of notice u/s 148 after 01.04.21 the new reassessment provisions would apply.

v) Notice which had become time barred prior to 01.04.21 as per old provisions, can’t be revived.

vi) All the impugned notices are issued after 01.04.21 without following the procedure contained in Section 148A of the Act and are therefore invalid.

vii) The Relaxation Act, only authorised the Government to extend the time limits.

viii) Issuing any explanation touching the provisions was not part of this delegation.

ix) the explanation cannot change the very basis of the statutory provisions.

x) If the plain meaning of the statutory provision is clear, a different position cannot be adopted in an explanation, by describing it to be clarificatory.

xi) by notifications issued by CBDT the new reassessment provisions could not be deferred.

xii) Accordingly, these explanations are unconstitutional and invalid.

xiii) that the notices impugned in the respective petitions are invalid and bad in law.

xiv) The learned Single Judge committed no error in quashing these notices.