Case Law Details
D G Patel Construction Pvt Ltd. & 761 Others Vs Union of India (Gujarat High Court)
In a recent ruling, the Gujarat High Court has echoed the Supreme Court’s decision in the case of Union of India and Others vs. Ashish Agarwal, wherein it addressed a group of petitions challenging the constitutional validity of Notification No. 20/2021 dated 31.03.2021 as well as Notification No. 38/2021 dated 27.04.2021 and consequential notices under Section 148 of the Income Tax Act.
Background and Constitutional Challenge
The petitions, led by Special Civil Application No. 12621 of 2021, contested the validity and application of Notification No. 20/2021 dated 31.03.2021 and Notification No. 38/2021 dated 27.04.2021. The primary contention was focused on the constitutional validity and vires of these notifications, asserting that they exceeded the powers delegated by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOL Act). The notifications were challenged on four main grounds:
1. The notifications were deemed ultra vires Section 3(1) of the TOL Act, which only allows the extension of time limits and does not extend the applicability of laws.
2. The notifications mandated the application of unamended provisions, allegedly exceeding the powers delegated by the TOL Act.
3. The law enacted by the parliament, effective from 01.04.2021, was argued to be applicable to notices issued under Section 148 of the Income Tax Act on or after 01.04.2021. Hence, the notices issued on the basis of unamended provisions were deemed without jurisdiction and bad in law.
4. The simultaneous operation of two different laws dealing with the common situation was considered untenable.
Relief Sought and Supreme Court’s Impact
The lead petitioner sought several reliefs, including a declaration of the unconstitutionality of the explanations in the challenged notifications, quashing of the impugned notice, and stays on their implementation and further proceedings for the Assessment Year 2013-14.
However, following the pronouncement of the Apex Court in the case of Union of India and Others vs. Ashish Agarwal, the Gujarat High Court ordered the disposal of all writ petitions without the need for adjudication on merit. The Supreme Court’s judgment allowed for a streamlined resolution of the issue.
Echoing the Apex Court’s Decision
The Gujarat High Court, in alignment with the Supreme Court’s decision, specified that the impugned section 148 notices issued under the unamended section 148 of the IT Act would be deemed to have been issued under section 148A of the IT Act. This substitution was brought about by the Finance Act, 2021.
Key points of alignment include:
1. Show-Cause Notices and Information Disclosure: The notices were to be treated as show-cause notices under section 148A(b). Assessing officers were required to provide relevant information and material to the assessees, allowing them to respond within two weeks.
2. Dispensation of Enquiry Requirement: The requirement for conducting an enquiry, if necessary, with prior approval was dispensed with as a one-time measure.
3. Assessing Officer’s Orders: Assessing officers were directed to pass orders in terms of section 148A(d) for each concerned assessee.
4. Continued Applicability of Defenses and Rights: All defenses available to the assessees, including those under section 149 of the IT Act, and the rights and contentions available to both the assessees and Revenue under the Finance Act, 2021, and in law, were affirmed.
Pan-India Applicability
The Gujarat High Court made it clear that the Supreme Court’s order would have pan-India applicability. All judgments and orders by different High Courts on the issue, wherein similar notices were issued after 01.04.2021 under section 148 of the Income Tax Act, were set aside. They would now be governed by the Supreme Court’s order, reducing the potential for further legal complications.
Conclusion
With the Gujarat High Court aligning its decision with the Supreme Court’s, the matter pertaining to notices under Section 148 of the Income Tax Act after 01.04.2021 takes a significant step towards resolution. The pan-India applicability of the order ensures a uniform approach to similar cases and reduces the burden on the legal system. The impact of this decision resonates not only in Gujarat but across the country, providing clarity and guidance in the interpretation and application of tax laws.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
This is a group of petitions challenging the constitutional validity and vires of the explanation contained in Notification No. 20/2021 dated 31.03.2021 as well as Notification No. 38/2021 dated 27.04.2021 and further challenges the consequential notices under Section 148 of the Income Tax Act (hereinafter referred to as the ‘IT Act’) as is existed and was applicable upto 31.03.2021. This being the group of petitions, the lead petition is Special Civil Application No. 12621 of 2021 and the basic facts necessary for the purpose of this order are drawn from the same.
2. The petitions are prayed under Article 226 of the Constitution of India claiming the constitutional rights guaranteed under Articles 14 and 19(1)(g) of the Constitution of India, against the respondent – State.
3. Broadly challenge is primarily on the four grounds; (i) the explanation contained in Notification No. 20/2021 dated 31.03.2021 and Notification No. 38/2021 dated 27.04.2021 is ultra-vires Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter referred to as the ‘TOL Act’) as the said section only allows extension of time limit for completion or compliance of such action mentioned therein and does not extend the applicability of laws; (ii) the explanation in Notification No. 20/2021 dated 31.03.2021 and Notification No. 38/2021 dated 27.04.2021 mandating the application of the unamended provisions is in excess of the powers delegated by the TOL Act; (iii) the law enacted by the parliament and in effect from 01.04.2021 is applicable to the notices issued under Section 148 of the Act on or after 01.04.2021 and therefore, the impugned notice issued on the basis of unamended provisions is without jurisdiction and bad in law; and (iv) two different laws dealing with the common situation cannot operate simultaneously i.e. the law enacted w.e.f. 01.04.2021 and the law as per explanation contained in the said notification.
4. As urged the explanation contained in the impugned Notification No. 20/2021 dated 31.03.2021 as well as the Notification No. 38/2021 dated 27.04.2021 being unconstitutional need to be struck down in the larger interest and therefore, the impugned notice issued under Section 148 of the IT Act for the year under consideration is sought to be declared as illegal and barred by limitation and without jurisdiction.
5. The prayers sought by the petitioner in the lead matter being Special Civil Application No. 12621/2021 are as follows:-
“(a) declare that the Explanation contained in Notification No. 20/2021 dated 31.03.2021 as well as Notification No. 38/2021 dated 27.04.2021 [ANNEXURE “A (Golly.)” to this petition] is ultra vires the Constitution of India and liable to be struck down;
(b) quash and set aside the impugned notice at ANNEXURE “B” to this petition;
(c) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the Explanation contained in Notification No. 20/2021 dated 31.03.2021 as well as Notification No. 38/2021 dated 27.04.2021 [ANNEXURE “A(Colly.) to this petition];
(d) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at ANNEXURE “B” to this petition and stay the further proceedings for the Assessment Year 2013-14;
(e) any other and further relief deemed just and proper be granted in the interest of justice;
(f) to provide for the cost of this petition.”
6. We have extensively heard learned senior counsels and learned counsels on both the sides and these matters were posted for pronouncement on merit.
7. In wake of the pronouncement of the Apex Court in case of Union of India and Others vs. Ashish Agarwal [Civil Appeal No. 3005/2022 and allied matters, decided on 04.05.2022] all the captioned writ petitions are ordered to be disposed of without any requirement of adjudication on merit.
7.1. Profitable it would be to reproduce the findings and observations made by the Apex Court:-
“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 onetime measure vis-à-vis 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.
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 01.04.2021 issued under section 148 of the Act are set aside 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 01.04.2021 are under challenge.
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.”
8. All the petitions stand disposed of in terms of the said order passed by the Apex Court.
9. We clarify that in any of these petitions, if there exist any other issue other than of Section 148 of the Income Tax Act, 1961, the liberty is reserved in favour of the particular writ petitioner to file a fresh petition in accordance with law.
10. Disposed of accordingly with no order as to cost.
