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.
