Mon Mohan Kohli Vs ACIT & Anr. (Delhi High Court)
This Court is of the view that as the Legislature has introduced the new provisions, Sections 147 to 151 of the Income Tax Act, 1961 by way of the Finance Act, 2021 with effect from 1st April, 2021 and as the said Section 147 is not even mentioned in the impugned Explanations, the reassessment notices relating to any Assessment Year issued under Section 148 after 31st March, 2021 had to comply with the substituted Sections.
It is clarified that the power of reassessment that existed prior to 31st March, 2021 continued to exist till the extended period i.e. till 30th June, 2021; however, the Finance Act, 2021 has merely changed the procedure to be followed prior to issuance of notice with effect from 1st April, 2021. 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 Finance Act, 2021. Consequently, the impugned Explanations in the Notifications dated 3 1st 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.
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 Finance Act, 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
The submission of the Revenue that Section 6 of the General Clauses Act saves notices issued under Section 148 post 31st March, 2021 is untenable in law, as in the present case, the repeal is followed by a fresh legislation on the same subject and the new Act manifests an intention to destroy the old procedure. Consequently, if the Legislature has permitted reassessment to be made in a particular manner, it can only be in this manner, or not at all.
The argument of the respondents that the substitution made by the Finance Act, 2021 is not applicable to past Assessment Years, as it is substantial in nature is contradicted by Respondents’ own Circular 549 of 1989 and its own submission that from 1st July, 2021, the substitution made by the Finance Act, 2021 will be applicable.
Revenue cannot rely on Covid-19 for contending that the new provisions Sections 147 to 151 of the Income Tax Act, 1961 should not operate during the period 1st April, 2021 to 30th June, 2021 as Parliament was fully aware of Covid-19 Pandemic when it passed the Finance Act, 2021. Also, the arguments of the respondents qua non-obstante clause in Section 3(1) of the Relaxation Act, ‘legal fiction’ and ‘stop the clock provision’ are contrary to facts and untenable in law.
Consequently, this Court is of the view that the Executive/Respondents/Revenue cannot use the administrative power to issue Notifications under Section 3(1) of the Relaxation Act, 2020 to undermine the expression of Parliamentary supremacy in the form of an Act of Parliament, namely, the Finance Act, 2021. This Court is also of the opinion that the Executive/Respondents/Revenue cannot frustrate the purpose of substituted statutory provisions, like Sections 147 to 151 of Income Tax Act, 1961 in the present instance, by emptying it of content or impeding or postponing their effectual operation.
RELIEF:
Keeping in view the aforesaid conclusions, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void.
Consequently, the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 are quashed and the present writ petitions are allowed. If the law permits the respondents/revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the petitioners have a grievance, they shall be at liberty to take their remedies in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER of DELHI HIGH COURT
1. Various issues arise for consideration in the present batch of one thousand three hundred and forty six (1346) writ petitions, yet in essence, the questions of law that arise for consideration are whether the Government/Executive can make or change law of the land by way of Explanations to Notifications without specific Authority from the Legislature to do so and whether the Government/Executive can impede the implementation of law made by the Legislature.
2. It is pertinent to mention that in the present batch of matters, the petitioners-assessees have sought quashing of the re-assessment Notices issued post 31st March, 2021 by the Respondents-Revenue under Section 148 of the Income Tax Act, 1961. The petitioners-assessees also seek a declaration declaring Explanations A(a)(ii)/A(b) to the Notification No.20 [S.O.1432(E)] dated 31st March, 2021 and Notification No.38 [S.O.1703(E)] dated 27th April, 2021 to the extent that the same extend the applicability of the “provisions of Section 148, Section 149 and Section 151 of the Act, as the case may be, as they stood as on the 31st day of March, 2021, before the commencement of the Finance Act, 2021” to the period beyond 3 1st March, 2021 as ultra vires the parent legislation, viz., The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter referred to as ‘Relaxation Act, 2020’).
ADMITTED FACTS
3. The procedure governing initiation of reassessment proceedings prior to coming into force of the Finance Act, 2021 was governed by the following provisions:-
“Income escaping assessment.
147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry offour years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :—
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;
(d) where a person is found to have any asset (including financial interest in any entity) located outside India.
Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.
Issue of notice where income has escaped assessment.
148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:
Provided that in a case—
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and
(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to subsection (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice:
Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.
(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.
Time limit for notice.
149. (1) 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 clause (b) or clause (c);
(b) if four years, but not more than six years, have elapsedfrom 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; (c) iffour 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.
Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a nonresident 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-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day ofApril, 2012.
Sanction for issue of notice.
151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is afit case for the issue of such notice.
(2) In a case other than a case falling under sub-section
(1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is afit case for the issue of such notice.
(3) For the purposes of sub-section (1) and sub-section
(2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.”
4. Due to the onset of Covid-19 pandemic followed by nationwide lockdown in March, 2020, the citizens and authorities inter alia faced difficulties in complying with the statutory time limits. To provide relaxation as well as to avoid any adverse consequence to either party, the Government of India announced various relaxations by way of The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (hereinafter referred to as the ‘Relaxation Ordinance, 2020’). The objects and reasons as well as the relevant portion of the Relaxation Ordinance, 2020 are reproduced herein below:-
“THE TAXATIONAND OTHER LAWS (RELAXATION OF CERTAIN PROVISIONS) ORDINANCE, 2020 NO. 2 of 2020, DATED 31-3 -2020
Promulgated by the President in the Seventy-first Year of the Republic ofIndia.
An Ordinance to provide relaxation in the provisions of certain Acts and for matters connected therewith or incidental thereto.
WHEREAS, in view of the spread of pandemic COVID-19 across many countries of the world including India, causing immense loss to the lives of people, it has become imperative to relax certain provisions, including extension of time limit, in the taxation and other laws;
AND WHEREAS, Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action;
NOW, THEREFORE, in exercise of the powers conferred by clause
(1) of article 123 of the Constitution, the President is pleased to promulgate the following Ordinance: —
CHAPTER I PRELIMINARY
Short title and commencement
1. (1) This Ordinance may be called the Taxation and Other Laws commencement. (Relaxation of Certain Provisions) Ordinance, 2020.
(2) Save as otherwise provided, it shall come into force at once.
Definitions
2. (1) In this Ordinance, unless the context otherwise requires,— (a) “specified Act” means—
(i) the Wealth-tax Act, 1957 (27 of 1957) ;
(ii) the Income-tax Act, 1961 (43 of 1961);
(iii) the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988);
(iv) Chapter VII of the Finance (No. 2) Act, 2004 (22 of2004);
(v) Chapter VII of the Finance Act, 2013 (17 of2013);
(vi) the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of2015);
(vii) Chapter VIII of the Finance Act, 2016; (28 of2016) or
(viii) the Direct Tax Vivad se Vishwas Act, 2020 (3 of2020);
(b) “notification” means the notification published in the Official Gazette.
(2) The words and expressions used herein and not defined, but defined in the specified Act, the Central Excise Act, 1944 (1 of 1944), the Customs Act, 1962 (52 of 1962), the Customs TariffAct, 1975 (51 of 1975) or the Finance Act, 1994 (32 of 1994), as the case may be, shall have the meaning respectively assigned to them in that Act.
CHAPTER II
RELAXATION OF CERTAIN PROVISIONS OF SPECIFIED ACT
Relaxation of certain provision of specified Act
3. (1) Where, anytime limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020 or such other date after the 29th day of June, 2020 as the Central Government may, by notification, specify in this behalf, for the completion or compliance of such action as—
(a) completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the specified Act; or
(b) filing of any appeal, reply or application or furnishing of any report, document, return, statement or such other record, by whatever name called, under the provisions of the specified Act; or
(c) in case where the specified Act is the Income-tax Act, 1961 (43 of 1961), —
(i) making of investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purposes of claiming any deduction, exemption or allowance under the provisions contained in—
(I) sections 54 to 54GB or under any provisions of Chapter VI-A under the heading “B.—Deductions in respect of certain payments” thereof; or
(II) such other provisions of that Act, subject to fulfillment of such conditions, as the Central Government may, by notification, specify; or
(ii) beginning of manufacture or production of articles or things or providing any services referred to in section 10AA of that Act, in a case where the letter of approval, required to be issued in accordance with the provisions of the Special Economic Zones Act, 2005 (28 of 2005), has been issued on or before the 31st day of March, 2020 (28 of2005),
and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 30th day of June, 2020, or such other date after the 30th day of June, 2020, as the Central Government may, by notification, specify in this behalf:
Provided that the Central Government may specify different dates for completion or compliance of different actions.
Provided further that such action shall not include payment of any amount as is referred to in sub-section (2).”
5. As the pandemic and problems arising therefrom did not show any sign of abatement, the Legislature enacted Relaxation Act, 2020 in September, 2020. By way of Relaxation Act, 2020, various due dates/time limits/limitations prescribed in different Central Acts, including the Income Tax Act, 1961, were relaxed. Additionally, Section 3 of Relaxation Act, 2020 enabled the Central Government to issue Notifications for further relaxing the time limits/limitations prescribed in the ‘Specified Acts’. The Statement of Objects and Reasons as well as the relevant portion of the Relaxation Act, 2020 are reproduced herein below:-
“STATEMENT OF OBJECTS AND REASONS
The outbreak of Novel Corona Virus (COVID-19) pandemic across many countries of the world, including India, has caused immense loss to lives of people and given rise to unprecedented humanitarian and economic crisis in the country. Due to vagaries of pandemic, a national lockdown was imposed which had to be further extended. Due to very rapid spread of pandemic, social distancing had to be ensured immediately to prevent society at large from its disastrous consequences. This necessitated ease of compliance under certain tax and other laws.
2. As Parliament was not in session and in view of the urgency, the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ord. 2 of 2020) was promulgated on the 31st day of March, 2020 which, inter alia, relaxed certain provisions of the specified Acts relating to direct taxes, indirect taxes and prohibition of Benami property transactions. Further, certain notifications were also issued under the said Ordinance.
3. In view of stakeholders’ representations received after enactment of the Finance Act, 2020, and due to need for further rationalisation of some provisions of certain Acts, further amendments are considered necessary to be incorporated in the proposed Bill replacing the Ordinance.
4. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 which seeks to replace the said Ordinance, inter alia, provides for extension of various time limits for completion or compliance of actions under the specified Acts and reduction in interest, waiver of penalty and prosecution for delay in payment of certain taxes or levies during the specified period.
5. Further, the Bill proposes amendments to the Income-tax Act, 1961 which, inter alia, include providing of tax incentive for Category-III Alternative Investment Funds located in the International Financial Services Centre (IFSC) to encourage relocation of foreign funds to the IFSC, deferment of new procedure of registration and approval of certain entities introduced through the Finance Act, 2020, providing for deduction for donation made to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) and exemption to its income, incorporation of Faceless Assessment Scheme, 2019 therein, empowering the Central Government to notify schemes for faceless processes under certain provisions by eliminating physical interface to the extent technologically feasible and to provide deduction or collection at source in respect of certain transactions at threefourth ’s rate for the periodfrom 14th May, 2020 to 31st March, 2021.
6. The Bill also proposes to amend the Direct Tax Vivad se Viswas Act, 2020 to extend the date for payment without additional amount to 31st December, 2020 and to empower the Central Government to notify certain dates relating to filing of declaration and making of payment.
7. The Finance Act, 2020 is also proposed to be amended to clarify regarding capping of surcharge at 15 per cent on dividend income of the Foreign Portfolio Investor.
8. The Bill also proposes to empower the Central Government to remove any difficulty up to a period of two years and provide for repeal and savings of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.
9. The Bill seeks to achieve the aforesaid objectives.
NEWDELHI;
The 11th September, 2020.
NIRMALA SITHARAMAN
THE TAXATIONAND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 NO. 38 OF2020
[29th September, 2020.]
AN ACT to provide for relaxation and amendment of provisions of certain Acts and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Seventy-first Year of the Republic of India as follows:—
CHAPTER II
PRELIMINARY
1. (1) This Act may be called the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
(2) Save as otherwise provided, it shall be deemed to have come into force on the 31st day of March, 2020.
2. (1) In this Act, unless the context otherwise requires,—
(a) “notification” means the notification published in the Official Gazette;
(b) “specified Act” means—
(i) the Wealth-tax Act, 1957;
(ii) the Income-tax Act, 1961;
(iii) the Prohibition of Benami Property Transactions Act, 1988;
(iv) Chapter VII of the Finance (No. 2) Act, 2004;
(v) Chapter VII of the Finance Act, 2013;
(vi) the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015;
(vii) Chapter VIII of the Finance Act, 2016; or
(viii) the Direct Tax Vivad se Vishwas Act, 2020.
(2) The words and expressions used herein and not defined, but defined in the specified Act, the Central Excise Act, 1944, the Customs
Act, 1962, the Customs TariffAct,1975 or the Finance Act,1994, as the case may be, shall have the same meaning respectively assigned to them in that Act.
CHAPTER II
RELAXATION OF CERTAIN PROVISIONS OF SPECIFIED ACT
3. (1) Where, any time-limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2020 to the 31st day of December, 2020, or such other date after the 31st day of December, 2020, as the Central Government may, by notification, specify in this behalf, for the completion or compliance of such action as—
(a) completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval, or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the specified Act; or
(b) filing of any appeal, reply or application or furnishing of any report, document, return or statement or such other record, by whatever name called, under the provisions of the specified Act; or
(c) in case where the specified Act is the Income-tax Act, 1961,—
(i) making of investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purposes of claiming any deduction, exemption or allowance under the provisions contained in—
(I) sections 54 to 54GB, or under any provisions of Chapter VI-A under the heading “B.—Deductions in respect of certain payments” thereof; or
(II) such other provisions of that Act, subject to fulfilment of such conditions, as the Central Government may, by notification, specify; or
(ii) beginning of manufacture or production of articles or things or providing any services referred to in section 10AA of that Act, in a case where the letter of approval, required to be issued in accordance with the provisions of the Special Economic Zones Act, 2005, has been issued on or before the 31st day ofMarch, 2020, and where completion or compliance of such action has not been made within such time, then, the time-limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 31st day of March, 2021, or such other date after the 31st day of March, 2021, as the Central Government may, by notification, specify in this behalf:
Provided that the Central Government may specify different dates for completion or compliance of different actions:
xxxx xxxx xxxx xxxx
10. (1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the difficulty:
Provided that no such order shall be made after the expiry of a period of two years from the end of the month in which this Act has received the assent of the President.
(2) Every order made under this section shall be laid before each House ofParliament.
11. (1) The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 is hereby repealed.
(2) Notwithstanding such repeal, anything done, any notification issued or any action taken under the said Ordinance, shall be deemed to have been done, issued or taken under the corresponding provisions of this Act.”
6. In pursuance to the power vested under Section 3 of Relaxation Act, 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:
