Notice under section 148 of Income Tax Act, 1961 without following the procedure under section 148A issued during  01.04.2021 to 30.06.2021 in relation to AY 2014-15 or earlier  assessment years. A Controversy

By way of various notifications issued under section 3 of the Taxation and Other Laws (Relaxation and Amendment Of Certain  Provisions) Act, 2020 [in short “Taxation Relief Act”], the Central Government from time to time, inter alia, extended the  limitation for issuance of notice under section 148 of the Act, as prescribed under section 149 of the Act, as under:

S. No. Date of Notification Where the original limitation for issuance of notice under section 148 of the Act fell during the  below period Extended Limitation
1. 31.03.2020 20.03.2020 to 29.06.2020 30.06.2020
2. 24.06.2020 20.03.2020 to 31.12.2020 31.03.2021
3. 31.03.2021 31.03.2021 30.04.2021
4. 27.04.2021 30.04.2021 (due to extension) 30.06.2021

The time to issue notice for AY 2014-15 and AY 2013-14 under the erstwhile provision of section 149 stood extended to 30.06.2021 owing to the above said extended period of limitation.

On account of the extended period of limitation, the Department has issued various notices for, inter-alia, AY 2014-15 and AY 2015-16 during the period 01.04.2021 to 30.06.2021

While issuing the notices under section 148 during 01-04-2021 – 30.06.2021, the department has followed the erstwhile provision of section 147-152.Procedure under section 148A has also not been followed by the department which is effective from 1.4.2021 as per Finance Act 2021 wef 1.4.2021.

The Department seeks to rely on the following Explanation provided under the Notification issued for extension of time limit for issuance of notice under section 148 to contest that the provision that existed prior to commencement of Finance Act, 2021 applied to such notices issued for AY 2014-15 and AY 2013-14:

“Explanation- For the removal of doubts, it is hereby clarified that for the purposes of issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, under this sub-clause, the provisions of section 148, section 149 and section 151 of the Income-tax 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, shall apply.”

The notice issued by following the earlier provisions is being contested to be bad in law on account of, inter-alia, the following reasons:

The Explanation issued under the Notification is beyond the power conferred upon and delegated to the Central Government under the provisions of section 3 of the Taxation Relief Act and is also contrary to the legislative intent behind the provisions of the Taxation Relief Act.At one time two provisions under the same law can not stand .Either earlier provision related to section 147 to 151 will be operative or the new provisions . At one time two acts can not run simultaneously .

The Explanation is also contrary to and ultra vires the provisions of sections 147 to 149 of the Act as substituted/introduced vide Finance Act, 2021.

Pursuant to coming into force of the new provisions of section 149, the provisions that existed prior there to have been repealed and thus cannot be resorted to and applied by the Department for any proceedings initiated on or after 01.04.2021.

Writs filed in various High Courts to challenge notice u/s 148 issued on or after 01.04.2021 without following the procedure under section 148A

Mon Mohan Kohli vs ACIT & Anr, W.P.(C) 6176/2021 [Delhi High Court]

Sahil International vs ACIT & Ors., Writ Petition (L) NO. 14687 OF 2021 [Bombay High Court]

Armada D1 Pte. Ltd. vs. DCIT & Ors., Writ Petition (L) No.11766 of 2021[Bombay High Court]

Tata Communications Transformation Services Limited vs ACIT & Ors., Writ Petition No.1334 of 2021 [Bombay High  Court]

Bagaria Properties and Investments Private Limited & Anr. Vs Union of India & ORS. WPO/244/2021 [Calcutta High Court]

The controversy is still  open and not settled . Hope the courts decides the issue soon .

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Qualification: LL.B / Advocate
Company: S.K. Jain and Co.
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I am S.K.Jain , Tax Consultant cum Advocate practising in Income Tax , GST , Company Matters . The name of the concern is S.K. Jain and Co. and I am prop. of this concern . I am in practice for the last 30 years . Professionals and non professional can feel free to contact me on mail . My mail ID is View Full Profile

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