Whether CBDT Instruction Dated 11.05.2022 Is Legally Correct? (Validity Of Notices Issued U/S 148 For Ay 2013-14, 2014-15, 2016-17 And 2017-18 After 31/03/2021)
Consequent to the Hon’ble Supreme Court’s Judgment in case of UOI & Ors. Vs. Ashish Agarwal (Civil Appeal No 3005/2022) dated 04/05/2022 adjudicating the validity of reassessment notices issued under unamended provisions of section 148 to 151 of the Income-tax Act, 1961 (‘the Act’) from 01/04/2021 to 30/06/2021, the CBDT issued instruction no. 01/2022 dated 11/05/2022 providing the interpretation and procedure to be adopted uniformly by the Assessing officers (‘AO) to comply with the Supreme Court’s Judgment. Said instruction also provided the applicability of the amended provisions for Assessment Year (‘AY’) 2013-14, 2014-15, 2016-17 and 2017-18 in context of TOLA [i.e., Taxation and Other Laws (relaxation and amendment of certain acts) Act, 2022].
Thereupon, the concerned AO’s initiated issuing notices u/s 148A(b) of the Act for various years including for AY 2013-14 & 2014-15, and also for AY 2016-17 & 2017-18 where income escaping assessment amounted below Rs.50 Lacs.
Hon’ble Supreme Court Verdict:
Hon’ble Supreme Court in its order concurred with the view of Hon’ble High Courts that notices issued on or after 01/04/2021 should have been issued according to the amended provisions since the amended provisions are remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as the same are in public interest. (Para 7 of the Hon’ble Supreme Court’s order).
Further, Hon’ble Supreme Court further held that the act of officers issuing notices under unamended provisions of section 148 to 151 of the Act was a bonafide mistake and was in view of the extension of time vide various notifications issued under the Relaxation Act (TOLA). Further, Hon’ble Supreme Court held that in its view notices should not have been issued under unamended provisions and ought to have been issued under amended provisions as per FA 2021. However, considering the Bonafide Belief it be deemed that all such notices have been issued u/s 148A of the amended provisions of the Act, subject to compliances of the procedural requirement and defences which may be available to Assessee u/s 147 to 151 of the Act as per FA 2021 (Para 8 of the Hon’ble Supreme Court’s order).
From the said Hon’ble Supreme Court’s order following points can be very easily understood
i. Even the Hon’ble Supreme Court is of the view that notices should have been issued according to the amended Provisions as per FA 2021.
ii. The officers view that the Extension provided through various notifications under The Relaxation Act (TOLA) were applicable even after 31/03/2021 was a Mistake.
iii. All such notices issued be now deemed to be Notices issued under amended provisions of section 148A of the Act as per FA 2021.
iv. Officer needs to consider the amended provisions of the Act.
v. The Assessee’s can take defences as available in amended provisions as per FA 2021.
CBDT instruction no. 01/2022 dated 11/05/2022:
However, in the CBDT instruction it has been stated that,
‘Decision of Hon’ble Supreme Court read with the extension provided by the TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point. (Para 6.1 of the Instruction)’
Accordingly, it has been further stated that cases pertaining to
a. AY 2013-14 and 2014-15 can be opened subject to provisions of section 149(1)(b) of the Act i.e., the amount escaping assessment must be Rs.50 Lacs or more than that
b. AY 2016-17 and 2017-18 are within three years thus fresh notices u/s 148 can be issued according to the provisions of section 149(1)(a) of the Act i.e., amount escaping can be below Rs.50 Lac.
Amended provisions of Section 149 of the Act as per FA 2021:
Before moving to discuss the validity of such instruction, it is important to understand the amended provisions of section 149 of the Act as per FA 2021.
[Time limit for notice.
149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021
Brief analysis of amended section 149 of the Act as per FA 2021
i. Sec 149(1)(a): Notice u/s 148 of the Act can be issued within 3 years if income escaping assessment is below Rs.50 Lac
ii. Sec 149(1)(b): Notice u/s 148 of the Act can be issued for period prior to 3 years but not prior to 10 years only if the Income escaping assessment is Rs.50 Lacs or more than that (other conditions that AO must have possession of accounts, evidences etc. must also be fulfilled)
iii. First Proviso to Sec 149(1): Though the jurisdiction to issue notice is extended beyond 6 years i.e., till 10 years, no notice, for AY 2021-22 or prior AYs’, can be issued on any given date under amended provisions if such notice could not have been issued on that given date as per unamended provisions (i.e., provisions as stood immediately before the commencement of FA 2021).
Summary of Hon’ble Supreme Courts Judgment and section 149:
In view of Hon’ble Supreme Courts Judgment and the amended provisions of section 149 of the Act as per FA 2021, following important points can be summarized
i. Hon’ble Supreme Court categorically held that the view of officers that extension as per notifications under Relaxation Act (TOLA) were applicable even after 31/03/2021 was a Mistake.
ii. Hon’ble Supreme Court held that notices should be issued as per amended provisions of the Act as per FA 2021
iii. Section 149(1)(b) of the Act provides that no notice can be issued u/s 148 of the Act for period prior to 3 years where income escaping assessment is below Rs. 50 Lacs.
iv. First proviso to section 149(1) prohibits issuance of notice at any time under amended Provisions if such Notice could not have been issued at that time under unamended provisions for those AY’s before AY 2021-22.
Question for discussion:
Thus, in context of above summarized important points, whether the instruction, directing the officers to issue notices
a. for AY 2013-14 & 2014-15 and
b. for AY 2016-17 & 2017-18 though the amount escaping assessment is below Rs.50 Lac,
is a Valid Instruction?
Discussion:
With regard to re-opening of AY 2013-14 and AY 2014-15:
The 6 years’ time limit for issuance of notice u/s 148 of the unamended provisions for AY 2013-14 gets completed on 31/03/2020. Further, considering the notifications extending the time period under TOLA, this time limit of issuance of notice under old provisions was extended till 30/06/2021. However, considering Hon’ble Supreme Courts verdict that on or after 01/04/2021 notices u/s 148 can be issued according to the amended provisions as per FA 2021, the maximum extension which the TOLA could provide is till 31/03/2021 only and not thereafter. Whereas for AY 2014-15 it is 31/03/2021.
Accordingly, considering the first proviso to the amended section 149 of the Act as per FA 2021, for any AY beginning on or before AY 2021-22, notice u/s 148 of the Act cannot be issued, on any given date, if that notice could not have been issued on that date in the unamended provisions.
The relevant part of the First proviso to amended section 149 of the Act is reproduced as under,
“[Time limit for notice.
149. (1) ………
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021:”
Accordingly, since the case pertaining to AY 2013-14 or AY 2014-15 could not have been re-opened under unamended provisions after 31/03/2021, as the time limit of 6 years in unamended provisions had got completed on 31/03/2021 (even for AY 2013-14 considering TOLA), the said years (i.e., AY 2013-14 & 2015-16) cannot be re-opened under the amended provisions as per FA 2021.
Accordingly, to decide the validity of said instruction of CBDT, the moot question which need to discuss is, whether the extension as provided by the notifications under TOLA be applied on or after 01/04/2021 in case of issuance of notice u/s 148 of the Act?
Firstly, it be noted that, the TOLA was applicable to the due dates which were existing in the year of 2020, while the due dates of amended section 149 of the Act came into effect only on or after 01/04/2021, then how come the provisions of TOLA apply to a provision which got enacted on a future date.
Secondly, Hon’ble Supreme Court has very categorically held that the officers view that the extension provided through various notifications under TOLA were effective even after 01/04/2021 was a Mistake.
Thirdly, Hon’ble Supreme Court has agreed with the view of Hon’ble High Courts adjudicating that on or after 01/04/2021 notices ought to have been issued in accordance with the amended provisions as per FA 2021 only.
Accordingly, the interpretation of CBDT, as reflecting from instruction dated 11/05/2022, that the TOLA will apply even after 31/03/2021 for amended provisions under section 148 to 151 of the Act as per FA 2021 and owing to which the notices issued in period between 01/04/2021 to 30/06/2021 will travel back in time to their original dates, is totally misplaced and not in sync with Hon’ble Supreme Court’s verdict.
Since the Hon’ble Supreme Court’s verdict is very clear that the from 01/04/2021 only amended provisions as per FA 2021 are applicable, there cannot be a scenario that notices issued u/s 148 after 01/04/2021 to 30/06/2021 can be travelling back to their original dates.
Therefore, the calculation of time limit for issuance of notice u/s 148 for AY 2013-14 and 2014-15 as per amended section 149 of the Act as per FA 2021 be done without considering the extensions under TOLA. Upon which it would be derived that the notices u/s 148 of the Act issued after 31/03/2021 for AY 2013-14 and 2014-15 are time barred.
With regard to re-opening of AY 2016-17 and AY 2017-18:
As discussed above that on or after 01/04/2021 there won’t be any effect of extension of time limits under TOLA for issuance of notices u/s 148 of the Act accordingly all the notices issued on or after 01/04/2021 u/s 148 of the Act would not travel back in time. Therefore, on or after 01/04/2021 the calculation of time limit as per amended section 149 of the Act as per FA 2021 is to be done without considering the effect of TOLA.
Accordingly, the three years’ time limit according to amended section 149 of the Act as per FA 2021 for issuance of notice u/s 148 of the Act pertaining to,
a. AY 2016-17 ends on 31/03/2020, however, considering the extension of time limits as per TOLA it gets extended maximum till 31/03/2021 and not beyond that
b. AY 2017-18 ends on 31/03/2021.
Thus, if the notice u/s 148 of the Act is issued after 31/03/2021 for AY 2016-17 & 2017-18 then the amended provisions of section 149(1)(b) of the Act as per FA 2021 would apply and not the provisions of Section 149(1)(a). That is to say, for reopening the case for AY 2016-17 and 2017-18, after the date 31/03/2021, the income escaping assessment must be Rs.50 Lac or more than that.
Conclusion:
In a nutshell the interpretation of CBDT that TOLA applies even after 31/03/2021 for issuing notices u/s 148 of the Act is misplaced. From 01/04/2021 onwards only the amended provisions would apply and not the unamended one. Owing to which the calculation of time limits as per amended provisions of section 149 of the Act as per FA 2021 is to be done without considering the TOLA. Accordingly, notices issued u/s 148 of the Act or the Show Cause Notices/ proposals u/s 148A(b) of the Act to issue notice u/s 148 of the Act pertaining to
– AY 2013-14 & 2014-15, irrespective of the amount escaping assessment, and
– AY 2016-17 & 2017-18 where income escaping assessment is below Rs.50 Lac
are in my view invalid.
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Disclaimer: This Article/ Write-up is entirely personal opinion of the Author and should not be regarded or relied upon as legal advice by the Author. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although author has endeavored to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice.
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