Hon. Madhya Pradesh (MP) High Court (HC) Quashes Sec. 148 Notice Issued After 31st March 21
The Division Bench of Hon. Madhya Pradesh High Court consisting of Justice Sheel Nagu and Justice Maninder Singh Bhatti in Yuvraj Jain vs. ITO W.P No.28293 of 2021. Order dated 03.03.22 quashed the reassessment notice issued after 31.03.21.
Contentions Raised by the Petitioner Assessee:
i) Notice dated 31.03.21 was served to assessee on 16.04.21 through email.
ii) That because the proceedings are sought to be initiated after 31.03.21, notice u/s 148 cannot be issued without complying with newly introduced Sec.148A
iii)Newly enacted Sec 148A which has come into force from 1.4.21; requires that before issuing sec 148 notice Assessing officer shall:
> Conduct an enquiry;
> Provide opportunity of Being Heard to the Assessee;
> Issue Show Cause Notice.
iv) That Because Section 148A was not complied therefore Notice issued under omitted section 148 is illegal.
Contentions raised by the revenue:
Revenue did not dispute to the fact that though the date on the notice was 31.03.21 but it was issued on 16.04.21
Observations of the Hon. MP High Court:
The Hon. Court after referring to the amendments in the sections 147,148,149,150 and 151 and also to the newly enacted section 148A held as under:
Quote “4. The aforesaid newly inserted section 148-A now specifically provides for issuance of a notice if the Assessing Officer takes a decision to initiate re-assessment and therefore, a procedure has been laid down under section 148-A which is required to be adhered to by the Assessing Officer after 1/04/2021 i.e. the date on which the Finance Act, 2021 came into force.
5….
6……… we have no hesitation to hold that the impugned notice is bad in the eye of law, contained in Annexure P/1 dated 31/03/2021 (received by the petitioner on 16/04/2021 through Email) inasmuch as after 1/04/2021, it is mandatory requirement that prior to re-assessment proceedings notice under section 148-A of Income Tax Act, 1961 should be issued to assesseee……….
7. Accordingly, the impugned notice dated 31/03/2021 (served through Email to the petitioner on 16/04/2021) stands quashed. However, it is left open for the respondents to take recourse to the procedure laid down in newly enacted section 148-A of the Income Tax Act, 1961 if it is required under the law.” Unquote
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Hon. Allahabad H.C Quashes Sec. 148 Notices Issued After 31st March 21
The Finance Act, 2021 introduced a new set of reassessment proceedings from 01.04.21.The Central Board of Direct Taxes (C.B.D.T) by way of various notifications had extended the time limit of issuing the notice U/s 148 of the Act up to 30th June, 2021.
The Income tax department has issued many Section 148 notices for several assessment years (A.Y. 2013-14 onwards) after 31st March 2021.Many writ petitions have been filed across the country challenging the notices issued u/s 148 after 31st march 2021 and notifications issued by CBDT to extend the time limits for issuing such notices, various courts have also stayed the reassessment proceedings.
Earlier Hon. Chhattisgarh High Court in Palak Khatuja vs. UOI and others W.P.(T) 149 of 2021 had held the notice(s) issued after 31.03.21 to be valid.
Recently Hon. Allahabad High Court in Ashok Kumar Agrawal vs. UOI W.P. Tax. 524 of 2021 quashed the reassessment notices issued after 31.03.21 and held that Palak Khatuja (Supra) does not lay down the Correct Law.
Contentions Raised by the Petitioner Assessee(s):
i) Old Provisions were substituted by New Provisions w.e.f. 01.04.21;
ii) After substitution old provisions do not survive so extension of time not possible;
iii) CBDT Notification for extension of time limit cannot override law passed by the parliament;
iv) The Non Obstante Clause in Section 3(1) of the enabling Act can’t be given a wider meaning;
v) Notices u/s 148 was issued without complying with newly introduced Sec.148A
vi) Sec 148A which has come into force from 1.4.21; requires that before issuing sec 148 notice Assessing officer shall:
> Conduct an enquiry;
> Provide opportunity of Being Heard to the Assessee;
> Issue Show Cause Notice
vii) Because Section 148A was not complied therefore Notice(s) u/s 148 are illegal;
viii) There is no express provision in the Time Limit extension enabling act or the Finance Act to save applicability of the Older provisions afterwards as they existed up to 31.03.2021;
ix) Reassessment proceedings must arise only upon jurisdiction being validly assumed by the AO.
x) Until jurisdiction is validly assumed by the AO by issuance of the notice u/s 148, no reassessment proceeding may ever be said to be pending before the assessing authority
xi) As a fact, no jurisdiction had been assumed by the assessing authority against any of the petitioners, under the unamended law. Hence, no time extension could ever be made under section 3(1) of the Enabling Act, read with the Notifications issued thereunder.
Contentions raised by the revenue:
i) Due to Covid CBDT had extended time limit up to 30.06.21;
ii) Notice(s) are issued up to 30.06.21, therefore are completely valid and legal;
iii) The Non Obstante Clause in Enabling Act gave it an overriding effect over Finance Act;
iv) Practicality dictates that the reassessment proceedings be protected.
Observations of the Hon. Allahabad High Court:
i) Submissions of the Revenue are not unacceptable.
ii) The Enabling Act doesn’t speak of saving any proceedings from law enacted by the Parliament, It speaks of protecting certain proceedings from being hit by the rule of limitation.
iii) The Old Provisions stand substituted by new provisions, old Provisions could be protected only if AO had validly assumed jurisdiction up to 31.03.21.
iv) The non obstante clause, in section 3(1) of the Enabling Act is confined to its second part i.e. to protect proceedings already under way.
v) There is nothing in the language which gives a wider application i.e. to serve a purpose not contemplated under that provision.
vi) The Revenue is wrong in stating that no extension of time was granted beyond 30.06.2021. Vide Notification No. 3814 dated 17.09.2021, further extension of time has been granted till 31.03.22;
vii) To allow the delegate of the Parliament, to indefinitely extend such limitation, would be to allow the validity of an enacted law i.e. the Finance Act, 2021 to be defeated.
viii) In absence of any proceeding of reassessment having been initiated prior to the date 01.04.2021, only the new provisions would apply.
ix) Central Govt. or CBDT cannot issue Notifications to over reach the principal legislation.
x) Had Finance Act,2021 not substituted the reassessment procedure, the revenue authorities would have been within their rights to claim extension of time, under the Enabling Act.
xi) However, when sweeping amendments are made by the Parliament, it limits the applicability of the Enabling Act and the power to grant time extensions thereunder, to only such reassessment proceedings as had been initiated till 31.03.2021.
xii) It would be incorrect to look at Notification dated 31.03.2021 issued under the Enabling Act, to interpret the principal legislation made by Parliament i.e. The Finance Act, 202
xiii) It would be over simplistic to ignore the provisions of, to interpret the provisions of Finance Act, 2021 as inoperative in view of the spread of the COVID-19 pandemic.
xiv) Mischief rule has no application in the current issue, Upon the Finance Act 2021 enforced w.e.f. 1.4.2021 without any saving of the old provisions, there is no room as to conflict of laws.
xv) The argument of the revenue that because of practicality the reassessment proceedings must be saved, to read practicality in law is dangerous;
xvi) Practicality foreign to statutory provisions can never be used in taxation laws.
xvii) It was for the assessing authority to act according to the new law as existed after 31.03.2021.
xviii) If the rule of limitation permitted, it could initiate, reassessment proceedings in accordance with the new provisions, after making adequate compliance of the same. That not done, the reassessment proceedings initiated against the petitioners are without jurisdiction.
xix) As to the decision of the Chhattisgarh H.C, we are unable to persuade ourselves to that view.
xx) Consequently The notices issued after31.03.21 are quashed
CA Milind Wadhwani | DISA(ICAI), FAFD(Cert.), CCCA(Cert.), Research (Ph.D.) Scholar | Mobile +91 9826273333 | Mail ID: – MILIND.WADHWANI20@GMAIL.COM
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