INTRODUCTION:
In the words of Albert Einstein, “ The Hardest thing in the world to understand is the Income Tax” , However when such a task is before the Hon’ble Supreme Court of India, it is broken down in a way easily understood by everyone. One such task was to decide on the interplay between three parliamentary enactments which culminated in the judgment of the Hon’ble Supreme Court in Union of India V. Rajeev Bansal (Civil Appeal No 8629 of 2024),
The earlier round of litigation was the issuance of notices between 01.04.2021 and 30.06.2021 invoking the old regime, when the regime had taken over with effect from 01.04.2021. High Courts had struck all these notices as bad since these notices were not issued under the new regime. The Hon’ble Supreme Court in Ashish Agarwal invoking its power under Article 142, saved 90,000 such notices issued by declaring them as deemed to have been issued under the new regime, though issued under the old regime. Having saved all these notices under the new regime, what was under consideration before the Hon‟ble Court in Rajeev Bansal is whether TOLA and the subsequent Notifications issued under it, extending the time limits, would also apply to the new regime.
As stated earlier, the entire batch relates to the interplay between three parliamentary enactments, the Income Tax Act, TOLA, and Finance Act 2021, particularly with regard to the applicability of the acts to check the validity of reassessment notices issued under section 148 of the Income-tax Act, the matters relates to notices issued between 1.04.2021 and 30.06.2021 invoking the erstwhile regime of section 147/148 proceedings and not the amended law effective from 1.04.2021. In other words, though notices were issued between 1.04.2021 and 30.06.2021, all these notices were issued invoking the erstwhile provisions. In certain cases involving the issue of sanction alone for the four year period under the erstwhile law, the notices have been issued under the unamended regime on or prior to 31.03.2021.
THE IMPACT OF TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020
On 29.09.2020, Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) was enacted with effect from 31.03.2020. The nationwide lockdown created hardships on the people, including the assessee to comply with time-limits as given under the acts.In order to address the challenges faced by individuals, organizations, and governmental authorities, legislators worldwide were forced to dynamically modify their laws and regulations in response to the COVID-19 outbreak and the lockdowns that followed. The legislature made it clear that the TOLA would apply only to acts which were termed as specified acts as given under the statute, Under Section 2(1)(b)(ii), the Income Tax Act, 1961 was defined as a ‘Specified Act’. Subsequent to TOLA, four Income Tax notification dated 30.03.2020, 24.06.2020, 31.03.2021, and 27.04.2021 were issued by the Central Government pursuant to section 3(1) of the TOLA which cumulatively extended the extended time limit given under TOLA till 30.06.2021 for the period between 20.03.2020 and 30.04.2021. Therefore, for issuing a reassessment notice under Section 148 after 1 April 2021, the Revenue would still have to look at: (i) the time limit specified under Section 149 of the new regime; and (ii) the time limit for issuance of notice as extended by TOLA and its notifications.
It is further pertinent to note that section 3(1) of TOLA begins with “notwithstanding anything contained in the specified Act.” which is a non obstante clause against any provision contrary in the specified acts which in the instant case, the Income Tax Act. In the context of the issuance of a reassessment notice, the non obstante clause will override the provisions of the Income Tax Act in case of any direct conflict or inconsistency. Section 3(1) overrides Section 149 only to the extent of relaxing the time limit for issuance of reassessment notice under Section 148. It was clarified by the Hon’ble Court that the non obstante under section 3 of TOLA cannot be used to extend the time limit of three years under section 149(1)(b) of the new regime to reopen assessment or the time limit of 6 years for income escaping assessment of more than one lakh under section 149(1)(b) of the old regime. Once the limitation survives under the amended regime and the new procedure ought to have been followed, all cases where income chargeable to tax is below 50 Lakhs must be dropped and cannot be pursued in terms of Section 149(1)(b). Once the amended regime has come into force, all safeguards extended to the trade by virtue of Section 148A must be followed.
Illustration, suppose the relevant assessment year is 2013-14, the six year time limit as given under section 149 would expire on 31.03.2020. Now, we need to examine the applicability of extended time limit given by TOLA, pursuant to the same, for any notice which is supposed to be issued within 31.03.2020, TOLA read with the subsequent notification issued by the Central Government, the time limit is extended to 30.06.2021. What remains is a mere compliance under the new regime. Since the limitation for AY 2013-14 survived on 31.03.2021 and a notice could be issued till 30.06.2021, the new procedure prescribed under the new regime must be followed and a notice can be issued. In all the cases at hand, the new procedure has been deemed to be followed by a judgment of this Hon‟ble Court in Ashish Agarwal. Therefore, the third test is also passed. If the notice was issued after 31.03.2020 but before 31.3.2021, the notice has to be issued following the procedure of the old regime or the pre-amended regime, but if the same notice was issued from 01.04.2021- 30.06.2021, the notice must follow the procedure of the new regime. This was the contention placed by the revenue/ appellants before the Hon’ble Supreme Court which was also accepted by the Hon’ble Court.
The assessee/ respondents also argued that TOLA will be applicable only to the old regime, the same will not be applicable for Finance Act, 2021, however this contention of the assessee was not found to be meritorious as the Hon’ble Court reasoned using the jurisprudence surrounding a substituted amendment. The substitution amendment results in the repeal of an earlier provision and its replacement by a new provision. Therefore , after amendment by substitution any reference to a legislation must be construed as the legislation as amended by substitution. Finance Act, 2021 being an amendment substituting the earlier Income Tax Act, TOLA was said to be applicable even after 01.04.2021. Further, there is nothing to exclude or declare TOLA post 01.04.2021 as a dead letter to the Income Tax Act because in terms of Section 2 of TOLA, Income Tax Act continues to remain a Specified Act. The new amendment which came into effect on 01.04.2021 is now part of the Specified Act. Neither the Specified Act nor TOLA or the Notifications issued thereunder exclude the applicability of any of the provisions of the Specified Act namely the Income Tax Act. The amendment to the Income Tax act is not prospective nor has the amendment created a hiatus making itself inapplicable to the past assessment years.
Conclusion
The question of the applicability of TOLA and the interplay between the old and new regime of the Income Tax Act i,.e pre and post-Finance Act, 2021, led to a batch of appeals against the orders of various High Courts by the revenue department before a bench comprising of Hon’ble Cheif Justice Dr. D.Y. Chandrachud, Hon’ble Mr. Justice J.B Pardiwala, and Hon’ble Mr. Justice Manoj Misra of the Hon’ble Supreme Court which was delivered on October 03,2024. The Hon’ble Court while allowing the appeals filed by the department, set aside the judgments of the different Hon’ble High Courts to uphold the applicability of TOLA read with the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021.
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