Compare a situation where there is a pair of same-twin, one of whom is your employee. For some purposes, whether the sibling brother of your employee can replace your employee just because he is same-looking?

The reason for the title because the Finance Act, 2021 has substituted section 148 with effect from 1-Apr-2021 and a notification was issued to extended the life of section 148 Old to overlap with section 148 New. The question is can a notification give new lease life to a dead section? and can for the same time, there can be over-lapping parallel regime of re-assessment when Parliament has specifically decided otherwise.

In this case, the Revenue took a stand that the notice issued is not under section 148 New but under section 148 Old.

Objective

Author in this articles discusses legitimacy of the notification to extend life of section 148 especially in the backdrop of Chhatisghad High Court judgement in the case of Palak Khatuja(#)

Structure-:

The article gives authors own analysis. This article is based on a judicial pronouncement and is divided into following parts.

1 Citation of the Enactment 4 Background-: 7 Situation after Enactment
2 Entering the subject 5 Situation before Enactment 8 Judgements affected
3 Take away points 6 Enactment 9 Author’s Personal opinion

Abbreviations

the FA, 2021 The Finance Act, 2021 Sec 148 Old Sec 148 in force upto 31-Mar-2021
The Act The Income Tax Act, 1961 Sec 148 New Sec 148 in force from 01-Apr-2021

The Specified Act the Taxation & Others Laws (Relaxation & Amendment of Certain Provisions) Act, 2020.

Notifications issued u/s 3 of the Specified Act which has extended the validity [rightly or wrongly] of section 148 of the Act

Notif-20/2021 Notification No. 20/2021/F. No. 370142/35/2020-TPL – upto 30-Apr-2021
Notif-38/2021 Notification No. 38/2021/F. No. 370142/35/2020-TPL – upto 30-Jun-2021

Take Away Point

The HC upheld the validity of the notice.

Point of the Plaintiff Response of the IT Dept.
Notice u/s 148 was issued re-opening assessment u/s 147 dated 30-Jun-2021 without complying with requirements of section 148A.

The Assessee challenged the same being invalid and nullity.

Dept. stated that it has been issued under Sec 148 Old read with Notif-20/2021 r.w. Notif-38/2021 which extended the life of Sec 148 Old.

These notifications were issued u/s 3 of the Specified Act

Citation

# High Court of Chhattisgarh at Bilaspur in the case of Palak Khatuja, Bharti Khatuja v Income Tax Dept. Union of India, W.P.(T) No. 147 to 149 of 2021 dated 23-Aug-2021

It is apposite to note that, Delhi High Court on 24-Aug-2021 has passed an interim order in as many as 79 cases restraining revenue authorities to take any coercive action in the cases where notices are issued from 1-Apr-2021 to 30-Jun-2021 without complying with 148A because the bench is of a prima facie view that the impugned notification, in consonance with which the notices were issued, was contrary to settled principle of statutory interpretation, namely, that any action taken post the amendment of a procedural section would have to abide by the new procedures stipulated in the amended Act.

Relevant Facts and aspects

a) The Assessee only raised the ground that the notice u/s 148 was issued on 30-Jun-2021. Thus it should have been complied with the requirements of section 148A. This, by itself, is a sufficient basis to treat the notice as a nullity.

b) The Revenue took a stand that this notice has been issued under Sec 148 Old read with Notif-20/2021 r.w. Notif-38/2021 which extended the life of Sec 148 Old. These notifications were issued u/s 3 of the Specified Act.

c) It is important to recognise this aspect because the original plaint was only restricted to sub-stituted section 148 r.w.s 148A. There was nothing in the notice by which the assessee could decipher that the said notice has been issued under the section 148 Old.

Brief Legislative History-:

d) The brief legislative history relevant for the issue is as follows;. The text of the relevant legislative enactments is given in Annexure A for ready reference.

a. The Finance Act, 2021 (the FA, 2021) has ushered a new regime of re-assessment by substituting section 148 Old by section 148 New and inserting section 148A.

b. The FA, 2021 received ascent of President of 28-March-2021 and has come into effect from 1-Apr-2021.

c. The section 148 Old was substituted by the section 148 New by the FA, 2021.

d. Finance Ministry issued Notif-20/2021 extending life of section 148 Old firstly upto 30th April, 2021 and then by another Notif-38/2021 upto 30th June 2021.

e. The Notif-20/2021 dated 31-Mar-2021 and Notif-38/2021 dated 27-Apr-2021 were issued u/s 3 of the Specified Act.

Reasoning and effect of HC order

e) The reasoning and more importantly, the implied impacts of the order may be summarised as follows;

a. The high court weighted in favour of revenue on the basis of section 3 of the specified Act which was passed by the parliament to enable the Government to extend various compliance due dates to deal with the unprecedented pandemic situation caused by Covid-19.

b. There is no elaborate discussion on following questions / issues

i. Whether section 3 of the Specified Act is constitutionally valid?

ii. Whether Notif-20/2021 and Notif-38/2021 are valid?

iii. Whether extending life of a section [that too a dead section] can be equated with extension of compliance due date.

f) By implication, section 3 of the specified Act and notifications issued u/s 3 of the specified Act pass the muster of Constitutional validity.

Consequences

g) Treating both the notifications as valid, it will create an awkward situation whereby section 148 New and section 148 Old will be in force from 1-Apr-2021 to 30-Jun-2021.

h) The assessee, on receipt of notice u/s 148, will be in a limbo and will be left guessing as to whether it is under section 148 Old or section 148 New.

i) Whether it was not possible for an AO to comply with section 148A read with section 148 New

Author’s Opinion

Validity of section 3 of the Specified Act

j) The parliament enacted the Taxation & Others Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (the Specified Act). In such Act any time limit specified or prescribed or notified under specified Act between 20th March 2020 to 31st December 2021 or other date thereafter, after December 2021 Central Government were given the power to notify.

k) For the sake of brevity, the relevant part of relaxation of certain provisions of specified Act is reproduced herein below :

“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;”

(Para-phrased manner by author)

l) If one refers to the powers given to the Central Government, it clearly speaks about extending due date of as may be prescribed by any provisions of the Act for doing any action.

m) In the opinion of the author, section 3(1)(a) of the Specified Act will pass the muster of constitutional validity.

Validity of notifications issued u/s 3 of the Specified Act

n) The section 148 old became dead with the closing hours of 31-Mar-2021. Notif-20/2021 was issued u/s 3 of the Specified Act to extend the life of u/s 148 old which become dead with the closing hours of 31-Mar-2021 to 30-Apr-2021. The section 148 old was alive as on 31-Mar-2021 may be treated as a meagre attempt to save the validity of Notif-20/2021.

o) The operative portion of Notif-20/2021 is re-produced herein below

(A) where the specified Act is the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and, —

(a) the completion of any action referred to in section 3(1)(a) of the Specified Act relates to passing of an order section 144C(13) or issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, —

(i) the 31st day of March, 2021 shall be the end date of the period during which the time limit, specified in, or prescribed or notified under, the Income-tax Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time-limit for the completion of such action shall stand extended.

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.

(b) the compliance of any action referred section 3(1)(a) of the Specified Act relates to intimation of Aadhaar number to the prescribed authority under section 139AA(2) of the Income-tax  Act, the time-limit for compliance of such action shall stand extended to the 30th day of June, 2021.

(Para-phrased manner by author)

P) On reading the portion emphasised by underline, (by the author) it is amply clear that the Finance Ministry was very much aware of the situation that

a. Section 148 old is getting dead with the closing hours of 31-Mar-2021.

b. the FA, 2021 is an amendment by Parliament which has duly received ascent of the President of India on 28-March-2021.

c. They are exercising a delegated power u/s 3(1)(a) of the Specified Act

d. The parliament was in (Budget) session from January 29, 2021 to April 8, 2021 with a recess from Feb 15-March 8, 2021.

q) Irrespective of whether the notifications are constitutionally valid or not, there is definitely a difference in “extending life of a section killed by parliament and where a specific new section was given birth to” can-not be equated with “power given for extending due date”.

r) Notif-38/2021 was only a further extension of the date from 30-Apr-2021 to 30-Jun-2021. Needless to add, an explanation to a clause in the notification can-not give new life to a dead section.

s) The notifications may not pass the muster of constitutional validity.

Closing remark

t) The Finance Ministry was having an opportunity to extend the date of enforceability of section 148 new and 148A with effect from 1-July-2021 instead of 1-Apr-2021.

–X–

Annexure – A – Text of the relevant Legislation

On or after 1-4-2021 section 148 New Upto 31-3-2021 section 148 Old
Issue of notice where income has escaped assessment.

148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such 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 no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,—

(i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act.

Explanation 2.—For the purposes of this section, where,—

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.

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 sub-section (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:

Provided further that in a case—

(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment 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.

Conducting inquiry, providing opportunity before issue of notice under section 148.

148A. The Assessing Officer shall, before issuing any notice under section 148,—

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior (c)   the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.

Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.

As such, the Ministry of Finance in exercise of power under the Finance Act issued the notification whereby the application of old provisions of Section 148 of the Act was extended initially uptill 30th April, 2021 and thereafter was further extended uptill 30th day of June, 2021.

The parliament enacted the Taxation & Others Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (the Specified Act). In such Act any time limit specified or prescribed or notified under specified Act between 20th March 2020 to 31st December 2021 or other date thereafter, after December 2021 Central Government were given the power to notify.

For the sake of brevity, the relevant part of relaxation of certain provisions of specified Act is reproduced herein below :

“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;”

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 31st March, 2021
Notification No. 20/2021/F. No. 370142/35/2020-TPL

S.O. 1432(E).—In exercise of the powers conferred by subsection (1) of section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) (hereinafter referred to as the said Act), and in partial modification of the notification of the Government of India in the Ministry of Finance, (Department of Revenue) No. 93/2020 dated the 31st December, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 4805(E), dated the 31st December, 2020, the Central Government hereby specifies that,––

(A) where the specified Act is the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and, —

(a) the completion of any action referred to in clause (a) of sub-section (1) of section 3 of the Act relates to passing of an order under sub-section (13) of section 144C or issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, —

(i) the 31st day of March, 2021 shall be the end date of the period during which the time limit, specified in, or prescribed or notified under, the Income-tax Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time-limit for the completion of such action shall stand extended.

Explanation.— For the removal of doubts, it is hereby clarified that for the purposes of issuance of notice u   nder 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.

(b) the compliance of any action referred to in clause (b) of sub-section (1) of section 3 of the said Act relates to intimation of Aadhaar number to the prescribed authority under sub-section (2) of section 139AA of the Income-tax  Act, the time-limit for compliance of such action shall stand extended to the 30th day of June, 2021.

(B) where the specified Act is the Chapter VIII of the Finance Act, 2016 (28 of 2016) (hereinafter referred to as the Finance Act) and the completion of any action referred to in clause (a) of subsection  (1) of section 3 of the said Act relates to sending an intimation under sub-section (1) of section 168 of the Finance Act,—

(i) the 31st day of March, 2021 shall be the end date of the period during which the time limit, specified in, or prescribed  or notified under, the Finance Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time-limit for the completion of such action shall stand extended.

SHEFALI SINGH, Under Secy., Tax Policy and Legislation Division Note : The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3,Sub-section (ii) vide S.O. No. 4805 dated 31st December, 2020.

(B) MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 27th April, 2021
Notification No. 38 /2021/ F. No. 370142/35/2020-TPL

S.O. 1703(E).— In exercise of the powers conferred by subsection (1) of section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) (hereinafter referred to as the said Act), and in partial modification of the notifications of the Government of India in the Ministry of Finance, (Department of Revenue) No. 93/2020 dated the 31st December, 2020, No. 10/2021 dated the 27th February, 2021 and No. 20/2021 dated the 31st March, 2021, published in the Gazette of India, Extraordinary, Part-II, Section 3, Subsection (ii), vide number S.O. 4805(E), dated the 31st December, 2020, vide number S.O. 966(E) dated the 27th February, 2021 and vide number S.O. 1432(E) dated the 31st March, 2021, respectively (hereinafter referred to as the said notifications), the Central Government hereby specifies for the purpose of sub-section (1) of section 3 of the said Act that, —

(A) where the specified Act is the Income-tax Act, 1961 (43 o f 1961) (hereinafter referred to as the Income-tax Act) and, —

(a) the completion of any action, referred to in clause (a) of sub-section (1) of section 3 of the said Act, relates to passing of any order for assessment or reassessment under the Income-tax Act, and the time limit for completion of such action under section 153 or section 153B thereof, expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021;

(b) the completion of any action, referred to in clause (a) of sub-section (1) of section 3 of the said Act, relates to passing of an order under sub-section (13) of section 144C of the  Income-tax Act or issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, and the time limit for completion of such action expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021.

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.

(B) where the specified Act is the Chapter VIII of the Finance Act, 2016 (28 of 2016) (hereinafter referred to as the Finance Act) and the completion of any action, referred to in clause (a) of sub-section (1) of section 3 of the said Act, relates to sending an intimation under sub-section (1) of section 168 of the Finance Act, and the time limit for completion of such action expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021.

RAJESH KUMAR BHOOT, Jt. Secy. Tax Policy & Legislation Division

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