THE NEW INDIA ASSURANCE CO. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3 (2) (1) AND 2 OTHERS

2024:BHC-OS:723-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1945 OF 2023
The New India Assurance Company Limited )
87, New India Building, M. G. Road, Fort, )
Mumbai 400 001 ) ..Petitioner
V/s.
1. Assistant Commissioner of Income Tax )
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Circle-3(2)(1), Mumbai, Room No.673, 6 Floor )
Aayakar Bhavan, Maharshi Karve Road, )
Mumbai 400 020 )
2. The Principal Chief Commissioner of )
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Income Tax, Mumbai, Room No.321, 3 Floor, )
Aayakar Bhavan, Maharshi Karve Road, )
Churchgate, Mumbai 400 020 )
3. Union of India )
Through Joint Secretary & Legal Adviser, )
Branch Secretariat, Department of Legal Affairs )
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Ministry of Law and Justice, 2 floor, Aayakar )
Bhavan, M. K. Road, New Marine Lines, )
Mumbai 400 020 ) ..Respondents
----
Mr. P.J. Pardiwalla, Senior Advocate a/w. Mr. Harsh Kapadia i/b. Mr. Atul K.
Jasani for petitioner.
Mr. Akhileshwar Sharma for respondents – Revenue.
----
CORAM : K. R. SHRIRAM &
DR. NEELA GOKHALE, JJ.
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RESERVED ON : 12 DECEMBER 2023
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PRONOUNCED ON : 15 JANUARY 2024
JUDGMENT (PER K.R. SHRIRAM, J.) :
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1 This petition challenges (i) the notice dated 28 July 2022
issued under Section 148 of the Income Tax Act, 1961 (the Act) seeking to
reopen petitioner’s assessment for AY 2013-14, (ii) the order dated
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27 July 2022 passed under Section 148A(d) of the Act, and (iii) Central
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Board of Direct Taxes (CBDT) Instruction No.1 of 2022 dated 11 May
2022. According to petitioner, the said reopening notice, the order dated
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27 July 2022 and the said Instruction are illegal, without jurisdiction,
arbitrary, in violation of principles of natural justice, ultra vires the
provisions of the Act and hence deserve to be set aside.
2 Petitioner is a Public Sector Undertaking operating under the
control of Ministry of Finance, Government of India, viz., respondent no.3.
Petitioner is engaged in the business of General Insurance in India and
outside India. It is also a 'Public Finance Institution' under Section 4A of
the erstwhile Companies Act, 1956.
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For AY 2013-14, petitioner filed on 28 November 2013 its
original return of income under Section 139(1) of the Act declaring total
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income of Rs.NIL. On 9 June 2014, petitioner filed revised return of
income for the said assessment year, declaring a total loss of
Rs.94,06,18,248/-. Petitioner’s return of income was picked up for scrutiny
by respondent no.1 by issuing notice under Section 143(2) of the Act.
During the assessment proceedings, various details/information/documents
were sought, which petitioner furnished from time to time. After
considering all submissions, details and evidences furnished by petitioner,
respondent no.1 completed the assessment and passed the assessment order
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dated 29 February 2016 under Section 143(3) of the Act, assessing
petitioner’s total income at Rs.8,70,72,56,878/-. Several additions
aggregating to Rs.9,64,78,75,129/- were made by respondent no.1 in the
assessment order.
3 Aggrieved by this order, petitioner filed an appeal under
Section 246A of the Act before the Commissioner of Income Tax (Appeals),
[CIT(A)]. The said appeal was disposed by CIT(A) vide order dated
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19 March 2018, wherein petitioner got substantial relief. Against the said
order of CIT(A), respondent no.1 preferred an appeal before the Income
Tax Appellate Tribunal (ITAT) under Section 253 of the Act, which came to
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be dismissed by order dated 11 August 2020.
4 Petitioner’s assessment was reopened by notice dated
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30 March 2017, issued under Section 148 of the Act (first reopening
notice). Various details/information/documents were sought by respondent
no.1 during the first reassessment proceedings, in compliance of which
petitioner furnished all requisite submissions/details/information.
5 Reassessment proceedings under Section 147 of the Act for
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AY 2013-14 came to be repeated by an order dated 29 December 2017. In
the said order, an addition of Rs.85,65,42,069/- was made by respondent
no.1 and as a result, the total income of petitioner was reassessed at
Rs.9,56,37,98,947/-. Against the said reassessment order, petitioner, on
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29 January 2018, filed an appeal under Section 246A of the Act before the
CIT(A). At the time of filing this petition, the said Appeal was still pending
disposal before CIT(A).
6 With enactment of Finance Act, 2021 and the resulting
substitution of Sections 147, 148, 149 and 151 of the Act and insertion of
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Section 148A, from 1 April 2021, the Assessing Officer, before assuming
jurisdiction validly and before issuing any notice under Section 148 of the
Act, was duty-bound to follow the stipulated mandatory procedure. As
stated in the petition, respondent no.1 without following the statutory
procedure stipulated under Sections148, 148A, 149 and 151 of the Act,
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issued the notice dated 29 June 2021 under Section 148 of the Act,
seeking to reopen petitioner's assessment for AY 2013-14. This notice has
been issued after a period of three years from the end of the relevant
assessment year, i.e., AY 2013-14. In the said notice, respondent no.1
alleged that there were reasons to believe that income for the said year had
escaped assessment and proposed to reassess the income of petitioner.
According to petitioner’s respondent no.1 had sought to reopen the
assessment of petitioner by following the unamended provisions of Sections
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147 and 148 of the Act that existed prior to 1 April 2021. By a
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communication dated 26 July 2021, petitioner filed its objections to the
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reopening notice dated 29 June 2021. Petitioner also requested for a copy
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of the reasons recorded with necessary documents/evidence. Respondent
no.1 did not respond and in view thereof, petitioner filed a Writ Petition in
this Court being Writ Petition No.3119 of 2021 on the ground that
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reopening notice dated 29 June 2021 issued by respondent no.1 was
illegal and without jurisdiction.
7 The said writ petition came to be finally disposed by a common
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judgment dated 29 March 2022 passed by this Court in Tata
Communications Transformation Services Ltd. V/s. Assistant Commissioner
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of Income Tax wherein the reopening notice dated 29 June 2021 was also
quashed and set aside. Similar judgments inter alia quashing reopening
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notices issued after 1 April 2021 under the unamended provision of
Section 147 of the Act were passed by several High Court across the
country including Hon'ble Allahabad High Court, Hon'ble Delhi High Court,
Hon'ble Rajasthan High Court, Hon'ble Calcutta High Court and Hon'ble
Madras High Court. Respondent no.3 preferred a Special Leave Petition
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(SLP) – Union of India V/s. Ashish Agarwal before the Hon'ble Supreme
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Court of India. The SLP came to be disposed by judgment dated 4 May
2022, whereby the Apex Court held that the view taken by the various High
Courts that Revenue ought to have issued notice under the substituted
provisions of Sections 147 to 151 as per the Finance Act, 2021 was correct.
The Apex Court, however, exercising its power under Article 142 of the
1 (2022) 443 ITR 49 (Bombay)
2 (2022) 138 taxmann.com 64(SC)
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Constitution of India, modified and substituted the judgments of all the
High Courts including of this High Court as under :
"10. ...The impugned common judgments and orders passed by the
High Court of Judicature at Allahabad in W.T. No. 524/2021 and other
allied tax appeals/petitions, is/are hereby modified and substituted as
under :
(i) The impugned section 148 notices issued to the respective
assessees which were issued under unamended section 148 of the IT
Act, which were the subject matter of writ petitions before the various
respective High Courts shall be deemed to have been issued under
section 148A of the IT Act as substituted by the Finance Act, 2021 and
construed or treated to be show-cause notices in terms of section
148A(b). The assessing officer shall, within thirty days from today
provide to the respective assessees information and material relied
upon by the Revenue, so that the assessees can reply to the show-
cause notices within two weeks thereafter;
(ii) The requirement of conducting any enquiry, if required, with the
prior approval of specified authority under section 148A(a) is hereby
dispensed with as a one-time measure vis-à-vis those notices which
have been issued under section 148 of the unamended Act from 1-4-
2021 till date, including those which have been quashed by the High
Courts.
Even otherwise as observed hereinabove holding any enquiry with the
prior approval of specified authority is not mandatory but it is for the
concerned Assessing Officers to hold any enquiry, if required;
(iii) The assessing officers shall thereafter pass orders in terms of
section 148A(d) in respect of each of the concerned assessees;
Thereafter after following the procedure as required under section
148A may issue notice under section 148 (as substituted);
(iv) All defences which may be available to the assesses including
those available under section 149 of the IT Act and all rights and
contentions which may be available to the concerned assessees and
Revenue under the Finance Act, 2021 and in law shall continue to be
available."
The Apex Court held that the modifications/substitution would
apply to all judgments and orders passed by different High Courts where
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similar notices issued after 1 April 2021 under Section 148 of the Act are
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set aside.
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8 Subsequently, respondent no.3, through CBDT, on 11 May
2022 issued Instruction No.1 of 2022 titled Implementation of Judgment of
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Hon'ble Supreme Court, dated 4 May 2022 Union of India V/s. Ashish
Agarwal, Instructions Regarding. Pursuant to the judgment in Ashish
Agarwal (Supra) respondent no.1, in petitioner's case, re-initiated the
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assessment proceedings by issuing a notice on 30 May 2022. In the said
notice the allegations were made regarding petitioner’s transaction entered
into with one Renuka Mata State Urban Co-operative Credit Society Limited
(Renuka Mata Co-op. Society) and alleged tax evasion with respect to some
tax exemption claimed by petitioner. In the said notice, it was stated that
the information and material relied upon are “embedded in the reasons
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recorded" to reopen petitioner's case by issuing notice on 29 June 2021,
which petitioner stated was never communicated to petitioner. According to
petitioner, even the so called material was vague and incomplete.
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9 Petitioner, by its letter dated 6 June 2022 responded to the
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notice dated 30 May 2022. This was followed by another letter dated
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14 June 2022 wherein petitioner raised objections to the proposed
reopening of assessment.
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10 Respondent no.1, by a letter dated 14 June 2022, furnished
copy of the reasons for reopening which is purported to have been recorded
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prior to issuance of notice dated 29 February 2021 under Section 148.
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Respondent no.1 provided two sets of reasons dated 8 February 2021 and
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29 June 2021. Respondent no.1 stated that the reasons dated 8 February
2021 were formed after the perusal of the financial statement of petitioner
and hence the underlying information was not shared. In the reasons dated
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8 February 2021, respondent no.1 seeks to reopen petitioner’s assessment
in order to disallow the following deductions :
(i) Provisions for claims incurred but not reported (IBNR) and
claims incurred which were enough reported (IBNER) were in the nature of
unascertained liability and hence, not allowable.
(ii) Reinsurance premium ceded to foreign insurers without
deduction of tax at source under Section 195 and hence, to be disallowed
under Section 40(a)(i) of the Act.
(iii) Reserve for unexpired risk (URR) of Rs.30,75,00,000/-
ought to be added back to the book profits as per Explanation 1(b) of
Section 115JB of the Act.
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11 Respondent no.1, vide letter dated 16 June 2022, supplied
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additional information stipulated in his recorded reasons dated 29 June
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2021. In response to these letters dated 14 and 16 June 2022 petitioner,
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vide its letter dated 30 June 2022, raised its objections against the
proposed reopening of AY 2013-14 where, inter alia, petitioner furnished
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detailed submissions as regard to the transaction with Renuka Mata Co-op.
Society and the alleged tax evasion by claiming tax exemption as to why
the reopening proceedings in respect of both the issues was incorrect and
that no income had escaped assessment as contemplated under Section 147
of the Act. These objections were disposed by respondent no.1 by order
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dated 27 July 2022 passed under Section 148A(d) of the Act. Respondent
no.1 accepted petitioner’s explanation with regard to Renuka Mata Co-op.
Society and the issue of tax evasion due to tax exemption alleged and has
dropped the proceedings/proposed not to issue any reopening notice under
Section 148 of the Act in that regard.
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12 In so far as purported recorded reasoned dated 8 February
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2021, that were communicated to petitioner for the first time on 14 June
2022, respondent no.1 held that petitioner had not raised any objections
and hence he would presume that petitioner had nothing to argue in
respect of all the three issues raised therein. Respondent no.1, therefore,
concluded that the income had escaped assessment warranting a notice
under Section 148 of the Act for AY 2013-14 and issued the impugned
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notice dated 27 July 2022.
13 Therefore, petitioner has approached this Court, on, inter alia,
the following grounds :
(i) The said reopening notice is barred by limitation and, thus,
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bad in law.
(ii) The binding directives of the Apex Court have not been
complied with.
(iii) Admittedly, there is no information in existence which
suggests that income has escaped assessment, which is a jurisdictional
condition.
(iv) The assessment is sought to be reopened to disallow
certain expenses. Therefore, the so-called income claimed to have escaped
assessment is not represented in the form of asset.
(v) In view of the Section 151A of the Act read with the
E-Assessment of Income Escaping Assessment Scheme, 2022, the issuance
of notice under Section 148 ought to have been in a faceless manner and
not by respondent no.1.
(vi) Complete non-application of mind by respondent no.1 and
he has proceeded in the matter in a mechanical and casual manner.
(vii) Classic case of borrowed satisfaction, as, admittedly,
reopening is a consequence of audit objections.
(viii) Undeniably, no tangible material has come to his
possession as respondent no.1 admits that reopening is initiated based on a
perusal of petitioner's financial statements.
(ix) No income chargeable to tax has escaped assessment.
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(x) The impugned order under Section 148A(d) of the Act is
cryptic, non-speaking and passed without considering petitioner's
submissions.
(xi) CBDT's Instruction is beyond jurisdiction, illegal, contrary
to directions of the Apex Court and ultra vires.
14 With the consent of the parties, it was decided to first discuss
the preliminary issue, i.e., whether the notice is issued beyond the period of
limitation. It was felt, if petitioner would succeed on this aspect of
limitation, the other grounds of challenge need not be gone into.
Therefore, the Court instructed the counsels to restrict their submissions on
the preliminary issue of limitation.
15 Apart from this petition, there are many other pending
petitions pertaining to AY 2013-14, where, the validity of the notice issued
under Section 148 of the Act pursuant to Ashish Agarwal (Supra) is
challenged on the ground of being barred by limitation.
16 Mr. Pardiwalla submitted as under :
(a) The Apex Court to strike a balance between the rights of
both parties permitted the Revenue to re-initiate the reassessment
proceedings by following the new procedure for reassessment. At the same
time also specifically granted liberty to the assessees to raise all defences
available to them including the defence under Section 149 of the Act;
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(b) It is now a settled position in law that the validity of a
notice issued under Section 148 of the Act must be judged on the basis of
the law existing on the date on which such notice is issued. This principle
has been confirmed by this Court in Siemens Financial Services Private
3
Limited V/s. Deputy Commissioner of Income Tax & Ors. and in Tata
Communications (Supra), where at paragraph 34 the Court has held that “it
is well settled that the validity of a notice issued under section 148 of the
Act must be judged on the basis of the law existing on the date on which
such notice is issued. Even the Revenue accepts this well settled position.
Further, the provisions of sections 147 to 151 are procedural laws and
accordingly, the provisions as existing on the date of the notice would be
applicable. Even the revenue accepts this legal position and the CBDT
Circular No.549 of 1989, that Mr. Mistri relied upon, explaining the
provisions of the Finance Act, 1989 specifically sets out that any notices
issued by Revenue after the amendment made by the Finance Act, 1989
must comply with the amended provision of the law. ….………. This
contention has also been considered and upheld by the Delhi High Court
and the Allahabad High Court.”
In paragraph 35 of Tata Communications (Supra) the Court has
stated that “We have to also note the well settled proposition that when the
Act specifies that something is to be done in a particular manner, then, that
3 (2023) 457 ITR 647 (BOM)
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thing must be done in that specified manner alone, and any other
method/(s) of performance cannot be upheld………...”. Therefore, the
validity of the reopening notice must be tested on the basis of the law that
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exists at the time when such a notice was issued, i.e., 28 July 2022;
(c) As per the unamended Section 149(1)(b), the outer time
limit to issue a notice under Section 148 was 6 years from the end of the
relevant assessment year and thus, for the AY 2013-14, the time limit
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expired on 31 March 2020. Under the amended provision, notice under
Section 148 of the Act can be issued within a period of 3 years or 10 years,
the latter available only after fulfilling certain stipulated additional
conditions, including the limitation provided for by the first proviso to
Section 149(1) of the Act;
(d) The first proviso to Section 149(1) stipulates that no notice
under Section 148 can be issued at any time in a case for any assessment
year, if a notice under Section 148 could not have been issued at that time
on account of being beyond the time limit specified under the unamended
Section 149(1)(b), i.e., as it stood prior to the Finance Act, 2021.
Applicability of Section 149 to be seen qua the notice under Section 148,
and not with respect to the notice issued under Section 148A(b) or the
order passed under Section 148A(d) of the Act;
(e) Thus, for the AY 2013-14 the 6 years period expired on
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31 March 2020, the impugned notice dated 28 July 2022, is barred by
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limitation;
(f) The Calcutta High Court in Ved Prakash Mittal V/s. UOI &
4
Ors applied the first proviso to Section 149(1) of the Act and held that the
notice issued under Section 148 of the Act for the AY 2014-15 in the month
of July 2022 was barred. This was also endorsed by the Rajasthan High
5
Court in Sudesh Taneja V/s. Income Tax Officer, Ward 1(3), Jaipur , and by
this Court in Tata Communications (Supra). In Ashish Agarwal (Supra), the
Apex Court categorically affirmed the view taken by various High Courts
including the Rajasthan High Court and in Tata Communications (Supra) by
this Court;
(g) Taxation and other laws (Relaxation and Amendment of
certain provisions) Act, 2020 (TOLA) has no application in the present case
which pertains to AY 2013-14.
(h) The Apex Court in Ashish Agarwal (Supra) while enabling
the Revenue to restart the reassessment proceedings held that the old
Section 148 notices were to be treated as show cause notices in terms of
Section 148A(b) and not notice under Section 148 of the Act and,
therefore, the mandatory procedure stipulated in Section 148A was to be
followed. Thereafter, the Assessing Officers were authorised to issue the
notice under the amended Section 148 of the Act;
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4 Writ Petition No.2450 of 2022 dated 26 August 2022
5 (2022) 442 ITR 289
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(i) The first proviso to Section 149(1) of the Act puts a fetter
on issuing of a notice under Section 148 and not Section 148A(b) of the Act
beyond the stipulated period. The impugned notice under Section 148 of
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the Act is issued on 28 July 2022, therefore, TOLA has no application. The
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provisions of TOLA works itself out on 31 March 2021. The amended
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reassessment provisions are applicable after 1 April 2021 as confirmed in
Siemens Financial (Supra). Therefore, TOLA has no role to play and it
cannot salvage the notice under challenge;
(j) Even reliance on Instruction No.1 of 2022 issued by CBDT is
misplaced because neither the provisions of TOLA nor the judgment in
Ashish Agarwal (Supra) provide that any notice issued under Section 148 of
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the Act after 31 March 2021 will travel back to the original date. This very
argument of travel back to the original date was urged in the challenge to
the initial reassessment and was categorically rejected by this Court in Tata
Communications (Supra) as well as the Delhi High Court in Mon Mohan
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Kohli V/s. ACIT , and both these judgments have been affirmed in Ashish
Agarwal (Supra). In Siemens Financial (Supra) the Court has held that the
Instruction is erroneous in this regard;
(k) It is well settled that instructions/circulars cannot be
inconsistent with the provision of the parent act when they seek to tone
down the rigours of the Act. In any event, circulars/instructions are only
6 (2022) 441 ITR 207
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binding on the Revenue, not on the assessees and certainly not on the
7
Hon'ble Courts as held in Hindustan Aeronautics Ltd. V/s. CIT ;
(l) The Delhi High Court in Ganesh Dass Khanna V/s. Income
8
Tax Officer and Anr. has already declared paragraph 6.1 and 6.2(ii) of the
Instructions as bad in law. Further, this Court in Group M Media India P.
9
Ltd. V/s. Union of India and Ors. has held that a declaration of a Board's
instruction as ultra vires by a competent Court would be binding on all
authorities administering the Act all over the country and accordingly, the
officers implementing the Act were bound by the decision of the Delhi High
Court.
17 Mr. Sharma submitted as under :
(a) Under the Limitation Act, certain days are excluded. While
following the methodology of computation of limitation, even if the period
of limitation gets extended beyond limitation, are deemed as within
limitation. This so even where the actual date is beyond the date of
limitation so prescribed if no days are excluded from the limitation period;
(b) Section 3 of TOLA merely provides exclusion of Covid
period while computing the 4 years or the 6 years, as the case may be,
under Section 149 of the Act. Hence, after excluding the Covid period, if
the notice under Section 148 of the Act is within 6 years, it has to be
7 (2000) 243 ITR 808 (SC)
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8 WP(c)No.11527 of 2022 & CM Appl. No.34097 of 2022 dated 10 November 2023
9 (2016) 388 ITR 594
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deemed as within limitation period of 6 years. The relaxation has to be
deemed to be an integral part of Section 149 in so far as days are excluded
under Section 149 of the Act for computing 4 years and 6 years;
(c) After exclusion of the Covid period, the notice under
Section 148 of the Act for AY 2013-14 will be deemed as within limitation
of 6 years. The expression in the TOLA Act and Notification issued
thereunder that the end date to which the time limit for the completion of
such action shall stand extended refers to the extension so arrived at after
excluding the number of days/Covid period. The Notification No.20 of 2021
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dated 31 March 2021 seeks to extend the limitation which expires on
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31 March 2021 under the Act. Petitioner’s argument that Notification
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No.20 of 2021 dated 31 March 2021 has to be construed as extending the
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limitation which expires on 31 March 2021 under the Act will necessarily
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exclude what is expiring on 31 March 2021 by virtue of methodology
prescribed in TOLA is complete misreading of the TOLA and the
Notification issued thereunder;
(d) The limitation is prescribed under Section 149 of the Act
and limitation extends/expires under the Act and not under TOLA which
merely prescribes the methodology of computation of limitation under the
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Act. Further, the Notification No.20 of 2021 dated 31 March 2021 itself
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derives power from TOLA. It was obvious to the Apex Court that as on 31
March 2021, the limitation of 6 years under the pre-amendment provisions
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expired on 31 March 2021 in respect of two Assessment Years AY 2013-14
and AY 2014-15, if the Covid period was not excluded. It was also obvious
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that, despite setting aside notices under Section 148 issued during 1 April
th st
2021 to 30 June 2021, the Revenue as on 1 April 2021 could have
lawfully issued notices under Section 148A of the amended Act and,
therefore, was not remediless for the AY 2015-16, AY 2016-17 and AY
2017-18;
(e) After setting aside the notices by the High Court and
subject to the limitation under Section 149 of the unamended Act [without
excluding Covid period], the Revenue was remediless in respect of AY 2013-
14 and AY 2014-15. The Apex Court was conscious that the Revenue should
not be rendered remediless and, therefore, it exercised power under Article
142 of the Constitution. The Explanation attached to TOLA Notification was
set aside by the High Court and declared ultra vires but the notices were
issued within the time stipulated in TOLA which is on or before
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30 June 2021 and, therefore, within time. The intervention under Article
142 of the Constitution was required only for AY 2013-14 and AY 2014-15.
Petitioner’s contention, if accepted, would mean that Apex Court has
dismissed the Revenue Civil Appeal in Ashish Agrawal (Supra) and entire
direction of the Apex Court in Ashish Agrawal (Supra) order is unnecessary
and totally avoidable for the reasons that : (a) Where Revenue is remediless
no relief is required to be granted by the Apex Court and (b) Where
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Revenue is not remediless, no intervention is required by the Apex Court;
(f) Petitioner’s contention, if accepted, would also mean that
the Apex Court was totally blind to the facts of the lead case Ashish
Agrawal (Supra) which pertain to AY 2013-14. It is preposterous to say that
Apex Court order in Ashish Agrawal (Supra) does not assist Ashish Agrawal
(Supra) as an assessee. The meaning of the Apex Court order in Ashish
Agrawal (Supra) has to be found in respect of its observation :
(i) ‘strike a balance between the rights of the Revenue as well as
the respective assessees as because of a bonafide belief of the
officers of the Revenue in issuing approximately 90000 such
notices’; and,
(ii) Appeals are ALLOWED IN PART [Emphasis by upper case in
Original].”
(g) The true meaning of Apex Court order in Ashish Agrawal
(Supra) passed in exercise of power under Article 142 of the Constitution
are as under :
(i) The Notices u/s 148 irrespective of the Assessment Year, of
the unamended Act issued during 01-04-2021 to 30-06-2021
are to be treated as Show-Cause Notice under the amended
Income-tax Act 1961 without being hit by limitation, if issued
on or before 30-06-2021.
(ii) There is no necessity to issue fresh notice u/s 148A of the
Act in lieu of / in substitution of old notice u/s 148 issued
during 01-04-2021 to 30- 06-2021 even where the Revenue
could have issued fresh notice u/s 148A of the amended Act
without being hit by limitation.
(iii) The defence u/s 149 of the Act available to the assessee
would mean that if Revenue had issued any notice u/s 148
under the unamended Act during the period 01-04-2021 to 30-
06-2021 but pertain to an Assessment Year prior to the
Assessment Year 2013-14, where the relaxation under TOLA is
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not available, the same would be barred by limitation u/s 149 of
the Act. Any other meaning ascribed to reference to defence u/s
149 would mean that the effect of Ashish Agrawal is as if the
Civil Appeal of Revenue was dismissed.
(h) The Apex Court, in exercise of power under Article 142 of
the Constitution, has deemed the notices under Section 148 of the amended
st th
Act issued between 1 April 2021 to 30 June 2021 to be a notice under
Section 148A(b) of the Act issued within limitation. By following the
manner of computation of limitation provided in TOLA, the days from
st th
1 April 2021 to 30 June 2021 would stand excluded and, therefore, the
notices under Section 148 of the unamended Act could be deemed to be
st
issued on 31 March 2021. However, if notices under Section 148 of the
st
unamended Act were deemed to have been issued on 31 March 2021, the
assessee would not get the benefit of radical and reformative changes
inserted by the Finance Act, 2021. As against this, if such notices under
st th
Section 148 issued between 1 April 2021 to 30 June 2021 of the
unamended Act were deemed to be barred by limitation under Section 149
of the unamended Act or the first proviso to the amended Section 149 of
the Act, the Revenue would be rendered remediless;
(i) If notice under Section 148A(b) of the Act is valid then can
notice under Section 148 of the Act be deemed invalid on the ground that it
was not issued prior to notice under Section 148A(b) of the Act. The
argument of petitioner, if accepted, would require the Assessing Officer to
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do the impossible that is to complete the proceedings consequent to show
cause notice under Section 148A(b) of the Act before the issue of the show
th
cause notice. If the notice dated 30 May 2022 under Section 148A(b) of
the Act is valid in terms of Apex Court order in Ashish Agrawal (Supra),
st
then the notice under Section 148 of the Act cannot be issued on 31 March
2021. Respondent cannot be expected to do impossible.
18 In rejoinder, Mr. Pardiwalla submitted as under :
(a) The issue of limitation raised under the Limitation Act,
1963 would not apply to the provisions of the Income Tax Act and in
particular to the case at hand in view of the specific period provided under
the TOLA. Further this defence has not been raised either in the order
passed under Section 148A(d) of the Act nor in the affidavit in reply;
(b) Exclusion of Covid period while computing the 4 years or
the 6 years, as the case may be, is in effect, nothing but the theory of travel
back in time which has been rejected by this Court in Tata Communications
(Supra). So also in Siemens Financials (Supra). In Ganesh Dass Khanna
(Supra) the Delhi High Court has declared paragraph 6.1 of the Instructions
as bad in law;
st
(c) As regards the Notification No.20 of 2021 dated 31 March
st
2021, which extends the limitation expiring on 31 March 2021 to
th
30 April 2021, the Notification itself says “where the time limit specified in
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or prescribed or notified under the Income Tax Act falls for completion on
st
31 March 2021”. Since the limitation under the erstwhile Section 149 of
the Act for reopening the assessment for the AY 2013-14 expired on
st
31 March 2020, Notification No.20 of 2021 did not apply. Notification
th
No.38 of 2021 dated 27 April 2021 categorically uses the expression “the
th
time limit for completion of such action expires on the 30 day of April
2021 due to its extension by the said Notifications, such time limit shall
th
further stand extended to the 30 day of June 2021”. Hence, it is incorrect
st
to say that 31 March 2021 under the Act would mean under the Act, plus,
extension by TOLA;
(d) The submission of Revenue that the Apex Court, while
st
hearing Ashish Agrawal (Supra), was aware on 31 March 2021 the
st
limitation of 6 years under the pre-amendment provisions expired on 31
March 2021 in respect of AY 2013-14 and AY 2014-15 if the Covid period
was not excluded but still the Apex Court stated that all notices issued
should be treated as notice issued under Section 148A of the amended Act
because the Court was conscious that the Revenue should not be rendered
remediless, this argument has to fail because this would mean that despite
the substantive defence available to the assessee under Section 149 of the
amended Act, as well as the express directions of the Hon'ble Supreme
Court allowing the assessee to take all defences available under the Act, the
judgment of Ashish Agarwal (Supra) would permit them to reopen the
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assessment of AY 2013-14. That would not only make the defence expressly
available to the assessees useless and unusable, but would also be contrary
to well-established principles of law. As held in Supreme Court Bar
10
Association V/s. Union of India & Anr. , by the Apex Court, its powers
conferred under Article 142 of the Constitution of India, being curative in
nature, even with the width of its amplitude cannot be construed as powers
which authorise the Court to ignore the substantive rights of a litigant while
dealing with a cause pending before it. Article 142 cannot be used to
supplant substantive law applicable to a case or cause. It cannot be used to
build a new edifice where none existed earlier by ignoring express statutory
provisions. The contention of Revenue that notices issued under Section
st th
148 between 1 April 2021 and 30 June 2021 are deemed to be issued on
st
31 March 2021 defies sense because the provisions of the new
reassessment law introduced by the Finance Act, 2021 cannot apply as they
st
came into force, w.e.f., 1 April 2021;
11
(e) Touchstone Holdings (P.) Ltd. V/s. Income Tax Officer
relied upon by Mr. Sharma can be distinguished in as much as in that case,
without going into other details, petitioner accepted that the notice issued
th
on 29 June 2021 under Section 148 of the Act was within limitation. In
st
the case at hand it is petitioner’s case that any notice issued after 31 March
2021 for AY 2013-14 was barred by limitation. As regards Salil Gulati V/s.
10 (1998) 4 SCC 409
11 (2022) 142 taxmann.com 336 (Delhi)
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12
Assistant Commissioner of Income Tax it only followed Touchstone
Holdings (Supra).
FINDINGS :
19 Section 148 of the Act reads as under :
148. Issue of notice where income has escaped assessment.—
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,—
12 (2023) 150 taxmann.com 50(SC)
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(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
(ii) a survey is conducted under section 133A, other than under
sub-section (2A) or sub-section (5) of that section, on or after
the 1st day of April, 2021, in the case of the assessee; or
(iii) the Assessing Officer is satisfied, with the prior approval of
the Principal Commissioner or Commissioner, that any money,
bullion, jewellery or other valuable article or thing, seized or
requisitioned under section 132 or under section 132A in case of
any other person on or after the 1st day of April, 2021, belongs
to 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 preceeding 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.
Section 148A of the Act reads as under :
148A. Conducting inquiry, providing opportunity before issue of
notice under section 148.—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;
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(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
approval of specified authority, within one month from the end
of the month in which the reply referred to in clause (c) is
received by him, or where no such reply is furnished, within one
month from the end of the month in which time or extended
time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a
case where,—
(a) a search is initiated under section 132 or books of account,
other documents or any assets are requisitioned under section
132A in the case of the assessee on or after the 1st day of April,
2021; or
(b) the Assessing Officer is satisfied, with the prior approval of
the Principal Commissioner or Commissioner that any money,
bullion, jewellery or other valuable article or thing, seized in a
search under section 132 or requisitioned under section 132A, in
the case of any other person on or after the 1st day of April,
2021, belongs to the assessee; or
(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.
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Section 149 of the Act read as under :
149. Time limit for notice. — (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 an 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 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:
Provided further that the provisions of this sub-section shall not
apply in a case, where a notice under section 153A, or section
153C read with section 153A, is required to be issued in relation
to a search initiated under section 132 or books of account,
other documents or any assets requisitioned under section 132A,
on or before the 31st day of March, 2021:
Provided also that for the purposes of computing the period of
limitation as per this section, the time or extended time allowed
to the assessee, as per show-cause notice issued under clause (b)
of section 148A or the period during which the proceeding under
section 148A is stayed by an order or injunction of any court,
shall be excluded:
Provided also that where immediately after the exclusion of the
period referred to in the immediately preceding proviso, the
period of limitation available to the Assessing Officer for passing
an order under clause (d) of section 148A is less than seven
days, such remaining period shall be extended to seven days and
the period of limitation under this sub-section shall be deemed
to be extended accordingly.
Explanation.—For the purposes of clause (b) of this sub-section,
"asset" shall include immovable property, being land or building
or both, shares and securities, loans and advances, deposits in
bank account.
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(2) The provisions of sub-section (1) as to the issue of notice
shall be subject to the provisions of section 151.
20 The validity of a notice issued under Section 148 of the Act
must be judged on the basis of the law existing on the date on which such
notice is issued. A Division Bench of this Court in Siemens Financial
(Supra) followed what was held in Tata Communications (Supra) to hold
that the validity of a notice issued under Section 148 of the Act must be
judged on the basis of the law existing on the date on which such notice is
issued. Paragraphs 34 and 35 of Tata Communications (Supra) read as
under :
34. It is well settled that the validity of a notice issued under
Section 148 of the Act must be judged on the basis of the law
existing on the date on which such notice is issued. Even the
Revenue accepts this well settled position. Further, the provisions
of Sections 147 to 151 are procedural laws and accordingly, the
provisions as existing on the date of the notice would be
applicable. Even the revenue accepts this legal position and the
CBDT Circular No.549 of 1989, that Mr. Mistri relied upon,
explaining the provisions of the Finance Act, 1989 specifically
sets out that any notices issued by Revenue after the amendment
made by the Finance Act, 1989 must comply with the amended
provision of the law. Therefore, any notice issued after 1st April,
2021 must comply with the amended provisions of the Act which
st
was amended with effect from 1 April, 2021. This contention
has also been considered and upheld by the Delhi High Court
and the Allahabad High Court.
35. We have to also note the well settled proposition that when
the Act specifies that something is to be done in a particular
manner, then, that thing must be done in that specified manner
alone, and any other method/(s) of performance cannot be
upheld. Hence, notices issued under Section 148 of the Act after
st
1 April, 2021 must comply with the amended provisions of law
and cannot be sustained on the basis of the erstwhile provision.
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21 The Apex Court in Ashish Agarwal (Supra) did not disturb the
findings of this Court in Tata Communications (Supra). The Apex Court
only modified the orders passed by the respective High Courts to the effect
that the notices issued under Section 148 of the Act, which were subject
matter of writ petitions before various High Courts, shall be deemed to have
been issued under Section 148A(b) of the Act and the Assessing Officer was
directed to provide within 30 days to the respective assessee the
information and material relied upon by the Revenue so that the assessee
could reply to the show cause notices within two weeks thereafter. The
Apex Court held that the Assessing Officer shall thereafter, pass orders in
terms of Section 148A(d) in respect of each of the concerned assessees and
having followed the procedure as required under Section 148A of the Act
may issue notice under Section 148 of the Act. The Apex Court also kept
open expressly all contentions which may be available to the assessee
including those available under Section 149 of the Act and all rights and
contentions, which may be available to the concerned assessee and Revenue
under the Finance Act, 2021 and in law, shall be continued to be available.
This was done by the Apex Court to strike a balance between the rights of
both the parties. Therefore, the validity of the reopening notice to petitioner
must be decided on the basis of law which exists at the time when such a
th
notice was issued, i.e., 28 July 2022.
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22 As per the unamended Section 149(1)(b) of the Act, the outer
time limit to issue a notice under Section 148 was 6 years from the end of
the relevant assessment year and thus, for AY 2013-14, the time limit
st
expired on 31 March 2020. Under the amended provision, a notice under
Section 148 can be issued within a period of 3 years or 10 years, the latter
available only after fulfilling certain stipulated additional conditions,
including the limitation provided for by the first proviso to Section 149(1)
of the Act. The first proviso to Section 149(1) stipulates that no notice
under Section 148 can be issued at any time in a case for any assessment
year, if a notice under Section 148 could not have been issued at that time
on account of being beyond the time limit specified under the unamended
Section 149(1)(b), i.e., as it stood prior to the Finance Act, 2021.
Applicability of Section 149 to be seen qua the notice under Section 148
and not with respect to the notice issued under Section 148A(b) or the
order passed under Section 148A(d) of the Act.
23 In the present case, as for AY 2013-14, the 6 years period
st
expired on 31 March 2021, extended under Section 3(1) of TOLA.
th
Therefore, the impugned notice dated 28 July 2022, which is under
challenge in the petition, is barred by limitation. The Hon’ble Calcutta High
Court in Ved Prakash (Supra) held “By this writ petition, petitioner has
challenged the impugned order under Section 148 A(d) of the Income Tax
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th
Act, 1961 dated 29 July, 2022, relating to the assessment year 2014-2015
on the ground that the same being without jurisdiction and being barred by
limitation since the initiation of re-opening of the assessment has been
made admittedly after six years from the end of the expiry of the period of
relevant assessment year. Mr. Roychowdhury, learned Counsel appearing for
the respondent is not in a position to contradict the aforesaid factual and
legal position. Accordingly, this writ petition being WPO No.2450 of 2022 is
th
disposed of by quashing the aforesaid impugned order dated 29 July,
2022.” Prior thereto, the Rajasthan High Court in Sudesh Taneja (Supra),
which was followed by this Court in Tata Communications (Supra), in
paragraph 37 held as under :
37. In this context we have perused the provisions of
reassessment contained in the Finance Act, 2021. We have
noticed earlier the major departure that the new scheme of
reassessment has made under these provisions. The time limits
for issuing notice for reassessment have been changed. The
concept of income chargeable to tax escaping assessment on
account of failure on the part of the assessee to disclose truly or
fully all material facts is no longer relevant. Elaborate provisions
are made under Section 148A of the Act enabling the Assessing
Officer to make enquiry with respect to material suggesting that
income has escaped assessment, issuance of notice to the
assessee calling upon why notice under Section 148 should not
be issued and passing an order considering the material
available on record including response of the assessee if made
while deciding whether the case is fit for issuing notice under
Section 148. There is absolutely no indication in all these
provisions which would suggest that the legislature intended
that the new scheme of reopening of assessments would be
applicable only to the period post 01.04.2021. In absence of any
such indication all notices which were issued after 01.04.2021
had to be in accordance with such provisions. To reiterate, we
find no indication whatsoever in the scheme of statutory
provisions suggesting that the past provisions would continue to
apply even after the substitution for the assessment periods prior
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to substitution. In fact there are strong indications to the
contrary. We may recall, that time limits for issuing notice under
Section 148 of the Act have been modified under substituted
Section 149. Clause (a) of sub-section (1) of Section 149 reduces
such period to three years instead of originally prevailing four
years under normal circumstances. Clause (b) extends the upper
limit of six years previously prevailing to ten years in cases
where income chargeable to tax which has escaped assessment
amounts to or is likely to amount to 50 lacs or more. Sub-section
(1) of Section 149 thus contracts as well as expands the time
limit for issuing notice under Section 148 depending on the
question whether the case falls under clause (a) or clause (b). In
this context the first proviso to Section 149(1) provides that no
notice under Section 148 shall be issued at any time in a case for
the relevant assessment year beginning on or before 01.04.2021
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 Section 149 as they stood
immediately before the commencement of the Finance Act,
2021. As per this proviso thus no notice under Section 148
would be issued for the past assessment years by resorting to the
larger period of limitation prescribed in newly substituted clause
(b) of Section 149(1). This would indicate that the notice that
would be issued after 01.04.2021 would be in terms of the
substituted Section 149(1) but without breaching the upper time
limit provided in the original Section 149(1) which stood
substituted. This aspect has also been highlighted in the
memorandum explaining the proposed provisions in the Finance
Bill. If according to the revenue for past period provisions of
section 149 before amendment were applicable, this first proviso
to section 149(1) was wholly unnecessary. Looked from both
angles, namely, no indication of surviving the past provisions
after the substitution and in fact an active indication to the
contrary, inescapable conclusion that we must arrive at is that for
any action of issuance of notice under Section 148 after
01.04.2021 the newly introduced provisions under the Finance
Act, 2021 would apply. Mere extension of time limits for issuing
notice under section 148 would not change this position that
obtains in law. Under no circumstances the extended period
available in clause (b) of sub-section (1) of Section 149 which
we may recall now stands at 10 years instead of 6 years
previously available with the revenue, can be pressed in service
for reopening assessments for the past period. This flows from
the plain meaning of the first proviso to sub-section (1) of
Section 149. In plain terms a notice which had become time
barred prior to 01.04.2021 as per the then prevailing provisions,
would not be revived by virtue of the application of Section
149(1)(b) effective from 01.04.2021. All the notices issued in
the present cases are after 01.04.2021 and have been issued
without following the procedure contained in Section 148A of
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the Act and are therefore invalid.
(emphasis supplied)
In Sudesh Taneja (Supra), the Court held that for any action of
st
issuance of notice under Section 148 after 1 April 2021 the newly
introduced provisions under the Finance Act, 2021 would apply. Mere
extension of time limits for issuing notice under Section 148 would not
change this position that obtains in law. The Court held that a notice, which
st
had become time barred prior to 1 April 2021 as per the then prevailing
provisions, would not be revived by virtue of application of Section 149(1)
st
(b) effective from 1 April 2021. We respectfully agree with this view. As
noted earlier in Ashish Agarwal (Supra), the Hon’ble Supreme Court
categorically confirmed the view taken by various High Courts including the
Hon’ble Rajasthan High Court. Therefore, the impugned notices pertaining
to AY 2013-14 pursuant to Ashish Agarwal (Supra) are barred by limitation.
24 We could also note that the provisions of TOLA have no
application relating to AY 2013-14. Section 3(1) of TOLA reads as under :
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; or
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(b) filing of any appeal, reply or application or furnishing of any
report, document, return or statement or such other record, by
whatever name called, under the provisions of the specified Act;
or
(c) in case where the specified Act is the Income-tax Act, 1961,-
(i) making of investment, deposit, payment, acquisition,
purchase, construction or such other action, by whatever
name called, for the purposes of claiming any deduction,
exemption or allowance under the provisions contained
in -
(I) sections 54 to 54GB, or under any provisions of
Chapter VI-A under the heading "B.-Deductions in
respect of certain payments" thereof; or
(II) such other provisions of that Act, subject to
fulfillment of such conditions, as the Central
Government may, by notification, specify; or
(ii) beginning of manufacture or production of articles or
things or providing any services referred to in section
10AA of that Act, in a case where the letter of approval,
required to be issued in accordance with the provisions of
the Special Economic Zones Act, 2005, has been issued on
or before the 31st day of March, 2020, and where
completion or compliance of such action has not been
made within such time, then, the time-limit for
completion or compliance of such action shall,
notwithstanding anything contained in the specified Act,
stand extended to the 31st day of March, 2021, or such
other date after the 31st day of March, 2021, as the
Central Government may, by notification, specify in this
behalf.
xxxxxxxxxxxxxxxxxxx
st
25 The limitation for AY 2013-14 expired on 31 March 2020,
st
which by virtue of Section 3(1) of TOLA, got extended to 31 March 2021.
st
This was followed by a Notification dated 31 March 2021 being
Notification S.O. 1432(E) [No.20/2021/F.No.370142/35/2020-TPL], which
read as under :
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In exercise of the powers conferred by sub-section (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
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 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.
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This Notification, therefore, says that where the specified Act is
the Income Tax Act, 1961 and the completion of any action referred to in
clause (a) of sub-section (1) of Section 3 of TOLA relates to issuance of
notice under Section 148 as per time limit specified in Section 149 and
st
31 day of March 2021 is the end date of the period during which the time
limit, specified in, or prescribed or notified under the Income Tax Act falls
th
for the completion of such action, then, 30 day of April 2021 shall be the
extended end date for the completion of such action. Therefore, this would
apply only for AY 2014-15 because it says completion of any action when it
relates to issuance of notice under Section 148 ‘as per time limit specified in
st th
Section 149’ is 31 March 2021 it shall be extended to 30 April 2021.
It does not say “as per time limit specified under Section 149 as extended
st
by TOLA”. For AY 2014-15, the 6 years period will end on 31 March 2021,
st
whereas the time limit prescribed under Section 149 for AY 2013-14 is 31
March 2020. This is reiterated by the Explanation in the Notification which
says 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 under this sub-clause, the provisions of Section 149, as they stood as
st
on the 31 March 2021, before the commencement of the Finance Act,
st
2021, shall apply. The date of the Notification is also relevant and it is 31
March 2021.
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th
26 Another Notification dated 27 April 2021 being Notification
S.O. 1703(E) [No.38/2021/F.No.370142/35/2020-TPL] came to be issued
where a specific reference is made to Notification S.O.1432(E) dated
st
31 March 2021 and it also says - ‘ the Central Government hereby specifies
for the purpose of sub-section (1) of Section 3 of TOLA.’ It is stated, where
the specified Act is the Income Tax Act, 1961, the completion of any action,
referred to in clause (a) of sub-section (1) of Section 3 of TOLA, relates to
issuance of notice under Section 148 as per time limit specified in Section
th
149 and ‘the time limit for such action expires on 30 April 2021 due to its
extension by the said Notifications’, such time limit shall further stand
th th
extended to 30 June 2021. The Notification dated 27 April 2021 reads as
under :
In exercise of the powers conferred by sub-section (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 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 said Act, relates to
passing of any order for assessment or reassessment under
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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.
Therefore, it only extends the time limit prescribed in
th
Notification S.O. 1432(E) to 30 June 2021. When the Notification S.O.
1432(E) was not applicable to AY 2013-14, the question of time limit for
st
AY 2013-14 being extended beyond 31 March 2021 does not arise.
27 Therefore, under the Income Tax Act, when the completion of
any action relates to issuance of notice under Section 148 as per time limit
st
specified in Section 149 was 31 March 2021, it shall stand extended to
th
30 April 2021. The time limit under Section 149 expired on
st
31 March 2021 only for AY 2014-15 (and not for AY 2013-14, which
st
expired on 31 March 2020) and has got extended by virtue of clause (a) of
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sub-section (1) of Section 3 of TOLA. The Notification does not say
“issuance of notice under Section 148 as per time limit specified in Section
149 as extended under sub-section (1) of Section 3 of TOLA”. Therefore, the
provisions of TOLA cannot apply. Also the Notifications thereunder do not
apply to the case at hand for AY 2013-14.
28 It is required to be noted that the Apex Court, while enabling
the Revenue to restart the reassessment proceedings in Ashish Agarwal
(Supra), categorically held that the old Section 148 notices were to be
treated as show cause notices in terms of Section 148A(b) and not a notice
under Section 148 of the Act and, therefore, the mandatory procedure
stipulated in Section 148A was to be followed. Thereafter, the Assessing
Officers were authorised to issue the notice under the amended Section 148
of the Act. The first proviso to Section 149(1) of the Act puts a fetter on
issuing of a notice under Section 148 and not Section 148A(b) of the Act
beyond the stipulated period. The impugned notice under Section 148 of
th
the Act is issued on 28 July 2022. Hence, TOLA has no application.
29 This Court in Siemens Financial (Supra), in paragraph 26, has
held as under :
26. The Assessing Officer cannot rely on the provisions of TOLA
and the notifications issued thereunder as section 151 has been
amended by Finance Act, 2021 and the provisions of the
amended section would have to be complied with by the
Assessing Officer, w.e.f., 1st April 2021. Hence, the Assessing
Officer cannot seek to take the shelter of TOLA as a subordinate
legislation cannot override any statute enacted by the
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Parliament. Further, the notification extending the dates from
31st March 2021 till 30th June 2021 cannot apply once the
Finance Act, 2021 is in existence. The sanction of the specified
authority has to be obtained in accordance with the law existing
when the sanction is obtained and, therefore, the sanction is
required to be obtained by applying the amended section
151(ii) of the Act and since the sanction has been obtained in
terms of section 151(i) of the Act, the impugned order and
impugned notice are bad in law and should be quashed and set
aside.
30 The Allahabad High Court in Ashok Kumar Agarwal V/s. Union
13
of India held that TOLA is an enactment to extend timelines only.
Consequently, all references to issuance of notice contained in TOLA from
st
1 April 2021 must be read as reference to the substituted provisions only.
Paragraph 66 of Ashok Kumar Agarwal (Supra) reads as under :
66. It is equally true that the Enabling Act that was pre-existing,
had been enforced prior to enforcement of the Finance Act,
2021. It confronted the Act as amended by Finance Act, 2021,
as it came into existence on 01.04.2021. In the Enabling Act and
the Finance Act, 2021, there is absence, both of any express
provision in itself or to delegate the function - to save
applicability of the provisions of sections 147, 148, 149 or 151
of the Act, as they existed up to 31.03.2021. Plainly, the
Enabling Act is an enactment to extend timelines only.
Consequently, it flows from the above – 01.04.2021 onwards, all
references to issuance of notice contained in the Enabling Act
must be read as reference to the substituted provisions only.
Equally there is no difficulty in applying the pre-existing
provisions to pending proceedings. Looked in that manner, the
laws are harmonized.
In our view, TOLA has no role to play and it cannot salvage the
notice under challenge.
31 Reliance by respondents on Instruction No.1 of 2022 issued by
CBDT is also grossly misplaced. Neither the provisions of TOLA nor the
13 (2021) 131 taxmann.com 22 (Allahabad)
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judgment in Ashish Agarwal (Supra) provide that any notice issued under
st
Section 148 of the Act after 31 March 2021 will travel back to the original
date. This very argument was urged in the challenge to the initial
reassessment and was categorically rejected by this Court in Tata
Communications (Supra) as well as the Delhi High Court in Mon Mohan
Kohli (Supra). Paragraphs 37 and 38 of Tata Communications (Supra) read
as under :
37. Section 3(1) of Relaxation Act does not provide that any
notice issued under Section 148 of the Act, after 31 st March
2021 will relate back to the original date or that the clock is
stopped on 31 st March, 2021 such that the provision as existing
on such date will be applicable to notices issued relying on the
provision of Relaxation Act. A plain reading of Relaxation Act, as
Mr. Mistri rightly submitted, makes it clear that Section 3(1) of
Relaxation Act merely extends the limitation provided in the
specified Acts (including Income-tax Act) for doing certain Acts
but such Acts must be performed in accordance with the
provisions of the specified Acts. Therefore, if there is an
amendment in the specified Act, the amended provision of the
specified Act would apply to such actions of the Revenue. The
Delhi High Court has considered and rejected the contention of
the Revenue that the notice issued after 1st April 2021 relates
back to an earlier period.
38. The Delhi High Court has considered and rejected this
argument of the Revenue that Relaxation Act creates a legal
fiction such that the notices issued under Section 148 of the Act
are deemed to be issued on 31st March, 2021. The so-called
legal fiction is directly contrary to the Revenue's own Circular
No.549 of 1989, which is binding on them as well as the well
settled principle that the validity of a notice is to be judged on
the basis of the law that prevails at the time of its issue.
(emphasis supplied)
Both these judgments, i.e., Tata Communications (Supra) and
Mon Mohan Kohli (Supra), have been affirmed in Ashish Agarwal (Supra).
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32 Further, in Siemens Financial (Supra), this Court has held that
the Instruction is erroneous in this regard, i.e., travel back to the original
date. Paragraphs 28 to 31 of the said judgment read as under :
28. The interpretation placed by the CBDT in paragraph 6.1 of
Instruction No. 1/2022 dated 11th May 2022 cannot be
countenanced as it is not open to them to clarify that the law
laid down by the Apex Court means that the extended
reassessment notices will travel back in time to their original
date when such notices were to be issued and, then, the new
section 149 of the Act is to be applied as this is contrary to the
judgment of this court in Tata Communications (supra) wherein
it is held that TOLA does not envisage traveling back of any
notice. However, even assuming that it is held that these notices
th
travel back to the date of the original notice issued on 25 June
2021, even then the approval of the Principal Chief
Commissioner of Income Tax should be obtained in terms of
section 151(ii) of the Act as a period of three years from the end
of the relevant assessment year ended on 31st March 2020 for
AY 2016-17.
29. Further, the CBDT in Instruction no.1/2022 at paragraph
6.2(ii) has wrongly stated that the notices issued under section
148 of the Act for AY 2016-17 are to be considered as having
been issued within a period of three years from the end of the
relevant assessment year and, on that basis, has wrongly
mentioned that the approval of the specified authority under
section 151(i) should be taken. This conclusion is premised on
the basis that these notices travel back to 31 March 2020 which
premise is completely erroneous as explained hereinbefore. The
notice under section 148 of the Act is issued on 31 July 2022
and, hence, is issued beyond period of three years from the end
of the relevant assessment year and, accordingly, the approval of
the specified authority under section 151(ii) of the Act should
be taken.
30. This court in Tata Communications (Supra), has rejected
that argument of the Revenue on the issue of travel back. This
court in paragraph 37 of Tata Communications (Supra) has held
that Section 3(1) of TOLA does not provide that any notice
issued under Section 148 of the Act, after 31st March 2021 will
relate back to the original date or that the clock is stopped on
31st March, 2021 such that the provision as existing on such
date will be applicable to notices issued relying on the provision
of TOLA. The court held that Section 3(1) of TOLA merely
extends the limitation provided in the specified Acts including
Income-tax Act for doing certain Acts but such Acts must be
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performed in accordance with the provisions of the specified
Acts. The court had also recorded that the Delhi High Court had
considered and rejected the contention of the Revenue that the
notice issued after 1st April 2021 relates back to an earlier
period. The Delhi High Court had considered and rejected the
argument of the Revenue that TOLA creates a legal fiction such
that the notices issued under Section 148 of the Act are deemed
to be issued on 31st March, 2021. TOLA only granted power to
the Central Government to notify the period during which
actions are required to be taken that can fall within the ambit of
TOLA, and the power to extend the time limit within which
those actions are to be taken. There was no amendment to the
provisions of Sections 147 to 151 of the Act. The court also
observed that amendments to the substantive provisions of the
Act were envisaged under Section 3 of TOLA, which was only a
relaxation provision dealing with time limits under various
enactments. The Assessing Officer could have assumed
jurisdiction while issuing the impugned notices only after
complying with the amended Section 147 which has not been
done. In Tata Communications (Supra), this court also held that
TOLA was not applicable for A.Y.-2015-2016 or any subsequent
years. Hence question of applicability of notification issued
under TOLA also would not arise. Paragraphs 34 to 49 of Tata
Communications (Supra) read as under :
34. It is well settled that the validity of a notice issued
under Section 148 of the Act must be judged on the basis
of the law existing on the date on which such notice is
issued. Even the Revenue accepts this well settled position.
Further, the provisions of Sections 147 to 151 are
procedural laws and accordingly, the provisions as existing
on the date of the notice would be applicable. Even the
revenue accepts this legal position and the CBDT Circular
No.549 of 1989, that Mr. Mistri relied upon, explaining the
provisions of the Finance Act, 1989 specifically sets out
that any notices issued by Revenue after the amendment
made by the Finance Act, 1989 must comply with the
amended provision of the law. Therefore, any notice issued
st
after 1 April, 2021 must comply with the amended
provisions of the Act which was amended with effect from
st
1 April, 2021. This contention has also been considered
and upheld by the Delhi High Court and the Allahabad
High Court.
35. We have to also note the well settled proposition that
when the Act specifies that something is to be done in a
particular manner, then, that thing must be done in that
specified manner alone, and any other method/(s) of
performance cannot be upheld. Hence, notices issued
st
under Section 148 of the Act after 1 April, 2021 must
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comply with the amended provisions of law and cannot be
sustained on the basis of the erstwhile provision.
36. In order to uphold the arguments of the Revenue in
this regard, either a savings clause, or a specific legislative
enactment deferring applicability of the amended
provisions and the repeal of the old provisions of the Act,
would be required. Plainly no such savings clause or
enactment is available.
37. Section 3(1) of Relaxation Act does not provide that
st
any notice issued under Section 148 of the Act, after 31
March 2021 will relate back to the original date or that the
st
clock is stopped on 31 March, 2021 such that the
provision as existing on such date will be applicable to
notices issued relying on the provision of Relaxation Act. A
plain reading of Relaxation Act, as Mr. Mistri rightly
submitted, makes it clear that Section 3(1) of Relaxation
Act merely extends the limitation provided in the specified
Acts (including Income-tax Act) for doing certain Acts but
such Acts must be performed in accordance with the
provisions of the specified Acts. Therefore, if there is an
amendment in the specified Act, the amended provision of
the specified Act would apply to such actions of the
Revenue. The Delhi High Court has considered and
rejected the contention of the Revenue that the notice
st
issued after 1 April 2021 relates back to an earlier period.
38. The Delhi High Court has considered and rejected this
argument of the Revenue that Relaxation Act creates a
legal fiction such that the notices issued under Section 148
st
of the Act are deemed to be issued on 31 March, 2021.
The so-called legal fiction is directly contrary to the
Revenue’s own Circular No.549 of 1989, which is binding
on them as well as the well settled principle that the
validity of a notice is to be judged on the basis of the law
that prevails at the time of its issue.
39. Even though Relaxation Act was in existence when the
Finance Act, 2021 was passed, the parliament has
specifically made the amended provisions of Sections 147
st
to 151 of the Act as being applicable with effect from 1
April, 2021. Therefore, the intention of the legislature is
clear that substituted provisions must apply to notices
st
issued with effect from 1 April, 2021. No savings clause
has been provided in the Act for saving the erstwhile
provisions of Sections 147 to 151 of the Act, like in Section
297 of the Act where, the Parliament when it intended, has
specifically provided the savings clause.
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40. On a plain reading of Relaxation Act it is clear that the
only powers granted to the Central Government by
Relaxation Act is the power to notify the period during
which actions are required to be taken that can fall within
the ambit of Relaxation Act, and the power to extend the
time limit within which those actions are to be taken. A
plain reading of the impugned Explanations in Notification
Nos.20 of 2021 and 38 of 2021 shows that it purports to
“clarify” that the unamended provisions of Sections 147 to
151 of the Act will apply for the purposes of issue of
notices under Section 148 of the Act, which is clearly ultra
vires Relaxation Act.
st
41. In our view, the reopening notices issued after 1
April, 2021 are unsustainable and bad in law even if one
was to apply the Explanations to the Notification Nos.20 of
2021 and 38 of 2021. The Explanation seeks to extend the
applicability of erstwhile Sections 148, 149 and 151. The
impugned Explanation does not cover Section 147, which
(as amended) empowers the revenue to reopen an
assessment subject to Sections 148 to 153, which includes
Section 148A. Thus, even if Explanations are valid, the
mandatory procedure laid down by Section 148A has not
been followed and hence, without anything further, the
notices under Section 148 of the Act are invalid and must
be struck down for this reason as well. This proposition has
also been upheld by the Delhi High Court.
42. As regards Revenue’s arguments that Relaxation Act
being a beneficial legislation must be given purposive
interpretation’, the purpose of Section 3(1) of Relaxation
Act is to extend limitation periods as provided in a
specified Act (including the Income-tax Act). The purpose
of Section 3(1) of Relaxation Act is not to postpone the
applicability of amended provisions of a Specified Act.
Though Relaxation Act was in existence when the Finance
Act, 2021 was passed, the Parliament has specifically
enacted the new, (amended) provisions of Section 147 to
151 of the Act and made them applicable with effect form
st
1 April, 2021. Therefore, it is clear that amendment is to
st
be applied from 1 April, 2021. Further, when there is no
ambiguity on the applicability of the provision, there is no
question of resorting to purpose test.
43. As regards liberty granted by the Allahabad High
Court, certainly, if the law permits issuance of notices
under Section 148 of the Act (as amended), afresh, then
no liberty is required to be granted by the Court, and it
would be within the Assessing Officer’s powers to initiate
proceedings as per the amended law. The Madras High
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Court has considered this very plea and granted liberty to
initiate reassessment proceedings in accordance with the
provisions of the amended Act, “if limitation for it
survives”.
44. As submitted by Mr. Mistri, with whom we agree,
Chapter II of Relaxation Act provide for – “Relaxation of
Certain Provisions of Specified Act”and Section 3 forms
part of this Chapter. Further Chapter III provides for
amendment to Income Tax Act, 1961 and various Sections
of the Act have been amended in Chapter III. From this the
following propositions emerge :
(a) Wherever the Parliament thought fit, the
Parliament has itself amended the provision of the
Income Tax Act, 1961 and not left it for the CBDT to
make the amendment. Therefore, it is clear that no
power is given under Relaxation Act to postpone the
applicability of provisions of the Income Tax Act.
(b) Chapter II of Relaxation Act is only for ‘Relaxation
of Certain Provisions of Specified Act’ and, therefore,
there is no question of the Revenue relying on this
Chapter and Section 3 to justify the postponement of
applicability of certain provisions of the Income Tax
Act. If the Parliament wanted to give some right to the
CBDT, it would have formed part of Chapter III,
however, there is no such provision in Chapter III of
the Act.
45. As submitted by Mr. Pardiwalla there are other Sections
in the Finance Act, 2021 which have amended other
st
provisions of the Income Tax Act from dates other than 1
April, 2021. Like for example Section 12 of the Finance Act
inserted a proviso in Section 43CA. Had the intention of
the legislature, while amending Sections 147 to 153, been
st
to give it effect from 1 July, 2021, a similar savings clause
could have been inserted, which has not been done. We
agree with Mr. Pardiwalla because as per Section 1(2)(a)
of the Finance Act, 2021, the amendments to Sections 147
st
to 153 of the Act shall come into force on 1 April, 2021.
Similarly, the Memorandum explaining the provisions of
the Finance Bill, 2021 clarifies that these amendments will
st
take effect from 1 April, 2021. Section 12 of the Finance
Act inserted a proviso in Section 43CA which inter alia
provides that the words ‘one hundred and ten percent’ in
the first proviso will be substituted by the words ‘one
hundred and twenty percent’ if the transfer of residential
th
units takes place during the period beginning from 12 day
th
of November, 2020 and ending on the 30 day of June,
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2021. Therefore, had the intention of the legislature, while
amending Sections 147 to 153, was to give it effect from
st
1 July, 2021, a similar savings clause could have been
inserted, which has not been done.
46. Mr. Pardiwalla submitted that only Section 4 of
Relaxation Act which amended the Act and no such
amendments to the substantive provisions of the Act were
envisaged under Section 3 of Relaxation Act, which was
only a relaxation provision dealing with time limits under
various enactments.
47. As noted earlier, it is Revenue’s case that Section 3 of
Relaxation Act enabled the Central Government to issue
notifications which would permit the Assessing Officers to
st
issue notices under Section 148 of the Act after 1 April,
2021 in terms of the erstwhile provisions of Sections 147
to section 151, even though the said provisions were
st
repealed with effect from 1 April, 2021 by the Finance
Act, 2021. It is, however, pertinent to note that Section 3
of Relaxation Act falls in Chapter II of the said Act, which
is titled ‘Relaxation of Certain Provisions of Specified Act’.
In contradistinction, Section 4 of Relaxation Act which
does amend several provisions of the Act falls in Chapter
III, which is titled ‘Amendments to the Income Tax Act,
1961’. It will be apposite to notice that the amendments
provided for in Section 4 were made by the Legislature
itself in terms of the said Section and no such power to
amend the Act was delegated to the Central Government.
Therefore, we would agree with Mr. Pardiwalla that it is
only Section 4 of Relaxation Act which amended the Act
and no such amendments to the substantive provisions of
the Act were envisaged under Section 3 of Relaxation Act,
which was only a relaxation provision dealing with time
limits under various enactments.
48. Mr. Pardiwalla submitted that even assuming for a
moment that the primary contention of petitioners that the
Explanations in the notifications are invalid is not
accepted, still the impugned notices will be bad in law as
the Explanation only seeks to effectuate the provisions of
the erstwhile Sections 148, 149 and 151 of the Act. It does
not cover the erstwhile Section 147 of the Act. As rightly
submitted by Mr. Pardiwalla, the Assessing Officer could
have assumed jurisdiction while issuing the impugned
notices only after complying with the amended Section
147. The same has not been done by the Assessing Officers
as (a) his assumption of jurisdiction is on the basis of his
‘reason to believe’ that income chargeable to tax has
escaped assessment, a concept, which is no longer
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recognised in the amended Section 147; and (b) the
amended Section 147 is in any event subject to Sections
148 to 153, which would also include the procedure
contained in Section 148A, which has not been followed.
Therefore, the impugned notices do not even comply with
the relevant statutory provisions, even if we do not find
fault with the Explanations in the two notifications. Infact
the Delhi High Court in paragraph 84 of Mon Mohan Kohli
(Supra) has also considered and accepted this aspect of the
matter.
49. Some more reasons why the reopening notices must go
are :
(a) Section 297 of the Act provides a saving clause for
applicability of various provisions of the 1922 Act,
even though the Act itself had been repealed. In the
absence of such a saving clause for applicability of
erstwhile Sections 147 to 151 of the Act, the amended
st
provision of the Act would apply from 1 April,
2021.
st
(b) Moreover, the reopening notices issued after 1
April, 2021 are bad in law even if one was to apply
the Explanations to the Notification Nos.20 and 38.
The Explanations seek to extend the applicability of
erstwhile Sections 148, 149 and 151. They do not
cover Section 147, which empowers revenue to
reopen subject to Section 148 to 153, which includes
Section 148A. Thus, even if Explanation are valid,
procedure of Section 148A is not followed and hence,
notices are invalid.
(c) In any case, Relaxation Act is not applicable for
Assessment Years 2015-2016 or any subsequent year
and, hence, the question of applicability of the
Notification Nos.20 and 38 of 2021 does not arise.
The time limit to issue notice under Section 148 of the
Act for the Assessment Years 2015-2016 onwards was
not expiring within the period for which Section 3(1)
of Relaxation Act was applicable and, hence,
Relaxation Act could never apply for these assessment
years. As a consequence, there can be no question of
extending the period of limitation for such assessment
years.
These findings of the Bombay High Court have not
been disturbed by the Apex Court in Ashish Agarwal
(Supra). The Apex Court only modified the orders
passed by the respective High Courts to the effect that
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the notices issued under Section 148 of the Act which
were subject matter of writ petitions before various
High Courts shall be deemed to have been issued
under Section 148A(b) of the Act and the Assessing
Officer was directed to provide within 30 days to the
respective assessee the information and material
relied upon by the Revenue so that the assessee could
reply to the show cause notices within two weeks
thereafter. The Apex Court held that the Assessing
Officer shall thereafter pass orders in terms of Section
148A(d) in respect of each of the concerned assessees.
Thereafter, after following the procedure as required
under Section 148A may issue notice under Section
148 (as substituted). The Apex Court also expressly
kept open all contentions which may be available to
the assessee including those available under Section
149 of the Act and all rights and contentions which
may be available to the concerned assessee and
revenue under the Finance Act 2021 and in law, shall
be continued to be available.
31. Notwithstanding this, the CBDT has issued instruction No.1
of 2022 contrary to what the courts have held. Even by the
finding of the Apex Court in Ashish Agarwal (Supra), only the
original notice issued under Section 148 of the Act was
converted into a notice deemed to have been issued under
Section 148A(b) of the Act. The Apex Court held that the
Assessing Officer shall thereafter pass orders in terms of Section
148A(b) in respect of each of the assessee and after following
the procedure as required under Section 148 of the Act. Even
judgment in Ashish Agarwal (supra) does not anywhere indicate
the notices that could be issued for eternity like in this case, on
31st July 2022, would be sanctioned by the authority other than
sanctioning authority defined under the Act.
(emphasis supplied)
33 In Ganesh Dass Khanna (Supra), the Delhi High Court has
already declared paragraph 6.1 and 6.2(ii) of the Instructions as bad in law.
Further, this Court in Group M Media India P. Ltd. (Supra) has held that a
declaration of a Board's instruction as ultra vires by a competent Court
would be binding on all authorities administering the Act all over the
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country and accordingly, the officers implementing the Act were bound by
the decision of the Delhi High Court. Paragraphs 44.4, 49, 51, 52 and 55 of
Ganesh Dass Khanna (Supra) read as under :
44.4. In our opinion, the observations of the coordinate bench
make it amply clear that Section 149 of the amended 1961 Act
continued to operate despite attempts to the contrary made by
the introduction of the aforementioned explanations in
Notifications dated 31.03.2021 and 27.04.2021. This is evident
upon perusal of the following observations made by the
coordinate bench in Mon Mohan Kohli s case : ‟
“…100. This Court is of the opinion that Section 3(1) of
[the] Relaxation Act empowers the Government/Executive
to extend only the time limits and it does not delegate the
power to legislate on provisions to be followed for
initiation of reassessment proceedings. In fact, the
Relaxation Act does not give power to [the] Government to
extend the erstwhile Sections 147 to 151 beyond 31st
March, 2021 and/or defer the operation of substituted
provisions enacted by the Finance Act, 2021. Consequently,
st
the impugned Explanations in the Notifications dated 31
March, 2021 and 27th April, 2021 are not conditional
legislation and are beyond the power delegated to the
Government as well as ultra vires the parent statute i.e. the
Relaxation Act. Accordingly, this Court is respectfully not
in agreement with the view of the Chhattisgarh High Court
in Palak Khatuja (supra), but with the views of the
Allahabad High Court and Rajasthan High Court in Ashok
Kumar Agarwal (supra) and Bpip Infra Private Limited
(supra) respectively.
101. The submission of the Revenue that Section 6 of the
General Clauses Act saves notices issued under Section 148
post 31st March, 2021 is untenable in law, as in the
present case, the repeal is followed by a fresh legislation
on the same subject and the new Act manifests an
intention to destroy the old procedure. Consequently, if the
Legislature has permitted reassessment to be made in a
particular manner, it can only be in this manner, or not at
all.
102. The argument of the respondents that the substitution
made by the Finance Act, 2021 is not applicable to past
Assessment Years, as it is substantial in nature is
contradicted by[the] Respondents' own Circular 549 of
1989 and its own submission that from 1st July, 2021, the
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substitution made by the Finance Act, 2021 will be
applicable.
103. Revenue cannot rely on Covid-19 for contending that
the new provisions Sections 147 to 151 of the Income Tax
Act, 1961 should not operate during the period 1st April,
2021 to 30th June, 2021 as Parliament was fully aware of
[the] Covid-19 Pandemic when it passed the Finance Act,
2021. Also, the arguments of the respondents qua non-
obstante clause in Section 3(1) of the Relaxation Act,
„legal fiction and stop the clock provision are contrary ‟ ‟
to facts and untenable in law.
104. Consequently, this Court is of the view that the
Executive/Respondents/Revenue cannot use the
administrative power to issue Notifications under Section
3(1) of the Relaxation Act, 2020 to undermine the
expression of Parliamentary supremacy in the form of an
Act of Parliament, namely, the Finance Act, 2021. This
Court is also of the opinion that the
Executive/Respondents/Revenue cannot frustrate the
purpose of substituted statutory provisions, like Sections
147 to 151 of [the] Income Tax Act, 1961 in the present
instance, by emptying it of content or impeding or
postponing their effectual operation…”
xxxxxxxxxxxxxxxxx
49. The arguments advanced on behalf of the revenue that since
time limits have been extended by the Central Government by
virtue of the Notifications issued under Section 3(1) of TOLA
and, therefore, the impugned actions which were taken much
before the end date, i.e., 30.06.2021 were valid in the eyes of
the law, is misconceived for the following reasons :
(i) First, there was no power invested under TOLA, and
that too via Notifications, to amend the statute, which had
the imprimatur of the Legislature. Since, with effect from
01.04.2021, when FA 2021 came into force, the
Notifications dated 31.03.2021 and 27.04.2021, which are
sought to be portrayed by the revenue as extending the
period of limitation, were contrary to the provisions of
Section 149(1)(a) of the Act, in our opinion, they lost their
legal efficacy.
(ii) Second, the extension of the end date for completion
of proceedings and compliances, a power which was
conferred on the Central Government under Section 3(1)
of TOLA, cannot be construed as one which could extend
the period of limitation provided under Section 149(1)(a)
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of the 1961 Act. As per the ratio enunciated in Ashish
Agrawal s case, Section 149(1)(a) would apply to AY ‟
2016-17 and AY 2017-18.
xxxxxxxxxxxxxxxxx
51. This brings us to the tenability of the travel back in time
theory encapsulated in paragraphs 6.1 and 6.2(ii) of the
Instruction dated 11.05.2022. For convenience, the relevant part
of the instruction is set forth hereafter :
“…6.0 Operation of the new section 149 of the Act to
identify cases where fresh notice under section 148 of the
Act can be issued :
6.1 With respect of [to] operation of new section 149 of
the Act, the following may be seen :
Hon'ble Supreme Court has held that the new law shall
operate and all the defences available to assessees under
section 149 of the new law and whatever rights are
available to the Assessing Officer under the new law shall
continue to be available.
Sub-section (1) of new section 149 of the Act as amended
by the
Finance Act, 2021 (before its amendment by the Finance
Act, 2022) reads as under :-
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
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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.
Hon'ble Supreme Court has upheld the views of High
Courts that the benefit of new law shall be made available
even in respect of proceedings relating to past assessment
years. Decision of [the] Hon'ble Supreme Court read with
the time extension provided by 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.
6.2 Based on [the] above, the extended reassessment
notices are to be dealt with as under :
(i) AY 2013-14, AY 2014-15 and AY 2015-16: Fresh notice
under section 148 of the Act can be issued in these cases,
with the approval of the specified authority, only if the
case falls under clause (b) of sub-section (1) of section
149 as amended by the Finance Act, 2021 and reproduced
in paragraph 6.1 above. Specified authority under section
151 of the new law in this case shall be the authority
prescribed under clause (ii) of that section.
(ii) AY 16-17, AY 17-18: Fresh notice under section 148
can be issued in these cases, with the approval of the
specified authority, under clause (a) of sub-section (1) of
new section 149 of the Act, since they are within the
period of three years from the end of the relevant
assessment year. Specified authority under section 151 of
the new law in this case shall be the authority prescribed
under clause (i) of that section…”
52. A careful perusal of the judgment of the Supreme Court
rendered in Ashish Agrawal s case and the provisions of TOLA ‟
would show that neither the said judgment nor TOLA allowed
for any such modality to be taken recourse to by the revenue,
i.e., that extended reassessment notice would “travel back in
time” to their original date when such notices were to be issued
and thereupon the provisions of amended Section 149 would
apply.
xxxxxxxxxxxxxxxxx
55. Furthermore, the reference made in paragraphs 6.1 and
6.2(ii) of the Instruction dated 11.05.2022, to the extent it
propounds the “travel back in time” theory, is declared bad in
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law.
(emphasis supplied)
Paragraphs 6 and 8 of Group M Media India P. Ltd. (Supra)
read as under :
6. Mr. Easwar, learned Senior Counsel appearing for the
petitioner points out that Instruction No.1 of 2015 dated 13 th
January, 2015 issued by the CBDT has been quashed by the
Hon'ble Delhi High Court in Tata Teleservices Ltd. (supra).
Therefore, the Assessing Officer cannot now place reliance upon
it to disregard the statutory duty cast upon him in terms of
Section 143(1) and 143(1D) of the Act. Further attention was
drawn to the decisions of this Court in Commissioner of Income
Tax Vs. Smt. Godavaridevi Saraf, 113 ITR 589 and
Commissioner of Income Tax Vs. Valson Dyeing Bleaching and
Printing Works, 259 ELT 33 wherein it is held that where a
provision of law was declared ultra virus by the competent
Court then the same will be binding on all Authorities
administering the Act all over the Country. This so long as there
is no contrary decision on that point. The Assessing Officer is,
therefore, obliged to ignore Instruction No.1 of 2015 dated 13th
January, 2015 and decide the petitioner's application to process
the refund under Section 143(1) of the Act and consider the
applicability of sub-section 1(D) of Section 143 of the Act to the
facts of the present case for the purpose of grant of refund.
xxxxxxxxxxxxxxxxx
8. Before us, Mr. Mohanty does not dispute the fact that in view
of the Delhi High Court decision in Tata Teleservices Ltd.
(supra), Instruction No.1 of 2015 dated 13 th January, 2015 of
the CBDT would not fetter the Assessing Officer in any manner
from exercising his discretion to process the return of income
under Section 143(1) of the Act and considering the grant of
refund under Section 143(1D) of the Act. The petitioner before
the Delhi High Court was not granted refund, pending scrutiny
assessment in view of Instruction No.1/2015 dated 13th
January, 2015. The Delhi High Court held that the instruction
issued is without jurisdiction. This for the reason that although
Section 119 of the Act does empower the CBDT to issue
instructions for the proper administration of the Act, this power
is hedged in by limitations as provided in the proviso to Sections
119(1) and also 119(2) of the Act, i.e. the CBDT cannot direct
an Assessing Officer to dispose of a case in a particular manner
nor can the instructions be prejudicial to the assessee.
Therefore, the circulars / orders / instructions issued by the
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CBDT under Section 119 of the Act would be binding upon the
Revenue only to the extent they are beneficial to the assessee.
Such Instructions, if not beneficial to the assessee, cannot
prevail over the Act. In the above view, the Delhi High Court
held that Instruction No.1 of 2015 dated 13 th January, 2015
issued by the CBDT is unsustainable in law and, therefore, set it
aside. It must also be pointed out that the Revenue is not
disputing the decision of the Delhi High Court in Tata
Teleservices Ltd. (supra) either on facts or in law. Therefore, in
view of the decision of this Court in Godavaridevi Saraf (supra),
the officers implementing the Act are bound by the decision of
the Delhi High Court and Instruction No.1 of 2015 dated 13th
January, 2015 has ceased to exist. Therefore, no reference to the
above Instruction can be made by the Assessing Officer while
disposing of the petitioner's application in processing its return
under Section 143(1) of the Act and consequent refund, if any,
under Section 143(1D) of the Act. Needless to state that the
Assessing Officer would independently apply his mind and take
a decision in terms of Section 143 (1D) of the Act whether or
not to grant a refund in the facts and circumstances of the
petitioner's case for A.Y. 2015-16.
(emphasis supplied)
34 It will be also useful to note that even in Hindustan
Aeronautics Ltd. (Supra) the Apex Court has held that circulars/instructions
are only binding on the Revenue and not on the assessees and certainly not
on the Hon'ble Courts.
35 The Revenue’s contention that the reopening notice was to
relate back to an earlier date is entirely flawed and unacceptable. Thus, the
reassessment notices issued for AY 2013-14 are patently barred by
limitation as the six years limitation period under the Act (as extended by
st
Section 3 of TOLA) expired by 31 March 2021. However, even on the
Revenue’s demurrer and assuming that such reopening notices could travel
back in time and that the provisions of TOLA protected such reopening
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notices (we do not agree), even then, in so far as the notices issued for AY
2013-14 is concerned, would in any case be barred by limitation. As stated
earlier, under the erstwhile Section 149, a notice under Section 148 could
have been issued within a period of six years from the end of the relevant
assessment year. The Notifications issued under TOLA, viz., Notification
No.20/2021, which is relied upon by the Revenue, only cover those cases
st
where 31 March, 2021 was the end date of the period during which the
time limit, specified in, or prescribed or notified under the Income Tax Act
falls for completion. The limitation under the Income Tax Act, 1961
(erstwhile Section 149) for reopening the assessment for the AY 2013-14
st
expired on 31 March 2020. Hence, Notification No.20/2021 did not apply
to the facts of the present case, viz., reopening notice for the AY 2013-14.
Therefore, the Revenue could not issue any notice under Section 148
st
beyond 31 March 2021 and hence, even the relate back theory of the
Revenue could not safeguard the reassessment proceedings initiated after
st
1 April 2021 for AY 2013-14
36 Therefore, in the present case, as the foundation of the entire
reassessment proceeding, viz., the notice issued in June 2021 itself was
barred by limitation in view of non-applicability of Notification
No.20/2021, the superstructure sitting thereon, viz., the reassessment
proceedings initiated pursuant to judgment in Ashish Agarwal will also be
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regarded as beyond time limit. Therefore, on this ground as well, the
th
impugned reopening notice dated 28 July 2022 issued for AY 2013-14 in
petitioner’s case is barred by limitation and deserves to be quashed and set
aside. Alternatively, it is well settled that a notice under Section 148 of the
Act cannot be issued in order to reopen the assessment of an assessee in a
case where the right to reopen the assessment was already barred under the
pre-amended Act on the date when the new legislation came into force. In
14
CIT V/s. Onkarmal Meghraj (HUF) the Hon’ble Apex Court held :
“That raises the question whether that proviso could be applied
without reference to any period of limitation. It is a well-settled
principle that no action can be commenced has expired. It is
unnecessary to cite authorities in support of this position. Does
the fact that the second proviso says that there is no period of
limitation make a difference? xxxxxxxxxx.
xxxxxxxxxx In J.P. Jani, Income-tax Officer v. Induprasad
Devshanker Bhatt (1969) 72 I.T.R. 595; (1969) 1 S.C.R. 714
(S.C.) this court held that the Income-tax Officer cannot issue a
notice under section 148 of the Income Tax Act, 1961, in order
to reopen the assessment of an assessee in a case where the
right ti reopen the assessment was barred under the 1922 Act at
the date when the new Act camne into force. It was held that
section 297(2)(d)(ii) of the 1961 Act was applicable only to this
cases where the right of the Income-tax Officer to reopen an
assessment was not barred under the repealed Act. This
decision is broadly in line with the opinion of Das and Kapur JJ.
in Prashar’s case (1963) 49 I.T.R. (S.C.) 1; (1964) 1 S.C.R. 29
(S.C.) xxxxxxxxxx.
For AY 2013-14, the time limit to issue a notice under Section
st
148 of the Act had already expired on 1 April 2021. On the said date, the
st
assessee had a vested right, which de hors the 1 proviso to the amended
Section 149 of the Act, could not be taken away and thus, based on the well
14 (1974) 93 ITR 233 (SC)
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st
settled principles of law, the reopening of the AY 2013-14 after 31 March
2021 is invalid, without jurisdiction and barred by limitation.
37 We shall deal with Mr. Sharma’s submissions as under :
(a) As regards reliance on the provisions of the Limitation Act,
1963, the provisions of the Limitation Act, 1963 do not apply to the
provisions of the Income Tax Act, 1961 and especially, not in the present
case in view of the specific period provided for in the provisions of the Act
as well as TOLA. In any case, this defence of respondents cannot be
sustained as they have not taken any such contention in either the order
passed under Section 148A(d) or in the affidavit in reply;
(b) As regards applicability of Section 3 of TOLA - exclusion of
Covid period, this argument is, in effect, nothing but the theory of travel
back in time which was urged by the Revenue to support the reopening
st th
notices issued between 1 April 2021 to 30 June 2021 before this Court, as
well as other High Courts [and which eventually led to the judgment in
Ashish Agarwal (Supra)]. As noted earlier, this Court and other Courts have
already snubbed the relate back/travel back in time theory and also the
Instruction No.1 of 2022;
(c) As regards applicability of Notifications No.20 of 2021
st th
dated 31 March 2021 and No.38 of 2021 dated 27 April 2021 extending
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th
the time limit even for AY 2014-15 and it is extended till 30 June 2021,
respondent, in other words, argues that the Notification No.20 of 2021
seeks to extend the time limit inter alia for issuing notice under Section 148
st
which was expiring on 31 March 2021 not only under the provisions of the
Act, but would also include the time extension in the Act by virtue of TOLA.
st
To put in another way, the time limit expiring on 31 March 2021 specified
in Notification No.20 of 2021, according to respondents, would have to be
read to include limitation under the Act read with TOLA. As noted earlier,
this contention is flawed inasmuch as it expands the scope of the
Notification and violates its plain language, viz., the time limit, specified in,
or prescribed or notified under the Income Tax Act falls for completion. The
limitation under the Act (erstwhile Section 149) for reopening the
st
assessment for the AY 2013-14 expired on 31 March 2020. Hence,
Notification No.20 of 2021 did not apply to the facts of the present case.
th
Notification No.38 of 2021 dated 27 April 2021 categorically uses the
expression the time limit for completion of such action expires on the
th
30 day of April 2021 due to its extension by the said notifications, such
th
time limit shall further stand extended to the 30 day of June 2021. Hence,
st
it is incorrect to say that 31 March 2021 under the Act would mean under
the Act, plus, extension by TOLA;
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(d) The submission that the Hon’ble Supreme Court, while
deciding Ashish Agarwal (Supra), was conscious of the limitation of 6 years
st
expiring on 31 March 2021 under the pre-amendment provisions in
respect of AY 2013-14 if the Covid period was not excluded, despite which
the Apex Court has stated that all notices issued should be read to be issued
under Section 148A to prevent the Revenue getting remediless, is
unacceptable. This argument clearly fails to appreciate that the effect of
Revenue’s contention is that despite the substantive defence available to the
assessee in Section 149 of the amended Act, as well as the express
directions of the Hon'ble Supreme Court allowing the assessee to take all
defences available under the Act, the judgment of Ashish Agarwal (Supra)
would permit them to reopen the assessment of AY 2013-14 would not only
make the defence expressly available to the assessees useless and unusable,
but would be contrary to well established principles of law. In Supreme
Court Bar Association (Supra), the Hon'ble Supreme Court espoused that its
powers conferred under Article 142 of the Constitution of India, being
curative in nature and even with the width of its amplitude, cannot be
construed as powers which authorise the Court to ignore the substantive
rights of a litigant while dealing with a cause pending before it. Article 142
would not be used to supplant substantive law applicable to a case or cause
and it will not be used to build a new edifice where none existed earlier by
ignoring express statutory provisions dealing with a subject and thereby to
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achieve something indirectly which cannot be achieved directly. In the
present case, Revenue’s argument, if accepted, would be in conflict with the
st
above law as despite the express language of 1 proviso to Section 149,
reopening notice for the AY 2013-14 would be permitted to be issued
beyond 6 years on the pretext that the Hon'ble Supreme Court in exercise of
its powers under Article 142 permitted them to do so and otherwise, they
would be remediless. On the contrary, while permitting the Revenue to re-
initiate the reassessment proceedings, the Apex Court also granted liberty
to assessees to raise all defences available to the assessee including the
defences under Section 149 of the Act. The Apex Court observed that its
order will strike a balance between the rights of the Revenue as well as the
respective assessees. Moreover, in Siemens Financial (Supra), this Court has
already considered a similar contention of the Revenue and held that equity
has no place in taxation or while interpreting taxing statute such
intendment would have any place and that taxation statute has to be
interpreted strictly. The Revenue also fails to appreciate that no particular
case was considered by the Hon'ble Supreme Court while deciding Ashish
Agarwal (Supra).
It is apposite to cite here an extract of the judgment of the
Hon'ble Supreme Court in Parashuram Pottery Works Co. Ltd V/s. Income
15
Tax Officer , which reads as under :
15 (1977) 106 ITR 1 (SC)
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……..… It has been said that the taxes are the price that we pay
for civilization. If so, it is essential that those who are entrusted
with the task of calculating and realising that price should
familiarise themselves with the relevant provisions and become
well-versed with the law on the subject. Any remissness on their
part can only be at the cost of the national exchequer and must
necessarily result in loss of revenue. At the same time, we have
to bear in mind that the policy of law is that there must be a
point of finality in all legal proceedings, that stale issues should
not be reactivated beyond a particular stage and that lapse of
time must induce repose in and set at rest judicial and quasi-
judicial controversies as it must in other spheres of human
activity…”.
(e) The contentions that (i) the true meaning of Apex Court
order in Ashish Agrawal (Supra) is that the notices issued under Section
148, irrespective of the Assessment Year of the unamended Act, between
st th
1 April 2021 to 30 June 2021 are to be treated as show cause notices
th
without being hit by limitation, if issued on or before 30 March 2021 and
(ii) the defence under Section 149 available to the assessee would mean
that if the Revenue had issued any notice under Section 148 under the
st th
unamended Act during the period 1 April 2021 to 30 June 2021
pertaining to AY 2013-14, the same would be barred by limitation under
Section 149 in effect means the Civil Appeal of the Revenue in Ashish
Agrawal (Supra) was dismissed, are completely flawed. It completely fails
to appreciate that the limitation period to issuance of reopening notices
under Section 148 for all Assessment Years prior to AY 2013-14 had already
st
expired on 31 March 2019 or earlier. The provisions of TOLA obviously
could not save such a time limit and the Revenue could not have validly
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st
issued reopening notices for years prior to AY 2013-14 on or after 1 April
2019. Therefore, the defence so expressly allowed to be taken by the
Hon'ble Supreme Court would otherwise be unnecessary;
(f) The submission that the Apex Court, in exercise of power
under Article 142 of the Constitution, has deemed the notices issued
st th
between 1 April 2021 to 30 June 2021 under Section 148A(b) of the Act
issued within limitation and by following the manner of computation of
st th
limitation provided in TOLA, the days from 1 April 2021 to 30 June 2021
would stand excluded and, therefore, the notices could be deemed to be
st
issued on 31 March 2021, we find it to be rather fallacious. The fallacy of
this contention of Revenue is conspicuous inasmuch as if the notices issued
st th
under Section 148 between 1 April 2021 and 30 June 2021, which
st
according to them, are deemed to be issued on 31 March 2021, then it is
obvious that the provisions of the new reassessment law introduced by the
st
Finance Act, 2021 cannot apply as they came into force w.e.f. 1 April 2021
and onwards. Ashish Agarwal (Supra) in no uncertain words stated that the
new provisions have to apply to all such notices. Therefore, the argument
urged is completely contrary to law as well as the binding directions of the
Hon'ble Supreme Court;
(g) As regards reliance on Touchstone Holdings (Supra), the
th
Hon’ble Delhi High Court held that the initial notice dated 29 June, 2021
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issued under Section 148 is within limitation. No findings on the validity or
otherwise of the notice issued after May 2022 pursuant to the judgment in
Ashish Agarwal (Supra) is given. Moreover, in that case, petitioner did not
argue that for AY 2013-14 the time limit would have expired even under
st
TOLA on 31 March 2021;
(h) As regards Salil Gulati (Supra), the Delhi High Court, to
reach its conclusion, has merely relied upon its earlier decision in
Touchstone Holdings (Supra). It will be relevant to note that following Salil
Gulati (Supra), a similar view was taken by the Delhi High Court in Yogita
16
Mohan V/s. Income Tax Officer . Against the judgment, in an SLP preferred
by the assessee, the Apex Court has issued notice vide its order dated
th
20 February 2023. It should also be noted that the Hon’ble Gujarat High
17
Court in Keenara Industries (P.) Ltd. V/s. Income Tax Officer and the
18
Allahabad High Court in Rajeev Bansal V/s. Union of India have taken a
view that notices issued for AY 2013-14 were barred by limitation in view
of the amended Section 149 of the Act. Subsequently, the Apex Court, in
SLPs preferred by the Revenue, has issued notice and stayed both the
orders/judgments;
(i) We are unable to comprehend the contention raised that if
th
the notice dated 30 May 2022 under Section 148A(b) of the Act is valid in
16 WP(C) No.15676 of 2022 dated 15.11.2022
17 (2023) 453 ITR 51
18 (2023) 453 ITR 153
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terms of Apex Court order in Ashish Agrawal (Supra), then the notice under
st
Section 148 of the Act cannot be issued on 31 March 2021 and respondent
cannot be expected to do impossible. It has nowhere been urged by
petitioner that assessing officer ought to complete the proceedings before
the show cause notice under Section 148A(b) of the Act was issued. It is the
case of petitioner that the reopening notice under Section 148 ought to
have been issued within 6 years from the end of the AY 2013-14. This
st
limitation period, as extended by TOLA, expired on 31 March 2021.
However, in the present case, the reopening notice has been issued in July
2022 and, therefore, beyond the statutory time limit. In any case, as stated
above, the Hon'ble Supreme Court, while invoking powers under Article
142, consciously and categorically granted liberty to assessees to raise all
defences available to the assessee, including the defences under Section
149 of the Act. This specific and express directions cannot be set at naught.
Accepting this contention of the Revenue would be a travesty of justice.
38 In the circumstances, in our view, the notice issued under
Section 148 of the Act, impugned in this petition, for AY 2013-14 is issued
beyond the period of limitation.
39 Having decided in favour of assessee/petitioner on this issue of
limitation, we are not discussing the other grounds of challenge raised in
the petition. Petitioner may raise all those contentions independently in any
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other proceeding.
40 Petition disposed accordingly. No order as to costs.
(DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)
Gauri Gaekwad / Meera Jadhav
Signed by: Gauri A. Gaekwad
Designation: PS To Honourable Judge
Date: 15/01/2024 18:10:57