Section 45(5A) Of Income Tax Act Inserted By Way Of An Amendment In Finance Act, 2017 Cannot Be Treated As Retrospective: Patna HC

In a recent judgment, the Patna High Court has ruled that sub-section (5A) of Section 45 of the Income Tax Act, 1961, inserted by the Finance Act, 2017, has no retrospective effect.

The division bench of Chief Justice K. Vinod Chandran and Justice Madhuresh Prasad passed the above ruling while hearing a batch of writ petitions challenging the notices issued under Section 148 of the Income Tax Act, 1961. Some writ petitions also challenged the order issued under Section 144 read with Section 147 of the Act and the notice of demand issued pursuant to the assessment orders.

The major question of law raised in the writ petitions, filed under Article 226 of the Constitution of India, was whether sub-section (5A) of Section 45 of the Act, inserted by the Finance Act, 2017, with effect from 01.04.2018, applies retrospectively.

The petitioners contended that if the said amendment is held to be prospective, as is the consequence of the express words employed in the Finance Act, then it would violate Article 14 of the Constitution of India on the ground of invidious discrimination between the same class of persons.

It was also contended by the petitioners that subsection (5A) has been brought into the Income Tax Act to remove unintended consequences of the earlier provision for computation of capital gains on a conjoint reading of Sections 2(47)(v), 45 & 48. In such circumstances, the same should be considered as retrospective, despite the recitals in the Finance Act indicating it to be prospective.

The bench referred to Shyam Sundar & Others v. Ram Kumar & Another (2001) 8 SCC 24, wherein it was held that ‘... there is a presumption against the retrospective operation of a statute and further a statute is not to be construed to have a greater retrospective operation than its language renders necessary, but an amending Act which affects the procedure is presumed to be retrospective, unless amendingAct provides otherwise’.

While placing reliance on the above ruling of the Apex Court, the bench opined, “subsection (5A) inserted by way of an amendment in the Finance Act, 2017, to be effective from 01.04.2018 cannot be treated as retrospective, for reason of the express words employed and there can be no intendment ferreted out, so as to deem it impliedly retrospective.”

While clarifying that it has answered only the question of retrospectivity urged before the court, the bench rejected the writ petitions.

The Court further granted the appellants two months' time to file objections before the Assessing Officer in the case of notices and a further three months from the date of receipt of the certified copy of the judgment to file a statutory appeal before the first Appellate Authority.

Case Title: Pankaj Kumar vs. Commissioner of Income Tax Civil Writ Jurisdiction Case No.20926 of 2019

Click Here To Read/Download Judgment