Calcutta High Court Quashes Reassessment Notices Issued Post March 31, 2021 U/S 148 Of Income Tax Act, 1961

The Calcutta High Court on Monday allowed a batch of writ petitions seeking quashing of impugned re-assessment notices issued post March 31, 2021 by the concerned Income Tax Authority under Section 148 of the Income Tax Act, 1961. 

Justice Md. Nizamuddin was adjudicating upon a batch of petitions challenging the impugned notices under Section 148 of the Income Tax Act, 1961 on the ground that the same are barred by limitation and that the concerned Income Tax Authority had not complied with statutory formalities under Section 148 A of the Income Tax Act as prescribed by the Finance Act, 2021 which are applicable with effect from April 1, 2021 before issuance of such notices. 

Setting aside the impugned re-assessment notices, the Court observed, 

"All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law."

Background

The petitioners-assessees also sought a declaration for declaring Explanations A(a)(ii)/A(b) to the Notification dated March 31, 2021 and Notification dated April 27, 2021 to the extent that they extend the applicability of the "provisions of Section 148, Section 149 and Section 151 of the 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" to the period beyond March 31, 2021, as ultra vires to the parent legislation i.e. the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (Relaxation Act, 2020). 

Pursuant to the lockdown imposed in March last year amid the covid 19 pandemic, looking at the difficulties faced by citizens in complying with the statutory time limits, the Legislature enacted Relaxation Act, 2020. By way of the Relaxation Act, 2020, various time limits and limitations prescribed in different Central Acts, including the Income Tax Act, 1961, were relaxed. Additionally, sec. 3 of Relaxation Act, 2020 enabled the Central Government to issue Notifications for further relaxing the time limits prescribed in the 'Specified Acts'.

In pursuance to the power vested under sec. 3 of Relaxation Act, 2020, the Central Government had issued the Notifications extending the timelines prescribed under sec. 149 for issuance of re-assessment notices under sec. 148 of the Income Tax Act, 1961. The Explanations to the Notifications also provided that the provisions, as existed prior to amendment by Finance Act, 2021, shall apply to the re-assessment proceedings initiated thereunder. The said Explanations were impugned in the petitions.

Observations

Pursuant to a perusal of the rival submissions, the Court placed reliance on the decisions of the Allahabad High Court, Rajasthan High Court and the Delhi High Court wherein such re-assessment notices issued under Section 148 of the Income Tax Act, 1961 had been set aside. The Division Bench of the Allahabad High Court in the case of Ashok Kumar Agarwal v. Union of India through its Revenue Secretary North Block & Ors had made such a determination. 

Furthermore, referring to the decision of the Rajasthan High Court in this regard, the Court observed, 

"The Rajasthan High Court taking the similar view have allowed the Writ Petitions by quashing the impugned assessment notices under Section 148 of the Act by the order dated 25th November, 2021 in the case of Bpip Infra Private Limited –vs- Income Tax Officer, Ward 4 (1), Jaipur (S.B. Civil Writ Petition No. 13297/2021)."

Reliance was also placed on the Delhi High Court decision in the case of Man Mohan Kohli v. Assistant Commissioner of Income Tax & Anr wherein the Court had quashed re-assessment notices issued under Section 148 of the Income Tax Act, 1961 and had further held that sec. 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 empowers the Government or Executive to extend only the time limits and does not delegate the power to legislate on provisions to be followed for initiation of re-assessment proceedings.

Agreeing with the aforementioned decisions of the High Courts, Justice Md. Nizamuddin observed, 

"Respectfully agreeing with the reasonings and views taken by the Allahabad High Court, Rajasthan High Court and Delhi High Court in the cases referred hereinabove, all these Writ Petitions herein are disposed of by allowing the same. Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void."

Accordingly, the Court allowed the writ petitions and quashed the impugned re-assessment notices issued under sec. 148 of the Income Tax Act, 1961.

Case Title: Bagaria Properties and Investment Pvt. Ltd. & Anr v. Union of India 

Case Citation: 2022 LiveLaw (Cal) 6.

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