Rajasthan High Court Quashed Notices Issued by the Assessing Officers U/S 148 of the Income Tax Act, 1961 for Reopening Assessments for Various Assessment Years

The petitioners have also challenged portions of two notifications issued by CBDT clarifying that provisions of Sections 148, 149 and 151 of the Act as on 31.03.2021 shall apply for the purpose of issuance of notice under Section 148 for the past period. According to the petitioners, this explanation is beyond the jurisdiction of CBDT.

Chief Justice Akil Quresh and Justice Sameer Jain ruled, "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 the Act and are therefore invalid."

Facts

The petitioner had filed return of income on 01.10.2013 for the assessment year 2013-14 declaring total income of Rs.4,79,420/-, which appears to be accepted by the department without scrutiny. To reopen such assessment for the assessment year 2013-14, the respondent No.1 Income Tax Officer Jaipur issued a notice on 08.04.2021 under Section 148 of the Act. According to the petitioner, since indisputably the reassessment provisions introduced in the statute with effect from 01.04.2021 have not been followed in the present case, the notice is bad in law.

According to the petitioner, limitation for issuing notice would be as provided in amended section 149 of the Act. Before issuing notice under section 148, procedure prescribed in section 148A must be followed. In the present case the notice was time barred as per the amended section 149 and procedure under Section 148A was not followed. As an extension of this argument, the petitioner contends that this defect could not be cured through an explanation issued by the CBDT under purported exercise of power of delegated legislation.

Findings

After pursuing multiple judicial pronouncements, the court summarised certain principles applicable in the field of taxation:

(i) A taxing statute must be interpreted strictly. Equity has no place in taxation nor while interpreting taxing statute intendment would have any place.

(ii) Being the central legislation of pan-India effect and operating in the field of taxation, the view of another High Court would have considerable persuasive value.Unless the view expressed by another High Court is plainly unacceptable to the Court, the High Court would lean in favour of the well considered view already expressed by another Court.

(iii) When the Finance Minister who has piloted the budget in her speech explains the provisions contained in the Finance Bill and elaborates on the mischief which prevails and which is sought to be cured by substituting the existing statutory provisions, the explanation rendered by the Finance Minister has considerable importance in the context of correct interpretation of such provisions. For this observation, reliance was placed on Sole Trustee, Loka Shikshana Trust Vs. Commissioner of Income Tax,(1975)

(iv) Further relying on the Gujarat High Court decision in Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax [2013], the court observed that reopening a completed assessment causes great hardship to the assessee and also brings uncertainty.

The court dealt with two questions of law and answered them accordingly:

(i) Whether after introduction of new provisions for reassessment of income by virtue of the Finance Act, 2021 with effect from 01.04.2021, substituting the then existing provisions, would the substituted provisions survive and could be used for issuing notices for reassessment for the past period?

The court observed that 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. The court added that in absence of any such indication all notices which were issued after 01.04.2021 had to be in accordance with such provisions.

The court reiterated that 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 to substitution. The court opined that the original provisions upon their substitution stood repealed for all purposes and had no existence after introduction of the substituting provisions.

The court referred to Section 6 of the General Clauses Act, 1897 which provides inter alia that where the State Act or Central Act or regulation repeals any enactment then unless a different intention appears repeal shall not revive anything not in force or existing at the time at which the repeal takes effect or affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder.

(ii) Whether the explanations contained in the CBDT circulars dated 31.03.2021 and 27.04.2021 are legal and valid?

Relying on St. Johns Teachers Training Institute v. Regional Director, National Council For Teachers Education (2003), the court observed that the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the courts must adopt that construction which makes it valid.

The court opined that it is, however, equally well settled that the subordinate legislation does not enjoy the same level of immunity as the law framed by the Parliament or the State Legislature. The court added that the law framed by the Parliament or the State Legislature can be challenged only on the grounds of being beyond the legislative competence or being contrary to the fundamental rights or any other constitutional provisions.

The court further observed that a subordinate legislation can be challenged on all these grounds as well as on the grounds that it does not conform to the statute under which it is made or that it is inconsistent with the provisions of the Act or it is contrary to some of the statutes applicable on the subject matter

The court observed that two Division Benches of Allahabad and Delhi High Courts have taken a similar view. Two learned Single Judges of Calcutta and this High Court have followed this trend. Independently also we hold the same beliefs. The court noted that Chhattisgarh High Court, however, in Palak Khatuja v. Union of India rejected the view of the High Court that the impugned notices were valid since by virtue of notifications dated 31.03.2021 and 27.04.2021 the application of Section 148 which was originally existing before amendment was deferred.

Case Title: Sudesh Taneja v. Income Tax Officer, and connected matters

Citation: 2022 LiveLaw (Raj) 41

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