Reassessment Proceedings For AY 2013-14, 2014-15 Initiated After 1 April 2021 Have To Be Closed Irrespective Of Income Escaping Assessment: Allahabad High Court

The Allahabad High Court ruled that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) cannot be used to conduct the reassessment proceedings beyond March 30, 2021. The time limit outlined in Section 149(1)(b) (as amended beginning April 1, 2021) cannot be extended by the department after March 30, 2020.

The division bench of Justice Sunita Agarwal and Justice Vipin Chandra Dixit has observed that the relaxation law under TOLA would not govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act, 2021.

The writ petition challenged the reassessment orders passed by the assessing authority under Section 148-A(d) of the Income Tax Act of 1961 and the notices issued under Section 148 of the Act of 1961. The reassessment notices were issued between April 1, 2021, and June 30, 2021, for the assessment years 2013–14 and 2014–15.

The issue raised was whether the department will be eligible to receive the benefits of TOLA 2020 in relation to the proceedings where the first proviso to Section 149(1)(b) is attracted.

The Relaxation Act/Enabling Act/TOLA 2020 was enacted in March 2020 on account of unforeseen circumstances faced by the country due to the onset of the pandemic COVID-19, which has led to the enforcement of intermittent lockdowns. The normal functioning of the government and its institutions had been put to a halt. Because of the obstructions due to the spread of COVID-19, the Enabling Act of 2020 was enacted solely to extend the limitation under the provisions of the Income Tax Act of 1961.

The petitioner argued that the Finance Act 2021, which is a later Act, does not contain any saving clauses that may allow the pre-existing provisions an extended life. After the enforcement of the amendment, the pre-existing provisions could not be pressed into service by the department. The Enabling Act does not and could not save the pre-existing Sections 147, 148, and 151 of the Income Tax Act pertaining to reassessment, and no overriding effect could arise or be given to the pre-existing reassessment legislative regime by the Enabling Act since, on the date of enactment of the Enabling Act, the Finance Act of 2021 was not born. The Enabling Act, therefore, became wholly unenforceable or unacceptable to the proceedings that would arise under the latter Act.

The petitioners contended that the assessments for 2013–14, 2014–15, 2015–16, 2016–17, and 2017–18 cannot be reopened as the maximum period of six years prescribed in the pre-amendment provision of Section 149(1)(b) had expired on March 31, 2021.

The petitioner contended that, due to time constraints, no notice under Section 148 could be issued in a case for the assessment years 2013–14 and 2014–15 on or after April 1, 2021. The notice cannot be issued on account of being beyond the time limit specified under the provisions of Section 149(1)(b), as they stood immediately before the commencement of the Finance Act 2021.

The petitioners stated the monetary threshold and other requirements of the Income Tax Act in the post-amendment regime, i.e., after the commencement of the Finance Act in 2021, have to be followed. The validity of the jurisdictional notice under Section 148 is, therefore, to be tested on the touchstone of compliance or fulfillment of requirements by the revenue as per Section 149(1)(b) and the first proviso to Section 149(1) inserted by the amendment under the Finance Act of 2021, w.e.f. April 1, 2021.

The department contended that the reassessment notices would have been barred by the time had there been no extension of the time limit under the Income Tax Act of 1961 by the Enabling Act (TOLA 2020). The applicability of Explanation to Clause A(a) of the notification dated 31.03.2021 and Explanation to Clause A(b) of the notification dated 27.04.2021, may have been restricted to reassessment proceedings as in existence on 31.03.2021 and have been read down as applicable to the pre-existing Sections 147 to 151-A of the Act of 1961, but the substantive provisions of the notifications dated 31.03.2021 and 27.04.2021, as issued, still survive.

The court held that a heavy burden is cast upon the revenue to meet the requirements of clause (b) of sub-section (1) of Section 149 for the initiation of reassessment proceedings after the lapse of three years.

The court noted that, after the enforcement of the Finance Act in 2021, the general relaxation of limitation granted on account of general hardship existing upon the spread of the pandemic COVID-19 applies to the substituted provisions. The extension of time, thus, can be granted even after amendment by the Finance Act of 2021 under Section 3(1) of the Enabling Act (TOLA 2020).

Case Title: Rajeev Bansal Versus Union Of India

Citation: Writ Tax No. 1086 of 2022

Date: 22.02.2023

Counsel For Petitioner: Abhinav Mehrotra, Satya Vrata Mehrotra

Counsel For Respondent: Gaurav Mahajan, Manu Ghildyal, Sudarshan Singh

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