Taxation And Other Laws Act, 2020 Does Not Alter Sanction Powers For Reopening Conferred U/s 151 Of Income Tax Act: Delhi High Court

The Delhi High Court recently clarified that the TOLA [Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020] authorisation merely enables the competent authority to take action within the extended time period which would have otherwise been regulated by Sections 148 and 149, but does not amend the structure for approval which stands erected by virtue of Section 151.

As per Section 151 of Income tax Act, no notice shall be issued under section-148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice.

“Sanction”, when used in Section 3 of TOLA caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved, observed the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja.

The Bench added that once it is conceded that the notice came to be issued four or three years after the end of the relevant AY, the approval granted by the JCIT would not be compliant with the scheme of Section 151.

Facts of the case

The petitioners had approached the High Court challenging the reopening notices issued u/s 148 on the anvil of Section 151. The counsel for the petitioner contended that after the passing of the Finance Act 2021, Sections 148 and 148A introduced the concept of “specified authority” as the designated officer which would be liable to accord sanction for reassessment and which expression was defined by Section 151. In terms of Section 151(i), after the passing of the Finance Act 2021, if the notices for reassessment were issued where “three years or less than three years” had elapsed from the end of the relevant AY, the action would have to be based on the approval of the Principal Commissioner/Principal Director/Commissioner/Director. In all other cases, and which would relate to those reassessments which were proposed to be commenced “if more than three years” had elapsed from the end of the concerned AY, the authorities empowered to accord approval were specified to be the Principal Chief Commissioner/ Principal Director General/ Chief Commissioner/ Director General.

Thus, the petitioners contended that irrespective of whether the unamended Section 151 or the provision as it came to form part of the statute post Finance Act 2021, the approval of reassessment by the JCIT would not sustain.

Observation of the High Court

The Bench observed that TOLA does not impact the working of Section 151 and that the operation of the latter would not stand amended by TOLA which merely enabled the specified authority to issue notices or accord sanction within the extended time frame created by that legislation.

As far as divergent view with respect to the date when the notices could be said to have been “issued” and consequently the version of Section 151 which would be applicable, the Bench observed that while a document with a DIN number appears to have been drawn up on Mar 31, 2021, as per the respondents themselves, the document was digitally signed on 01 April 2021.

The Bench referred to the submission of respondents that although the DSC was “executed for signing” on 31 March 2021, due to system delay the digital signature bears the time stamp of 12:42 AM, and since the notice was not being processed on the portal, it was manually dispatched vide Speed Post on 07 April 2021.

A plain reading of Section 3 of TOLA establishes that where the time limit for the completion or compliance of any action under a specified Act were to fall between 20 March 2020 to 31 December 2020, the period for completion and compliance would stand extended up to 31 March 2021 or such other date thereafter as may be specified by the Union Government by way of a notification, added the Bench.

Concededly, Finance Act 2021 was enacted thereafter and came into effect from 01 April 2021, and the Bench found that the respondents admitted that the terminal point for initiation of reassessment for AY 2015-16 in ordinary circumstances would have been 31 March 2020 and that date clearly fell within the period spoken of in Section 3 of TOLA.

Section 3 of TOLA essentially extended the time period statutorily prescribed for initiation and compliance up to the dates notified by the Union Government from time to time, and extension of these timelines was intended to apply to all statutes which were included in the expression “specified Act” as defined in Section 2(b) of TOLA, added the Bench.

The Bench went on to explain that TOLA was concerned with overcoming the statutory closure and eclipse which would have otherwise descended upon the authority to act and take action under the specified statutes.

TOLA, was neither aimed at nor designed or intended to confer a new jurisdiction or authority upon an officer under a specified enactment, added the Bench while stating that it would be wholly incorrect to read TOLA as intending to amend the distribution of power or the categorisation envisaged and prescribed by Section 151.

The additional time that TOLA provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by Section 151, and the issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant AY or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant AY or thereafter, added the Bench.

Thus, the Bench clarified that even if the reassessment was proposed to be initiated with the aid of TOLA after the expiry of four years from the end of the relevant AY, the authority statutorily empowered to confer approval would be the Principal Chief Commissioner /Chief Commissioner /Principal Commissioner /Commissioner.

Hence, the High Court allowed Assessee's petition and quashed the notices issued u/s 148.

Counsel for Petitioner/ Assessee: Kapil Goel and Sandeep Goel

Counsel for Respondent/ Revenue: Sanjay Kumar and Easha

Case Title: Abhinav Jindal HUF versus ITO

Citation: 2024 LiveLaw (Del) 1060

Case Number: W.P.(C) 2698/2022

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