SONAM GARG vs. ASST. COMMISSIIONER OF INCOME TAX (CPC)

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CW/2159/2022HC RajasthanRJHC01008708202218 February 2022Author: MANINDRA MOHAN SHRIVASTAVA,MADAN GOPAL VYAS6 pages
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What did the High Court hold?

The Tribunal held that for any action of issuing a notice under Section 148 after April 1, 2021, the newly introduced provisions under the Finance Act, 2021, would apply. The Tribunal found that the first proviso to Section 149(1) clearly indicates that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before April 1, 2021, if such notice could not have been issued at that time due to being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. Therefore, the extended period available in the new Section 149(1)(b) cannot be used for reopening assessments for past periods. The Tribunal also held that the explanations introduced by the CBDT notifications dated March 31, 2021, and April 27, 2021, were unconstitutional and invalid. The Tribunal reasoned that these explanations, in the guise of clarification, exceeded the delegated powers granted by the parent Act (Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020) by attempting to alter the statutory provisions of the Income Tax Act. Consequently, the impugned notice was quashed and set aside.

What were the facts?

The petitioner, Sonam Garg, challenged a notice of re-assessment for assessment year 2014-15, issued on June 30, 2021. The petitioner argued that the issues were covered by a previous Division Bench judgment in Sudesh Taneja vs. Income Tax Officer. This judgment, dated January 27, 2022, dealt with similar circumstances and quashed reassessment notices. The petitioner's counsel relied on this precedent. The respondents, Assistant Commissioner of Income Tax (CPC) and Income Tax Officer, Ward 34 (3) (5), Mumbai, did not present any arguments.

What were the issues?

1. Whether the notice of re-assessment for assessment year 2014-15, issued on June 30, 2021, is invalid in light of the reassessment provisions introduced by the Finance Act, 2021, and the first proviso to Section 149(1) of the Income Tax Act, 1961. (Question of law) 2. Whether the explanations introduced by CBDT notifications dated March 31, 2021, and April 27, 2021, which sought to apply pre-amendment provisions for issuing notices under Section 148, are valid and constitutional. (Question of law) Assessee's contentions: The petitioner argued that the notice was issued after April 1, 2021, and therefore, the new scheme of reassessment under the Finance Act, 2021, should apply. They contended that the notice was issued without following the procedure under Section 148A and that the extended time limits under the new Section 149(1)(b) could not be applied to past periods due to the first proviso to Section 149(1). The petitioner relied on the Division Bench judgment in Sudesh Taneja vs. Income Tax Officer. Revenue's contentions: No arguments were recorded for the revenue.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 149,Section 151

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 2159/2022 Sonam Garg D/o Shri Inder Chand Todi, W/o Sourabh Garg, Aged About 39 Years, Permanent R/o 102, Main Sector Shastri Nagar, Bhilwara (Raj.) ----Petitioner Versus 1. Asst. Commissiioner Of Income Tax (Cpc), Banglore 2. Income Tax Officer, Ward 34 (3) (5), Mumbai. ----Respondents For Petitioner(s) : Mr. A.R. Beniwal For Respondent(s) : --- HON'BLE MR. JUSTICE MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE MADAN GOPAL VYAS

Order 18/02/2022 The petitioner has challenged the notice of re-assessment for the assessment year 2014-15, which notice was issued on 30.06.2021. Learned counsel for the petitioner pointed out that [D.B. Civil Writ Petition No. 969/2022], in which the Division Bench in identical circumstances quashed the impugned notices of re-assessment making following observations:- “37. In this context we have perused the provisions of reassessment contained in the Finance Act, 2021. We have noticed earlier the major departure that the new scheme of reassessment has made under these provisions. The time limits for issuing notice for reassessment have been changed. The concept of (Uploaded on 19/02/2022 at 03:40:39 PM) (Downloaded on 28/10/2026 at 12:03:23 AM) (2 of 6) [CW-2159/2022] income chargeable to tax escaping assessment on account of failure on the part of the assessee to disclose truly or fully all material facts is no longer relevant. Elaborate provisions are made under Section 148A of the Act enabling the Assessing Officer to make enquiry with respect to material suggesting that income has escaped assessment, issuance of notice to the assessee calling upon why notice under Section 148 should not be issued and passing an order considering the material available on record including response of the assessee if made while deciding whether the case is fit for issuing notice under Section 148. 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. In absence of any such indication all notices which were issued after 01.04.2021 had to be in accordance with such provisions. To reiterate, we find 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. In fact there are strong indications to the contrary. We may recall, that time limits for issuing notice under Section 148 of the Act have been modified under substituted Section 149. Clause (a) of sub-section (1) of Section 149 reduces such period to three years instead of originally prevailing four years under normal circumstances. Clause (b) extends the upper limit of six years previously prevailing to ten years in cases where income chargeable to tax which has escaped assessment amounts to or is likely to amount to 50 lacs or more. Sub-section (1) of Section 149 thus contracts as well as expands the time limit for issuing notice under Section 148 depending on the question whether the case falls under clause (a) or clause (b). In this context the first proviso to Section 149(1) provides that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. As per this proviso thus no notice under Section 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 would be in terms of the substituted Section 149(1) but without breaching the upper time limit provided in the original Section 149(1) which stood substituted. This aspect has also been highlighted in the memorandum explaining the proposed provisions in the Finance Bill. If according to the revenue for past period provisions of section 149 (Uploaded on 19/02/2022 at 03:40:39 PM) (Downloaded on 28/10/2026 at 12:03:23 AM) (3 of 6) [CW-2159/2022] before amendment were applicable, this first proviso to section 149(1) was wholly unnecessary. Looked from both angles, namely, no indication of surviving the past provisions after the substitution and in fact an active indication to the contrary, inescapable conclusion that we must arrive at is that for any action of issuance of notice under Section 148 after 01.04.2021 the newly introduced provisions under the Finance Act, 2021 would apply. Mere extension of time limits for issuing notice under section 148 would not change this position that obtains in law. Under no circumstances the extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue, can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms 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.

38.

The second question framed by us arises in this context. Would the explanation contained in both the notifications of CBDT dated 31.03.2021 and 27.04.2021 save the situation for the revenue?

39.

It is well settled that there is presumption of constitutionality of a statute (refer to the Constitution Bench judgment in case of The State of Jammu & (Uploaded on 19/02/2022 at 03:40:39 PM) (Downloaded on 28/10/2026 at 12:03:23 AM) (4 of 6) [CW-2159/2022] as under:- “63. At the outset, we may state that on account of globalization and socio-economic problems (including income disparities in our economy) the power of Delegation has become a constituent element of legislative power as a whole. However, as held in the case of Indian Express Newspaper v. Union of India reported in (1985) 1 SCC 641 at page 689, subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent Legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In addition, it may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is inconsistent with the provisions of the Act or that it is contrary to some other statute applicable on the same subject matter. Therefore, it has to yield to plenary legislation. It can also be questioned on the ground that it is manifestly arbitrary and unjust. That, any inquiry into its vires must be confined to the grounds on which plenary legislation may be questioned, to the grounds that it is contrary to the statute under which it is made, to the grounds that it is contrary to other statutory provisions or on the ground that it is so patently arbitrary that it cannot be said to be inconformity with the statute. It can also be challenged on the ground that it violates Article 14 of the Constitution.”

40.

With this background we may revert to the Relaxation Act, 2020 and the two notifications issued by the CBDT. We may recall, under sub-section (1) of Section 3 of the Relaxation Act, 2020 while extending the time limits for taking action and making compliances in the specified Acts upto 31.12.2020 the power was given to the Central Government to extend the time further by issuing a notification. This was the only power vested in the Central Government. As a piece of delegated legislation the notifications issued (Uploaded on 19/02/2022 at 03:40:39 PM) (Downloaded on 28/10/2026 at 12:03:23 AM) (5 of 6) [CW-2159/2022] in exercise of such powers, had to be within the confines of such powers. In plain terms under sub- section (1) of Section 3 of the Relaxation Act, 2020 the Government of India was authorized to extend the time limits by issuing notifications in this regard. Issuing any explanation touching the provisions of the Income Tax Act was not part of this delegation at all. The CBDT while issuing the notifications dated 31.03.2021 and 27.04.2021 when introduced an explanation which provided by way of clarification that for the purposes of issuance of notice under Section 148 as per the time limits specified in Section 149 or 151, the provisions as they stood as on 31.03.2021 before commencement of the Finance Act, 2021 shall apply, plainly exceeded its jurisdiction as a subordinate legislation. The subordinate legislation could not have travelled beyond the powers vested in the Government of India by the parent Act. Even otherwise it is extremely doubtful whether the explanation in the guise of clarification can change the very basis of the statutory provisions. If the plain meaning of the statutory provision and its interpretation is clear, by adopting a position different in an explanation and describing it to be clarificatory, the subordinate legislature cannot be permitted to amend the provisions of the parent Act. Accordingly, these explanations are unconstitutional and declared as invalid.

41.

As noted, two Division Benches of Allahabad and Delhi High Courts have taken similar view. Two learned Single Judges of Calcutta and this High Court have followed this trend. Independently also we hold the same beliefs. As noted earlier we are conscious that Single Judge of Chhattisgarh High Court in Palak Khatuja (supra) has taken a different view. The view of the High Court was 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. It was further observed as under:- “Reading of the aforesaid notification would show that it was issued in exercise of power conferred under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and time for issuance of notice under Section 148, the end date was initially extended uptill on 30th day of April 2021 and subsequently again by notification dated 27th April, 2021 the time limit of 30th day of April 2021 was further extended up till 30th day of June, 2021. By effect of such notification, the individual identity of Section 148, which was prevailing prior to amendment and insertion of (Uploaded on 19/02/2022 at 03:40:39 PM) (Downloaded on 28/10/2026 at 12:03:23 AM) (6 of 6) [CW-2159/2022] section 148A was insulated and saved uptill 30.06.2021.” With respect, we are unable to persuade ourselves to accept this analysis of the situation. In our understanding by virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act, 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021. 42. In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed. Pending applications if any stand disposed of.” Under the circumstances, without recording separate reasons, the impugned notice is quashed. The petition is disposed off accordingly. (MADAN GOPAL VYAS),J (MANINDRA MOHAN SHRIVASTAVA),J 2-jayesh/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 19/02/2022 at 03:40:39 PM) (Downloaded on 28/10/2026 at 12:03:23 AM)

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