AJAY KUMAR AGARWAL vs. ASSISTANT COMMISSIONER OF INCOME TAX
What did the High Court hold?
The Tribunal held that the explanations introduced by the CBDT in the notifications dated 31.03.2021 and 27.04.2021 were unconstitutional and invalid. The reasoning was that the power delegated to the Central Government under Section 3(1) of the Relaxation Act, 2020, was limited to extending time limits for actions and compliances. Issuing an explanation that provided a clarification on the applicability of Section 148 provisions, effectively altering the basis of statutory provisions or amending the parent Act, plainly exceeded the delegated jurisdiction. Subordinate legislation must operate within the confines of the powers vested by the parent Act and cannot travel beyond them. The Tribunal found it doubtful that an explanation, even in the guise of clarification, could change the fundamental basis of statutory provisions. The ratio decidendi is that subordinate legislation cannot amend the provisions of a parent Act and must yield to plenary legislation. Consequently, the impugned notices issued under Section 148 were quashed and set aside. The appeals of the revenue were dismissed.
What were the facts?
The judgment consolidates multiple writ petitions filed by various assessees against the Union of India and Income Tax Officers. The core issue revolves around the validity of notices issued under Section 148 of the Income Tax Act, 1961, for reopening assessments. The assessees challenged these notices, arguing they were issued based on explanations in notifications that exceeded the delegated powers granted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The Central Board of Direct Taxes (CBDT) issued notifications extending certain compliances and introduced explanations regarding the applicability of Section 148 provisions. The revenue contended that these explanations were clarificatory and that the notices were validly issued.
What were the issues?
1. Whether the explanations introduced by the CBDT in its notifications dated 31.03.2021 and 27.04.2021, which stipulated that for the purpose of issuing notices under Section 148, the provisions as they stood on 31.03.2021 before the commencement of the Finance Act, 2021, would apply, were within the scope of the delegated power under Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020? Assessee's contention: The assessees argued that the CBDT, through these explanations, exceeded its delegated authority. They contended that the parent Act only empowered the government to extend time limits, not to introduce substantive clarifications that altered the basis of statutory provisions or amended the Act indirectly. They relied on principles of subordinate legislation and the judgment in Indian Express Newspaper v. Union of India. Revenue's contention: The revenue contended that the notifications were issued in exercise of powers conferred under the Relaxation Act, 2020, and that the application of Section 148, as it existed before the amendment, was effectively deferred. They argued that the individual identity of the pre-amendment Section 148 was insulated and saved until the extended dates.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Order 28/01/2022 These writ petitions involve identical issues. The petitioners assessees have challenged respective notices of re-assessment issued by the assessing officer. All these notices are issued after 01.04.2021 and pertain to the assessment period prior to the said date. According to the petitioners, these notices are issued under (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM) (17 of 22) [CW-652/2022] the provisions for re-assessment contained in the Income Tax Act, 1961, which prevailed period prior to 01.04.2021, in particular, in none of these cases the procedure laid down under Section 148-A [D.B. Civil Writ Petition No. 969/2022], the Division Bench in the 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 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 (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM) (18 of 22) [CW-652/2022] 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 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 (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM) (19 of 22) [CW-652/2022] 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.
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?
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 & 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 (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM) (20 of 22) [CW-652/2022] 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.”
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 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 (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM) (21 of 22) [CW-652/2022] 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.
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 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 (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM) (22 of 22) [CW-652/2022] the revenue are dismissed. Pending applications if any stand disposed of.” Under the circumstances, without recording separate reasons, all respective impugned notices challenged in these petitions are quashed. The petitions are disposed of accordingly. (MADAN GOPAL VYAS),J (AKIL KURESHI),CJ 93to122,1,2,8,c/1to15-MohitTak/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 29/01/2022 at 01:19:49 PM) (Downloaded on 28/10/2026 at 12:05:58 AM)
More judgments on Section 148
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
- Adj Agri International LLP, Rajkot vs The Income Tax Officer, Ward-1(1)(1), RajkotITA 1198/RJT/2026[2018-19]Status: Disposed21 Oct 2026AY 2018-19
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