KMG INDUSTRIAL TRADERS PVT LTD vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 13 (1) DELHI

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W.P.(C)/6403/2022HC DelhiDLHC01015471202222 April 2022Bench: HON'BLE MR. JUSTICE MANMOHAN,HON'BLE MR. JUSTICE DINESH KUMAR SHARMA5 pages
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What did the High Court hold?

The Delhi High Court held that the reassessment notices issued under Section 148 of the Income Tax Act, 1961, post-March 31, 2021, were invalid because they failed to comply with the substituted Sections 147 to 151, which became effective from April 1, 2021. The Court found that the Legislature introduced new provisions via the Finance Act, 2021, and any reassessment notice issued after March 31, 2021, had to comply with these substituted sections. The Court ruled that Section 3(1) of the Relaxation Act, 2020, empowers the government only to extend time limits, not to legislate on procedural provisions for initiating reassessment proceedings. Consequently, the Explanations A(a)(ii)/A(b) to the Notifications dated March 31, 2021, and April 27, 2021, were declared ultra vires the Relaxation Act, 2020, and thus null and void. The Court disagreed with the Chhattisgarh High Court's view in Palak Khatuja but agreed with the Allahabad and Rajasthan High Courts in Ashok Kumar Agarwal and Bpip Infra Private Limited, respectively. The Revenue's reliance on Section 6 of the General Clauses Act was rejected, as the repeal was followed by a fresh legislation on the same subject manifesting an intention to destroy the old procedure. The Court quashed the impugned reassessment notices and allowed the writ petitions, with liberty to the respondents to take further steps if permitted by law.

What were the facts?

The petitioners, including Ramesh Arora, KMG Industrial Traders Pvt Ltd, Rajesh Kumar Aggarwal, and Inder Travels Private Limited, filed writ petitions before the Delhi High Court. The petitions challenged reassessment notices issued under Section 148 of the Income Tax Act, 1961. The core issue was that these notices were issued post-March 31, 2021, without adhering to the procedure prescribed in the substituted Sections 147 to 151 of the Income Tax Act, 1961, which became effective from April 1, 2021. The Revenue contended that certain explanations in notifications issued by the government extended the applicability of old provisions or procedures. The High Court was to decide if these notices were validly issued.

What were the issues?

1. Whether reassessment notices issued under Section 148 of the Income Tax Act, 1961, post-March 31, 2021, are valid if they do not comply with the substituted Sections 147 to 151 effective from April 1, 2021? (Question of law, concerning Sections 147, 148, 151 of the Income Tax Act, 1961 and Section 3(1) of the Relaxation Act, 2020). Assessee's Contention: The impugned notices were issued after the new procedure under Sections 147-151, as substituted by the Finance Act, 2021, came into effect. Therefore, the notices should have followed the new procedure. The explanations in the notifications dated March 31, 2021, and April 27, 2021, are ultra vires the Relaxation Act, 2020, as they attempt to legislate beyond the executive's power to extend time limits. Revenue's Contention: The Revenue argued that the power of reassessment that existed prior to March 31, 2021, continued to exist till June 30, 2021. They also relied on Section 6 of the General Clauses Act to save notices issued under Section 148 post-March 31, 2021. Further, they argued that the substitution made by the Finance Act, 2021, was not applicable to past Assessment Years as it was substantial in nature, and that Covid-19 necessitated the extension of old provisions.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

W.P.(C) 6402/2022
W.P.(C) 6403/2022
W.P.(C) 6407/2022

Read from the judgment's own cause title. This page is filed under one of them.

$~72, 73, 75, 76 & 81 * IN THE HIGH COURT OF DELHI AT NEW DELHI 72 + W.P.(C) 6402/2022 & 19384/2022, CM APPL.19385/2022

RAMESH ARORA (EARLIER KNOWN AS RAMESH KUMAR) ..... Petitioner

Through: Ms. Divya and Mr. Ruchesh Sinha,

Advocates.

versus

INCOME TAX OFFICER WARD- 47(1), NEW DELHI & ANR. ..... Respondents

Through: Mr. Kunal Sharma, Advocate.

Mr. Akash Vajpai with Mr. Akshay

Ravi, Advocates for respondent No.2. 73 + W.P.(C) 6403/2022 & CM APPL. 19408/2022, CM APPL.

19409/2022

KMG INDUSTRIAL TRADERS PVT LTD ..... Petitioner

Through: Mr. Shubhankar Jha, Advocate.

versus

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 13 (1)

DELHI

..... Respondent

Through: Mr. Ajit Sharma, Advocate. 75 + W.P.(C) 6407/2022 & CM APPL. 19414/2022, CM APPL.

19514/2022

RAJESH KUMAR AGGARWAL

..... Petitioner

Through: Mr. Ashvini Kumar with Mr. Abhinav

Arya, Advocates. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/06/2026 at 08:21:30

versus

ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 52(1),

DELHI & ANR. ..... Respondent

Through: Mr. Kunal Sharma, Advocate. 76 + W.P.(C) 6409/2022 & CM APPL. 19416/2022, CM APPL.

19417/2022

INDER TRAVELS PRIVATE LIMITED

..... Petitioner

Through: Mr. Himanshu Sinha with

Mr. Bhuwan Dhoopar, Advocates.

versus

ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL

CIRCLE 4 DELHI

..... Respondent

Through: Mr. Sunil Kumar Agarwal, Advocate. 81 + W.P.(C) 6421/2022 & CM APPL. 19441/2022, CM APPL.

19442/2022

INDER TRAVELS PRIVATE LIMITED

..... Petitioner

Through: Mr. Himanshu Shekhar Sinha,

Advocate.

versus

ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL

CIRCLE 4 DELHI

..... Respondent

Through: Mr. Sunil Kumar Agarwal, Advocate.

CORAM:

HON'BLE MR. JUSTICE MANMOHAN

HON'BLE MR. JUSTICE DINESH KUMAR SHARMA

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/06/2026 at 08:21:30

22.04.2022 O R D E R

1.

Learned counsel for the parties admit that as the impugned notices in the present matters have been issued post 31st March, 2021 without following the procedure prescribed in the substituted Sections 147 to 151 w.e.f. 01st April, 2021, the present matters are covered by the judgment dated 15th 2. The conclusion reached by this Court in Mon Mohan Kohli (supra) is reproduced hereinbelow:- December, 2021 passed by this Court in the case of Mon Mohan Kohli vs. Assistant Commissioner of Income Tax & Anr., W.P.(C) No.6176/2021. “CONCLUSION 97. This Court is of the view that as the Legislature has introduced the new provisions, Sections 147 to 151 of the Income Tax Act, 1961 by way of the Finance Act, 2021 with effect from 1st April, 2021 and as the said Section 147 is not even mentioned in the impugned Explanations, the reassessment notices relating to any Assessment Year issued under Section 148 after 31st

March, 2021 had to comply with the substituted Sections. 98. It is clarified that the power of reassessment that existed prior to 31st March, 2021 continued to exist till the extended period i.e. till 30th June, 2021; however, the Finance Act, 2021 has merely changed the procedure to be followed prior to issuance of notice with effect from 1st

April, 2021. 99. This Court is of the opinion that Section 3(1) of Relaxation Act empowers the Government/Executive to extend only the time limits and it does not delegate the power to legislate on provisions to be followed for initiation of reassessment proceedings. In fact, the Relaxation Act does not give power to Government to extend the erstwhile Sections 147 to 151 beyond 31st March, 2021 and/or defer the operation of substituted provisions enacted by the Finance Act, This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/06/2026 at 08:21:30

2021. Consequently, the impugned Explanations in the Notifications dated 31st March, 2021 and 27th

April, 2021 are not conditional legislation and are beyond the power delegated to the Government as well as ultra vires the parent statute i.e. the Relaxation Act. Accordingly, this Court is respectfully not in agreement with the view of the Chhattisgarh High Court in Palak Khatuja (supra), but with the views of the Allahabad High Court and Rajasthan High Court in Ashok Kumar Agarwal (supra) and Bpip Infra Private Limited (supra) respectively. 100. The submission of the Revenue that Section 6 of the General Clauses Act saves notices issued under Section 148 post 31st

March, 2021 is untenable in law, as in the present case, the repeal is followed by a fresh legislation on the same subject and the new Act manifests an intention to destroy the old procedure. Consequently, if the Legislature has permitted reassessment to be made in a particular manner, it can only be in this manner, or not at all. 101. The argument of the respondents that the substitution made by the Finance Act, 2021 is not applicable to past Assessment Years, as it is substantial in nature is contradicted by Respondents’ own Circular 549 of 1989 and its own submission that from 1st

July, 2021, the substitution made by the Finance Act, 2021 will be applicable. 102. Revenue cannot rely on Covid-19 for contending that the new provisions Sections 147 to 151 of the Income Tax Act, 1961 should not operate during the period 1st April, 2021 to 30th

June, 2021 as Parliament was fully aware of Covid-19 Pandemic when it passed the Finance Act, 2021. Also, the arguments of the respondents qua non-obstante clause in Section 3(1) of the Relaxation Act, ‘legal fiction’ and ‘stop the clock provision’ are contrary to facts and untenable in law. 103. Consequently, this Court is of the view that the Executive/Respondents/Revenue cannot use the administrative power to issue Notifications under Section 3(1) of the Relaxation Act, 2020 to undermine the expression of Parliamentary supremacy in the form of an Act of Parliament, namely, the Finance Act, 2021. This Court is also of the opinion that the Executive/Respondents/Revenue cannot This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/06/2026 at 08:21:30

frustrate the purpose of substituted statutory provisions, like Sections 147 to 151 of Income Tax Act, 1961 in the present instance, by emptying it of content or impeding or postponing their effectual operation.”

3.

Keeping in view the aforesaid, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th 4. Consequently, the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 are quashed and the present writ petitions are allowed. If the law permits the respondents/revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the petitioners have a grievance, they shall be at liberty to take their remedies in accordance with law. April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void.

MANMOHAN, J

DINESH KUMAR SHARMA, J APRIL 22, 2022 st This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 17/06/2026 at 08:21:30

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