RAJESH BATRA,NEW DELHI vs. ITO, WARD 29(1), DELHI

When enacting a statute, the legislature often endeavours to ensure that the provisions of one legislation do not conflict with provisions of another legislation. Interplay (supra) [between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 INSC 1066]. The purpose of the Income-tax Act is to levy tax on income and raise revenues for the functioning of the Government. On the other hand, the purpose of TOLA is to provide relaxation of the time for completion of any actions or proceedings falling for completion within a particular period. Thus, the two enactments operate in separate and distinct fields. This Court must ensure that the provisions of the two enactments are interpreted harmoniously unless there is an irreconcilable conflict between them. …… b. Reading TOLA into Section 149 68. After 1 April 2021, the Income-tax Act has to be read along with the substituted provisions. The substituted provisions apply retrospectively for past assessment years as well. On 1 April 2021, TOLA was still in existence, and the Revenue could not have ignored the application of TOLA and its notifications. Therefore, for issuing are assessment notice under section 148 after 1 April 2021, the Revenue would still have to look at: (i) the time limit specified under section 149 of the new regime; and (ii) the time limit for issuance of notice as extended by TOLA and its notifications. The Revenue cannot extend the operation of the old law under TOLA, but it can certainly benefit from the extended time limit for completion of actions falling for completion between 20 March 2020 and 31 March 2021.

For instance, Section 149(1)(a) of the new regime specified the time limit of three years from the end of the relevant assessment year for reopening of the assessment. For assessment year 2017- 2018, the three year period expired on 31 March 2021. The expiry of time fell within the time period contemplated by Section 3 of TOLA read with its notifications. Resultantly, the Revenue had time until 30 June 2021 to issue a reassessment notice for assessment year 2017-2018 under section 149(1)(a). This harmonious reading gives effect to the legislative intention of both the Income-tax Act and TOLA. Moreover, Sections 147 to 151 are machinery provisions. Therefore, they must be given an interpretation that is consistent with the object and purpose of the Income-tax Act. ……

The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.

Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whetherTOLA will apply to Section 151 of the new regime is this: if the time limit ofthree years from the end of an assessment year falls between 20 March2020 and 31 March 2021, then the specified authority under section 151(i)has an extended time till 30 June 2021 to grant approval. In the case ofSection 151 of the old regime, the test is: if the time limit of four years fromthe end of an assessment year falls between 20 March 2020 and 31 March2021, then the specified authority under section 151(2) has time till 31March 2021 to grant approval. The time limit for Section 151 of the oldregime expires on 31 March 2021 because the new regime comes into effecton 1 April 2021.

For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the timeperiod of 20 March 2020 and 31 March 2021, contemplated undersection 3(1) of TOLA. Resultantly, the authority specified undersection 151(i) of the new regime can grant sanction till 30 June2021.

Under Finance Act 2021, the assessing officer was required to obtainprior approval or sanction of the specified authorities at four stages: a. Section 148A(a) - to conduct any enquiry, if required, with respect to theinformation which suggests that the income chargeable to tax has escapedassessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee byserving upon them a show cause notice as to why a notice under section148 should not be issued based on the information that suggests thatincome chargeable to tax has escaped assessment. It must be noted thatthis requirement has been deleted by the Finance Act 2022;33 c. Section 148A(d) - to pass an order deciding whether or not it is a fit casefor issuing a notice under section 148; and d. Section 148 - to issue a reassessment notice.

In Ashish Agarwal (supra), this Court directed that Section 148 noticeswhich were challenged before various High Courts "shall be deemed to havebeen issued under section 148-A of the Income-tax Act as substituted by theFinance Act, 2021 and construed or 6 treated to be show-cause notices interms of Section 148-A(b)." Further, this Court dispensed with therequirement of conducting any enquiry with the prior approval of thespecified authority under section 148A(a). Under Section 148A(b), anassessing officer was required to obtain prior approval from the specifiedauthority before issuing a show cause notice. When this Court deemedthe Section 148 notices under the old regime as Section 148A(b)notices under the new regime, it impliedly waived the requirementof obtaining prior approval from the specified authorities undersection 151 for Section 148A(b). It is well established that this Courtwhile exercising its jurisdiction under Article 142, is not bound by theprocedural requirements of law High Court Bar Association v. State of U P[2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.

This Court in Ashish Agarwal (supra) directed the assessing officers to"pass orders in terms of Section 148-A(d) in respect of each of the assessesconcerned." Further, it directed the assessing officers to issue a notice underSection 148 of the new regime "after following the procedure as requiredunder section 148-A." Although this Court waived off the requirement ofobtaining prior approval under section 148A(a) and Section 148A(b), it didnot waive the requirement for Section 148A(d) and Section 148. Therefore,the assessing officer was required to obtain prior approval of the specifiedauthority according to Section 151 of the new regime before passing an orderunder section 148A(d) or issuing a notice under section 148. These noticesought to have been issued following the time limits specified under section151 of the new regime read with TOLA, where applicable. F. Section 148 notices issued in June-September 2022 i. Scope of Article 142 113. In Ashish Agarwal (supra), this Court allowed the assesses to avail allthedefences, including the defence of expiry of the time limit specified undersection 149(1). In the instant appeals, the reassessment notices pertain tothe assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and2017-2018. To assume jurisdiction to issue notices under section 148 withrespect to the relevant assessment years, an assessing officer has to: (i)issue the notices within the period prescribed under section 149(1) of thenew regime read with TOLA; and (ii) obtain the previous approval of theauthority specified under section 151. A notice issued without complyingwith the preconditions is invalid as it affects the jurisdiction of the assessingofficer. Therefore, the reassessment notices issued under section 148of the new regime, which are in pursuance of the deemed notices,ought to be issued within the time limit surviving under the Incometax Act read with TOLA. A reassessment notice issued beyond thesurviving time limit will be time-barred. G. Conclusions 114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income-tax Act has to be read along with thesubstituted provisions; b. TOLA will continue to apply to the Income-tax Act after 1 April 2021 if any action or proceeding specified under the substitutedprovisions of the Income-tax Act falls for completion between 20 March 2020 and 31 March 2021; c. Section 3(1) of TOLA overrides Section 149 of the Income-tax Actonly to the extent of relaxing the time limit for issuance of areassessment notice under section 148; d. TOLA will extend the time limit for the grant of sanction by the authorityspecified under section 151. The test to determine whether TOLA will applyto Section 151 of the new regime is this: if the time limit of three yearsfrom the end of an assessment year falls between 20 March 2020and 31 March 2021, then the specified authority under section 151(i)has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit offour years from the end of an assessment year falls between 20 March 2020and 31 March 2021, then the specified authority under section 151(2) hasextended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninetythousand reassessment notices issued under the old regime during theperiod 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayedis from the date of issuance of the deemed notice between 1 April 2021 and30 June 2021 till the supply of relevant information and material by theassessing officers to the assesses in terms of the directions issued by thisCourt in Ashish Agarwal (supra), and the period of two weeks allowed tothe assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment noticeunder section 148 of the new regime within the time limit surviving underthe Income-tax Act read with TOLA. All notices issued beyond the survivingperiod are time barred and liable to be set aside;”