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The High Court held that the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 are ultra vires, bad in law, and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act is a provision for relaxing time limits and does not empower the Central Government to amend substantive provisions of the Income Tax Act, unlike Section 4 which was enacted by the legislature itself. The Court further found that even if the Explanations were valid, the impugned notices were bad in law because they did not comply with the amended Section 147 of the Act, which requires adherence to Sections 148 to 153, including the procedure under Section 148A. The 'reason to believe' basis for assumption of jurisdiction, a concept from the repealed provisions, was also noted as a flaw. The Court also held that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the statutory requirements. The Court relied on decisions of the Allahabad, Rajasthan, Delhi, and Madras High Courts.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the assessee that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act was the provision that amended the Act, and these amendments were made by the legislature itself. The Court found that the notices issued under Section 148 were bad in law for multiple reasons: (a) the Explanations did not cover Section 147, which empowers revenue to reopen subject to Sections 148 to 153, including Section 148A; (b) the procedure under Section 148A was not followed; (c) the assumption of jurisdiction was based on 'reason to believe,' a concept no longer recognized in the amended Section 147; and (d) the Relaxation Act was not applicable for Assessment Years 2015-2016 or subsequent years. Consequently, all impugned notices were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the procedure.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 are ultra vires and therefore bad in law and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act only deals with relaxation of time limits and does not empower the Central Government to amend substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act, which amends provisions, was enacted by the legislature itself. The Court further found that even if the Explanations were considered valid, the impugned notices are bad in law because they do not comply with the amended Section 147, as the 'reason to believe' concept is obsolete, and the mandatory procedure under Section 148A was not followed. Additionally, the Court noted that the Relaxation Act is not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021, strictly complying with the statutory requirements.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the petitioners' submission that Section 3 of the Relaxation Act was merely a relaxation provision dealing with time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act, which amended the Act, was distinct. The Court further found that even if the Explanations were considered valid, they did not cover Section 147 of the Act, which empowers reopening subject to Sections 148 to 153, including the mandatory procedure under Section 148A. Since this procedure was not followed, the notices were invalid. Additionally, the Court noted that the Relaxation Act was not applicable to assessment years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the statutory requirements.
The High Court held that the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision for time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act, unlike Section 4. The Court found that the Explanations sought to extend the applicability of erstwhile Sections 148, 149, and 151 but did not cover Section 147. Consequently, the notices issued were invalid as they did not comply with the amended Section 147, which requires adherence to Sections 148 to 153, including the procedure under Section 148A, which was not followed. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. All impugned notices were quashed and set aside, with liberty to the Assessing Officers to initiate fresh proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act was the provision that amended the Act. Furthermore, the Court found that even if the Explanations were considered valid, the impugned notices were still bad in law because the Assessing Officers had not complied with the amended Section 147, which requires adherence to Sections 148 to 153, including the procedure under Section 148A. The Court also noted that the Relaxation Act was not applicable to Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the law. The Court relied on decisions of the Allahabad High Court, Rajasthan High Court, Delhi High Court, and Madras High Court.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act, unlike Section 4. The Court found that the Explanations sought to give effect to erstwhile Sections 148, 149, and 151 but did not cover Section 147, which requires compliance with Sections 148 to 153, including the procedure under Section 148A. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards, as the time limits for issuing notices for these years were not expiring within the period for which Section 3(1) of the Relaxation Act was applicable. Consequently, the impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the law. The Court was in respectful agreement with the views of the Allahabad, Rajasthan, Delhi, and Madras High Courts.
The High Court held that the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 are ultra vires, bad in law, and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act, which falls under Chapter II titled ‘Relaxation of Certain Provisions of Specified Act’, only deals with time limits and does not grant power to amend substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act, which amends the Act, falls under Chapter III. Therefore, the Explanations, by attempting to revive repealed provisions for reassessment, exceeded the scope of Section 3. Furthermore, the Court found that even if the Explanations were considered valid, the impugned notices were still invalid as they failed to comply with the amended Section 147 of the Act, specifically by not following the procedure under Section 148A and by relying on the 'reason to believe' concept, which is no longer recognized. The Court also noted that the Relaxation Act was not applicable to Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside, with liberty to the Assessing Officers to initiate fresh proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 are ultra vires and therefore bad in law and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act was only a relaxation provision dealing with time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act, which amended the Act, was enacted by the legislature itself. The Court further found that even if the Explanations were valid, the impugned notices were bad in law because they did not comply with the amended Section 147, which no longer recognizes the concept of 'reason to believe' for assuming jurisdiction, and importantly, did not follow the procedure under Section 148A. Additionally, the Court noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021, strictly complying with the statutory provisions.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires the Relaxation Act and therefore null and void. The Court reasoned that Section 3 of the Relaxation Act, which falls under Chapter II titled ‘Relaxation of Certain Provisions of Specified Act’, was a relaxation provision dealing with time limits and did not grant the power to amend substantive provisions of the Income Tax Act. This power was not delegated to the Central Government. The Court agreed with the assessee that only Section 4 of the Relaxation Act amended the Act. Furthermore, the Court found that even if the Explanations were considered valid, they did not cover the erstwhile Section 147 of the Act, which empowers the revenue to reopen assessments subject to Sections 148 to 153, including the mandatory procedure under Section 148A. As this procedure was not followed, the impugned notices were bad in law. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 or subsequent years. Consequently, all impugned notices issued under Section 148 were quashed and set aside, with liberty to the Assessing Officers to initiate fresh proceedings in accordance with the amended provisions of the Act.
The High Court held that Section 3 of the Relaxation Act was a provision for relaxing time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act. It agreed with the assessee that only Section 4 of the Relaxation Act amended the Act. The Court found that the Explanations to Notifications No. 20 of 2021 and 38 of 2021 were ultra vires the Relaxation Act and therefore bad in law and null and void. The Court further held that even if the Explanations were considered valid, the impugned notices were bad in law because they did not comply with the amended Section 147, which requires compliance with Section 148A, nor did they cover the erstwhile Section 147. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 or subsequent years. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021, after strictly complying with the statutory provisions.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act. It noted that Section 4 of the Relaxation Act, which did amend the Act, was distinct and made by the Legislature itself. The Court further found that even if the Explanations were considered valid, the impugned notices were bad in law because they were issued based on the erstwhile Section 147 ('reason to believe') and failed to comply with the mandatory procedure under the amended Section 147, including Section 148A. The Court also held that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act.
The High Court allowed the writ petitions, declaring the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 as ultra vires, bad in law, and void. The Court held that Section 3 of the Relaxation Act, which falls under Chapter II titled 'Relaxation of Certain Provisions of Specified Act', did not empower the Central Government to amend substantive provisions of the Income Tax Act. Only Section 4 of the Relaxation Act, falling under Chapter III titled 'Amendments to the Income Tax Act, 1961', contained legislative amendments. Therefore, the Explanations seeking to revive repealed provisions were invalid. Furthermore, the Court agreed with the assessee that even if the Explanations were valid, the notices were bad in law because they did not comply with the amended Section 147, which requires compliance with Sections 148 to 153, including the mandatory procedure under Section 148A. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside, with liberty to the Assessing Officers to initiate fresh proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act, unlike Section 4. The Court found that the impugned notices were invalid for multiple reasons: (a) the Explanations sought to revive repealed provisions without legislative backing; (b) the assumption of jurisdiction was based on the 'reason to believe' concept, which is no longer recognized in the amended Section 147; (c) the procedure under the amended Section 147, including Section 148A, was not followed; and (d) the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards as the time limits for these years were not expiring within the period covered by Section 3(1) of the Relaxation Act. Consequently, all impugned notices were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 are ultra vires and consequently bad in law and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act, which falls under Chapter II titled ‘Relaxation of Certain Provisions of Specified Act’, only deals with time limits and does not grant power to amend substantive provisions of the Income Tax Act. Such amendments, if any, would typically be found in Chapter III, as exemplified by Section 4 of the Relaxation Act. The Court further noted that even if the Explanations were considered valid, they did not cover Section 147 of the Act, and the mandatory procedure under the amended Section 147 and Section 148A was not followed. The Court also found that the Relaxation Act was not applicable for Assessment Years 2015-2016 or subsequent years. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021, after strictly complying with the statutory requirements.
The High Court allowed the writ petitions. It held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and void. The Court reasoned that Section 3 of the Relaxation Act, which falls under Chapter II titled 'Relaxation of Certain Provisions of Specified Act', only deals with time limits and does not grant power to amend substantive provisions or revive repealed sections. In contrast, Section 4 of the Relaxation Act, which amends provisions of the Income Tax Act, falls under Chapter III. The Court agreed with the assessee that only Section 4 amended the Act, not Section 3. Furthermore, the Court found that even if the Explanations were considered valid, the impugned notices were invalid because they did not comply with the amended Section 147, which is subject to Sections 148 to 153, including the mandatory procedure under Section 148A. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 and subsequent years. Consequently, all impugned notices issued under Section 148 were quashed and set aside, with liberty to the Assessing Officers to initiate fresh proceedings in accordance with the amended provisions.
The High Court allowed the writ petitions, declaring the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 as ultra vires, and therefore, bad in law and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision for time limits and did not empower the Central Government to amend substantive provisions of the Income Tax Act; only Section 4 of the Relaxation Act did so. Furthermore, the Court found that even if the Explanations were considered valid, the impugned notices were invalid because they did not comply with the amended Section 147, which requires adherence to Section 148A. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021, strictly complying with the statutory procedures.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 are ultra vires, bad in law, and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act, 2020, was a relaxation provision dealing with time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act, 1961. Such amendments were only provided for under Section 4 of the Relaxation Act, which was enacted by the legislature itself. Consequently, the Court found that the impugned notices issued under Section 148 of the Act after April 1, 2021, were invalid. This was because they were based on the repealed provisions and failed to comply with the amended Section 147, which no longer recognizes the 'reason to believe' criterion, and crucially, did not follow the mandatory procedure under Section 148A. The Court also noted that the Relaxation Act was not applicable to the assessment years in question. All the writ petitions were allowed, and the impugned notices were quashed and set aside, with liberty to the Assessing Officers to initiate fresh proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 are ultra vires, bad in law, and null and void. The Court agreed with the assessee's contention that Section 3 of the Relaxation Act was only a relaxation provision for time limits and did not empower the Central Government to revive repealed substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act, which contained legislative amendments, was distinct and did not apply to the situation. Furthermore, the Court found that even if the Explanations were considered valid, the notices were still invalid because they did not comply with the amended Section 147, which requires adherence to Sections 148 to 153, including the procedure under Section 148A. The 'reason to believe' clause, a concept from the repealed provisions, was incorrectly used. The Court also noted that the Relaxation Act was not applicable to Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act. It noted that Section 4 of the Relaxation Act, which amended provisions of the Act, was distinct and made by the legislature itself. The Court found that the impugned notices were bad in law because they relied on the repealed 'reason to believe' clause from the erstwhile Section 147 and failed to comply with the procedure under the amended Section 147, which includes Section 148A. The Court also held that the Relaxation Act was not applicable for Assessment Years 2015-2016 or any subsequent year, as the time limit for issuing notices for these years was not expiring within the period for which Section 3(1) of the Relaxation Act was applicable. Consequently, all impugned notices were quashed and set aside, with liberty to the Assessing Officers to initiate fresh reassessment proceedings in accordance with the relevant amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires, bad in law, and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was merely a provision for relaxing time limits and did not grant the power to amend substantive provisions of the Income Tax Act. Section 4 of the Relaxation Act was the provision that amended the Act, and this was done by the legislature itself, not delegated to the Central Government. Furthermore, the Court found that the impugned notices were invalid because they relied on the 'reason to believe' concept, which was no longer recognized in the amended Section 147, and failed to comply with the procedure under the amended Section 147, including Section 148A. The Court also noted that the Relaxation Act was not applicable to Assessment Years 2015-2016 onwards. Consequently, all impugned notices were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act.
The High Court allowed the petition. The Court found that both issues raised for reopening were matters that had been considered during the original assessment proceedings. For the first issue concerning unsold finished goods, the Court referred to a previous order of the same Court in WP No. 102 of 2022, which dealt with identical reasons for reopening for AY 2016-17. In that case, it was held that if a query was raised and replied to during assessment, and the Assessing Officer proceeded to pass the assessment order, it implied consideration of the issue. For the second issue regarding Section 43CA(1), the Court noted that a notice under Section 142(1) was issued, and the petitioner had provided the required Index IIs for flats sold. Following the precedent in Aaroni Commercials Ltd. vs. Deputy Commissioner of Income-tax, the Court held that once a query is raised and replied to, it is considered a subject of consideration by the Assessing Officer. Therefore, reopening the assessment on these grounds was merely a change of opinion, which does not constitute a valid reason to believe that income chargeable to tax has escaped assessment. The Court quashed the notice of reopening and the subsequent order rejecting objections.
The High Court held that the Explanations to Notification No. 20 of 2021 and Notification No. 38 of 2021 are ultra vires and therefore bad in law and null and void. The Court reasoned that Section 3 of the Relaxation Act falls under a chapter titled 'Relaxation of Certain Provisions of Specified Act' and deals with time limits, whereas Section 4, which amends the Income Tax Act, falls under a different chapter. The Court agreed with the assessee that Section 3 did not grant the power to amend substantive provisions of the Act. Furthermore, the Court found that even if the Explanations were valid, they did not cover Section 147, and the mandatory procedure under the amended Section 147 and Section 148A was not followed. The Court also noted that the Relaxation Act was not applicable for assessment years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 of the Act were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act, 1948, was a provision for relaxation of time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act, 1961. Section 4 of the Relaxation Act, which amended the Act, was distinct from Section 3. The Court found that the impugned notices were bad in law for multiple reasons: (a) the Explanations sought to revive repealed provisions without legislative backing; (b) the notices were issued based on the 'reason to believe' criterion, which was no longer applicable under the amended Section 147; (c) the procedure under Section 148A, which is mandatory for reassessment proceedings under the amended Act, was not followed; and (d) the Relaxation Act was not applicable to Assessment Years 2015-2016 and subsequent years. The Court explicitly stated that it was in respectful agreement with the views taken by the Allahabad, Rajasthan, Delhi, and Madras High Courts. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the relevant amended provisions of the Act. The Court left no issue undecided.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the assessee's submission that Section 3 of the Relaxation Act was only a relaxation provision dealing with time limits and did not empower amendments to substantive provisions of the Income Tax Act, unlike Section 4. The Court found that the Explanations sought to give effect to the erstwhile provisions of Sections 148, 149, and 151 but did not cover Section 147, which empowers reopening subject to Sections 148 to 153, including Section 148A. Therefore, even if the Explanations were valid, the procedure under Section 148A was not followed, rendering the notices invalid. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 or subsequent years. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the statutory procedures.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore null and void. The Court agreed with the petitioners' submission that Section 3 of the Relaxation Act was a provision dealing with time limits and did not grant the power to amend the substantive provisions of the Income Tax Act, unlike Section 4. The Court found that the Assessing Officers had not complied with the amended Section 147, as their assumption of jurisdiction was based on the 'reason to believe' concept, which is no longer recognized. Additionally, the mandatory procedure under Section 148A, which is part of the amended provisions (Sections 148 to 153), had not been followed. The Court also noted that the Relaxation Act was not applicable for Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the statutory requirements.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires and therefore bad in law and null and void. The Court agreed with the petitioners' submission that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not amend the substantive provisions of the Income Tax Act, unlike Section 4. The Court found that the Assessing Officers' assumption of jurisdiction was based on the 'reason to believe' concept, which is no longer recognized in the amended Section 147. Moreover, the amended Section 147 is subject to Sections 148 to 153, including the procedure in Section 148A, which was not followed. The Court also held that the Relaxation Act was not applicable for Assessment Years 2015-2016 or any subsequent year, as the time limit for issuing notices under Section 148 for these years was not expiring within the period for which Section 3(1) of the Relaxation Act was applicable. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Court permitted the Assessing Officers to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the statutory requirements.
The High Court allowed the writ petitions. It held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires, bad in law, and void. The Court reasoned that Section 3 of the Relaxation Act, which falls under the chapter 'Relaxation of Certain Provisions of Specified Act', only deals with time limits and does not grant power to amend substantive provisions of the Income Tax Act. Such amendments, if any, were to be made by the legislature itself, as seen in Section 4 of the Relaxation Act. The Court agreed with the assessee that Section 3 did not envisage amendments to substantive provisions. Furthermore, the Court found that even if the Explanations were valid, the notices were invalid because the Assessing Officers had assumed jurisdiction based on the repealed 'reason to believe' concept under Section 147 and had failed to follow the mandatory procedure under the amended Section 148A. The Court also noted that the Relaxation Act was not applicable to Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act.
The High Court held that the Explanations to Notification No. 20/2021 and Notification No. 38/2021 were ultra vires, bad in law, and null and void. The Court agreed with the petitioners that Section 3 of the Relaxation Act was a relaxation provision dealing with time limits and did not empower the Central Government to amend the substantive provisions of the Income Tax Act. Only Section 4 of the Relaxation Act amended the Act. The Court found that the Explanations sought to extend the applicability of erstwhile Sections 148, 149, and 151 but did not cover Section 147, which mandates compliance with Sections 148 to 153, including Section 148A. Therefore, even if the Explanations were valid, the procedure under Section 148A was not followed. The Court also noted that the Relaxation Act was not applicable to Assessment Years 2015-2016 onwards. Consequently, all impugned notices issued under Section 148 were quashed and set aside. The Assessing Officers were permitted to initiate fresh reassessment proceedings in accordance with the amended provisions of the Act, strictly complying with the statutory requirements.
The High Court held that a notice issued to a dead person is not valid. The Court found that the JAO's argument that there was no communication from the legal heirs intimating the death was contradictory to the JAO's own statement acknowledging that the legal heir had filed the return for AY 2020-21 on February 22, 2021, thereby owning up as the legal heir of the deceased. The Court reasoned that if the JAO was aware of the legal heir filing a return on February 22, 2021, it was inexplicable how a notice could still be issued on March 31, 2021, to a deceased person. The principle established is that notices under Section 148 must be issued to living assessees, and issuance to a deceased individual renders the notice void ab initio. The petition was allowed, quashing the impugned notice and subsequent orders.
The High Court held that the notice issued under Section 148 of the Income Tax Act, 1961, cannot be sustained. The Court reasoned that the "reason to believe" that income has escaped assessment cannot be based on borrowed information. Citing the Supreme Court judgment in Indian & Eastern Newspaper Society vs. Commissioner of Income Tax, the Court reiterated that the opinion of an internal audit party on a point of law cannot be regarded as "information" within the meaning of Section 147(b) of the Act. The Court further relied on its own judgments in Ananta Landmark (P) Ltd. vs. Deputy Commissioner of Income-tax and Hamilton Housewares (P) Ltd. vs. Deputy Commissioner of Income Tax, which established that the decision to reopen an assessment must be based on the belief formed by the Assessing Officer independently, not merely on the dictates of others, including audit parties. Consequently, the notice under Section 148 and the consequential order under Section 92CA(3) were quashed and set aside.
The High Court held that the impugned order dated March 1, 2022, passed by respondent No. 3, was in total violation of the principles laid down by the Court in the case of Tata Capital Financial Services Limited Vs. Assistant Commissioner of Income Tax Circle 1(3)(1) and others. The Court found that respondent No. 3 had not recorded sufficient and cogent reasons while dealing with the petitioner's objections. Specifically, the Court noted that while the order quoted Section 153C, it failed to provide any reasoning for rejecting the petitioner's contention that the case should fall under Section 153C and not Section 147. The Court emphasized that the Assessing Officer must deal with each objection by recording reasons. Consequently, the impugned order was quashed and set aside. The proceedings were restored to respondent No. 3 to decide the objections afresh, in accordance with law and the principles laid down in the Tata Capital Financial Services Limited case, within three weeks. The petitioner was granted liberty to file appropriate proceedings if the decision was adverse.
The High Court directed the petitioner to file its objections to the Section 148 notice within two weeks from the date of the order. These objections are to be heard and disposed of by the Jurisdictional Assessing Officer (JAO) within three weeks thereafter. The JAO must grant a personal hearing to the petitioner at least seven working days after communicating the notice for the hearing. If the JAO intends to rely on any judgments or orders, a list must be provided to the petitioner along with the hearing notice, allowing the petitioner an opportunity to address them during the hearing. The petitioner's submissions on these judgments must be considered in the assessment order. The time from the lodging of the petition (March 15, 2022) until the date of the order was excluded for completing assessment proceedings. The respondents were restrained from passing the assessment order until the objections were decided and for four weeks thereafter. All rights and contentions of both parties were kept open. The court explicitly stated that no observations were made on the merits of the case.
The High Court held that the reopening of the assessment under Section 147 was invalid. The Court found that the issue of deduction under Section 54 of the Act was a subject matter of consideration during the original assessment proceedings, as evidenced by the notices issued and the details provided by the assessee. The Court reiterated that a reopening based on a mere change of opinion by the Assessing Officer, without any tangible material, is not permissible, especially when the original assessment was completed under Section 143(3). The Court noted that the original Assessing Officer had considered the relevant documents, including those pertaining to the purchase of the new property. The Court also observed that the assessee had provided evidence that the property purchased was a single residential unit of approximately 7500 sq. ft., which was not disputed by the Assessing Officer. The Court allowed the petition, quashing the notice under Section 148 and the order disposing of objections. The ratio is that reopening of assessment after completion under Section 143(3) based on a change of opinion, without new tangible material, is impermissible.
The Tribunal held that the jurisdictional condition for reopening the assessment was not met. It found that the proposed reopening suffered from the vice of 'change of opinion'. The Tribunal noted that the search action under Section 132 did not reveal any tangible material regarding the loan transaction from M/s. Jineshwar Multitrade Private Limited (JMPL). The petitioner was asked to explain the very transaction that was already scrutinized during the original assessment, and the Assessing Officer was satisfied with the explanation then. The Tribunal relied on the judgment in Ananta Landmark Pvt Ltd. vs. Deputy Commissioner of Income Tax, wherein it was held that if primary facts are fully and truly disclosed, the Assessing Officer is not entitled to commence reassessment proceedings based on a change of opinion. The Tribunal concluded that the Assessing Officer had all material facts before him during the original assessment, and one view was conclusively taken, making it impermissible to reopen based on the same material to take another view. Therefore, the petition was allowed, quashing the notice and the order rejecting objections.
The High Court held that the impugned notice of reopening and the order on objections deserved to be quashed and set aside. The Court found that the AO's belief that income had escaped assessment was based on a 'guess' or 'hunch' rather than tangible material, which is insufficient to invoke Section 147, especially when the original assessment was completed under Section 143(3) and the notice was issued beyond four years. The Court noted that the AO had previously considered the material and allowed the deduction for AY 2006-07. The reasons for reopening, derived from subsequent assessment years, were not applicable to AY 2006-07. The Court also found that the revenue's attempt to justify the misclassification of branches was not substantiated, as only one branch was claimed as rural for AY 2006-07, contrary to the revenue's assertion. The Court emphasized that the reopening must be based on the reasons that weighed with the AO at the time of issuing the notice, and supplementing or substituting those reasons is not permissible. The fact that the petitioner did not assail reopening for subsequent years was irrelevant once the jurisdictional condition for invoking Section 147 was not satisfied for AY 2006-07. The petition was allowed, quashing the notice and the order on objections.
The High Court held that the payments made by the petitioner to the non-resident assessees for the hire of tugs and barges were properly assessable under Section 44BB of the Income Tax Act, 1961. The Court applied the "pith and substance" test, as laid down by the Supreme Court in a similar context, to determine the true nature of the agreements. It found that the hire of tugs and barges to transport an integral part of the equipment (compressor module) for enhancing the exploration/production capacity was inextricably connected with the extraction and production of mineral oil. Therefore, the dominant purpose of the agreements was related to mineral oil extraction and production, making Section 44BB applicable. The Court found the authorities' view that the use of tugs and barges was a "mere transportation facility" to be unjustified on the facts. Consequently, the impugned orders of the Director of Income-tax (under Section 264) and the Deputy Director of Income-tax (under Section 195) were quashed and set aside, and it was declared that the payments were assessable under Section 44BB, entitling the petitioner to consequential benefits.
The Bombay High Court allowed the petition and quashed the show cause notice and the impugned order. The Court held that Section 195 of the Income Tax Act, 1961, is applicable only to a person responsible for paying to a non-resident any sum chargeable under the provisions of the Act, and that such person must deduct tax at the time of credit or payment. The undisputed fact was that the petitioner was not the purchaser of the shares of THL; rather, IMAHI, a wholly-owned subsidiary, was the purchaser. The petitioner's role was limited to being a guarantor, and this guarantee was never invoked as IMAHI discharged its obligation. The Court emphasized that a subsidiary company is an independent entity, and its transactions are not automatically those of the holding company. Since the petitioner did not make any payment and was not responsible for paying any sum chargeable under the Act, the obligation to deduct tax at source under Section 195 did not arise. The Court found no evidence that the petitioner made any payment through IMAHI. Consequently, the notice and order treating the petitioner as an assessee in default were set aside.
The High Court allowed the petition. On the first issue, it held that interest under Section 220(2) is to be charged only up to the date of the order admitting the settlement application under Section 245D(1), relying on the Supreme Court judgment in CIT v. Damani Brothers. The Court directed that interest should be limited from January 5, 1997 (36 days after the assessment order) up to April 9, 1997. On the second issue, following the Apex Court's decision in Vatika Township (P.) Ltd., the Court held that the proviso to Section 113, which provides for surcharge, cannot be applied retrospectively to a search conducted in 1995, as it was introduced with effect from June 1, 2002, and is an onerous provision. The Court directed the ACIT to issue a fresh assessment order recalculating tax and interest without the surcharge and limiting the interest period as specified. The undertaking to withdraw the pending appeal was accepted.
The High Court allowed the petition, quashing the notice under Section 148 and the order rejecting objections. The Court held that the reasons recorded by the AO for reopening the assessment singularly lacked the element of satisfaction that the escapement of income was on account of the petitioner's failure to make a true and full disclosure of material facts, which is a mandatory condition under the first Proviso to Section 147 when reopening is sought beyond four years after a scrutiny assessment. The Court noted that there was no assertion of such failure by the petitioner. Furthermore, the Court found that the AO had not applied his mind to the fact that the amount of Rs. 1,78,05,149/- towards 'assets written off (irregular spares)' was added back by the petitioner itself, and thus, this part of the alleged escapement of income was not borne out by the record. The Court also held that the reopening amounted to a mere change of opinion on the same material that was considered during the original assessment, which is legally impermissible. The Court relied on its previous decision in Aroni Commercials Ltd. vs. Deputy Commissioner of Income-tax-2(1) to establish that once a query is raised and the assessee furnishes an explanation, the AO is presumed to have applied his mind, and the absence of specific mention in the assessment order does not justify reopening, especially when it leads to a change of opinion. The petition was allowed in terms of prayer clauses (a) and (b).
The High Court quashed and set aside the notice dated 10th January 2014 issued under Section 148 of the Income Tax Act, 1961, to the petitioner (Pavan Morarka) and a similar notice dated 14th February 2014 issued to Rachna Morarka for Assessment Year 2006-2007. The Court also quashed and set aside the orders rejecting the petitioners' objections. The Court reasoned that the reassessment proceedings were initiated based on a belief that income "may escape assessment" in the future, contingent on the outcome of the SLP before the Supreme Court. This was held to be impermissible, as Section 148 requires a "reason to believe" that income "has escaped assessment," indicating a past event. The Court relied on the principle that tax legislation cannot be rewritten by substituting "may escape assessment" for "has escaped assessment," and that a protective assessment under Section 148 cannot be justified on such grounds. The Court found that the observations of the Delhi High Court did not constitute a "finding" or "direction" as required for Section 150 to apply, and therefore, Section 150 was not applicable to save the notice from limitation. The Court also noted that the initial notice issued by the Assessing Officer at New Delhi was invalid due to lack of sanction under Section 151.
The High Court held that a notice issued under Section 148 of the Income Tax Act, 1961, in the name of a deceased person for reopening of assessment is null and void in law. The Court relied on its own decision in Sumit Balkrishna Gupta vs. Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, and other High Court judgments, including the Gujarat High Court's decision in Bhupendra Bhikhalal Desai vs. Income Tax Officer, which was upheld by the Supreme Court. The Court reasoned that the issuance of a notice to the correct person is a foundational requirement for acquiring jurisdiction to reopen an assessment, not merely a procedural formality. Section 292B of the Act, which deals with the validity of proceedings notwithstanding certain defects, cannot be invoked to cure such a substantial or foundational error. Consequently, the impugned notices dated June 30, 2021, were quashed and set aside. The Court did not consider the second ground regarding the non-compliance with provisions effective from April 1, 2021, as the notices were already invalidated on the first ground. The Revenue was not prohibited from issuing a fresh notice if the requirements of Section 147/148 were satisfied, including the limitation period.
The High Court held that a notice issued under Section 148 of the Income Tax Act, 1961, in the name of a deceased person is null and void in law. The Court relied on its own decision in Sumit Balkrishna Gupta vs. Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, and decisions of the Gujarat High Court in Vikram Singh vs. Union of India and Bhupendra Bhikhalal Desai vs. Income Tax Officer, which were upheld by the Apex Court in Income Tax Officer vs. Bhupendra Bhikhalal Desai. The Court reasoned that the issuance of a notice to the correct person is a foundational requirement for acquiring jurisdiction to reopen an assessment, not merely a procedural requirement. Sections 292B and 292BB of the Act cannot cure such a substantial error. Consequently, the impugned notices dated June 30, 2021, were quashed and set aside. The Court did not consider the second ground regarding procedural compliance with the April 1, 2021 provisions, as the notice itself was found to be invalid. The Revenue was not prohibited from issuing a fresh notice if the requirements of Section 147/148 were satisfied, including limitation periods.
The High Court held that the assessment order dated September 30, 2021, passed by the Assessing Officer under Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act, 1961, for Assessment Year 2016-17, was illegal. The Court found that the time limit for the Assessing Officer to complete the assessment under Section 144C(13) was one month from the end of the month in which the DRP's directions were received. Since the DRP's directions were received on March 20, 2021, the assessment should have been completed by April 30, 2021. The Court examined the applicability of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, and the notifications issued thereunder. It concluded that Notification No. 74/2021, on which the revenue heavily relied for the extension up to September 30, 2021, specifically excluded Section 144C(13) and therefore did not extend the time limit for passing orders under this specific section. The Court also rejected the revenue's argument to read 'and' as 'or' in the notification. Consequently, the assessment order was quashed and set aside. The petition was allowed in terms of prayer clause (a).
The High Court held that the Principal Commissioner of Income-Tax (PCIT) committed an error in constricting the scope of revisional jurisdiction under Section 264 of the Income Tax Act, 1961. The PCIT's view that the jurisdiction could only be exercised if the refund was claimed and considered by the Assessing Officer was not supported by the text of Section 264 or judicial precedents. The Court distinguished revisional jurisdiction from review jurisdiction, stating that the PCIT had unjustifiably imported principles of review into the exercise of power under Section 264. The Court relied on the Bombay High Court's judgment in Geekay Security Services (P) Ltd. vs. Deputy Commissioner of Income Tax, which held that Section 264 does not limit the power to correct errors committed by subordinate authorities or restrict the Commissioner's power to grant relief to the assessee even if mistakes are detected after assessment. Consequently, the impugned order was quashed, and the revision application was remitted back to the PCIT for de novo consideration on merits, with all questions, except the tenability of the revision application, expressly left open.
The High Court held that the petitioner's contention regarding the year of indexation was correct. Following the principles laid down in cases like DCIT Vs. Manjula J. Shah, the Court ruled that when a capital asset is acquired by the assessee through modes specified in Section 49(1), and the previous owner acquired it before April 1, 1981, the indexed cost of acquisition must be computed with reference to the year in which the previous owner first held the asset, not the year the assessee became the owner. Therefore, indexation should be available from FY 1981-82. Consequently, the impugned order directing tax deduction of Rs. 28,74,100/- was quashed and set aside. Regarding the refund, the Court noted that the seller's assessment for AY 2011-12 accepted capital gains at Rs. 3,85,613/-. The Court directed the Revenue to retain Rs. 91,360/- (a demand raised in the seller's assessment) and refund the balance of the deposited amount of Rs. 28,74,100/-, along with proportionate interest on the excess amount, calculated from the date of payment (January 7, 2011), as per Section 244A(1)(b).
The High Court allowed the petition. The Court found that the Revenue failed to satisfy the twin tests for reopening under Section 147. Firstly, there was no assertion, much less material, to indicate that income escaped assessment due to the petitioner's failure to disclose fully and truly all material facts. The reasons recorded were conspicuously silent on this aspect. Secondly, the reasons recorded by the Assessing Officer fell within the ambit of a "mere change of opinion" on the very same material. The Court noted that the original assessment was under Section 143(3), followed by an appeal to the CIT(A), and the reasons for reopening, particularly concerning the set-off of losses against eligible profits under Section 10A and the computation of business income and deductions under Section 10A and 80HHE, indicated a re-evaluation of the original assessment's conclusions based on the same material. The Court held that there was no material to justify the formation of a reason to believe that income escaped assessment and to invoke the power under Section 147. Consequently, the impugned notice and the consequent action were held to be legally unsustainable. The petition was allowed, quashing and setting aside the notice dated March 31, 2010, under Section 148 and the order dated November 30, 2010.