Rajasthan High Court Judgments — 2022

The High Court held that the explanations introduced by the CBDT notifications dated 31.03.2021 and 27.04.2021 were unconstitutional and invalid. The Court reasoned that the Relaxation Act, 2020, under which these notifications were issued, only empowered the Central Government to extend time limits for actions and compliances. Issuing an explanation that clarified the application of Section 148 provisions, effectively deferring the impact of the Finance Act, 2021 amendments, went beyond the scope of the delegated power. The Court emphasized that subordinate legislation must operate within the confines of the parent Act and cannot amend or alter statutory provisions under the guise of clarification. The Court disagreed with the view taken by the Chhattisgarh High Court in Palak Khatuja (supra), finding that the notifications did not defer the substitution of reassessment provisions by the Finance Act, 2021, and that the amendments effective from 01.04.2021 remained applicable. Consequently, the notices impugned in the petitions were quashed and set aside.

The High Court held that the explanations introduced by the CBDT notifications dated March 31, 2021, and April 27, 2021, were unconstitutional and invalid. The Court reasoned that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, only empowered the Central Government to extend time limits for actions and compliances, not to issue explanations that altered the basis of statutory provisions. The CBDT, as a subordinate legislation, exceeded its jurisdiction by introducing an explanation that effectively sought to amend the provisions of the Income Tax Act, particularly concerning the applicability of Section 148 and the reassessment regime introduced by the Finance Act, 2021. The Court found it doubtful that an explanation, even if termed clarificatory, could change the plain meaning of a statutory provision or amend the parent Act. The Court explicitly disagreed with the view taken by the Chhattisgarh High Court in Palak Khatuja (supra), stating that the substitution of reassessment provisions under the Finance Act, 2021, were not deferred by the notifications, and their effective date remained April 1, 2021. Consequently, the notices impugned in the writ petitions were declared invalid and quashed. The learned Single Judge's decision to quash these notices was upheld.

The High Court held that the explanations inserted by the CBDT in its notifications dated 31.03.2021 and 27.04.2021 were unconstitutional and invalid. The Court reasoned that the CBDT, as a subordinate legislative authority, had exceeded its jurisdiction by introducing an explanation that sought to alter the substantive provisions of the Income Tax Act. The parent Act, the Relaxation Act, 2020, only empowered the government to extend time limits, not to issue clarifications that changed the basis of statutory provisions. The Court found it doubtful that an explanation, even if termed clarificatory, could amend the parent Act. The Court disagreed with the view of the Chhattisgarh High Court in Palak Khatuja, stating that the substitution of reassessment provisions under the Finance Act, 2021, which came into effect from 01.04.2021, could not have been deferred by the CBDT notifications. Consequently, the notices impugned in the writ petitions were declared invalid and quashed. The Court allowed all the writ petitions and dismissed the appeals of the revenue.

The High Court held that the explanations introduced by the CBDT notifications dated March 31, 2021, and April 27, 2021, were unconstitutional and invalid. The Court reasoned that under Section 3(1) of the Relaxation Act, 2020, the Central Government was empowered only to extend time limits by issuing notifications. Introducing an explanation that provided a clarification on the applicability of Section 148 and Section 149 provisions, as they stood before the Finance Act, 2021, went beyond the scope of this delegated power. The Court found that the subordinate legislation (CBDT notifications) had exceeded its jurisdiction by attempting to clarify or alter the substantive provisions of the parent Act. The Court disagreed with the view taken by the Chhattisgarh High Court in Palak Khatuja (supra), stating that the substitution of reassessment provisions under the Finance Act, 2021, were not deferred by these notifications, and their effective date remained April 1, 2021. Consequently, the notices impugned in the writ petitions were declared invalid and bad in law, and were quashed and set aside. All writ petitions were allowed, and appeals of the revenue were dismissed.

The High Court held that the explanations introduced by the CBDT notifications dated March 31, 2021, and April 27, 2021, were unconstitutional and invalid. The Court reasoned that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, only empowered the Central Government to extend time limits for actions and compliances, not to issue explanations that could alter the interpretation or application of statutory provisions of the Income Tax Act. The CBDT, as a subordinate legislation, had exceeded its jurisdiction by introducing such an explanation, which attempted to change the basis of statutory provisions. The Court found that the plain meaning of the statutory provision was clear, and a subordinate legislature could not amend the provisions of the parent Act through a purported clarification. The Court disagreed with the view taken by the Chhattisgarh High Court in Palak Khatuja (supra), which held that the notices were valid because the application of Section 148 prior to amendment was deferred. The High Court concluded that the substitution of reassessment provisions under the Finance Act, 2021, was not deferred and came into effect on April 1, 2021. Consequently, the notices impugned in the respective petitions were declared invalid and quashed.

The High Court held that the explanation inserted by the CBDT in its notifications dated 31.03.2021 and 27.04.2021 was unconstitutional and invalid. The Court reasoned that the Relaxation Act, 2020, under Section 3(1), only empowered the Central Government to extend time limits by issuing notifications. The introduction of an explanation that provided for the application of pre-amendment provisions for issuing notices under Section 148 plainly exceeded the scope of this delegated power. The Court emphasized that subordinate legislation cannot travel beyond the powers vested in it by the parent Act and cannot amend the provisions of the parent Act under the guise of a clarification. The Court disagreed with the view of the Chhattisgarh High Court, stating that the substitution of reassessment provisions under the Finance Act, 2021, could not have been deferred by the CBDT notifications. Consequently, the notices impugned in the writ petitions were found to be invalid and bad in law, and were quashed and set aside. All writ petitions were allowed.

The High Court held that the explanation inserted by the CBDT in its notifications dated 31.03.2021 and 27.04.2021 was unconstitutional and invalid. The Court reasoned that the Relaxation Act, 2020, only empowered the Central Government to extend time limits for actions and compliances, not to issue explanations that altered the basis of statutory provisions. The CBDT, as a subordinate legislation, had plainly exceeded its jurisdiction by introducing an explanation that sought to clarify or modify the application of Section 148 and Section 149/151 of the Income Tax Act, effectively circumventing the amendments brought by the Finance Act, 2021. The Court found it doubtful that an explanation, even if termed clarificatory, could change the plain meaning of a statutory provision. The Court disagreed with the view taken by the Chhattisgarh High Court, stating that the substitution of reassessment provisions under the Finance Act, 2021, could not have been deferred by the CBDT notifications. Consequently, the impugned notices under Section 148 were quashed and set aside. The appeals of the revenue were dismissed.

The High Court held that the notifications dated 31.03.2021 and 27.04.2021 issued by the CBDT, particularly the explanation introduced therein, were unconstitutional and invalid. The Court reasoned that the Relaxation Act, 2020, only empowered the Central Government to extend time limits for actions and compliances, not to issue explanations that altered the basis of statutory provisions. The CBDT, as a subordinate legislation, exceeded its jurisdiction by introducing an explanation that effectively sought to apply the pre-amendment provisions of Section 148, thereby attempting to amend the parent Act. The Court found it doubtful that an explanation, even if termed clarificatory, could change the plain meaning of a statutory provision. The Court disagreed with the view of the Chhattisgarh High Court, stating that the substitution of reassessment provisions under the Finance Act, 2021, could not have been deferred by these notifications, and the amendments were effective from 01.04.2021. Consequently, the reassessment notices impugned in the petitions were quashed and set aside. The ratio decidendi is that subordinate legislation cannot expand or alter the scope of the parent Act under which it is made, and any attempt to do so renders it invalid.

The Tribunal held that the explanations introduced by the CBDT notifications dated 31.03.2021 and 27.04.2021 were unconstitutional and invalid. The reasoning was that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, only granted the power to extend time limits, not to alter substantive provisions of the Income Tax Act. The CBDT, as a subordinate legislation, exceeded its jurisdiction by introducing explanations that effectively changed the basis of statutory provisions, particularly concerning the applicability of Section 148. The Tribunal found that these explanations could not amend the parent Act and were therefore beyond the scope of delegated power. The ratio decidendi is that subordinate legislation cannot travel beyond the powers vested by the parent Act and cannot alter statutory provisions under the guise of clarification. Consequently, the notices impugned in the respective petitions were quashed and set aside. The Tribunal noted that two Division Benches of the Allahabad and Delhi High Courts, along with learned Single Judges of the Calcutta and Rajasthan High Courts, had taken a similar view, while disagreeing with the Chhattisgarh High Court's contrary opinion.

The High Court enhanced the compensation, considering future prospects, income tax, personal expenses, and other heads like consortium. The court directed the insurance company to deposit the enhanced amount with specific instructions for disbursement and investment.

The High Court held that no question of law arises from the ITAT's order. The Court found no reason to interfere with the Tribunal's decision. The reasoning was based on the categorical and clear admission made by the director of the firm under Section 132(4) of the Income Tax Act, 1961, confirming the receipt of Rs. 1.35 crores as 'on-money' income of the firm. The Court noted that this statement was not retracted for a long time. Consequently, the Court found no basis for the assessee's suggestion to apply the net profit ratio to determine the income embedded in the receipt, as the entire admitted amount was to be brought to tax. The appeal was dismissed, upholding the ITAT's order which restored the Assessing Officer's addition of the full Rs. 1.35 crores.

The High Court noted that the learned counsel for the revenue stated on instructions that the impugned notice of reopening of assessment has been withdrawn. The revenue also indicated its intention to consider issuing a fresh notice for the same assessment year. In light of these developments, the prayers made in the writ petition were rendered infructuous. The Court explicitly stated that it has expressed no opinion on the proposal of the revenue to issue a fresh notice. Consequently, the petition was disposed of with these observations. The ratio decidendi is that when the action under challenge is withdrawn by the authority, the petition becomes infructuous, and the court will not delve into the merits of the original action or the proposed future action.

The High Court allowed the Revenue's prayer for withdrawal of the appeal. Consequently, the appeal was dismissed based on the revised monetary limits for litigation management.

The Tribunal prima facie observed that the Assessing Officer appeared to have passed a hurried order of assessment due to advancing deadlines for completing the assessment. This haste led to the AO not recording any reasons for not accepting the petitioner's request for a reference to a valuer, as contemplated under Section 50C of the Act. The Tribunal noted that the AO disposed of the petitioner's objections on September 24, 2021, and passed the assessment order on September 30, 2021, within a short span. Consequently, the High Court stayed the order of assessment as an ad-interim relief. The specific finding on the merits of the addition or the validity of the reopening notice is not recorded as the matter is at the stage of issuing notice and granting interim relief.