The High Court of Rajasthan quashed notices issued by Assessment Officers U/S 148 of the Income Tax Act 1961 for reopening assessments for various assessment years
Providing relief to a group of claimants, the Divisional Bench of the High Court of Rajasthan quashed notices issued by assessment officers under Section 148 of the Income Tax Act 1961 ( law of 1961) for the reopening of assessments for various assessment years.
The petitioners also contested parts of two notifications issued by CBDT stating that the provisions of articles 148, 149 and 151 of the law as of 31.03.2021 will apply for the purposes of issuing a notice under article 148. for the past period. According to the petitioners, this explanation is beyond the jurisdiction of the CBDT.
Chief Justice Akil Quresh and Judge Sameer Jain ruled, “A notice which had become statute-barred before 01.04.2021 in accordance with the provisions then in force, would not be reinstated under the operation of section 149 (1) (b) from 01.04.2021. All opinions issued in the present cases are subsequent to 01.04.2021 and were issued without following the procedure provided for in section 148A of the law and are therefore invalid.”
The petitioner had filed a tax return on 01.10.2013 for the tax year 2013-14 stating a total income of Rs.4,79,420/-, which appears to be accepted by the department without examination. In order to reopen this assessment for the tax year 2013-2014, Jaipur Income Tax Officer No. 1 issued a notice on 08.04.2021 under Section 148 of the Act. According to the petitioner, since the reassessment provisions introduced into the law with effect from 01.04.2021 were unquestionably not followed in the present case, the advice is wrong in law.
According to the petitioner, the limitation on the issuing of an opinion would be that provided for in the amended article 149 of the law. Before issuing a notice under section 148, the procedure prescribed in section 148A must be followed. In this case, the notice was prescribed pursuant to amended section 149 and the procedure provided for in section 148A was not followed. Further to this argument, the petitioner submits that this defect could not be corrected by an explanation issued by the CBDT in the context of an alleged exercise of the power of delegated legislation.
After pursuing multiple court decisions, the court summarized some applicable tax principles:
(i) A tax law must be interpreted strictly. Equity has no place in taxation or in interpreting the intent of a tax law.
(ii) As central legislation with pan-India effect and operating in the field of taxation, the opinion of another High Court would have considerable persuasive value. Unless the opinion expressed by another High Court is manifestly unacceptable to the Court, the High Court would favor the considered opinion already expressed by another Court.
(iii) When the Minister of Finance who steered the budget in his speech explains the provisions contained in the finance bill and expands on the prevailing evil which is sought to be remedied by replacing the existing legislative provisions, the The explanation given by the Ministry of Finance The Minister is of considerable importance in the context of the correct interpretation of such provisions. For this observation, we relied on Sole Trustee, Loka Shikshana Trust Vs. Commissioner of Income Tax, (1975)
(iv) Further relying on the decision of the Gujarat High Court in Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax the court observed that reopening a completed assessment causes great hardship to the assessee and also brings uncertainty.
The court dealt with two questions of law and answered them accordingly:
(i) If, after the introduction of new revenue reassessment provisions under the Finance Act 2021 with effect from 01.04.2021, replacing the then existing provisions, would the superseded provisions survive and be able to be used to issue notices of reassessment for the past period?
The court observed that there is absolutely no indication in any of these provisions that would suggest that the legislator intended that the new scheme for reopening assessments would only be applicable to the period after 01.04.2021. The court added that in the absence of such an indication, all notices issued after 01.04.2021 must comply with these provisions.
The court reiterated that there was no indication whatsoever in the body of the statutory provisions to suggest that the prior provisions would continue to apply even after the substitution for the valuation periods prior to the substitution. The court held that the original provisions when superseded were repealed for all purposes and ceased to exist after the introduction of the superseding provisions.
The court referred to section 6 of the General Terms Act 1897, which provides among others that where state law or central law or regulation repeals a law, unless a different intention appears, the repeal shall not restore anything not in effect or in existence at the time that the repeal shall take effect or affect the foregoing operation of any Act so repealed or anything duly done or suffered under it.
(ii) Are the explanations contained in the CBDT circulars of 31.03.2021 and 27.04.2021 legal and valid?
Resting on St. Johns Teachers Training Institute v. Regional Director, National Council for Teacher Education (2003)the court observed that the vires of subordinate legislation should proceed from the presumption that it is intra vires and if it is open to two interpretations, one of which would render it valid and the other invalid, the courts must adopt this interpretation that makes it valid.
The court held that it is, however, equally well established that subordinate legislation does not enjoy the same level of immunity as law made by Parliament or the state legislature. The court added that law made by Parliament or the state legislature can only be challenged on the grounds that it exceeds legislative jurisdiction or is contrary to fundamental rights or any other constitutional provision.
The court further observed that subordinate legislation may be challenged on all of these grounds as well as on the ground that it is not in accordance with the law under which it is enacted or that it is inconsistent with the provisions of the law or that it is contrary to some of the laws applicable in the matter
The court observed that two divisional benches of the high courts of Allahabad and Delhi took a similar view. Two unique learned judges of Kolkata and this High Court have followed this trend. Independently also we have the same beliefs. The court noted that the Chhattisgarh High Court, however, in Palak Khatuja v. Indian Union rejected the High Court’s view that the disputed notices were valid since, under notices dated 31.03.2021 and 27.04.2021, the application of Section 148 which originally existed prior to the amendment has been postponed.
Case title: Sudesh Taneja v. Income Tax Officer and Related Matters
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