Bela Kishor Varmaversusthe Principal Chief Commissioner, Income Taxand Another v. Ghuge

*1*904y wp9125o22 INCOME TAX IN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABAD WRIT PETITION NO.9125 OF 2022 BELA KISHOR VARMAVERSUSTHE PRINCIPAL CHIEF COMMISSIONER, INCOME TAXAND ANOTHER. … Shri Raviraj R. Chandak, Advocate for the Petitioner.Shri Alok Sharma, Advocate for the Respondents/ ITDepartment. ... CORAM : RAVINDRA V. GHUGE &R.M. JOSHI, JJ. DATE :- 01[st] March, 2024 Per Court :- 1.We have heard the learned Advocates for the respective sides for quite some time. The Respondent/Department opposes the contentions of the Petitioner and praysthat the Petition be dismissed. 2.It is undisputed that the impugned notice has been issued after the amendment to the Finance Act, on the basis of theprovisions that existed before the amendment and the said noticeis in relation to the Assessment Year 2014-2015. 3.The contention of the Department is that certain *2*904y wp9125o22 INCOME TAX quantum of earnings / transactions escaped assessment ofincome. Hence, the Assessment Officer had issued notice forreopening the assessment for Assessment Year 2014-2015 withregard to the purported escaped income assessment. 4.Considering that the Principal Seat has delivered ajudgment on 15.01.2024 in Writ Petition No.1945/2023 (TheNew India Assurance Company Limited Vs. The AssistantCommissioner of Income Tax and Others) 2014 SCC OnlineBom 146, we are referring to the short issue raised in thisPetition. By the judgment delivered in The New India AssuranceCompany Limited (supra) in relation to the notice issued forAssessment Year 2013-2014, this Court has come to a conclusion in paragraph Nos.36 to 39 as under :- “36 .Therefore, in the present case, as thefoundation of the entire reassessmentproceeding, viz., the notice issued in June 2021itself was barred by limitation in view of non-applicability of Notification No.20/2021, thesuperstructure sitting thereon, viz., thereassessment proceedings initiated pursuant tojudgment in Ashish Agarwal will also beregarded as beyond time limit. Therefore, onthis ground as well, the impugned reopeningnotice dated 28th July 2022 issued for AY2013-14 in petitioner's case is barred bylimitation and deserves to be quashed and setaside. Alternatively, it is well settled that anotice under Section 148 of the Act cannot befoundation of the entire reassessmentproceeding, viz., the notice issued in June 2021itself was barred by limitation in view of non-applicability of Notification No.20/2021, thesuperstructure sitting thereon, viz., thereassessment proceedings initiated pursuant tojudgment in Ashish Agarwal will also beregarded as beyond time limit. Therefore, onthis ground as well, the impugned reopeningnotice dated 28th July 2022 issued for AY2013-14 in petitioner's case is barred bylimitation and deserves to be quashed and setaside. Alternatively, it is well settled that anotice under Section 148 of the Act cannot be *3*904y wp9125o22 INCOME TAX issued in order to reopen the assessment of anassessee in a case where the right to reopen theassessment was already barred under the pre-amended Act on the date when the newlegislation came into force. In CIT V/s.Onkarmal Meghraj (HUF) the Hon'ble ApexCourt held: "That raises the question whether thatproviso could be applied without reference toany period of limitation. It is a well-settledprinciple that no action can be commenced hasexpired. It is unnecessary to cite authorities insupport of this position. Does the fact that thesecond proviso says that there is no period oflimitation make a difference? xxxxxxxxxx. *3*904y wp9125o22 INCOME TAX issued in order to reopen the assessment of anassessee in a case where the right to reopen theassessment was already barred under the pre-amended Act on the date when the newlegislation came into force. In CIT V/s.Onkarmal Meghraj (HUF) the Hon'ble ApexCourt held: "That raises the question whether thatproviso could be applied without reference toany period of limitation. It is a well-settledprinciple that no action can be commenced hasexpired. It is unnecessary to cite authorities insupport of this position. Does the fact that thesecond proviso says that there is no period oflimitation make a difference? xxxxxxxxxx. XXXXXXXXXX In J.P. Jani, Income-tax Officer v. Induprasad Devshanker Bhatt(1969) 72 1.T.R. 595; (1969) 1 S.C.R. 714(S.C.) this court held that the Income-taxOfficer cannot issue a notice under section 148of the Income Tax Act, 1961, in order to reopenthe assessment of an assessee in a case wherethe right ti reopen the assessment was barredunder the 1922 Act at the date when the newAct camne into force. It was held that section297(2)(d) (ii) of the 1961 Act was applicableonly to this cases where the right of theIncome-tax Officer to reopen an assessmentwas not barred under the repealed Act. Thisdecision is broadly in line with the opinion ofDas and Kapur JJ. in Prashar's case (1963) 491.T.R. (S.C.) 1; (1964) 1 S.C.R. 29 (S.C.)xxxxxxxxxx. For AY 2013-14, the time limit to issue anotice under Section 148 of the Act had alreadyexpired on 1" April 2021. On the said date, theassessee had a vested right, which de hors the1" proviso to the amended Section 149 of theAct, could not be taken away and thus, basedon the well settled principles of law, thereopening of the AY 2013-14 after 31 March *4*904y wp9125o22 INCOME TAX 2021 is invalid, without jurisdiction and barredby limitation. We shall deal with Mr. Sharma's submissionsas under: (a) As regards reliance on the provisionsof the Limitation Act, 1963, the provisions ofthe Limitation Act, 1963 do not apply to theprovisions of the Income Tax Act, 1961 andespecially, not in the present case in view of thespecific period provided for in the provisions ofthe Act as well as TOLA. In any case, thisdefence of respondents cannot be sustained asthey have not taken any such contention ineither the order passed under Section 148A(d)or in the affidavit in reply; (b) As regards applicability of Section 3of TOLA - exclusion of Covid period, thisargument is, in effect, nothing but the theory oftravel back in time which was urged by theRevenue to support the reopening noticesissued between 1" April 2021 to 30th June2021 before this Court, as well as other HighCourts [and which eventually led to thejudgment in Ashish Agarwal (Supra)]. As notedearlier, this Court and other Courts havealready snubbed the relate back/travel back intime theory and also the Instruction No.1 of2022; (c) As regards applicability ofNotifications No.20 of 2021 dated 31 March2021 and No.38 of 2021 dated 27th April 2021extending the time limit even for AY 2014-15and it is extended till 30 June 2021, respondent,in other words, argues that the NotificationNo.20 of 2021 seeks to extend the time limitinter alia for issuing notice under Section 148which was expiring on 31 March 2021 not onlyunder the provisions of the Act, but would alsoinclude the time extension in the Act by virtueof TOLA. To put in another way, the time limit *5*904y wp9125o22 INCOME TAX (c) As regards applicability ofNotifications No.20 of 2021 dated 31 March2021 and No.38 of 2021 dated 27th April 2021extending the time limit even for AY 2014-15and it is extended till 30 June 2021, respondent,in other words, argues that the NotificationNo.20 of 2021 seeks to extend the time limitinter alia for issuing notice under Section 148which was expiring on 31 March 2021 not onlyunder the provisions of the Act, but would alsoinclude the time extension in the Act by virtueof TOLA. To put in another way, the time limit *5*904y wp9125o22 INCOME TAX expiring on 31 March 2021 specified inNotification No.20 of 2021, according torespondents, would have to be read to includelimitation under the Act read with TOLA. Asnoted earlier, this contention is flawedinasmuch as it expands the scope of theNotification and violates its plain language,viz., the time limit, specified in, or prescribedor notified under the Income Tax Act falls forcompletion. The limitation under the Act(erstwhile Section 149) for reopening theassessment for the AY 2013-14 expired on 31March 2020. Hence, Notification No.20 of2021 did not apply to the facts of the presentcase. Notification No.38 of 2021 dated 27thApril 2021 categorically uses the expressionthe time limit for completion of such actionexpires on the 30th day of April 2021 due to itsextension by the said notifications, such timelimit shall further stand extended to the 30thday of June 2021. Hence, it is incorrect to saythat 31 March 2021 under the Act would meanunder the Act, plus, extension by TOLA; (d) The submission that the Hon'bleSupreme Court, while deciding Ashish Agarwal(Supra), was conscious of the limitation of 6years expiring on 31 March 2021 under thepre-amendment provisions in respect of AY2013-14 if the Covid period was not excluded,despite which the Apex Court has stated that allnotices issued should be read to be issuedunder Section 148A to prevent the Revenuegetting remediless, is unacceptable. Thisargument clearly fails to appreciate that theeffect of Revenue's contention is that despitethe substantive defence available to theassessee in Section 149 of the amended Act, aswell as the express directions of the Hon'bleSupreme Court allowing the assessee to take alldefences available under the Act, the judgmentof Ashish Agarwal (Supra) would permit them *6*904y wp9125o22 INCOME TAX *6*904y wp9125o22 INCOME TAX to reopen the assessment of AY 2013-14 wouldnot only make the defence expressly availableto the assessees useless and unusable, butwould be contrary to well establishedprinciples of law. In Supreme Court BarAssociation (Supra), the Hon'ble SupremeCourt espoused that its powers conferred underArticle 142 of the Constitution of India, beingcurative in nature and even with the width of itsamplitude, cannot be construed as powerswhich authorise the Court to ignore thesubstantive rights of a litigant while dealingwith a cause pending before it. Article 142would not be used to supplant substantive lawapplicable to a case or cause and it will not beused to build a new edifice where none existedearlier by ignoring express statutory provisionsdealing with a subject and thereby to achievesomething indirectly which cannot be achieveddirectly. In the present case, Revenue'sargument, if accepted, would be in conflictwith the above law as despite the expresslanguage of 1 proviso to Section 149,reopening notice for the AY 2013-14 would bepermitted to be issued beyond 6 years on thepretext that the Hon'ble Supreme Court inexercise of its powers under Article 142permitted them to do so and otherwise, theywould be remediless. On the contrary, whilepermitting the Revenue to re- initiate thereassessment proceedings, the Apex Court alsogranted liberty to assessees to raise all defencesavailable to the assessee including the defencesunder Section 149 of the Act. The Apex Courtobserved that its order will strike a balancebetween the rights of the Revenue as well asthe respective assessees. Moreover, in SiemensFinancial (Supra), this Court has alreadyconsidered a similar contention of the Revenueand held that equity has no place in taxation orwhile interpreting taxing statute such *7*904y wp9125o22 INCOME TAX intendment would have any place and thattaxation statute has to be interpreted strictly.The Revenue also fails to appreciate that noparticular case was considered by the Hon'bleSupreme Court while deciding Ashish Agarwal(Supra). It is apposite to cite here an extract of thejudgment of the Hon'ble Supreme Court inParashuram Pottery Works Co. Ltd V/s. IncomeTax Officer, which reads as under: ……..It has been said that the taxes arethe price that we pay for civilization. If so, it isessential that those who are entrusted with thetask of calculating and realising that priceshould familiarise themselves with the relevantprovisions and become well-versed with thelaw on the subject. Any remissness on their partcan only be at the cost of the nationalexchequer and must necessarily result in loss ofrevenue. At the same time, we have to bear inmind that the policy of law is that there must bea point of finality in all legal proceedings, thatstale issues should not be reactivated beyond aparticular stage and that lapse of time mustinduce repose in and set at rest judicial andquasi- judicial controversies as it must in otherspheres of human activity...". (e) The contentions that (i) the truemeaning of Apex Court order in AshishAgrawal (Supra) is that the notices issuedunder Section 148, irrespective of theAssessment Year of the unamended Act,between 1st April 2021 to 30th June 2021 areto be treated as show cause notices withoutbeing hit by limitation, if issued on or before30th March 2021 and (ii) the defence underSection 149 available to the assessee wouldmean that if the Revenue had issued any noticeunder Section 148 under the unamended Actduring the period 1st April 2021 to 30th June2021 pertaining to AY 2013-14, the same *8*904y wp9125o22 INCOME TAX (e) The contentions that (i) the truemeaning of Apex Court order in AshishAgrawal (Supra) is that the notices issuedunder Section 148, irrespective of theAssessment Year of the unamended Act,between 1st April 2021 to 30th June 2021 areto be treated as show cause notices withoutbeing hit by limitation, if issued on or before30th March 2021 and (ii) the defence underSection 149 available to the assessee wouldmean that if the Revenue had issued any noticeunder Section 148 under the unamended Actduring the period 1st April 2021 to 30th June2021 pertaining to AY 2013-14, the same *8*904y wp9125o22 INCOME TAX would be barred by limitation under Section149 in effect means the Civil Appeal of theRevenue in Ashish Agrawal (Supra) wasdismissed, are completely flawed. It completelyfails to appreciate that the limitation period toissuance of reopening notices under Section148 for all Assessment Years prior to AY 2013-14 had already expired on 31 March 2019 orearlier. The provisions of TOLA obviouslycould not save such a time limit and theRevenue could not have validly issuedreopening notices for years prior to AY 2013-14 on or after 1st April 2019. Therefore, thedefence so expressly allowed to be taken by theHon'ble Supreme Court would otherwise beunnecessary; (f) The submission that the Apex Court,in exercise of power under Article 142 of theConstitution, has deemed the notices issuedbetween 1st April 2021 to 30th June 2021under Section 148A(b) of the Act issued withinlimitation and by following the manner ofcomputation of limitation provided in TOLA,the days from 1st April 2021 to 30th June 2021would stand excluded and, therefore, thenotices could be deemed to be issued on 31stMarch 2021, we find it to be rather fallacious.The fallacy of this contention of Revenue isconspicuous inasmuch as if the notices issuedunder Section 148 between 1st April 2021 and30th June 2021, which according to them, aredeemed to be issued on 31st March 2021, thenit is obvious that the provisions of the newreassessment law introduced by the FinanceAct, 2021 cannot apply as they came into forcew.e.f. 1st April 2021 and onwards. AshishAgarwal (Supra) in no uncertain words statedthat the new provisions have to apply to allsuch notices. Therefore, the argument urged iscompletely contrary to law as well as thebinding directions of the Hon'ble Supreme *9*904y wp9125o22 INCOME TAX Court; (g) As regards reliance on TouchstoneHoldings (Supra), the Hon'ble Delhi HighCourt held that the initial notice dated 29thJune, 2021 issued under Section 148 is withinlimitation. No findings on the validity orotherwise of the notice issued after May 2022pursuant to the judgment in Ashish Agarwal(Supra) is given. Moreover, in that case,petitioner did not argue that for AY 2013-14 thetime limit would have expired even underTOLA on 31st March 2021; (h) As regards Salil Gulati (Supra), theDelhi High Court, to reach its conclusion, hasmerely relied upon its earlier decision inTouchstone Holdings (Supra). It will berelevant to note that following Salil Gulati(Supra), a similar view was taken by the DelhiHigh Court in Yogita Mohan V/s. Income TaxOfficer. Against the judgment, in an SLPpreferred by the assessee, the Apex Court hasissued notice vide its order dated 20th February2023. It should also be noted that the Hon'bleGujarat High Court in Keenara Industries (P)Ltd. V/s. Income Tax Officer" and theAllahabad High Court in Rajeev Bansal V/s.Union of India have taken a view that noticesissued for AY 2013-14 were barred bylimitation in view of the amended Section 149of the Act. Subsequently, the Apex Court, inSLPs preferred by the Revenue, has issuednotice and stayed both the orders/judgments; (i) We are unable to comprehend thecontention raised that if the notice dated 30thMay 2022 under Section 148A(b) of the Act isvalid in terms of Apex Court order in AshishAgrawal (Supra), then the notice under Section148 of the Act cannot be issued on 31st March2021 and respondent cannot be expected to doimpossible. It has nowhere been urged bypetitioner that assessing officer ought to *10*904y wp9125o22 INCOME TAX complete the proceedings before the showcause notice under Section 148A(b) of the Actwas issued. It is the case of petitioner that thereopening notice under Section 148 ought tohave been issued within 6 years from the end ofthe AY 2013-14. This limitation period, asextended by TOLA, expired on 31st March2021. However, in the present case, thereopening notice has been issued in July 2022and, therefore, beyond the statutory time limit.In any case, as stated above, the Hon'bleSupreme Court, while invoking powers underArticle 142, consciously and categoricallygranted liberty to assessees to raise all defencesavailable to the assessee, including thedefences under Section 149 of the Act. Thisspecific and express directions cannot be set atnaught. Accepting this contention of theRevenue would be a travesty of justice. 38. In the circumstances, in our view, the noticeissued under Section 148 of the Act, impugnedin this petition, for AY 2013-14 is issuedbeyond the period of limitation. 39 .Having decided in favour of assessee/petitioneron this issue of limitation, we are notdiscussing the other grounds of challengeraised in the petition. Petitioner may raise allthose contentions independently in any otherproceeding.”on this issue of limitation, we are notdiscussing the other grounds of challengeraised in the petition. Petitioner may raise allthose contentions independently in any otherproceeding.” 5.In similar circumstances, insofar as the notice issuedfor Assessment Year 2014-2015 is concerned, this Court at thePrincipal Seat in Writ Petition No.450/2023 (Original Side),Godrej Industries Limited versus The Assistant Commissioner of *11*904y wp9125o22 INCOME TAX Income Tax and others, has decided in favour of the Assesseevide judgment dated 28.02.2024. This Court relied upon theobservations in The New India Assurance Company Limited(supra) and held that the notice issued for the Assessment Year2014-2015, is also barred by limitation. 6.In view of the above, the Writ Petition is allowed. The impugned notice is quashed and set aside. 7.We record that this order is restricted only to the point of limitation since the impugned notice had been issued forthe Assessment Year 2014-2015, after the amendment to theFinance Act on 01.04.2021, and that too under the provisionsexisting prior to the amendment to the Finance Act. kps(R.M. JOSHI, J. ) ( RAVINDRA V. GHUGE, J. )