Dharmendra Gupta (Huf) v. Income Tax Officer, Ward-1, Kishangarh, Ajmer

S.B. Civil Writ Petition No. 7810/2021 Dharmendra Gupta (Huf), Through Its Karta Shri DharmendraGupta S/o Sh. Babu Lal Gupta, Aged About 54 Years, R/o- Opp.Laxmi Narayan Mandir, Ajmer Road, Madanganj, Kishangarh,Ajmer-305801 (Raj.) ----Petitioner Versus Income Tax Officer, Ward-1, Kishangarh, Ajmer. ----Respondent Connected with S.B. Civil Writ Petition No. 13961/2021 Deepak Kumar Nowlakha S/o Sh. Darshan Kumar Nowlakha,Aged About 67 Years, R/o 104, Pearl Pride Madho 6,Vivekanand Marg, C-Scheme, Jaipur, Rajasthan-302001. ----Petitioner Versus 1. Union Of India, Through Ministry Of Finance,Department Of Income Tax, New Delhi.Department Of Income Tax, New Delhi. 2. Income Tax Officer, Ward-25(1), Aayakaar Bhawan,Dakshin 2, Gariahat Road, Kolkata, West Bengal-700068.Dakshin 2, Gariahat Road, Kolkata, West Bengal-700068. ----Respondents S.B. Civil Writ Petition No. 13854/2021 Rajnandini Constructions Pvt Ltd, C-39, Lajpat Marg, C-Scheme, Jaipur 302001, Rajasthan Through Director AshishGupta ----Petitioner Versus Acit Circle-1, Office Of The Assistant Commissioner Of IncomeTax, Jaipur 302001, Rajasthan. ----Respondent S.B. Civil Writ Petition No. 14022/2021 HON'BLE MR. JUSTICE INDERJEET SINGH 02/12/2021 Order In all these writ petitions, since common question of law isinvolved, hence with consent of the parties all these writ petitions have been heard together and are being decided by the presentcommon order. From perusal of the record, it is revealed that the petitionersare aggrieved of issuance of the re-assessment notice u/s.148 ofthe Income Tax Act, 1961 (hereinafter to be referred as theAct), which according to the petitioners is barred by limitation andthat the respondent before issuing the notice under Section 148 ofthe Act has not followed the mandatory procedure prescribedunder Section 148A of the Act as prescribed by the Finance Act,2021 and applicable w.e.f. 01.04.2021 before issuance of noticeunder Section 148 of the Act. At the outset, all the counsels appearing for the petitionersjointly submitted that the issue involved in these writ petitions hasbeen considered and decided by the Division Bench of theAllahabad High Court in the matter of ‘Ashok Kumar AgarwalVs. Union of India through its Revenue Secretary NorthBlock & Ors.’ (Writ Tax No.524/2021) decided on 30.09.2021followed with order dated 08.10.2021 wherein it has been held asunder: “63. Having heard learned counsel for theparties and having perused the record, wefind that the thrust of the submissionsadvanced by learned counsel for thepetitioners, are: (i) By substituting the provisions of the Actby means of the Finance Act, 2021 witheffect from 01.04.2021, the old provisionswere omitted from the statute book andreplaced by fresh provisions with effectfrom 01.04.2021. Relying on the principle -substitution omits and thus obliterates thepre-existing provision, it has been furthersubmitted, in absence of any saving clauseshown to exist either under the Ordinanceor the Enabling Act or the Finance Act2021, there exists no presumption infavour of the old provision continuing to operate for any purpose, beyond31.03.2021. “63. Having heard learned counsel for theparties and having perused the record, wefind that the thrust of the submissionsadvanced by learned counsel for thepetitioners, are: (i) By substituting the provisions of the Actby means of the Finance Act, 2021 witheffect from 01.04.2021, the old provisionswere omitted from the statute book andreplaced by fresh provisions with effectfrom 01.04.2021. Relying on the principle -substitution omits and thus obliterates thepre-existing provision, it has been furthersubmitted, in absence of any saving clauseshown to exist either under the Ordinanceor the Enabling Act or the Finance Act2021, there exists no presumption infavour of the old provision continuing to operate for any purpose, beyond31.03.2021. (ii) The Act is a dynamic enactment thatsustains through enactment of the FinanceAct every year. Therefore, on 1st Aprilevery year, it is the Act as amended by theFinance Act, for that year which is applied.In the present case, it is the Act asamended by the Finance Act 2021, thatconfronted the Enabling Act as was pre-existing. In absence of any legislativeintent expressed either under the FinanceAct, 2021 or under the Enabling Act, topreserve any part of the pre-existing Act,plainly, reference to provisions of Sections147 and 148 of the Act and the words'assessment' and 'reassessment' appearingin the Notifications issued under theEnabling Act may be read to be indicatingonly at proceedings already commencedprior to 01.04.2021, under the Act (beforeamendment by the Finance Act, 2021).The delegated action performed under theEnabling Act cannot, itself create anoverriding effect in favour of the EnablingAct. (iii) The Enabling Act read with itsNotifications does not validate the initiationof any proceeding that may otherwise beincompetent under the law. That law onlyaffects the time limitation to conduct orconclude any proceeding that may havebeen or may be validly instituted under theAct, whether prior to or after itsamendment by Finance Act, 2021. Insofaras, Section 1(2)(a) unequivocally enforcedSections 2 to 88 of the Finance Act, 2021,w.e.f. 01.04.2021, there can be no disputeif any valid proceeding could be initiatedunder the pre-existing Section 148 readwith Section 147, after 01.04.2021. Insupport thereof other submission alsoappear to exist - based upon theenactment of Section 148A (w.e.f.01.04.2021). (iv) The delegation made could beexercised within the four corners of theprincipal legislation and not to overreachit. Insofar as the Enabling Act does notdelegate any power to legislate - withrespect to enforceability of any provision ofthe Finance Act, 2021 and those provisions(Sections 2 to 88) had come into force, ontheir own, on 01.04.2021, any exercise ofthe delegate under the Enabling Act, to defeat the plain enforcement of that lawwould be wholly unconstitutional. (v) It also appears to be the submission oflearned counsel for the petitioners that theParliament being aware of all realities,both as to the fact situation and the lawsthat were existing, it had consciouslyenacted the Enabling Act, to extend certaintime limitations and to enforce only apartial change to the reassessmentprocedure, by enacting section 151-A tothe Act. It then enacted the Finance Act,2021 to change the substantive andprocedurallawgoverningthereassessment proceedings. That havingbeen done, together with introduction ofsection 148-A to the Act, legislative fieldstood occupied, leaving the delegate withno room to manipulate the law except asto the time lines with respect toproceedings that may have been initiatedunder the Act (both prior to and afterenforcement of the Finance Act, 2021). Tobolster their submission, learned counselfor the petitioners also rely on the principle- the delegated legislation can neverdefeat the principal legislation. (vi) Last, it has also been asserted, thenon-obstante clause created under section3(1) of the Enabling Act must be read inthe context and for the purpose or intentfor which it is created. It cannot be given awider meaning or application as maydefeat the other laws. 64. As to the first line of reasoning appliedby the learned counsel for the petitioner,as noted above, there can be no exceptionto the principle - an Act of legislativesubstitution is a composite act. Thereby,the legislature chooses to put in placeanother or, replace an existing provision oflaw. It involves simultaneous omission andre-enactment. By its very nature, once anew provision has been put in place of apre-existing provision, the earlier provisioncannot survive, except for things done oralready undertaken to be done or thingsexpressly saved to be done. In absence ofany express saving clause and, since noreassessment proceeding had beeninitiated prior to the Act of legislativesubstitution, the second aspect of thematter does not require any furtherexamination. 65. Therefore, other things apart,undeniably, on 01.04.2021, by virtue ofplain/unexcepted effect of Section 1(2)(a)of the Finance Act, 2021, the provisions ofSections 147, 148, 149, 151 (as thoseprovisions existed upto 31.03.2021), stoodsubstituted, along with a new provisionenacted by way of Section 148A of thatAct. In absence of any saving clause, tosave the pre-existing (and nowsubstituted) provisions, the revenueauthorities could only initiate reassessmentproceeding on or after 01.04.2021, inaccordance with the substituted law andnot the pre-existing laws. 66. It is equally true that the Enabling Actthat was pre-existing, had been enforcedprior to enforcement of the Finance Act,2021. It confronted the Act as amended byFinance Act, 2021, as it came intoexistence on 01.04.2021. In the EnablingAct and the Finance Act, 2021, there isabsence, both of any express provision initself or to delegate the function - to saveapplicability of the provisions of sections147, 148, 149 or 151 of the Act, as theyexisted up to 31.03.2021. Plainly, theEnabling Act is an enactment to extendtimelines only. Consequently, it flows fromthe above - 01.04.2021 onwards, allreferences to issuance of notice containedin the Enabling Act must be read asreference to the substituted provisionsonly. Equally there is no difficulty inapplying the pre-existing provisions topending proceedings. Looked in thatmanner, the laws are harmonized. 67. It may also be not forgotten, areassessment proceeding is not justanother proceeding emanating from asimple show cause notice. Both, under thepre-existing law as also under the lawenforced from 01.04.2021, that proceedingmust arise only upon jurisdiction beingvalidly assumed by the assessingauthority. Till such time jurisdiction isvalidly assumed by assessing authority -evidenced by issuance of the jurisdictionalnotice under Section 148, no re-assessment proceeding may ever be saidto be pending before the assessingauthority. The admission of the revenueauthorities that all re-assessment noticesinvolved in this batch of writ petitions hadbeen issued after the enforcement date 01.04.2021, is tell-tale and critical. As afact, no jurisdiction had been assumed bythe assessing authority against any of thepetitioners, under the unamended law.Hence, no time extension could ever bemade under section 3(1) of the EnablingAct, read with the Notifications issuedthereunder. 01.04.2021, is tell-tale and critical. As afact, no jurisdiction had been assumed bythe assessing authority against any of thepetitioners, under the unamended law.Hence, no time extension could ever bemade under section 3(1) of the EnablingAct, read with the Notifications issuedthereunder. 68. The submission of the learnedAdditional Solicitor General of India thatthe provision of Section 3(1) of theEnabling Act gave an overriding effect tothat Act and therefore saved the provisionsas existed under the unamended law, alsocannot be accepted. That saving couldarise only if jurisdiction had been validlyassumed before the date 01.04.2021. Inthe first place Section 3(1) of the EnablingAct does not speak of saving any provisionof law. It only speaks of saving orprotecting certain proceedings from beinghit by the rule of limitation. That provisionalso does not speak of saving anyproceeding from any law that may beenacted by the Parliament, in future. Forboth reasons, the submission advanced bylearned Additional Solicitor General ofIndia is unacceptable.69.Evenotherwisetheword 69.Evenotherwisetheword'notwithstanding' creating the nonobstante clause, does not govern theentire scope of Section 3(1) of theEnabling Act. It is confined to and may beemployed only with reference to thesecond part of Section 3(1) of the EnablingAct i.e. to protect proceedings alreadyunder way. There is nothing in thelanguage of that provision to admit a wideror sweeping application to be given to thatclause – to serve a purpose notcontemplated under that provision and theenactment, wherein it appears. 70. The upshot of the above reasoning is,the Enabling Act only protected certainproceedings that may have become timebarred on 20.03.2020, upto the date30.06.2021. Correspondingly, by delegatedlegislation incorporated by the CentralGovernment, it may extend that time limit.That time limit alone stood extended upto30 June, 2021. We also note, the learnedAdditional Solicitor General of India maynot be entirely correct in stating that noextension of time was granted beyond30.06.2021. Vide Notification No. 3814 dated 17.09.2021, issued under section3(1) of the Enabling Act, further extensionof time has been granted till 31.03.2022.In absence of any specific delegationmade, to allow the delegate of theParliament, to indefinitely extend suchlimitation, would be to allow the validity ofan enacted law i.e. the Finance Act, 2021to be defeated by a purely colourableexercise of power, by the delegate of theParliament. 71. Here, it may also be clarified, Section3(1) of the Enabling Act does not itselfspeak of reassessment proceeding or ofSection 147 or Section 148 of the Act as itexisted prior to 01.04.2021. It onlyprovides a general relaxation of limitationgranted on account of general hardshipexisting upon the spread of pandemicCOVID -19. After enforcement of theFinance Act, 2021, it applies to thesubstituted provisions and not the pre-existing provisions.72.Referencetoreassessmentproceedings with respect to pre-existingand now substituted provisions of Sections147 and 148 of the Act has beenintroduced only by the later Notificationsissued under the Act. Therefore, thevalidity of those provisions is also requiredto be examined. We have concluded asabove, that the provisions of Sections 147,148, 148A, 149, 150 and 151 substitutedthe old/pre-existing provisions of the Actw.e.f. 01.04.2021. We have furtherconcluded, in absence of any proceeding ofreassessment having been initiated prior tothe date 01.04.2021, it is the amended lawalone that would apply. We do not see howthe delegate i.e. Central Government orthe CBDT could have issued theNotifications, plainly to over reach theprincipal legislation. Unless harmonized asabove, those Notifications would remaininvalid. 73. Unless specifically enabled under anylaw and unless that burden had beendischarged by the respondents, we areunable to accept the further submissionadvanced by the learned AdditionalSolicitor General of India that practicalitydictatesthatthereassessmentproceedings be protected. Practicality, ifany, may lead to legislation. Once thematter reaches Court, it is the legislation and its language, and the interpretationoffered to that language as may primarilybe decisive to govern the outcome of theproceeding. To read practicality intoenacted law is dangerous. Also, it wouldinvolve legislation by the Court, an ideaand exercise we carefully tread away from.74. Similarly, the mischief rule has limitedapplication in the present case. Only incase of any doubt existing as to which ofthe two interpretations may apply or toclear a doubt as to the true interpretationof a provision, the Court may look at themischief rule to find the correct law.However, where plain legislative actionexists, as in the present case (whereunderthe Parliament has substituted the oldprovisions regarding reassessment withnew provisions w.e.f. 01.04.2021), themischief rule has no application. 75. As we see there is no conflict in theapplication and enforcement of theEnabling Act and the Finance Act, 2021.Juxtaposed, if the Finance Act, 2021 hadnot made the substitution to thereassessment procedure, the revenueauthorities would have been within theirrights to claim extension of time, underthe Enabling Act. However, upon thatsweepingamendmentmadetheParliament, by necessary implication orimplied force, it limited the applicability ofthe Enabling Act and the power to granttime extensions thereunder, to only suchreassessment proceedings as had beeninitiated till 31.03.2021. Consequently, theimpugnedNotificationshavenoapplicabilitytothereassessmentproceedings initiated from 01.04.2021onwards. 76. Upon the Finance Act 2021 enforcedw.e.f. 1.4.2021 without any saving of theprovisions substituted, there is no room toreach a conclusion as to conflict of laws. Itwas for the assessing authority to actaccording to the law as existed on andafter 1.4.2021. If the rule of limitationpermitted, it could initiate, reassessmentproceedings in accordance with the newlaw, after making adequate compliance ofthe same. That not done, thereassessment proceedings initiated againstthe petitioners are without jurisdiction.77. Insofar as the decision of the SupremeCourt in the case of Ramesh Kymal Vs. Siemens Gamesa Renewable PowerPrivate Limited (supra) is concerned,we opine, the same is whollydistinguishable. Therein The Insolvencyand Bankruptcy Code 2016 was amendedby the Parliament and a new Section 10A,was introduced, apparently again onaccount of the difficulties arising from thespread of pandemic COVID-19. ThatSection reads as under: “10A. Notwithstanding anything contained insections 7, 9 and 10, no application forinitiation of corporate insolvency resolutionprocess of a corporate debtor shall be filed, forany default arising on or after 25th March,2020 for a period of six months or suchfurther period, not exceeding one year fromsuch date, as may be notified2in this behalf:Provided that no application shall ever be filedfor initiation of corporate insolvency resolutionprocess of a corporate debtor for the saiddefault occurring during the said period.Explanation. – For the removal of doubts, it ishereby clarified that the provisions of thissection shall not apply to any defaultcommitted under the said sections before 25thMarch, 2020.]” “10A. Notwithstanding anything contained insections 7, 9 and 10, no application forinitiation of corporate insolvency resolutionprocess of a corporate debtor shall be filed, forany default arising on or after 25th March,2020 for a period of six months or suchfurther period, not exceeding one year fromsuch date, as may be notified2in this behalf:Provided that no application shall ever be filedfor initiation of corporate insolvency resolutionprocess of a corporate debtor for the saiddefault occurring during the said period.Explanation. – For the removal of doubts, it ishereby clarified that the provisions of thissection shall not apply to any defaultcommitted under the said sections before 25thMarch, 2020.]” 78. Plainly, in that case, the earlierprovisions were not substituted rather theycontinued to exist. The parliamentaryintervention by introducing Section 10A ofthat Act only provided - no proceeding beinstituted for any default arising after21.3.2020, for a period of six months orsuch period not exceeding one year, asmay be notified. Thus, in that case, byvirtue of amendment made, delegatedpower created, could be exercised to relaxthe otherwise stringent provisions of theAct, in cases, wherein difficulties arosefrom the spread of the pandemic COVID-19. Thus, that ratio is plainlydistinguishable. 79. As to the decision of the ChhattisgarhHigh Court, with all respect, we are unableto persuade ourselves to that view.According to us, it would be incorrect tolook at the delegation legislation i.e.Notification dated 31.03.2021 issued underthe Enabling Act, to interpret the principallegislation made by Parliament, being theFinance Act, 2021. A delegated legislationcan never overreach any Act of theprincipal legislature. Second, it would beover simplistic to ignore the provisions of,either the Enabling Act or the Finance Act, 79. As to the decision of the ChhattisgarhHigh Court, with all respect, we are unableto persuade ourselves to that view.According to us, it would be incorrect tolook at the delegation legislation i.e.Notification dated 31.03.2021 issued underthe Enabling Act, to interpret the principallegislation made by Parliament, being theFinance Act, 2021. A delegated legislationcan never overreach any Act of theprincipal legislature. Second, it would beover simplistic to ignore the provisions of,either the Enabling Act or the Finance Act, 2021 and to read and interpret theprovisions of Finance Act, 2021 asinoperative in view of the factcircumstances arising from the spread ofthe pandemic COVID-19. Practicality of lifede hors statutory provisions, may never bea good guiding principle to interpret anytaxation law. In absence of any specificclause in Finance Act, 2021, either to savethe provisions of the Enabling Act or theNotifications issued thereunder, by nointerpretativeprocesscanthoseNotifications be given an extended run oflife, beyond 31 March 2020. They may alsonot infuse any life into a provision thatstood obliterated from the statute witheffect from 31.03.2021. Inasmuch as theFinance Act, 2021 does not enable theCentral Government to issue anynotification to reactivate the pre-existinglaw (which that principal legislature hadsubstituted), the exercise made by thedelegate/Central Government would be dehors any statutory basis. In absence of anyexpress saving of the pre-existing laws,the presumption drawn in favour of thatsaving, is plainly impermissible. Also, nopresumption exists that by Notificationissued under the Enabling Act, theoperation of the pre-existing provision ofthe Act had been extended and therebyprovisions of Section 148A of the Act(introduced by Finance Act 2021) andother provisions had been deferred. SuchNotifications did not insulate or save, thepre-existing provisions pertaining toreassessment under the Act.80. In view of the above, all the writpetitions must succeed and are allowed. Itis declared that the Ordinance, theEnabling Act and Sections 2 to 88 of theFinance Act 2021, as enforced w.e.f.01.04.2021, are not conflicted. Insofar asthe Explanation appended to Clause A(a),A(b), and the impugned Notifications dated31.03.2021 and 27.04.2021 (respectively)are concerned, we declare that the saidExplanations must be read, as applicableto reassessment proceedings as may havebeen in existence on 31.03.2021 i.e.before the substitution of Sections 147,148, 148A, 149, 151 & 151A of the Act.Consequently, the reassessment notices inall the writ petitions are quashed. It is leftopen to the respective assessing authorities to initiate reassessmentproceedings in accordance with theprovisions of the Act as amended byFinance Act, 2021, after making allcompliances, as required by law.” Counsels for the petitioners further submitted that variousother High Courts including Delhi High Court, Punjab & HaryanaHigh Court, Gujarat High Court, Bombay High Court & MadhyaPradesh High Court have also considered the same issue andpassed the interim orders in favour of the assessee. Counsels appearing on behalf of the respondents opposedthe writ petitions and relied upon the judgment passed by thelearned Single Judge of Chhattisgarh High Court in the matter ofPalak Khatuja Vs. Union of India & Ors. (W.P. (T) No.149 of2021) in favour of the Department, however, not disputed thejudgment passed by the Division Bench of the Allahabad HighCourt in the matter of Ashok Kumar (supra) on the question oflaw involved in these writ petitions. Heard counsel for the parties and perused the record. Counsels appearing on behalf of the respondents opposedthe writ petitions and relied upon the judgment passed by thelearned Single Judge of Chhattisgarh High Court in the matter ofPalak Khatuja Vs. Union of India & Ors. (W.P. (T) No.149 of2021) in favour of the Department, however, not disputed thejudgment passed by the Division Bench of the Allahabad HighCourt in the matter of Ashok Kumar (supra) on the question oflaw involved in these writ petitions. Heard counsel for the parties and perused the record. I find that the issue involved in the present writ petitions issquarely covered by the decision of the Allahabad High Court inthe matter of Ashok Kumar (supra), which in my view is acorrect view and has been taken after considering the judgmentpassed by the Single Bench of Chhatisgarh High Court in thematter of Palak Khatuja (supra) which has been relied upon byrespondents’ counsel and therefore in my considered view thepresent petitions deserve to succeed. Accordingly, the writ petitions are allowed. The re-assessment notice issued to the petitioners under Section 148 ofthe Income Tax Act is quashed. However, it is left open to the assessing authority to initiate re-assessment proceedings inaccordance with the provisions of the Act, as amended by theFinance Act, 2021 after making due compliance as required underthe law. A copy of this order be placed separately in each file. (INDERJEET SINGH),J MG/54,59,91,221 & 222