Gudwala And Sons v. Assistant Commissioner Of Income Tax Circle 4 Delhi And Anr

$~39 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 12540/2022 GUDWALA AND SONS .....Petitioner Through: Dr. Kapil Goel and Mr. Sandeep Goel, Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4 DELHI AND ANR .....Respondents Through: Mr. Sunil Agarwal, SSC, Mr. Shivansh B. Pandya, Mr. Viplav Acharya, Ms. Priya Sarkar, JSCs and Mr. Utkarsh Tiwari, Adv. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE RAVINDER DUDEJA O R D E R % 24.02.2025 1.This writ petition has been preferred seeking the following reliefs:- “A. Issue of a writ of certiorari, mandamus, prohibition or any other writ and/or order and or directions quashing the impugned order passed u/s 148A(d) of the Act dated 30.05.2022 by respondent /JAO being made in totally “abdicated” manner on mere dictate and directions of PCIT(C) as evident from noting (s) on case order sheet ; B.Issue of a writ of certiorari or an order quashing the impugned notice purportedly issued u/s 148 of the act dated 30.05.2022 based on unlawful order passed u/s 148A(d) and non existing/ “discharged” SCN issued u/s 148A(b) of the 1961 Act. C. Issue of a writ of certiorari or an order quashing the impugned action of respondent/JAO in mechanically/irrationally deciding u/s 148A(d) of 1961 Act that extant case is a fit case for issue of notice u/s 148 of 1961 Act; D. Issue a writ in the nature of mandamus or an order prohibiting the operation of the proceedings as deemed fit and proper in the Page 1 of 7 facts and circumstances of the present case as initiated by the respondent u/s 148 of the 1961 Act; E. Pass any other order(s) as this Hon’ble Court may deem to be fit and more appropriate may please give order to grant interim relief to the petitioner by staying the operation of impugned noticed issued by respondent which suffers from series of jurisdictional errors as pointed above;” 2.Before us the solitary argument which is addressed today is with respect to the validity of the sanction which was accorded to the reassessment action by the Principal Commissioner of Income Tax[1]. 3.Dr. Goel, learned counsel for the writ petitioner, draws our attention to the provisions of Section 151 of the Income Tax Act, 19612 as they stood at the relevant time and which read as follows:- “151. Specified authority for the purposes of section 148 and section 148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.” 4.Undisputedly, we are in this writ petition concerned with Assessment Year[3] 2018-19 and in respect of which the notice under Section 148 of the Act ultimately came to be issued on 30 May 2022. It is thus apparent that the action has come to be initiated after the expiry of three years from the end of the relevant AY. It is in the aforesaid context that the petitioner contends that the sanction accorded by the PCIT would not sustain. 1 PCIT 2 Act 3 AY 2018-19 W.P.(C) 12540/2022 Page 2 of 7 5.In cases where reassessment is sought to be commenced after the lapse of three years from the end of the relevant AY, undisputedly, it would be the Principal Chief Commissioner who would be liable to be recognised as being the competent authority. Viewed in that light, it is apparent that the reassessment action would not sustain. 6.Dealing with an identical question, we had in Abhinav Jindal HUF v. Commissioner of Income Tax and Ors[4] held as under:- 1 PCIT 2 Act 3 AY 2018-19 W.P.(C) 12540/2022 Page 2 of 7 5.In cases where reassessment is sought to be commenced after the lapse of three years from the end of the relevant AY, undisputedly, it would be the Principal Chief Commissioner who would be liable to be recognised as being the competent authority. Viewed in that light, it is apparent that the reassessment action would not sustain. 6.Dealing with an identical question, we had in Abhinav Jindal HUF v. Commissioner of Income Tax and Ors[4] held as under:- “30. Tested on the principles which were enunciated in Suman Jeet Agarwal v. ITO [(2022) 449 ITR 517 (Delhi); 2022 SCC OnLine Del 3141.], the petitioners would appear to be correct in their submission of the date liable to be ascribed to the impugned notices and those being viewed as having been issued and dispatched after April 1, 2021. However, and in our considered opinion, the same would be of little relevance or significance when one bearsin mind the indubitable fact that all the notices wereapproved by the Joint Commissioner of Income-tax andwhich was an authority recognised under the unamendedsection 151. The answer to the argument based on theprovisions of the Taxation and Other Laws (Relaxationand Amendment of Certain Provisions) Act would alsolargely remain unimpacted by our finding on this score aswould become evident from the discussion which ensues. xxxx 33. A plain reading of section 3 establishes that where the time limit for the completion or compliance of any action under a specified Act were to fall between March 20, 2020 to December 31, 2020, the period for completion and compliance would stand extended up to March 31, 2021 or such other date thereafter as may be specified by the Union Government by way of a notification. Undisputedly, the date of March 31, 2021 came to be extended thereafter up to April 30, 2021 and lastly up to June 30, 2021. 34.Concededly, the Finance Act, 2021 was enactedthereafter and came into effect from April 1, 2021. It isadmitted by the respondents that the terminal point for-initiation of reassessment for the assessment year 2015 4 2024 SCC OnLine Del 6585 W.P.(C) 12540/2022 Page 3 of 7 2016 in ordinary circumstances would have been March31, 2020 and that date clearly fell within the period spokenof in section 3 of the Taxation and Other Laws (Relaxationand Amendment of Certain Provisions) Act. The period-for issuance of notice for the assessment year 20152016,thus and principally speaking, stood extended up to June30, 2021. 35.However, the key to answering the argument whichwas canvassed on behalf of the respondents is contained insection 3 itself and which purported to extend the periodfor completion of proceedings, passing of an order,issuance of a notice, intimation, notification, sanction orapproval. The provision extended the time limit for suchaction, notwithstanding anything contained in thespecified Act, initially up to March 31, 2021 and whichdate was extended subsequently to April 30, 2021 andlastly up to June 31, 2021. 36. Section 3 thus essentially extended the time periodstatutorily prescribed for initiation and compliance up tothe dates notified by the Union Government from time totime. The extension of these timelines was intended toapply to all statutes which were included in the expression“specified Act” as defined in section 2(b) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 36. Section 3 thus essentially extended the time periodstatutorily prescribed for initiation and compliance up tothe dates notified by the Union Government from time totime. The extension of these timelines was intended toapply to all statutes which were included in the expression“specified Act” as defined in section 2(b) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 37. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act was thusconcerned with overcoming the statutory closure andeclipse which would have otherwise descended upon theauthority to act and take action under the specifiedstatutes. It was essentially concerned with tiding over theinsurmountable hurdles which arose due to the pandemicand the disruption that followed in its wake. The Taxationand Other Laws (Relaxation and Amendment of Certain Provisions) Act, viewed in that light, was neither aimed at nor designed or intended to confer a new jurisdiction orauthority upon an officer under a specified enactment. Ona fundamental plane, it was a remedial measure aimed atovercoming a position of irretrievable and irreversibleconsequences which were likely to befall during thenationwide lockdown. It was principally aimed at enablingauthorities to take and commence action within theextended timelines that the Taxation and Other Laws(Relaxation and Amendment of Certain Provisions) Actintroduced. However, it neither altered nor modified oramended the distribution of functions, the command Page 4 of 7 structure or the distribution of powers under a specifiedAct. It was in that light that we had spoken of the carvingor conferral of a new or altered jurisdiction. 38. It would therefore be wholly incorrect to read theTaxation and Other Laws (Relaxation and Amendment ofCertain Provisions) Act as intending to amend thedistribution of power or the categorisation envisaged andprescribed by section 151. The additional time that thesaid statute provided to an authority cannot possibly beconstrued as altering or modifying the hierarchy or thestructure set up by section 151 of the Act. The issue ofapproval would still be liable to be answered based onwhether the reassessment was commenced after or within a period of four years from the end of the relevantassessment year or as per the amended regime dependentupon whether action was being proposed within threeyears of the end of the relevant assessment year orthereafter. The bifurcation of those powers would continue unaltered and unaffected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 39. The fallacy of the submission addressed by the respondents becomes even more evident when we weigh in consideration the fact that even if the reassessment action were initiated, as per the extended Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act timelines, and thus after the period of four years, section 151 incorporated adequate measures to deal with such a contingency and in unambiguous terms identified the authority which was to be moved for the purposes of sanction and approval. Section 151 distributedthe powers of approval amongst a set of specifiedauthorities based upon the lapse of time between the endof the relevant assessment year and the date whenreassessment was proposed. Thus even if the reassessmentwas proposed to be initiated with the aid of the Taxationand Other Laws (Relaxation and Amendment of CertainProvisions) Act after the expiry of four years from the endof the relevant assessment year, the authority statutorilyempowered to confer approval would be the PrincipalChief Commissioner/Chief Commissioner/PrincipalCommissioner/Commissioner. It would only be in a case where the reassessment was proposed to be initiatedbefore the expiry of four years from the end of the relevantassessment year that approval could have been accordedby the Joint Commissioner of Income-tax. Similar would be the position which would emerge if the actions were Page 5 of 7 Page 5 of 7 tested on the basis of the amended section 151 and whichdivides the power of sanction amongst two sets ofauthorities based on whether reassessment is commencedwithin three years or thereafter. 40. What we seek to emphasise is that the Taxation andOther Laws (Relaxation and Amendment of Certain Provisions) Act authorisation merely enables thecompetent authority to take action within the extendedtime period and irrespective of the closure which wouldhave ordinarily come about by virtue of the provisionscontained in the Act. It does not alter or amend thestructure for approval and sanction which stands erectedby virtue of section 151. The Taxation and Other Laws(Relaxation and Amendment of Certain Provisions) Actmerely extended the period within which action couldhave been initiated and which would have otherwise andordinarily been governed and regulated by sections 148and 149 of the Act. If the contention of the respondentswere to be accepted it would amount to us virtuallyignoring the date when reassessment is proposed to beinitiated and the same being indelibly tied to the end of therelevant assessment year. Once it is conceded that thenotice came to be issued four or three years after the endof the relevant assessment year, the approval granted bythe Joint Commissioner of Income-tax would not becompliant with the scheme of section 151. We thus find ourselves unable to sustain the grant of approval by the Joint Commissioner of Income-tax. 41. It is pertinent to note that the respondents had feebly sought to urge that the use of the expression “sanction” in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act also merits due consideration and is liable to be read as supportive of the contentions that were addressed on their behalf. The argument is however clearly meritless when one bears in consideration the indisputable fact that the set of provisions with which we are concerned nowhere prescribe a timeframe within which sanction is liable to be accorded. “Sanction” when used in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved. That is clearly not the position which obtains here. We thus find ourselves unable to sustain the impugned action of reassessment. The impugned notices which rest on a Page 6 of 7 sanction obtained from the Joint Commissioner of Income-tax would thus be liable to be quashed.” Consequently, and for the aforesaid reasons, we find ourselves unable to sustain the reassessment action on this short score alone. 7.Accordingly, the writ petition is allowed. The impugned order referable to Section 148A(d) and notice under Section 148, both dated 30 May 2022 are quashed. However, the present order shall be without prejudice to the right of the respondent to draw such other proceedings as may be permissible in law. YASHWANT VARMA, J. FEBRUARY 24, 2025/nd RAVINDER DUDEJA, J. Page 7 of 7