Hotel Ranthambore Regency v. Assistant Commissioner Of Income Tax, Dcit Central Circle

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR 1.D.B. Civil Writ Petition No. 3021/2022 Hotel Ranthambore Regency, Having Its Office At O,Ranthambore Road, Sawai Madhopur-322021, Rajasthan, IndiaThrough Its Partner Sh. Dharmendra Kumar Agarwal. ----Petitioner Versus Assistant Commissioner Of Income Tax, Dcit Central Circle-1,Jaipur, New Central Revenue Building, Bhagwan Das Road, C-Scheme, Jaipur. ----Respondent 2.D.B. Civil Writ Petition No. 3045/2022 Hotel Ranthambore Regency, Having Its Office At 0,Ranthambore Road, Sawai Madhopur-322021, Rajasthan, IndiaThrough Its Partner Sh. Dharmendra Kumar Agarwal. ----PetitionerVersus Assistant Commissioner Of Income Tax, Dcit Central Circle-1,Jaipur, New Central Revenue Building, Bhagwan Das Road, C-Scheme, Jaipur. ----Respondent 3.D.B. Civil Writ Petition No. 3049/2022 Harsh Stock Portefolio Private Limited, Having Its RegisteredOffice At D-65/335, Baulia Lahartara, Inside Bhardwaj Hospital,Varanasi -221002, Uttar Pradesh, India Through Its DirectorSmt. Usha Agarwal. ----Petitioner Versus Assistant Commissioner Of Income Tax, Dcit Central Circle-1,Jaipur, New Central Revenue Building, Bhagwan Das Road, C-Scheme, Jaipur. ----Respondent 4.D.B. Civil Writ Petition No. 3050/2022 HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL 23/02/2022 Order In all these petitions issue involved is identical namely thevalidity of notices for reassessment issued by the assessingofficers after 01.04.2021 for past assessment periods but applyingthe provisions under the Income Tax Act, 1961 concerningreassessment which were issued prior to 01.04.2021 before their substitution by new set of provisions under the Finance Act, 2021.This will be clear from the following data:- Identical issue had come up for consideration before thisCourt in case of Sudesh Taneja Vs. Income Tax Officer (D.B.Civil Writ Petition No. 969/2022) in which vide judgmentdated 27.01.2022 the impugned notices were quashed making thefollowing observations:- "37. In this context we have perused the provisionsof reassessment contained in the Finance Act, 2021.We have noticed earlier the major departure that thenew scheme of reassessment has made under theseprovisions. The time limits for issuing notice forreassessment have been changed. The concept ofincome chargeable to tax escaping assessment onaccount of failure on the part of the assessee todisclose truly or fully all material facts is no longerrelevant. Elaborate provisions are made underSection 148A of the Act enabling the AssessingOfficer to make enquiry with respect to materialsuggesting that income has escaped assessment,issuance of notice to the assessee calling upon whynotice under Section 148 should not be issued andpassing an order considering the material availableon record including response of the assessee if madewhile deciding whether the case is fit for issuingnotice under Section 148. There is absolutely noindication in all these provisions which would suggestthat the legislature intended that the new scheme ofreopening of assessments would be applicable only tothe period post 01.04.2021. In absence of any suchindication all notices which were issued after01.04.2021 had to be in accordance with suchprovisions. To reiterate, we find no indicationwhatsoever in the scheme of statutory provisionssuggesting that the past provisions would continue toapply even after the substitution for the assessment periods prior to substitution. In fact there are strongindications to the contrary. We may recall, that timelimits for issuing notice under Section 148 of the Acthave been modified under substituted Section 149.Clause (a) of sub-section (1) of Section 149 reducessuch period to three years instead of originallyprevailing four years under normal circumstances.Clause (b) extends the upper limit of six yearspreviously prevailing to ten years in cases whereincome chargeable to tax which has escapedassessment amounts to or is likely to amount to 50lacs or more. Sub-section (1) of Section 149 thuscontracts as well as expands the time limit for issuingnotice under Section 148 depending on the questionwhether the case falls under clause (a) or clause (b).In this context the first proviso to Section 149(1)provides that no notice under Section 148 shall beissued at any time in a case for the relevantassessment year beginning on or before 01.04.2021if such notice could not have been issued at that timeon account of being beyond the time limit specifiedunder the provisions of clause (b) of sub-section (1)of Section 149 as they stood immediately before thecommencement of the Finance Act, 2021. As per thisproviso thus no notice under Section 148 would beissued for the past assessment years by resorting tothe larger period of limitation prescribed in newlysubstituted clause (b) of Section 149(1). This wouldindicate that the notice that would be issued after01.04.2021 would be in terms of the substitutedSection 149(1) but without breaching the upper timelimit provided in the original Section 149(1) whichstood substituted. This aspect has also beenhighlighted in the memorandum explaining theproposed provisions in the Finance Bill. If accordingto the revenue for past period provisions of section149 before amendment were applicable, this firstproviso to section 149(1) was wholly unnecessary.Looked from both angles, namely, no indication ofsurviving the past provisions after the substitutionand in fact an active indication to the contrary,inescapable conclusion that we must arrive at is thatfor any action of issuance of notice under Section 148after 01.04.2021 the newly introduced provisionsunder the Finance Act, 2021 would apply. Mereextension of time limits for issuing notice undersection 148 would not change this position thatobtains in law. Under no circumstances the extendedperiod available in clause (b) of sub-section (1) ofSection 149 which we may recall now stands at 10years instead of 6 years previously available with therevenue, can be pressed in service for reopeningassessments for the past period. This flows from theplain meaning of the first proviso to sub-section (1)of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per thethen prevailing provisions, would not be revived byvirtue of the application of Section 149(1)(b)effective from 01.04.2021. All the notices issued inthe present cases are after 01.04.2021 and havebeen issued without following the procedurecontained in Section 148A of the Act and aretherefore invalid. 38.The second question framed by us arises in thiscontext. Would the explanation contained in both thenotifications of CBDT dated 31.03.2021 and 27.04.2021save the situation for the revenue? become time barred prior to 01.04.2021 as per thethen prevailing provisions, would not be revived byvirtue of the application of Section 149(1)(b)effective from 01.04.2021. All the notices issued inthe present cases are after 01.04.2021 and havebeen issued without following the procedurecontained in Section 148A of the Act and aretherefore invalid. 38.The second question framed by us arises in thiscontext. Would the explanation contained in both thenotifications of CBDT dated 31.03.2021 and 27.04.2021save the situation for the revenue? 39.It is well settled that there is presumption ofconstitutionality of a statute (refer to the ConstitutionBench judgment in case of The State of Jammu &Kashmir, Vs. Triloki Nath Khosa and Ors., reportedin AIR 1974 SC 1). The said principle of presumption ofconstitutionality also applies to piece of delegatedlegislation. In case of St. Johns Teachers TrainingInstitute Vs. Regional Director, National CouncilFor Teachers Education and Another, reported in(2003) 3 SCC 321, it was observed that it is wellsettled in considering the vires of subordinate legislationone should start with the presumption that it is intravires and if it is open to two constructions, one of whichwould make it valid and other invalid, the courts mustadopt that construction which makes it valid. However itis equally well settled that the subordinate legislationdoes not enjoy same level of immunity as the law framedby the Parliament or the State Legislature. The lawframed by the Parliament or the State Legislature can bechallenged only on the grounds of being beyond thelegislative competence or being contrary to thefundamental rights or any other constitutionalprovisions. Third ground of challenge which is nowrecognized in the judgment in case of Shayara Bano VsUnion of India reported in 2017 9 SCC 1 is oflegislation being manifestly arbitrary. A subordinatelegislation can be challenged on all these grounds as wellas on the grounds that it does not conform to the statuteunder which it is made or that it is inconsistent with theprovisions of the Act or it is contrary to some of thestatutes applicable on the subject matter. In case of J.K.Industries Ltd. and Ors. Vs. Union of India andOrs., reported in (2007) 13 SCC 673, it was observedas under:- “63. At the outset, we may state that onaccount of globalization and socio-economic problems (including incomedisparities in our economy) the power ofDelegation has become a constituentelement of legislative power as a whole. However, as held in the case of IndianExpress Newspaper v. Union of Indiareported in (1985) 1 SCC 641 at page 689,subordinate legislation does not carry thesame degree of immunity which is enjoyedby a statute passed by a competentLegislature. Subordinate legislation may bequestioned on any of the grounds on whichplenary legislation is questioned. Inaddition, it may also be questioned on theground that it does not conform to thestatute under which it is made. It mayfurther be questioned on the ground that itis inconsistent with the provisions of theAct or that it is contrary to some otherstatute applicable on the same subjectmatter. Therefore, it has to yield to plenarylegislation. It can also be questioned onthe ground that it is manifestly arbitraryand unjust. That, any inquiry into its viresmust be confined to the grounds on whichplenary legislation may be questioned, tothe grounds that it is contrary to thestatute under which it is made, to thegrounds that it is contrary to otherstatutory provisions or on the ground thatit is so patently arbitrary that it cannot besaid to be inconformity with the statute. Itcan also be challenged on the ground thatit violates Article 14 of the Constitution.” 40.With this background we may revert to theRelaxation Act, 2020 and the two notifications issuedby the CBDT. We may recall, under sub-section (1) ofSection 3 of the Relaxation Act, 2020 while extendingthe time limits for taking action and makingcompliances in the specified Acts upto 31.12.2020 thepower was given to the Central Government to extendthe time further by issuing a notification. This was theonly power vested in the Central Government. As apiece of delegated legislation the notifications issuedin exercise of such powers, had to be within theconfines of such powers. In plain terms under sub-section (1) of Section 3 of the Relaxation Act, 2020the Government of India was authorized to extend thetime limits by issuing notifications in this regard.Issuing any explanation touching the provisions of theIncome Tax Act was not part of this delegation at all.The CBDT while issuing the notifications dated31.03.2021 and 27.04.2021 when introduced anexplanation which provided by way of clarification thatfor the purposes of issuance of notice under Section148 as per the time limits specified in Section 149 or151, the provisions as they stood as on 31.03.2021before commencement of the Finance Act, 2021 shall apply, plainly exceeded its jurisdiction as asubordinate legislation. The subordinate legislationcould not have travelled beyond the powers vested inthe Government of India by the parent Act. Evenotherwise it is extremely doubtful whether theexplanation in the guise of clarification can change thevery basis of the statutory provisions. If the plainmeaning of the statutory provision and itsinterpretation is clear, by adopting a position differentin an explanation and describing it to be clarificatory,the subordinate legislature cannot be permitted toamend the provisions of the parent Act. Accordingly,these explanations are unconstitutional and declaredas invalid. 41.As noted, two Division Benches of Allahabad andDelhi High Courts have taken similar view. Twolearned Single Judges of Calcutta and this High Courthave followed this trend. Independently also we holdthe same beliefs. As noted earlier we are consciousthat Single Judge of Chhattisgarh High Court in PalakKhatuja (supra) has taken a different view. Theview of the High Court was that the impugned noticeswere valid since by virtue of notifications dated31.03.2021 and 27.04.2021 the application of Section148 which was originally existing before amendmentwas deferred. It was further observed as under:- “Reading of the aforesaid notification wouldshow that it was issued in exercise of powerconferred under the Taxation and other Laws(Relaxation and Amendment of CertainProvisions) Act, 2020 and time for issuanceof notice under Section 148, the end datewas initially extended uptill on 30th day ofApril 2021 and subsequently again bynotification dated 27th April, 2021 the timelimit of 30th day of April 2021 was furtherextended up till 30th day of June, 2021. Byeffect of such notification, the individualidentity of Section 148, which was prevailingprior to amendment and insertion of section148A was insulated and saved uptill30.06.2021.” With respect, we are unable to persuadeourselves to accept this analysis of the situation. In ourunderstanding by virtue of notifications dated31.03.2021 and 01.04.2021 issued by CBDTsubstitution of reassessment provisions framed underthe Finance Act, 2021 were not deferred nor could theyhave been deferred. The date of such amendmentscoming into effect remained 01.04.2021. 42.In the result we find that the notices impugned inthe respective petitions are invalid and bad in law. Thesame are quashed and set aside. The learned SingleJudge committed no error in quashing these notices. Allthe writ petitions are allowed. Appeals of the revenueare dismissed. Pending applications if any standdisposed of." With respect, we are unable to persuadeourselves to accept this analysis of the situation. In ourunderstanding by virtue of notifications dated31.03.2021 and 01.04.2021 issued by CBDTsubstitution of reassessment provisions framed underthe Finance Act, 2021 were not deferred nor could theyhave been deferred. The date of such amendmentscoming into effect remained 01.04.2021. 42.In the result we find that the notices impugned inthe respective petitions are invalid and bad in law. Thesame are quashed and set aside. The learned SingleJudge committed no error in quashing these notices. Allthe writ petitions are allowed. Appeals of the revenueare dismissed. Pending applications if any standdisposed of." In view of above, without recording separate reasons, theimpugned notices challenged in these petitions are quashed. Thepetitions stand disposed of accordingly. (SUDESH BANSAL),J(AKIL KURESHI),CJ N.Gandhi/24-28