Jalaj Joshi Son Of Mr. Jitendra Kumar Joshi v. Assistant Commissioner Of Income Tax, Circle

HIGH COURT OF JUDICATURE FOR RAJASTHAN D.B. Civil Writ Petition No. 2489/2022 Jalaj Joshi Son Of Mr. Jitendra Kumar Joshi, Aged About 54Years, Resident Of D-30, Janpath, Shyam Nagar, Jaipur 302019 ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Circle-7, Jaipur,Ncr Building, Bhagwan Das Road, Jaipur.Ncr Building, Bhagwan Das Road, Jaipur. 2. Union Of India, Through Finance Secretary, Ministry OfFinance (Department Of Revenue), Central Board OfDirect Taxes, North Block, New Delhi 110002Finance (Department Of Revenue), Central Board OfDirect Taxes, North Block, New Delhi 110002 ----Respondents For Petitioner(s) : Mr. Rakesh Kumar through VCFor Respondent(s): Mr. Nikhil Simlote on behalf of Mr. R.B. Mathur (Sr. Advocte)For Respondent(s): Mr. Nikhil Simlote on behalf of Mr. R.B. Mathur (Sr. Advocte) HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL 11/02/2022 Judgment The petitioner has challenged a notice of reassessment dated22.05.2021 for the assessment year 2017-18. Learned counsel forthe petitioner pointed out that the assessing officer has appliedthe old provisions of the Income Tax Act, 1961 for issuing noticeand the procedure prescribed under Section 148A of the Act whichwas inserted with effect from 01.04.2021 has not been followed. Under similar circumstances in a judgment dated 27.01.2022 passed in D.B. Civil Writ Petition No. 969/2022-SudeshTaneja Vs. Income Tax Officer and Anr. and other connectedmatters, we had quashed the reassessment notices makingfollowing observations:- HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL 11/02/2022 Judgment The petitioner has challenged a notice of reassessment dated22.05.2021 for the assessment year 2017-18. Learned counsel forthe petitioner pointed out that the assessing officer has appliedthe old provisions of the Income Tax Act, 1961 for issuing noticeand the procedure prescribed under Section 148A of the Act whichwas inserted with effect from 01.04.2021 has not been followed. Under similar circumstances in a judgment dated 27.01.2022 passed in D.B. Civil Writ Petition No. 969/2022-SudeshTaneja Vs. Income Tax Officer and Anr. and other connectedmatters, we had quashed the reassessment notices makingfollowing observations:- "37. In this context we have perused the provisions ofreassessment contained in the Finance Act, 2021. Wehave noticed earlier the major departure that the newscheme 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 to disclosetruly or fully all material facts is no longer relevant.Elaborate provisions are made under Section 148A of theAct enabling the Assessing Officer to make enquiry withrespect to material suggesting that income has escapedassessment, issuance of notice to the assessee callingupon why notice under Section 148 should not be issuedand passing an order considering the material availableon record including response of the assessee if madewhile deciding whether the case is fit for issuing noticeunder Section 148. There is absolutely no indication in allthese provisions which would suggest that the legislatureintended that the new scheme of reopening ofassessments would be applicable only to the period post01.04.2021. In absence of any such indication all noticeswhich were issued after 01.04.2021 had to be inaccordance with such provisions. To reiterate, we find noindication whatsoever in the scheme of statutoryprovisions suggesting that the past provisions wouldcontinue to apply even after the substitution for theassessment periods prior to substitution. In fact thereare strong indications to the contrary. We may recall,that time limits for issuing notice under Section 148 ofthe Act have been modified under substituted Section149. Clause (a) of sub-section (1) of Section 149reduces such period to three years instead of originallyprevailing four years under normal circumstances.Clause (b) extends the upper limit of six years previouslyprevailing to ten years in cases where income chargeableto tax which has escaped assessment amounts to or islikely to amount to 50 lacs or more. Sub-section (1) ofSection 149 thus contracts as well as expands the timelimit for issuing notice under Section 148 depending onthe question whether the case falls under clause (a) orclause (b). In this context the first proviso to Section149(1) provides that no notice under Section 148 shallbe issued at any time in a case for the relevantassessment year beginning on or before 01.04.2021 ifsuch notice could not have been issued at that time onaccount of being beyond the time limit specified underthe provisions of clause (b) of sub-section (1) of Section149 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 to thelarger period of limitation prescribed in newly substitutedclause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 wouldbe in terms of the substituted Section 149(1) but withoutbreaching the upper time limit provided in the originalSection 149(1) which stood substituted. This aspect hasalso been highlighted in the memorandum explaining theproposed provisions in the Finance Bill. If according tothe revenue for past period provisions of section 149before amendment were applicable, this first proviso tosection 149(1) was wholly unnecessary. Looked fromboth angles, namely, no indication of surviving the pastprovisions after the substitution and in fact an activeindication to the contrary, inescapable conclusion that wemust arrive at is that for any action of issuance of noticeunder Section 148 after 01.04.2021 the newlyintroduced provisions under the Finance Act, 2021 wouldapply. Mere extension of time limits for issuing noticeunder section 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 10 yearsinstead of 6 years previously available with the revenue,can be pressed in service for reopening assessments forthe past period. This flows from the plain meaning of thefirst proviso to sub-section (1) of Section 149. In plainterms a notice which had become time barred prior to01.04.2021 as per the then prevailing provisions, wouldnot be revived by virtue of the application of Section149(1)(b) effective from 01.04.2021. All the noticesissued in the present cases are after 01.04.2021 andhave been issued without following the procedurecontained in Section 148A of the Act and are thereforeinvalid. 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 framed by 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 shallapply, 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." In view of above, without recording separate reasons, theimpugned notice challenged in this petition is quashed. Thepetition stands disposed of accordingly. (SUDESH BANSAL),JBRIJ MOHAN GANDHI/14 (AKIL KURESHI),CJ