Nikita Hada v. Income Tax Officer, Ward 2 (1), Kota

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 2148/2022 Nikita Hada W/o Bhanu Pratap Singh, 196, Old Baggi Khana,Naya Pura, Kota 324001, Rajasthan ----Petitioner Versus Income Tax Officer, Ward 2 (1), Kota Having Its Address At OfficeOf The Income Tax Officer Kota Rajasthan ----Respondent For Petitioner(s) : Mr. Ashok Kumar Gupta & Mr. Shrawan Kumar Gupta For Respondent(s) : Mr. Nikhil Simlote on behalf of Mr. R.B. Mathur (Senior Advocate) HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL Order 10/02/2022 The petitioner has challenged a notice of reassessment dated19.04.2021 for the assessment year 2013-2014. Learned counselfor the 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 27.01.2022passed 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 making follow-ing 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 new The petitioner has challenged a notice of reassessment dated19.04.2021 for the assessment year 2013-2014. Learned counselfor the 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 27.01.2022passed 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 making follow-ing 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 new scheme of reassessment has made under these provi-sions. The time limits for issuing notice for reassessmenthave been changed. The concept of income chargeableto tax escaping assessment on account of failure on thepart of the assessee to disclose truly or fully all materialfacts is no longer relevant. Elaborate provisions aremade under Section 148A of the Act enabling the As-sessing Officer to make enquiry with respect to materialsuggesting that income has escaped assessment, is-suance of notice to the assessee calling upon why noticeunder Section 148 should not be issued and passing anorder considering the material available on record includ-ing response of the assessee if made while decidingwhether the case is fit for issuing notice under Section148. There is absolutely no indication in all these provi-sions which would suggest that the legislature intendedthat the new scheme of reopening of assessments wouldbe applicable only to the period post 01.04.2021. In ab-sence of any such indication all notices which were is-sued after 01.04.2021 had to be in accordance with suchprovisions. To reiterate, we find no indication whatsoeverin the scheme of statutory provisions suggesting that thepast provisions would continue to apply even after thesubstitution for the assessment periods prior to substitu-tion. In fact there are strong indications to the contrary.We may recall, that time limits for issuing notice underSection 148 of the Act have been modified under substi-tuted Section 149. Clause (a) of sub-section (1) of Sec-tion 149 reduces such period to three years instead oforiginally prevailing four years under normal circum-stances. Clause (b) extends the upper limit of six yearspreviously prevailing to ten years in cases where incomechargeable to tax which has escaped assessmentamounts to or is likely to amount to 50 lacs or more.Sub-section (1) of Section 149 thus contracts as well asexpands the time limit for issuing notice under Section148 depending on the question whether the case fallsunder clause (a) or clause (b). In this context the firstproviso to Section 149(1) provides that no notice underSection 148 shall be issued at any time in a case for therelevant assessment year beginning on or before01.04.2021 if such notice could not have been issued atthat time on account of being beyond the time limitspecified under the provisions of clause (b) of sub-sec-tion (1) of Section 149 as they stood immediately beforethe commencement of the Finance Act, 2021. As per thisproviso thus no notice under Section 148 would be is-sued for the past assessment years by resorting to thelarger period of limitation prescribed in newly substitutedclause (b) of Section 149(1). This would indicate thatthe 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 the proposed provisions in the Finance Bill. If according tothe revenue for past period provisions of section 149 be-fore 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 active in-dication 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 newly intro-duced provisions under the Finance Act, 2021 would ap-ply. Mere extension of time limits for issuing notice undersection 148 would not change this position that obtainsin law. Under no circumstances the extended periodavailable in clause (b) of sub-section (1) of Section 149which we may recall now stands at 10 years instead of 6years previously available with the revenue, can bepressed in service for reopening assessments for thepast 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 notices is-sued in the present cases are after 01.04.2021 and havebeen issued without following the procedure contained inSection 148A of the Act and are therefore invalid. 38.The second question framed by us arises in thiscontext. Would the explanation contained in both the no-tifications of CBDT dated 31.03.2021 and 27.04.2021save the situation for the revenue? 39.It is well settled that there is presumption of con-stitutionality of a statute (refer to the Constitution Benchjudgment in case of The State of Jammu & Kashmir,Vs. Triloki Nath Khosa and Ors., reported in AIR1974 SC 1). The said principle of presumption of consti-tutionality also applies to piece of delegated legislation.In case of St. Johns Teachers Training Institute Vs.Regional Director, National Council For TeachersEducation and Another, reported in (2003) 3 SCC321, it was observed that it is well settled in consideringthe vires of subordinate legislation one should start withthe presumption that it is intra vires and if it is open totwo constructions, one of which would make it valid andother invalid, the courts must adopt that constructionwhich makes it valid. However it is equally well settledthat the subordinate legislation does not enjoy samelevel of immunity as the law framed by the Parliament orthe State Legislature. The law framed by the Parliamentor the State Legislature can be challenged only on thegrounds of being beyond the legislative competence orbeing contrary to the fundamental rights or any otherconstitutional provisions. Third ground of challengewhich is now recognized in the judgment in case of Sha- yara Bano Vs Union of India reported in 2017 9SCC 1 is of legislation being manifestly arbitrary. A sub-ordinate legislation can be challenged on all thesegrounds as well as on the grounds that it does not con-form to the statute under which it is made or that it isinconsistent with the provisions of the Act or it is con-trary to some of the statutes applicable on the subjectmatter. In case of J.K. Industries Ltd. and Ors. Vs.Union of India and Ors., reported in (2007) 13 SCC673, it was observed as under:- yara Bano Vs Union of India reported in 2017 9SCC 1 is of legislation being manifestly arbitrary. A sub-ordinate legislation can be challenged on all thesegrounds as well as on the grounds that it does not con-form to the statute under which it is made or that it isinconsistent with the provisions of the Act or it is con-trary to some of the statutes applicable on the subjectmatter. In case of J.K. Industries Ltd. and Ors. Vs.Union of India and Ors., reported in (2007) 13 SCC673, it was observed as under:- “63. At the outset, we may state that onaccount of globalization and socio-eco-nomic problems (including income dispari-ties in our economy) the power of Delega-tion has become a constituent element oflegislative power as a whole. However, asheld in the case of Indian Express Newspa-per v. Union of India reported in (1985) 1SCC 641 at page 689, subordinate legisla-tion does not carry the same degree of im-munity which is enjoyed by a statutepassed by a competent Legislature. Subor-dinate legislation may be questioned onany of the grounds on which plenary legis-lation is questioned. In addition, it mayalso be questioned on the ground that itdoes not conform to the statute underwhich it is made. It may further be ques-tioned on the ground that it is inconsistentwith the provisions of the Act or that it iscontrary to some other statute applicableon the same subject matter. Therefore, ithas to yield to plenary legislation. It canalso be questioned on the ground that it ismanifestly arbitrary and unjust. That, anyinquiry into its vires must be confined tothe grounds on which plenary legislationmay be questioned, to the grounds that itis contrary to the statute under which it ismade, to the grounds that it is contrary toother statutory provisions or on the groundthat it is so patently arbitrary that it cannotbe said to be inconformity with the statute.It can also be challenged on the groundthat it violates Article 14 of the Constitu-tion.” 40.With this background we may revert to the Re-laxation Act, 2020 and the two notifications issued bythe CBDT. We may recall, under sub-section (1) ofSection 3 of the Relaxation Act, 2020 while extendingthe time limits for taking action and making compli-ances in the specified Acts upto 31.12.2020 the powerwas given to the Central Government to extend the 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 the con-fines of such powers. In plain terms under sub-section(1) of Section 3 of the Relaxation Act, 2020 the Gov-ernment of India was authorized to extend the timelimits by issuing notifications in this regard. Issuingany explanation touching the provisions of the IncomeTax Act was not part of this delegation at all. TheCBDT while issuing the notifications dated 31.03.2021and 27.04.2021 when introduced an explanationwhich provided by way of clarification that for the pur-poses of issuance of notice under Section 148 as perthe time limits specified in Section 149 or 151, theprovisions as they stood as on 31.03.2021 beforecommencement of the Finance Act, 2021 shall apply,plainly exceeded its jurisdiction as a subordinate leg-islation. The subordinate legislation could not havetravelled beyond the powers vested in the Govern-ment of India by the parent Act. Even otherwise it isextremely doubtful whether the explanation in theguise of clarification can change the very basis of thestatutory provisions. If the plain meaning of the statu-tory provision and its interpretation is clear, by adopt-ing a position different in an explanation and describ-ing it to be clarificatory, the subordinate legislaturecannot be permitted to amend the provisions of theparent Act. Accordingly, these explanations are un-constitutional and declared as 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 Certain Pro-visions) Act, 2020 and time for issuance ofnotice under Section 148, the end date wasinitially extended uptill on 30th day of April2021 and subsequently again by notificationdated 27th April, 2021 the time limit of 30thday of April 2021 was further extended uptill 30th day of June, 2021. By effect of such notification, the individual identity of Section148, which was prevailing prior to amend-ment and insertion of section 148A was in-sulated and saved uptill 30.06.2021.” With respect, we are unable to persuade our-selves to accept this analysis of the situation. In ourunderstanding by virtue of notifications dated31.03.2021 and 01.04.2021 issued by CBDT substitu-tion of reassessment provisions framed under the Fi-nance Act, 2021 were not deferred nor could they havebeen deferred. The date of such amendments cominginto 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 stand dis-posed of." In view of above, without recording separate reasons, the impugned notice challenged in this petition is quashed. The peti- tion stands disposed of accordingly. (SUDESH BANSAL),JN.Gandhi/19 (AKIL KURESHI),CJ