Supreme Electricals Private Limited v. Income Tax Officer, Ward 4(2), Jaipur, Ncr Building, Statuecircle, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 3621/2022 Supreme Electricals Private Limited, Having Its Registered OfficeAt F-409-B, Road No. 14, Vkia, Jaipur 302013 Through ItsAuthorized Representative Shridhar Biyani. ----Petitioner Versus Income Tax Officer, Ward 4(2), Jaipur, Ncr Building, StatueCircle, Jaipur. ----Respondent For Petitioner(s) For Respondent(s) : Mr. Aditya Vijay : Mr. Nikhil Simlote HON'BLE MR. JUSTICE PANKAJ BHANDARI HON'BLE MR. JUSTICE BIRENDRA KUMAR 05/03/2022 Judgment / Order With the consent of the parties, the matter is heard at thisstage. The writ petition arising out of the impugned notice involvesthe same issue. In the writ petition, the petitioner has challenged the noticeissued by the Assessing Officer under Section 148 of the IncomeTax Act, 1961, for reopening the assessment for variousassessment years. The notice was issued after 01.04.2021 and pertain to therelevant period which is prior to the said date. The issue involved in the writ petition is no more res integraas the same has been decided by the Co-ordinate Bench of thisCourt while deciding a batch of petitions with the lead case of"Sudesh Tanesh Vs. Income Tax Officer in D.B. Civil Writ PetitionNo.969/2022". At the time of hearing of the identical petitions,this Court formulated the following two questions of law forconsideration as under: 1. Whether after introduction of new provisions forreassessment of income by virtue of the Finance Act, 2021 witheffect from 01.04.2021, substituting the then existing provisions,would the substituted provisions survive and could be used forissuing notices for reassessment for the past years? 2. Whether the explanations contained in the Central Boardof Direct Taxes (for short 'the CBDT') circular dated 31.03.2021and 27.04.2021 are legal and valid? After hearing the arguments of the counsel appearing for theDepartment of Income Tax as well as the counsel appearing forthe asseessee, the Co-ordinate Bench disposed of the identicalD.B. Civil Writ Petition No.969/2022 titled as "Sudesh Tanesh Vs.Income Tax Officer" along-with the connected matters videjudgment dated 27.01.2022 by observing that:- "36. It can thus be seen that original provisionsupon their substitution stood repealed for allpurposes and had no existence after introduction ofthe substituting provisions. We may refer to Section6 of the General Clauses Act, 1897 which providesinter-alia that where the State Act or Central Act orregulation repeals any enactment then unless adifferent intention appears repeal shall not reviveanything not in force or existing at the time atwhich the repeal takes effect or affect the previousoperation of any enactment so repealed or anythingduly done or suffered thereunder. Under thecircumstances after substitution unless there is anyintention discernible in the scheme of statute eitherupon their substitution stood repealed for allpurposes and had no existence after introduction ofthe substituting provisions. We may refer to Section6 of the General Clauses Act, 1897 which providesinter-alia that where the State Act or Central Act orregulation repeals any enactment then unless adifferent intention appears repeal shall not reviveanything not in force or existing at the time atwhich the repeal takes effect or affect the previousoperation of any enactment so repealed or anythingduly done or suffered thereunder. Under thecircumstances after substitution unless there is anyintention discernible in the scheme of statute either pre-existing or newly introduced, the substitutedprovisions would not survive. pre-existing or newly introduced, the substitutedprovisions would not survive. 37.In this context we have perused the provisionsof reassessment contained in the Finance Act, 2021.We have noticed earlier the major departure thatthe new scheme of reassessment has made underthese provisions. The time limits for issuing noticefor reassessment have been changed. The conceptof income chargeable to tax escaping assessmenton account 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 ifmade while deciding whether the case is fit forissuing notice under Section 148. There isabsolutely no indication in all these provisions whichwould suggest that the legislature intended that thenew scheme of reopening of assessments would beapplicable only to the period post 01.04.2021. Inabsence of any such indication all notices whichwere issued after 01.04.2021 had to be inaccordance with such provisions. To reiterate, wefind no indication whatsoever in the scheme ofstatutory provisions suggesting that the pastprovisions would continue to apply even after thesubstitution for the assessment periods prior tosubstitution. In fact there are strong indications tothe contrary. We may recall, that time limits forissuing notice under Section 148 of the Act havebeen 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 forissuing notice under Section 148 depending on thequestion whether the case falls under clause (a) orclause (b). In this context the first proviso toSection 149(1) provides that no notice underSection 148 shall be issued at any time in a case forthe relevant assessment year beginning on orbefore 01.04.2021 if such notice could not havebeen issued at that time on account of beingbeyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 asthey stood immediately before the commencementof the Finance Act, 2021. As per this proviso thusno notice under Section 148 would be issued for thepast assessment years by resorting to the largerperiod of limitation prescribed in newly substitutedclause (b) of Section 149(1). This would indicatethat the notice that would be issued after01.04.2021 would be in terms of the substitutedSection 149(1) but without breaching the uppertime limit provided in the original Section 149(1)which stood 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 isthat for any action of issuance of notice underSection 148 after 01.04.2021 the newly introducedprovisions under the Finance Act, 2021 would apply.Mere extension of time limits for issuing noticeunder section 148 would not change this positionthat obtains in law. Under no circumstances theextended period available in clause (b) of sub-section (1) of Section 149 which we may recall nowstands at 10 years instead of 6 years previouslyavailable with the revenue, can be pressed inservice for reopening assessments for the pastperiod. This flows from the plain meaning of thefirst proviso to sub-section (1) of Section 149. Inplain terms a notice which had become time barredprior to 01.04.2021 as per the then prevailingprovisions, would not be revived by virtue of theapplication of Section 149(1)(b) effective from01.04.2021. All the notices issued in the presentcases are after 01.04.2021 and have been issuedwithout following the procedure contained in Section148A of the Act and are therefore invalid. 38.The second question framed by us arises inthis context. Would the explanation contained inboth the notifications of CBDT dated 31.03.2021and 27.04.2021 save the situation for the revenue?39.It is well settled that there is presumption ofconstitutionality of a statute (refer to theConstitution Bench judgment in case of The Stateof Jammu & Kashmir, Vs. Triloki Nath Khosaand Ors., reported in AIR 1974 SC 1). The saidprinciple of presumption of constitutionality alsoapplies to piece of delegated legislation. In case ofSt. Johns Teachers Training Institute Vs. 38.The second question framed by us arises inthis context. Would the explanation contained inboth the notifications of CBDT dated 31.03.2021and 27.04.2021 save the situation for the revenue?39.It is well settled that there is presumption ofconstitutionality of a statute (refer to theConstitution Bench judgment in case of The Stateof Jammu & Kashmir, Vs. Triloki Nath Khosaand Ors., reported in AIR 1974 SC 1). The saidprinciple of presumption of constitutionality alsoapplies to piece of delegated legislation. In case ofSt. Johns Teachers Training Institute Vs. Regional Director, National Council ForTeachers Education and Another, reported in(2003) 3 SCC 321, it was observed that it is wellsettled in considering the vires of subordinatelegislation one should start with the presumptionthat it is intra vires and if it is open to twoconstructions, one of which would make it valid andother invalid, the courts must adopt thatconstruction which makes it valid. However it isequally well settled that the subordinate legislationdoes not enjoy same level of immunity as the lawframed by the Parliament or the State Legislature.The law framed by the Parliament or the StateLegislature can be challenged only on the groundsof being beyond the legislative competence or beingcontrary to the fundamental rights or any otherconstitutional provisions. Third ground of challengewhich is now recognized in the judgment in case ofShayara Bano Vs Union of India reported in2017 9 SCC 1 is of legislation being manifestlyarbitrary. A subordinate legislation can bechallenged on all these grounds as well as on thegrounds that it does not conform to the statuteunder which it is made or that it is inconsistent withthe provisions of the Act or it is contrary to some ofthe statutes applicable on the subject matter. Incase of J.K. Industries Ltd. and Ors. Vs. Unionof India and Ors., reported in (2007) 13 SCC673, it was observed as under:- “63. At the outset, we may state that on account ofglobalizationandsocio-economicproblems(including income disparities in our economy) thepower of Delegation has become a constituentelement of legislative power as a whole. However,as held in the case of Indian Express Newspaper v.Union of India reported in (1985) 1 SCC 641 atpage 689, subordinate legislation does not carry thesame degree of immunity which is enjoyed by astatute passed by a competent Legislature.Subordinate legislation may be questioned on any ofthe grounds on which plenary legislation isquestioned. In addition, it may also be questionedon the ground that it does not conform to thestatute under which it is made. It may further bequestioned on the ground that it is inconsistent withthe provisions of the Act or that it is contrary tosome other statute applicable on the same subjectmatter. Therefore, it has to yield to plenarylegislation. It can also be questioned on the groundthat it is manifestly arbitrary and unjust. That, anyinquiry into its vires must be confined to thegrounds on which plenary legislation may bequestioned, to the grounds that it is contrary to thestatute under which it is made, to the grounds that it is contrary to other statutory provisions or on theground that it is so patently arbitrary that it cannotbe said to be inconformity with the statute. It canalso be challenged on the ground that it violatesArticle 14 of the Constitution.” it is contrary to other statutory provisions or on theground that it is so patently arbitrary that it cannotbe said to be inconformity with the statute. It canalso be challenged on the ground that it violatesArticle 14 of the Constitution.” 40.With this background we may revert to theRelaxation Act, 2020 and the two notificationsissued by the CBDT. We may recall, under sub-section (1) of Section 3 of the Relaxation Act, 2020while extending the time limits for taking action andmaking compliances in the specified Acts upto31.12.2020 the power was given to the CentralGovernment to extend the time further by issuing anotification. This was the only power vested in theCentral Government. As a piece of delegatedlegislation the notifications issued in exercise ofsuch powers, had to be within the confines of suchpowers. In plain terms under sub-section (1) ofSection 3 of the Relaxation Act, 2020 theGovernment of India was authorized to extend thetime limits by issuing notifications in this regard.Issuing any explanation touching the provisions ofthe Income Tax Act was not part of this delegationat all. The CBDT while issuing the notificationsdated 31.03.2021 and 27.04.2021 when introducedan explanation which provided by way ofclarification that for the purposes of issuance ofnotice under Section 148 as per the time limitsspecified in Section 149 or 151, the provisions asthey stood as on 31.03.2021 before commencementof the Finance Act, 2021 shall apply, plainlyexceeded its jurisdiction as a subordinatelegislation. The subordinate legislation could nothave travelled beyond the powers vested in theGovernment of India by the parent Act. Evenotherwise it is extremely doubtful whether theexplanation in the guise of clarification can changethe very basis of the statutory provisions. If theplain meaning of the statutory provision and itsinterpretation is clear, by adopting a positiondifferent in an explanation and describing it to beclarificatory, the subordinate legislature cannot bepermitted to amend the provisions of the parentAct. Accordingly, these explanations areunconstitutional and declared as invalid.41.As noted, two Division Benches of Allahabadand Delhi High Courts have taken similar view. Twolearned Single Judges of Calcutta and this HighCourt have followed this trend. Independently alsowe hold the same beliefs. As noted earlier we areconscious that Single Judge of Chhattisgarh HighCourt in Palak Khatuja (supra) has taken adifferent view. The view of the High Court was thatthe impugned notices were valid since by virtue of notifications dated 31.03.2021 and 27.04.2021 theapplication of Section 148 which was originallyexisting before amendment was deferred. It wasfurther observed as under:- “Reading of the aforesaid notification would showthat it was issued in exercise of power conferredunder the Taxation and other Laws (Relaxation andAmendment of Certain Provisions) Act, 2020 andtime for issuance of notice under Section 148, theend date was initially extended uptill on 30th day ofApril 2021 and subsequently again by notificationdated 27th April, 2021 the time limit of 30th day ofApril 2021 was further extended up till 30th day ofJune, 2021. By effect of such notification, theindividual identity of Section 148, which wasprevailing prior to amendment and insertion ofsection 148A was insulated and saved uptill30.06.2021.” With respect, we are unable to persuadeourselves to accept this analysis of the situation. Inour understanding by virtue of notifications dated31.03.2021 and 01.04.2021 issued by CBDTsubstitution of reassessment provisions framedunder the Finance Act, 2021 were not deferred norcould they have been deferred. The date of suchamendments coming into effect remained01.04.2021. With respect, we are unable to persuadeourselves to accept this analysis of the situation. Inour understanding by virtue of notifications dated31.03.2021 and 01.04.2021 issued by CBDTsubstitution of reassessment provisions framedunder the Finance Act, 2021 were not deferred norcould they have been deferred. The date of suchamendments coming into effect remained01.04.2021. 42.In the result we find that the notices impugnedin the respective petitions are invalid and bad inlaw. The same are quashed and set aside. Thelearned Single Judge committed no error inquashing these notices. All the writ petitions areallowed. Appeals of the revenue are dismissed.Pending applications if any stand disposed of." We have heard counsel for the parties and we are in fullagreement with the judgment passed by the Co-ordinate Bench ofthis Court in the case of Sudesh Taneja (Supra). We see no reasonto take a different view. In the result, we find that the notice impugned in thepetition is held to be invalid and bad in law and the same isquashed and set aside. The directions issued in the case of SudeshTaneja (Supra) shall mutatis mutandis apply to the present casesalso. The writ petition stands allowed. Pending applications, if any, also stand disposed of. (BIRENDRA KUMAR),J(PANKAJ BHANDARI),J ARTI SHARMA /43