Vijaykumar Babulaji Sharmaversusthe Principal Chief Commissioner Income Tax Andothers v. Ghugeand R. M. Joshi, Jj

(1) IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD 8 WRIT PETITION NO. 2254 OF 2023 VIJAYKUMAR BABULAJI SHARMAVERSUSTHE PRINCIPAL CHIEF COMMISSIONER INCOME TAX ANDOTHERS …. Mr S. C. Swami, Advocate for Petitioner;Mr Alok Sharma, Advocate for Respondent Nos.1 to 3 CORAM : RAVINDRA V. GHUGEAND R. M. JOSHI, JJ. DATE : 26[th] March, 2024 PER COURT: 1.We have heard the learned Advocates for the respective sides for quite some time. The Respondent /Department opposes the contentions of the Petitioner and praysthat the Petition be dismissed. 2.Considering that the Principal Seat has delivered ajudgment on 15.01.2024 in WP No.1945/2023 (The New India Assurance Company Limited Vs. The Assistant Commissionerof Income Tax and Others), we are referring to the short issueraised in this Petition. It is undisputed that the impugned noticehas been issued after the amendment to the Finance Act, on the 2254.23wp basis of the provisions that existed before the amendment and thesaid notice is in relation to the Assessment Year 2014-2015. 3.The contention of the Department is that certainquantum of earning / transaction escaped assessment of theincome. Hence, the Assessment Officer had issued notice forreopening the assessment for Assessment Year 2014-2015 withregard to the purported escaped income assessment. By thejudgment delivered in The New India Assurance CompanyLimited (supra), this Court has come to a conclusion in paragraphNos. 36 to 39 as under :- “36 Therefore, in the present case, as the foundation of theentire reassessment proceeding, viz., the notice issued inJune 2021 itself was barred by limitation in view of non-applicability of Notification No.20/2021, the superstructuresitting thereon, viz., the reassessment proceedings initiatedpursuant to judgment in Ashish Agarwal will also beregarded as beyond time limit. Therefore, on this ground aswell, the impugned reopening notice dated 28th July 2022issued for AY 2013-14 in petitioner's case is barred bylimitation and deserves to be quashed and set aside.Alternatively, it is well settled that a notice under Section148 of the Act cannot be issued in order to reopen theassessment of an assessee in a case where the right toreopen the assessment was already barred under the pre- 2254.23wp amended Act on the date when the new legislation cameinto force. In CIT V/s. Onkarmal Meghraj (HUF) theHon'ble Apex Court held: "That raises the question whether that provisocould be applied without reference to any periodof limitation. It is a well-settled principle thatno action can be commenced has expired. It isunnecessary to cite authorities in support of thisposition. Does the fact that the second provisosays that there is no period of limitation make adifference? xxxxxxxxxx. XXXXXXXXXX In J.P. Jani, Income-tax Officerv. Induprasad Devshanker Bhatt (1969) 721.T.R. 595; (1969) 1 S.C.R. 714 (S.C.) this courtheld that the Income-tax Officer cannot issue anotice under section 148 of the Income Tax Act,1961, in order to reopen the assessment of anassessee in a case where the right ti reopen theassessment was barred under the 1922 Act atthe date when the new Act came into force. Itwas held that section 297(2)(d) (ii) of the 1961Act was applicable only to this cases where theright of the Income-tax Officer to reopen anassessment was not barred under the repealedAct. This decision is broadly in line with theopinion of Das and Kapur JJ. in Prashar's case (4) 2254.23wp (1963) 49 1.T.R. (S.C.) 1; (1964) 1 S.C.R. 29(S.C.) xxxxxxxxxx. For AY 2013-14, the time limit to issue a noticeunder Section 148 of the Act had already expired on 1"April 2021. On the said date, the assessee had a vestedright, which de hors the 1" proviso to the amended Section149 of the Act, could not be taken away and thus, based onthe well settled principles of law, the reopening of the AY2013-14 after 31 March 2021 is invalid, without jurisdictionand barred by limitation. (4) 2254.23wp (1963) 49 1.T.R. (S.C.) 1; (1964) 1 S.C.R. 29(S.C.) xxxxxxxxxx. For AY 2013-14, the time limit to issue a noticeunder Section 148 of the Act had already expired on 1"April 2021. On the said date, the assessee had a vestedright, which de hors the 1" proviso to the amended Section149 of the Act, could not be taken away and thus, based onthe well settled principles of law, the reopening of the AY2013-14 after 31 March 2021 is invalid, without jurisdictionand barred by limitation. 37We shall deal with Mr. Sharma's submissions asunder: (a) As regards reliance on the provisions of theLimitation Act, 1963, the provisions of the Limitation Act,1963 do not apply to the provisions of the Income Tax Act,1961 and especially, not in the present case in view of thespecific period provided for in the provisions of the Act aswell as TOLA. In any case, this defence of respondentscannot be sustained as they have not taken any suchcontention in either the order passed under Section 148A(d)or in the affidavit in reply; (b) As regards applicability of Section 3 ofTOLA - exclusion of Covid period, this argument is, ineffect, nothing but the theory of travel back in time whichwas urged by the Revenue to support the reopening noticesissued between 1" April 2021 to 30th June 2021 before this Court, as well as other High Courts [and which eventuallyled to the judgment in Ashish Agarwal (Supra)]. As notedearlier, this Court and other Courts have already snubbedthe relate back/travel back in time theory and also theInstruction No.1 of 2022; (c) As regards applicability of NotificationsNo.20 of 2021 dated 31 March 2021 and No.38 of 2021dated 27th April 2021 extending the time limit even for AY2014-15 and it is extended till 30 June 2021, respondent, inother words, argues that the Notification No.20 of 2021seeks to extend the time limit inter alia for issuing noticeunder Section 148 which was expiring on 31 March 2021not only under the provisions of the Act, but would alsoinclude the time extension in the Act by virtue of TOLA. Toput in another way, the time limit expiring on 31 March2021 specified in Notification No.20 of 2021, according torespondents, would have to be read to include limitationunder the Act read with TOLA. As noted earlier, thiscontention is flawed inasmuch as it expands the scope of theNotification and violates its plain language, viz., the timelimit, specified in, or prescribed or notified under theIncome Tax Act falls for completion. The limitation underthe Act (erstwhile Section 149) for reopening the assessmentfor the AY 2013-14 expired on 31 March 2020. Hence,Notification No.20 of 2021 did not apply to the facts of thepresent case. Notification No.38 of 2021 dated 27th April2021 categorically uses the expression the time limit forcompletion of such action expires on the 30th day of April 2021 due to its extension by the said notifications, such timelimit shall further stand extended to the 30th day of June2021. Hence, it is incorrect to say that 31 March 2021under the Act would mean under the Act, plus, extension byTOLA; 2021 due to its extension by the said notifications, such timelimit shall further stand extended to the 30th day of June2021. Hence, it is incorrect to say that 31 March 2021under the Act would mean under the Act, plus, extension byTOLA; (d) The submission that the Hon'ble SupremeCourt, while deciding Ashish Agarwal (Supra), wasconscious of the limitation of 6 years expiring on 31 March2021 under the pre-amendment provisions in respect of AY2013-14 if the Covid period was not excluded, despitewhich the Apex Court has stated that all notices issuedshould be read to be issued under Section 148A to preventthe Revenue getting remediless, is unacceptable. Thisargument clearly fails to appreciate that the effect ofRevenue's contention is that despite the substantive defenceavailable to the assessee in Section 149 of the amended Act,as well as the express directions of the Hon'ble SupremeCourt allowing the assessee to take all defences availableunder the Act, the judgment of Ashish Agarwal (Supra)would permit them to reopen the assessment of AY 2013-14would not only make the defence expressly available to theassessees useless and unusable, but would be contrary towell established principles of law. In Supreme Court BarAssociation (Supra), the Hon'ble Supreme Court espousedthat its powers conferred under Article 142 of theConstitution of India, being curative in nature and evenwith the width of its amplitude, cannot be construed aspowers which authorise the Court to ignore the substantive 2254.23wp rights of a litigant while dealing with a cause pendingbefore it. Article 142 would not be used to supplantsubstantive law applicable to a case or cause and it will notbe used to build a new edifice where none existed earlier byignoring express statutory provisions dealing with a subjectand thereby to achieve something indirectly which cannotbe achieved directly. In the present case, Revenue'sargument, if accepted, would be in conflict with the abovelaw as despite the express language of 1 proviso to Section149, reopening notice for the AY 2013-14 would bepermitted to be issued beyond 6 years on the pretext that theHon'ble Supreme Court in exercise of its powers underArticle 142 permitted them to do so and otherwise, theywould be remediless. On the contrary, while permitting theRevenue to re- initiate the reassessment proceedings, theApex Court also granted liberty to assessees to raise alldefences available to the assessee including the defencesunder Section 149 of the Act. The Apex Court observed thatits order will strike a balance between the rights of theRevenue as well as the respective assessees. Moreover, inSiemens Financial (Supra), this Court has alreadyconsidered a similar contention of the Revenue and heldthat equity has no place in taxation or while interpretingtaxing statute such intendment would have any place andthat taxation statute has to be interpreted strictly. TheRevenue also fails to appreciate that no particular case wasconsidered by the Hon'ble Supreme Court while decidingAshish Agarwal (Supra). 2254.23wp It is apposite to cite here an extract of thejudgment of the Hon'ble Supreme Court in ParashuramPottery Works Co. Ltd V/s. Income Tax Officer, which readsas under: 2254.23wp It is apposite to cite here an extract of thejudgment of the Hon'ble Supreme Court in ParashuramPottery Works Co. Ltd V/s. Income Tax Officer, which readsas under: ………..It has been said that the taxes are theprice that we pay for civilization. If so, it isessential that those who are entrusted with thetask of calculating and realising that priceshould familiarise themselves with the relevantprovisions and become well-versed with the lawon the subject. Any remissness on their part canonly be at the cost of the national exchequerand must necessarily result in loss of revenue.At the same time, we have to bear in mind thatthe policy of law is that there must be a point offinality in all legal proceedings, that stale issuesshould not be reactivated beyond a particularstage and that lapse of time must induce reposein and set at rest judicial and quasi- judicialcontroversies as it must in other spheres ofhuman activity...". (e) The contentions that (i) the true meaning ofApex Court order in Ashish Agrawal (Supra) is that thenotices issued under Section 148, irrespective of theAssessment Year of the unamended Act, between 1[st] April2021 to 30[th] June 2021 are to be treated as show cause notices without being hit by limitation, if issued on or before30[th] March 2021 and (ii) the defence under Section 149available to the assessee would mean that if the Revenuehad issued any notice under Section 148 under theunamended Act during the period 1[st] April 2021 to 30[th] June2021 pertaining to AY 2013-14, the same would be barredby limitation under Section 149 in effect means the CivilAppeal of the Revenue in Ashish Agrawal (Supra) wasdismissed, are completely flawed. It completely fails toappreciate that the limitation period to issuance ofreopening notices under Section 148 for all AssessmentYears prior to AY 2013-14 had already expired on 31 March2019 or earlier. The provisions of TOLA obviously could notsave such a time limit and the Revenue could not havevalidly issued reopening notices for years prior to AY 2013-14 on or after 1[st] April 2019. Therefore, the defence soexpressly allowed to be taken by the Hon'ble Supreme Courtwould otherwise be unnecessary; (f) The submission that the Apex Court, inexercise of power under Article 142 of the Constitution, hasdeemed the notices issued between 1[st] April 2021 to 30[th]June 2021 under Section 148A(b) of the Act issued withinlimitation and by following the manner of computation oflimitation provided in TOLA, the days from 1[st] April 2021 to30th June 2021 would stand excluded and, therefore, thenotices could be deemed to be issued on 31[st] March 2021,we find it to be rather fallacious. The fallacy of this 2254.23wp contention of Revenue is conspicuous inasmuch as if thenotices issued under Section 148 between 1[st] April 2021 and30[th] June 2021, which according to them, are deemed to beissued on 31[st] March 2021, then it is obvious that theprovisions of the new reassessment law introduced by theFinance Act, 2021 cannot apply as they came into forcew.e.f. 1[st] April 2021 and onwards. Ashish Agarwal (Supra)in no uncertain words stated that the new provisions have toapply to all such notices. Therefore, the argument urged iscompletely contrary to law as well as the binding directionsof the Hon'ble Supreme Court; (g) As regards reliance on Touchstone Holdings(Supra), the Hon'ble Delhi High Court held that the initialnotice dated 29[th] June, 2021 issued under Section 148 iswithin limitation. No findings on the validity or otherwise ofthe notice issued after May 2022 pursuant to the judgmentin Ashish Agarwal (Supra) is given. Moreover, in that case,petitioner did not argue that for AY 2013-14 the time limitwould have expired even under TOLA on 31[st] March 2021; (g) As regards reliance on Touchstone Holdings(Supra), the Hon'ble Delhi High Court held that the initialnotice dated 29[th] June, 2021 issued under Section 148 iswithin limitation. No findings on the validity or otherwise ofthe notice issued after May 2022 pursuant to the judgmentin Ashish Agarwal (Supra) is given. Moreover, in that case,petitioner did not argue that for AY 2013-14 the time limitwould have expired even under TOLA on 31[st] March 2021; (h) As regards Salil Gulati (Supra), the DelhiHigh Court, to reach its conclusion, has merely relied uponits earlier decision in Touchstone Holdings (Supra). It willbe relevant to note that following Salil Gulati (Supra), asimilar view was taken by the Delhi High Court in YogitaMohan V/s. Income Tax Officer. Against the judgment, in anSLP preferred by the assessee, the Apex Court has issued (11) 2254.23wp notice vide its order dated 20[th] February 2023. It shouldalso be noted that the Hon'ble Gujarat High Court inKeenara Industries (P) Ltd. V/s. Income Tax Officer" andthe Allahabad High Court in Rajeev Bansal V/s. Union ofIndia¹ have taken a view that notices issued for AY 2013-14were barred by limitation in view of the amended Section149 of the Act. Subsequently, the Apex Court, in SLPspreferred by the Revenue, has issued notice and stayed boththe orders/judgments; (i) We are unable to comprehend the contentionraised that if the notice dated 30[th] May 2022 under Section148A(b) of the Act is valid in terms of Apex Court order inAshish Agrawal (Supra), then the notice under Section 148of the Act cannot be issued on 31[st] March 2021 andrespondent cannot be expected to do impossible. It hasnowhere been urged by petitioner that assessing officerought to complete the proceedings before the show causenotice under Section 148A(b) of the Act was issued. It is thecase of petitioner that the reopening notice under Section148 ought to have been issued within 6 years from the endof the AY 2013-14. This limitation period, as extended byTOLA, expired on 31[st] March 2021. However, in the presentcase, the reopening notice has been issued in July 2022 and,therefore, beyond the statutory time limit. In any case, asstated above, the Hon'ble Supreme Court, while invokingpowers under Article 142, consciously and categoricallygranted liberty to assessees to raise all defences available 2254.23wp to the assessee, including the defences under Section 149 ofthe Act. This specific and express directions cannot be set atnaught. Accepting this contention of the Revenue would bea travesty of justice. 38 In the circumstances, in our view, the noticeissued under Section 148 of the Act, impugned in thispetition, for AY 2013-14 is issued beyond the period oflimitation. 39 Having decided in favour of assessee/petitioneron this issue of limitation, we are not discussing the othergrounds of challenge raised in the petition. Petitioner mayraise all those contentions independently in any otherproceeding.” 4.In view of the above, this Writ Petition is allowed.The impugned notice is quashed and set aside. 5.We record that this order is restricted only to the pointof limitation since the impugned notice had been issued for theAssessment Year 2014-2015, after the amendment to the FinanceAct on 01.04.2021, and that too under the provisions existingprior to the amendment to the Finance Act. sjk Signed by: Sachin J KulkarniDesignation: PA To Honourable JudgeDate: 02/04/2024 11:49:47 (R. M. JOSHI, J.) (RAVINDRA V. GHUGE, J.)