Vikas Malpani Huf v. Income Tax Officer, Ward 4(1), Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR 1. D.B. Civil Writ Petition No. 3277/2022 Vikas Malpani Huf, Through Its Karta Shri Vikas Malpani Son OfShri Sita Ram Malpani Aged About 38 Years, Resident Of A-66-A,Ram Marg, Shyam Nagar, Sodala, Jaipur 302019 ----Petitioner Versus 1.Income Tax Officer, Ward 4(1), Jaipur Having Its AddressAt New Central Revenue Building, Bhagwan Das Road,Jaipur 302005At New Central Revenue Building, Bhagwan Das Road,Jaipur 302005 2.Central Board Of Direct Taxes, Ministry Of Finance, HavingIts Address At North Block, New Delhi-110011 Through ItsChairman.Its Address At North Block, New Delhi-110011 Through ItsChairman. ----Respondents Connected with 2. D.B. Civil Writ Petition No. 8680/2021 Chaitanya Gems Private Limited, Having Registered Office At4796,GroundFloor,KgbKaRasta,JohariBazar,Jaipur,Rajasthan, India Through Its Executive Director Yashwant SinghLabh Chand Jain ----Petitioner Versus 1.UnionOfIndia,ThroughTheSecretary,MinistryOfFinance,DepartmentOfRevenue,NorthBlock,Secretariat Building New Delhi - 110 001Finance,DepartmentOfRevenue,NorthBlock,Secretariat Building New Delhi - 110 001 2.Central Board Of Direct Tax, Through The Secretary,MinistryOfFinance,DepartmentOfRevenue,NorthBlock, Secretariat Building New Delhi - 110 001MinistryOfFinance,DepartmentOfRevenue,NorthBlock, Secretariat Building New Delhi - 110 001 3.The Income Tax Officer, Wd - 1(1) Having His Office AtNewCentralRevenueBuilding,BhagwanDasRoad,Jaipur, Rajasthan 302005.NewCentralRevenueBuilding,BhagwanDasRoad,Jaipur, Rajasthan 302005. 4.The Principal Commissioner Of Income Tax-1, JaipurHaving Office At N C R Building, Statue Circle, Jaipur302-005Having Office At N C R Building, Statue Circle, Jaipur302-005 3. D.B. Civil Writ Petition No. 8665/2021 M/s Saharan Avas Vikas Pvt. Ltd., Through Authorized SignatoryDr. Beg Raj Saharan, Shop No. 2, Prem Nagar Colony, OppositeObc, Ajmer Road, Jaipur. ----Petitioner Versus Income Tax Officer, Ward 1(4), New Central Revenue Building,Janpath, Jaipur. ----Respondent 4. D.B. Civil Writ Petition No. 8679/2021 Chaitanya Gems Private Limited, Having Registered Office At4796,GroundFloor,KgbKaRasta,JohariBazar,Jaipur,Rajasthan, India Through Its Executive Director Yashwant SinghLabh Chand Jain ----PetitionerVersus1.UnionOfIndia,ThroughTheSecretary,MinistryOfFinance,DepartmentOfRevenue,NorthBlock,Secretariat Building New Delhi - 110 001Finance,DepartmentOfRevenue,NorthBlock,Secretariat Building New Delhi - 110 001 2.Central Board Of Direct Tax, Through The Secretary,MinistryOfFinance,DepartmentOfRevenue,NorthBlock, Secretariat Building New Delhi - 110 001MinistryOfFinance,DepartmentOfRevenue,NorthBlock, Secretariat Building New Delhi - 110 001 3.The Income Tax Officer, Wd - 1(1) Having His Office AtNewCentralRevenueBuilding,BhagwanDasRoad,Jaipur, Rajasthan 302005NewCentralRevenueBuilding,BhagwanDasRoad,Jaipur, Rajasthan 302005 4.The Principal Commissioner Of Income Tax-1, JaipurHaving Office At N C R Building, Statue Circle, Jaipur302-005Having Office At N C R Building, Statue Circle, Jaipur302-005 ----Respondents For Petitioner(s):Mr. Siddharth Ranka Mr. Muzaffar Iqbal Mr. Pranjul Chopra Mr. Dileep Shivpuri through VC Ms. Arti Agarwal through VC and Ms. Rosy Banerjee For Respondent(s) :Mr. Nikhil Simlote on behalf ofMr. R.B. Mathur (Sr. Advocate)Mr. R.B. Mathur (Sr. Advocate) Mr. N S Bhati on behalf of Mr. Anuroop Singhi HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHIHON'BLE MR. JUSTICE SUDESH BANSAL Order 25/02/2022 In all these petitions issue involved is identical namely thevalidityofnoticesforreassessmentissuedbytheassessingofficers after 01.04.2021 for past assessment periods but applyingtheprovisionsundertheIncomeTaxAct,1961concerningreassessment which were issued prior to 01.04.2021 before theirsubstitution by new set of provisions under the Finance Act, 2021. This will be clear from the following data:- Mr. Pranjul Chopra Mr. Dileep Shivpuri through VC Ms. Arti Agarwal through VC and Ms. Rosy Banerjee For Respondent(s) :Mr. Nikhil Simlote on behalf ofMr. R.B. Mathur (Sr. Advocate)Mr. R.B. Mathur (Sr. Advocate) Mr. N S Bhati on behalf of Mr. Anuroop Singhi HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHIHON'BLE MR. JUSTICE SUDESH BANSAL Order 25/02/2022 In all these petitions issue involved is identical namely thevalidityofnoticesforreassessmentissuedbytheassessingofficers after 01.04.2021 for past assessment periods but applyingtheprovisionsundertheIncomeTaxAct,1961concerningreassessment which were issued prior to 01.04.2021 before theirsubstitution 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 this Court 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.Thetimelimitsforissuingnoticeforreassessment 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.ElaborateprovisionsaremadeunderSection148AoftheActenablingtheAssessingOfficer to make enquiry with respect to materialsuggestingthatincomehasescapedassessment,issuance of notice to the assessee calling upon whynotice under Section 148 should not be issued andpassing an order considering the material available "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.Thetimelimitsforissuingnoticeforreassessment 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.ElaborateprovisionsaremadeunderSection148AoftheActenablingtheAssessingOfficer to make enquiry with respect to materialsuggestingthatincomehasescapedassessment,issuance of notice to the assessee calling upon whynotice under Section 148 should not be issued andpassing an order considering the material available on 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 suchindicationallnoticeswhichwereissuedafter01.04.2021hadtobeinaccordancewithsuchprovisions.Toreiterate,wefindnoindicationwhatsoever in the scheme of statutory provisionssuggesting that the past provisions would continue toapply even after the substitution for the assessmentperiods 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 reducessuchperiodtothreeyearsinsteadoforiginallyprevailing four years under normal circumstances.Clause(b)extendstheupperlimitofsixyearspreviously prevailing to ten years in cases whereincomechargeabletotaxwhichhasescapedassessment 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 beissuedatanytimeinacasefortherelevantassessment 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) whichstoodsubstituted.Thisaspecthasalsobeenhighlightedinthememorandumexplainingtheproposed 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 substitutionandinfactanactiveindicationtothecontrary,inescapable conclusion that we must arrive at is that for any action of issuance of notice under Section 148after01.04.2021thenewlyintroducedprovisionsundertheFinanceAct,2021wouldapply.Mereextensionoftimelimitsforissuingnoticeundersection148wouldnotchangethispositionthatobtains 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 hadbecome time barred prior to 01.04.2021 as per thethen prevailing provisions, would not be revived byvirtueoftheapplicationofSection149(1)(b)effective from 01.04.2021. All the notices issued inthe present cases are after 01.04.2021 and havebeenissuedwithoutfollowingtheprocedurecontainedinSection148AoftheActandaretherefore 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.Itiswellsettledthatthereispresumptionofconstitutionality 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 ofconstitutionalityalsoappliestopieceofdelegatedlegislation. 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 thelegislativecompetenceorbeingcontrarytothefundamentalrightsoranyotherconstitutionalprovisions.Thirdgroundofchallengewhichisnowrecognized in the judgment in case of Shayara Bano VsUnion of India reported in 2017 9 SCC 1 is oflegislationbeingmanifestlyarbitrary.Asubordinatelegislation can be challenged on all these grounds as wellas on the grounds that it does not conform to the statute under 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:- under 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 onaccountofglobalizationandsocio-economicproblems(includingincomedisparities in our economy) the power ofDelegationhasbecomeaconstituentelement of legislative power as a whole.However, as held in the case of IndianExpressNewspaperv.UnionofIndiareported in (1985) 1 SCC 641 at page 689,subordinate legislation does not carry thesame degree of immunity which is enjoyedbyastatutepassedbyacompetentLegislature. Subordinate legislation may bequestioned on any of the grounds on whichplenarylegislationisquestioned.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 otherstatuteapplicableonthesamesubjectmatter. 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, tothegroundsthatitiscontrarytothestatute under which it is made, to thegroundsthatitiscontrarytootherstatutory 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.Withthisbackgroundwemay revertto 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 extendingthetimelimitsfortakingactionandmakingcompliances 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 the confines 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.TheCBDTwhileissuingthenotificationsdated31.03.2021and27.04.2021whenintroducedanexplanation 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,plainlyexceededitsjurisdictionasasubordinatelegislation.Thesubordinatelegislationcould not have travelled beyond the powers vested inthe Government of India by the parent Act. Evenotherwiseitisextremelydoubtfulwhethertheexplanation in the guise of clarification can change thevery basis of the statutory provisions. If the plainmeaningofthestatutoryprovisionanditsinterpretation 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 andDelhiHighCourtshavetakensimilarview.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 noticeswerevalidsincebyvirtueofnotificationsdated31.03.2021 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(RelaxationandAmendmentofCertainProvisions) Act, 2020 and time for issuanceof notice under Section 148, the end datewas initially extended uptill on 30th day ofApril2021andsubsequentlyagainbynotification dated 27th April, 2021 the timelimit of 30th day of April 2021 was furtherextended up till 30th day of June, 2021. Byeffectofsuchnotification,theindividualidentity of Section 148, which was prevailingprior to amendment and insertion of section 148Awasinsulatedandsaveduptill30.06.2021.” Withrespect,weareunabletopersuadeourselves to accept this analysis of the situation. In ourunderstandingbyvirtueofnotificationsdated31.03.2021and01.04.2021issuedbyCBDTsubstitution 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 revenuearedismissed.Pendingapplicationsifanystanddisposed 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 NAVAL KISHOR /9,17-19