w w w . L a w y e r S e r v i c e s . i n



For the Petitioners: Javed Khan, Prateek Kedawat, Sarvesh Jain, P.K. Kasliwal, Priyesh Kasliwal, Aditya Bohra, Anant Kashliwal, Vaibhav Kasliwal, Shashank Kasliwal, Suresh Sahni, Gunjan Pathak, Ishita Rawat, Siddharth Ranka, M. Iqbal, Vedant Agrawal, Harish Agrawal, Sanjay Jhanwar, Prakul Khurana, Naresh Gupta, Abhilasha Sharma, Prateek Agarwal, Ashok Kumar Gupta, Sanjeev Johari, Rajeev Sogarwal, Sushil Daga, Anurag Kalavatiya, Mahendra Gargieya, Prateek Kasliwal, Rakesh Kumar, Vishal Tiwari, Sanjay Jhanwar, Nehpal Yogi, Jaideep Malik, Raghu Nandan Sharma, Prabhansh Sharma, Darshan Shree Verma, Suveer Gaur, Ajatshatru Mina, Harshvardhan Singh Chundawat, Pankaj Ghiya, Mohit Khandelwal, Prakhar Gupta, Aniroodh Mathur, Krishnaveer Singh, Rohit Solanki, S.L. Poddaur, Sanjeev Johari, M.S. Bhati, Lalit Parihar, Subhankar Johari, Abhishek Mehta, Anjay Kothari, Advocates. For the Respondents: R.B. Mathur, Nikhil Simlote, Sandeep Pathak, Anuroop Singhi, Parinitoo Jain, Kamal Kishore Bissa, Advocates.

    Civil Writ Petition Nos. 5, 181, 301, 419, 508, 527, 561, 575, 590, 595, 597, 600, 611, 627, 651, 685, 888, 909, 918, 953 & 969 of 2022, 8311, 8480, 8747, 8755, 8768, 9012, 9235, 9236, 9248, 9254, 9259, 9319, 9342, 10483, 10485, 14533, 14704, 14706, 14707, 15174 & 15177 of 2021 & Special Appeal Writ Nos. 54, 55, 56, 57, 58, 59 to 151 of 2022 Etc.

    Decided On, 27 January 2022

    At, High Court of Rajasthan Jaipur Bench

    By, THE HONOURABLE CHIEF JUSTICE MR. AKIL KURESHI & THE HONOURABLE MR. JUSTICE SAMEER JAIN

    Sudesh Taneja & Others Versus Income Tax Officer, Jaipur & Others



Judgment Text

Akil Kureshi, CJ.

1. This group of cases involves writ petitions and D.B. Special Appeals against the judgment of the learned Single Judge. Central issues arising in all these proceedings are common with little different in material facts. They were heard on different dates but due to commonality of issues required to be considered, they were clubbed together for disposal through common judgment.

2. In the writ petitions the petitioners have challenged respective notices issued by the Assessing Officers under Section 148 of the Income Tax Act, 1961 (‘the Act’ for short) for reopening assessments for various assessment years. All these notices have been issued after 01.04.2021 and pertain to relevant period which is prior to the said date. The petitioners contend that since the notices are issued after 01.04.2021, the same could be done only as per the provisions contained in the Act effective from 01.04.2021. Since in the present cases the notices are issued under the old provisions which have already been substituted, the notices are invalid. The petitioners have also challenged portions of two notifications issued by the Central Board of Direct Taxes (for short ‘CBDT’) clarifying that provisions of Sections 148, 149 and 151 of the Act as they stood on 31.03.2021 shall apply for the purpose of issuance of notice under Section 148 for the past period. According to the petitioners, this explanation is beyond the jurisdiction of CBDT.

3. In Special Appeals, the revenue has challenged the judgment of the learned Single Judge dated 25.11.2021 in case of BPIP Infra Private Limited Vs. Income Tax Officer (S.B. Civil Writ Petition No.13297/2021), reported in 2021 (12) TMI 207, in which relying on a decision of Division Bench of Allahabad High Court in case of Ashok Kumar Agarwal Vs. Union of India through its Revenue Secretary North Block And Ors. (Writ Tax Petition No.524/2021), dated 30.09.2021, reported in 2021(10) TMI 517, the learned Single Judge had quashed the notices issued under Section 148 of the Act.

4. Since material facts emerging from the record are undisputable and since the outcome of this litigation depends on pure questions of law, we have proceeded to hear these petitions and appeals finally without waiting for the replies of the department on factual aspects. Learned counsel for both the sides had also agreed to this formula.

5. Civil Writ Petition No.969/2022 is taken as a lead case. Facts may be noted in brief from the petition. The petitioner is an individual. For the assessment year 2013-14 the petitioner had filed return of income on 01.10.2013 declaring total income of Rs.4,79,420/-. It appears that such return was accepted by the department without scrutiny. To reopen such assessment for the assessment year 2013-14, the respondent No.1 Income Tax Officer Jaipur issued a notice on 08.04.2021 under Section 148 of the Act. Case of the petitioner is that this notice which has been issued under provisions contained in the Act for reopening of the assessment which existed prior to 01.04.2021, is bad in law since with effect from 01.04.2021 new provisions have been introduced in the Act which are in substitution of the old provisions. According to the petitioner, since undisputably the reassessment provisions introduced in the statute with effect from 01.04.2021 have not been followed in the present case, the notice is bad in law. According to the petitioner, limitation for issuing notice would be as provided in amended section 149 of the Act. Before issuing notice nuder section 148, procedure prescribed in section 148A must be followed. In the present case the notice was time barred as per the amended section 149 and procedure under Section 148A was not followed. As an extension of this argument, the petitioner contends that this defect could not be cured through an explanation issued by the CBDT under purported exercise of power of delegated legislation. We would elaborate on these aspects of the matter once we take note of the existing and the substituted provisions for reassessment.

Provisions for reassessment prior to 01.04.2021:

6. As is well known, Chapter XIV of the Act pertains to procedure for assessment. This Chapter also contains provisions for reassessment which permits the department to reopen the assessments under certain circumstances. As per Section 147 as it stood prior to substitution by the Finance Act, 2021, if the Assessing Officer had reason to believe that any income chargeable to tax had escaped assessment for any assessment year he could subject to the provisions of Sections 148 to 153 of the Act assess or reassess such income and also any other income chargeable to tax which had escaped assessment. As per Section 148 of the Act before making any such assessment, reassessment or recomputation under Section 147 the Assessing Officer has to serve a notice on the assessee requiring him to furnish the return of his income. Sub-section (2) of Section 148 provided that the Assessing Officer shall before issuing any such notice record his reasons for doing so. As per sub-section (1) of Section 149 read with Section 147, in case of scrutiny assessment no notice under Section 148 could be issued beyond a period of four years from the end of relevant assessment year unless the assessee had failed to file the return or income chargeable to tax had escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment and in which case also no notice could be issued beyond a period of six years from the end of relevant assessment year. This period would extend to 16 years in cases where income in relation to any asset which has escaped assessment is located outside India. Section 151 of the Act pertained to sanction for issuance of notice. As per sub-section (1) of Section 151, no notice could be issued under Section 148 by the Assessing Officer after expiry of a period of four years from the end of relevant assessment year unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it was a fit case for issuance of such notice. As per sub-section (2) of Section 151 of the Act, in a case other than a case falling under sub-section (1), no notice could be issued by the Assessing Officer who is below the rank of Joint Commissioner unless the Joint Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a case fit for issuance of notice. Section 153 of the Act contained provisions for time limit for completion of assessments and reassessments. This in nutshell was the scheme of reassessment which existed prior to the amendments made in the Act by the Finance Act, 2021.

Provisions for reassessment contained in the Act with effect from 01.04.2021:

7. This entire scheme of reassessment has undergone major changes under the Finance Act, 2021 which amendments have been brought into effect from 01.04.2021. Section 147 has been simplified. As per the provision as it stands now if any income chargeable to tax in the case of an assessee has escaped assessment for any assessment year, the Assessing Officer may subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or any other allowance or deduction for such assessment year. The distinction between the cases where income chargeable to tax has escaped assessment for the failure of the assessee to disclose truly or fully all material facts and the rest is done away with.

8. As per Section 148 of the Act before making assessment, reassessment or recomputation under Section 147 and subject to the provisions of Section 148A, the Assessing Officer has to serve on the assessee a notice along with a copy of the order passed if required under clause (d) of Section 148A requiring him to furnish the return within the specified time and in prescribed form. The proviso to Section 148 provides that no notice shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority for issuing such notice. Explanation (1) to Section 148 of the Act explains what “information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment” means. Explanation (2) lists the situations where the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment.

9. Section 148A is newly inserted and it pertains to conducting enquiry, providing opportunity before issue of notice under Section 148 and reads as under:

“148A.—The Assessing Officer shall, before issuing any notice under section 148,—

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where,—

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.

Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151."

10. As per this newly introduced provision thus before issuing notice under Section 148, the Assessing Officer may conduct any enquiry if required; with the prior approval of the specified authority with respect to the information which suggests that the income chargeable to tax has escaped assessment. He has to provide an opportunity of being heard to the assessee by serving on him a notice to show cause within the specified time which shall not be less than seven days but not exceeding 30 days from the date of issue of notice but which can be extended by him on an application by the assessee. Such notice would be to call upon the assessee why a notice under Section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment. As per clause (c), the Assessing Officer has to consider the reply of the assessee furnished, if any, in response to such notice. As per clause (d), the Assessing Officer would decide on the basis of material available on record including the reply of the asssessee whether or not the case is fit for issuance of notice under Section 148 of the Act, for which purpose he would pass an order with the prior approval of the specified authority within one month from the end of the month in which the reply from the assessee is received by him and where no such reply is furnished, within one month from the end of the month in which time or extended time for furnishing reply expires. Proviso to Section 148A lists the cases where this procedure would not apply. As per the explanation to Section 148A the specified authority means the authority referred to in Section 151.

11. Section 149 also underwent major changes in time limit for issuing notice under Section 148 of the Act. This provision reads as under:

“149.(1) No notice under section 148 shall be issued for the relevant assessment year,—

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per showcause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this subsection shall be deemed to be extended accordingly.

Explanation.—For the purposes of clause (b) of this sub- section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.”

12. As per sub-section (1) of Section 149 as it stands now, time limit for issuing notice under Section 148 is three years from the end of relevant assessment year unless the case falls under clause (b) where the period available for issuing such notice is ten years. Clause (b) applies to cases where the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax represented in the form of asset which has escaped assessment amounts to or is likely to amount to total 50 lacs or more. Explanation to Section 149 provides that for the purpose of clause (b) the asset shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.

13. Sub-section (1) of Section 149 contains four provisos which will come up for discussion later in the context of interpretation of these provisions and in the context of the question whether after substitution the substituted provisions would continue to apply.

14. Section 151 pertaining to sanction for issue of notice has also been amended. As per the amended provisions the specified authority for the purposes of Sections 148 and 148A would be (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of relevant assessment year and (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of relevant assessment year.

15. Section 153 containing time limit for completion of assessment, reassessment and recomputation has also been amended. It is not necessary to compare the old and the new provisions except to record in brief that the time limits have been shortened.

Comparison between old and new provisions for reassessment

16. A comparison of the existing and the substituted reassessment proceedings contained in the Act would show that earlier distinction of time limit of four years for issuing notice under Section 148 in normal cases and six years in cases where income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose truly and fully all material facts, has been done away with and time limits are revised. New time limits provided are three years unless income chargeable to tax which has escaped assessment amounts to or is likely to amount Rs.50 lacs or more and in which case the time limit for issuing notice under Section 148 applicable would be ten years from the end of relevant assessment year. Section 147 previously referred to term “the Assessing Officer has reason to believe” that income chargeable to tax has escaped assessment. Under proviso to Section 148 as it stands now, no notice for the reassessment would be issued unless there is information with the Assessing Officer which suggests that income chargeable to tax has escaped assessment. This shift from the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment to the Assessing Officer should have information which suggests that income chargeable to tax has escaped assessment would come up for consideration and interpretation in appropriate cases in future. Since we are not directly concerned with this change it is not necessary for us to delve on this issue.

17. The major change which the new regime of reassessment has brought about is introduction of Section 148A of the Act for the first time. As is well known the Supreme Court in case of GKN Driveshafts (India) Ltd. Vs. Income-tax Officer, (2003) 259 ITR 19 (SC), had introduced a requirement of the Assessing Officer providing reasons recorded for issuing notice for reopening of assessment upon being demanded by the assessee and to consider and dispose of his objections to the notice for reopening, if so raised. Section 148A codifies this procedure in modified form. Clause (a) of Section 148A of the Act permits the Assessing Officer to conduct enquiry if required with the prior approval of the specified authority with respect to the information which suggests that income chargeable to tax has escaped assessment. Clause (b) of Section 148A requires the Assessing Officer to provide an opportunity of being heard to the assessee by issuing notice calling upon him why notice under Section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment. Clause (c) requires the Assessing Officer to consider the reply of the assessee if furnished and as per clause (d) he would decide on the basis of material available on record and the reply if furnished, whether it is a fit case for issuing notice under Section 148.

18. Section 148A goes far beyond the mechanism provided by the Supreme Court in GKN Driveshafts (India) Ltd. (supra)(2003) 259 ITR 19 (SC). Under the said mechanism the assessee would have access to the reasons recorded by the Assessing Officer after receipt of notice under Section 148. His right was limited to raising objections which would be disposed of by the Assessing Officer. Under the new scheme of Section 148A, the Assessing Officer has to first provide an opportunity to the assessee why notice under Section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment. Though clause (b) of Section 148A does not so specify, since the notice calls upon the assessee why assessment should not be reopened on the basis of information which suggests that income chargeable to tax has escaped assessment, the requirement of furnishing such information to the assessee is inbuilt in the said provision. The assessee thus has an opportunity to oppose even issuance of notice under Section 148 and he could legitimately expect that the Assessing Officer provides him the information which according to him suggests that income chargeable to tax has escaped assessment. The Assessing Officer has a duty to decide whether it is a fit case for issuing notice under Section 148 of the Act. Such decision has to be taken on the basis of material available on record and the reply of the assessee, if any filed. The decision has to be taken within the time prescribed.

19. While the Finance Act, 2021 was not yet in horizon, around third week of March, 2020 the country was hit by spread of corona virus which led to nationwide strict lockdowns which put the lives of citizens and even the Government machinery totally out of gear. It became virtually impossible for individuals as well as Government authorities to adhere to several statutory time limits which in many cases were inflexible. To overcome these difficulties in the context of tax collections, the Government first introduced the Taxation and Other Laws (Relaxation of Certain Provisions), Ordinance, 2020 (hereinafter to be referred as ‘Relaxation Ordinance, 2020’). The provisions contained in the said Ordinance would apply to specified Acts which were defined in clause (a) of Section 2(1) which included the Income Tax Act, 1961. As per sub-section (1) of Section 3 of the Relaxation Ordinance, 2020, any time limit provided in the specified Acts which fell during the period from 20.03.2020 to 29.06.2020 or such other date after 29.06.2020 as the Central Government may by notification specify for completion or compliance of the action and where such completion and compliance had not been made within the time then the time limit for such purpose notwithstanding anything contained in the specified Act would stand extended to 30.06.2020 or such other date after 30.06.2020 as the Central Government may by notification specify in this behalf. The Relaxation Ordinance, 2020 was replaced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter to be referred as ‘the Relaxation Act, 2020’) introduced with effect from 29.09.2020. As per sub-section (1) of Section 3 of the Relaxation Act, 2020 the time limits specified in the specified Acts which fell during the period from 20.03.2020 to 31.12.2020 or such other date after 31.12.2020 as the Central Government may notify, were extended to 31.03.2021 or such other date after 31.03.2021 as the Central Government may by notification specify. Such extension would operate notwithstanding anything contained in the specified act.

20. In exercise of powers delegated under the Extension Ordinance, the Central Government had extended time limits by issuing notification. Since there is no controversy about these extensions, it is not necessary to refer to them in this judgment.

21. In exercise of powers under sub-section (1) of Section 3 of the Relaxation Act, 2020, the Government of India (Central Board of Direct Taxes) issued a notification dated 31.03.2021 and extended, besides others, time limit for issuance of notice under Section 148 of the Act. This notification contained an explanation which is under challenge. The notification reads as under:

“S.O. 1432(E).—In exercise of the powers conferred by sub-section (1) of section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) (hereinafter referred to as the said Act), and in partial modification of the notification of the Government of India in the Ministry of Finance, (Department of Revenue) No.93/2020 dated the 31st December, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 4805(E), dated the 31st December, 2020, the Central Government hereby specifies that,––

(A) where the specified Act is the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and, —

(a) the completion of any action referred to in clause (a) of sub- section (1) of section 3 of the Act relates to passing of an order under sub-section (13) of section 144C or issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, —

(i) the 31st day of March, 2021 shall be the end date of the period during which the time-limit, specified in, or prescribed or notified under, the Income-tax Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time-limit for the completion of such action shall stand extended.

Explanation.— For the removal of doubts, it is hereby clarified that for the purposes of issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, under this sub-clause, the provisions of section 148, section 149 and section 151 of the Income-tax Act, as the case may be, as they stood as on the 31st day of March 2021, before the commencement of the Finance Act, 2021, shall apply.

(b) the compliance of any action referred to in clause (b) of sub-section (1) of section 3 of the said Act relates to intimation of Aadhaar number to the prescribed authority under sub-section (2) of section 139AA of the Income-tax Act, the time-limit for compliance of such action shall stand extended to the 30th day of June, 2021.

(B) where the specified Act is the Chapter VIII of the Finance Act, 2016 (28 of 2016) (hereinafter referred to as the Finance Act) and the completion of any action referred to in clause (a) of sub-section (1) of section 3 of the said Act relates to sending an intimation under sub-section (1) of section 168 of the Finance Act, —

(i) the 31st day of March, 2021 shall be the end date of the period during which the timelimit, specified in, or prescribed or notified under, the Finance Act falls for the completion of such action; and

(ii) the 30th day of April, 2021 shall be the end date to which the time-limit for the completion of such action shall stand extended.

[F. No. 370142/35/2020-TPL]”

22. Yet another extension was issued by the CBDT under notification dated 27.04.2021 extending, besides others, time limit for issuing notice under Section 148 of the Act to 30.06.2021. This notification also contained an explanation similar to one contained in the notification dated 31.03.2021. It is not necessary to reproduce the entire notification. Reproduction of only the explanation, which is also under challenge, would be sufficient and reads as under:

“Explanation.— For the removal of doubts, it is hereby clarified that for the purposes of issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, under this sub-clause, the provisions of section 148, section 149 and section 151 of the Income-tax Act, as the case may be, as they stood as on the 31st day of March 2021, before the commencement of the Finance Act, 2021, shall apply.”

23. In background of such facts and statutory provisions applicable the learned counsel for the assessee had raised following contentions:

(i) Upon enactment of the Finance Act, 2021 the provisions contained in the Act pertaining to reassessment of income stood substituted by new set of provisions. Upon such substitution the old provisions ceased to exist. There is no indication either in express terms or implied in the newly introduced provisions that the legislature desired to retain the old provisions for the past period. In that view of the matter any action of issuance of notice for reassessment which is taken after 01.04.2021, must be in accordance with the amended provisions.

(ii) Insertion of new provisions and substitution of the old would have the effect of repealing the old provisions which would cease to have any applicability thereafter. Our attention was drawn to the speech of the Finance Minister made in the Parliament explaining the proposed provisions for reassessment. Our attention was also drawn to notes on clauses explaining these provisions. It was contended that the speech of the Finance Minister and these notes on clauses leave no manner of doubt that the new provisions for reassessment contained in the Finance Act, 2021 were meant to have effect from 01.04.2021 and that the old provisions would cease to have any existence.

(iii) It was contended that the Relaxation Act, 2020 merely authorised the Government to extend the time limits contained in the specified Acts. This did not include power to issue any explanation or clarification. The subordinate legislature must submit to the limits of powers vested in it by the parent Act. By way of explanation, the subordinate legislature cannot revive the statutory provisions which had lapsed. The explanations contained in the notifications dated 31.03.2021 and 27.04.2021 are thus ultra vires the powers of the subordinate legislation and therefore unconstitutional.

(iv) It was contended that under the taxing statutes there is no scope for intendment. If two views are possible, one favouring the assessee should be taken. It was pointed out that the two Divisions Benches of Allahabad and Delhi High Courts have already decided these issues in favour of the assessees. Being the pan- India legislation in the field of taxation, the Court should strive to achieve consistency. The view adopted by two Division Benches should therefore appeal to the Court.

(v) It was lastly contended that the learned Single Judge of this Court in the case of BPIP Infra Private Limited (supra)2021( 12) TMI 207has committed no error in allowing the writ petitions relying upon the decision of the Allahabad High Court in the case of Ashok Kumar Agarwal (supra)2021(10) TMI 517.

24. On the other hand learned counsel appearing for the revenue strongly opposed these petitions and pressed for allowing their appeals. They contended that the substitution of old provisions for reopening of assessment would not obliterate the previous set of statutory provisions. They would continue to have effect for the past period. In other words, if the notice for reopening of assessment was issued for any period prior to 01.04.2021, the provisions as they stood at the relevant time would apply. In such a case there was no requirement of following the procedure laid down under Section 148A of the Act before issuing notice under Section 148. They would point out that present situation is unprecedented and has arisen on account on account of spread of corona virus. This unprecedented situation required taking extraordinary measures. The Relaxation Ordinance, 2020 and Relaxation Act, 2020 were therefore framed giving extension of time limits for taking actions and making compliances. These extensions were for the benefit of both, actions that had to be taken by the revenue as well as compliances which had to be made by the assessees. The assessees cannot take advantage of the unusual circumstances prevailing on account of spread of corona virus. The CBDT therefore in exercise of powers conferred in sub-section (1) of Section 3 of the Relaxation Act, 2020, has issued necessary explanation which merely clarifies which statutory provisions any way provide. This explanation makes explicit what is otherwise implicit under the Act. The same is well within the power of the Government.

25. Two questions of law which arise for our consideration are as under:

(i) Whether after introduction of new provisions for reassessment of income by virtue of the Finance Act, 2021 with effect from 01.04.2021, substituting the then existing provisions, would the substituted provisions survive and could be used for issuing notices for reassessment for the past period?

(ii) Whether the explanations contained in the CBDT circulars dated 31.03.2021 and 27.04.2021 are legal and valid? 26. At the outset we may note how other High Courts have viewed this situation. A Division Bench of the Allahabad High Court in case of Ashok Kumar Agarwal (supra)2021(10) TMI 517has ruled in favour of the assessee making following observations:

“64. As to the first line of reasoning applied by the learned counsel for the petitioner, as noted above, there can be no exception to the principle – an Act of legislative substitution is a composite act. Thereby, the legislature chooses to put in place another or, replace an existing provision of law. It involves simultaneous omission and re-enactment. By its very nature, once a new provision has been put in place of a pre-existing provision, the earlier provision cannot survive, except for things done or already undertaken to be done or things expressly saved to be done. In absence of any express saving clause and, since no reassessment proceeding had been initiated prior to the Act of legislative substitution, the second aspect of the matter does not require any further examination.

65. Therefore, other things apart, undeniably, on 01.04.2021, by virtue of plain/unexcepted effect of Section 1(2)(a) of the Finance Act, 2021, the provisions of Sections 147, 148, 149, 151 (as those provisions existed upto 31.03.2021), stood substituted, along with a new provision enacted by way of Section 148A of that Act. In absence of any saving clause, to save the pre-existing (and now substituted) provisions, the revenue authorities could only initiate reassessment proceeding on or after 01.04.2021, in accordance with the substituted law and not the pre-existing laws.

66. It is equally true that the Enabling Act that was pre-existing, had been enforced prior to enforcement of the Finance Act, 2021. It confronted the Act as amended by Finance Act, 2021, as it came into existence on 01.04.2021. In the Enabling Act and the Finance Act, 2021, there is absence, both of any express provision in itself or to delegate the function – to save applicability of the provisions of sections 147, 148, 149 or 151 of the Act, as they existed up to 31.03.2021. Plainly, the Enabling Act is an enactment to extend timelines only. Consequently, it flows from the above – 01.04.2021 onwards, all references to issuance of notice contained in the Enabling Act must be read as reference to the substituted provisions only. Equally there is no difficulty in applying the preexisting provisions to pending proceedings. Looked in that manner, the laws are harmonized.

67. It may also be not forgotten, a reassessment proceeding is not just another proceeding emanating from a simple show cause notice. Both, under the preexisting law as also under the law enforced from 01.04.2021, that proceeding must arise only upon jurisdiction being validly assumed by the assessing authority. Till such time jurisdiction is validly assumed by assessing authority – evidenced by issuance of the jurisdictional notice under Section 148, no reassessment proceeding may ever be said to be pending before the assessing authority. The admission of the revenue authorities that all re-assessment notices involved in this batch of writ petitions had been issued after the enforcement date 01.04.2021, is tell-tale and critical. As a fact, no jurisdiction had been assumed by the assessing authority against any of the petitioners, under the unamended law. Hence, no time extension could ever be made under section 3(1) of the Enabling Act, read with the Notifications issued thereunder.

68. The submission of the learned Additional Solicitor General of India that the provision of Section 3(1) of the Enabling Act gave an overriding effect to that Act and therefore saved the provisions as existed under the unamended law, also cannot be accepted. That saving could arise only if jurisdiction had been validly assumed before the date 01.04.2021. In the first place Section 3(1) of the Enabling Act does not speak of saving any provision of law. It only speaks of saving or protecting certain proceedings from being hit by the rule of limitation. That provision also does not speak of saving any proceeding from any law that may be enacted by the Parliament, in future. For both reasons, the submission advanced by learned Additional Solicitor General of India is unacceptable.

69. Even otherwise the word ‘notwithstanding’ creating the non obstante clause, does not govern the entire scope of Section 3(1) of the Enabling Act. It is confined to and may be employed only with reference to the second part of Section 3(1) of the Enabling Act i.e. to protect proceedings already under way. There is nothing in the language of that provision to admit a wider or sweeping application to be given to that clause – to serve a purpose not contemplated under that provision and the enactment, wherein it appears.

70. The upshot of the above reasoning is, the Enabling Act only protected certain proceedings that may have become time barred on 20.03.2021, upto the date 30.06.2021. Correspondingly, by delegated legislation incorporated by the Central Government, it may extend that time limit. That time limit alone stood extended upto 30 June, 2021. We also note, the learned Additional Solicitor General of India may not be entirely correct in stating that no extension of time was granted beyond 30.06.2021. Vide Notification No. 3814 dated 17.09.2021, issued under section 3(1) of the Enabling Act, further extension of time has been granted till 31.03.2022. In absence of any specific delegation made, to allow the delegate of the Parliament, to indefinitely extend such limitation, would be to allow the validity of an enacted law i.e. the Finance Act, 2021 to be defeated by a purely colourable exercise of power, by the delegate of the Parliament.

71. Here, it may also be clarified, Section 3(1) of the Enabling Act does not itself speak of reassessment proceeding or of Section 147 or Section 148 of the Act as it existed prior to 01.04.2021. It only provides a general relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19. After enforcement of the Finance Act, 2021, it applies to the substituted provisions and not the pre-existing provisions.

72. Reference to reassessment proceedings with respect to pre-existing and now substituted provisions of Sections 147 and 148 of the Act has been introduced only by the later Notifications issued under the Act. Therefore, the validity of those provisions is also required to be examined. We have concluded as above, that the provisions of Sections 147, 148, 148A, 149, 150 and 151 substituted the old/preexisting provisions of the Act w.e.f. 01.04.2021. We have further concluded, in absence of any proceeding of reassessment having been initiated prior to the date 01.04.2021, it is the amended law alone that would apply. We do not see how the delegate i.e. Central Government or the CBDT could have issued the Notifications, plainly to over reach the principal legislation. Unless harmonized as above, those Notifications would remain invalid.

73. Unless specifically enabled under any law and unless that burden had been discharged by the respondents, we are unable to accept the further submission advanced by the learned Additional Solicitor General of India that practicality dictates that the reassessment proceedings be protected. Practicality, if any, may lead to legislation. Once the matter reaches Court, it is the legislation and its language, and the interpretation offered to that language as may primarily be decisive to govern the outcome of the proceeding. To read practicality into enacted law is dangerous. Also, it would involve legislation by the Court, an idea and exercise we carefully tread away from.”

27. A Division Bench of Delhi High Court in case of Mon Mohan Kohli Vs. Assistant Commissioner of Income Tax, reported in 2021 (12) TMI 664, has decided such issue in favour of the assessee. Following observations may be noted:

“42. Having heard learned counsel for the parties, this Court is of the view that by virtue of Section 1 (2)(a) of the Finance Act, 2021, the substituted Sections 147, 148, 149 and 151 of the Income Tax Act, 1961 pertaining to reopening of assessments came into force on 1st April, 2021. The significance of the expression ‘shall’ in Section 1 (2)(a) of the Finance Act, 2021 cannot be lost sight of. This is in contrast to the language under Section 1(2)(b) which states that Sections 108 to 123 of the Finance Act, 2021 shall come into force on such date, as the Central Government may, by Notification in the Official Gazette, appoint. The Memorandum to the Finance Bill, 2021, too, clarifies that its Sections 2 to 88 which included the substituted Sections 147 to 151 of the Income Tax Act, 1961 will take effect from 1st April, 2021. There is also no power with the Executive/Respondents/Revenue to defer/postpone the implementation of Sections 2 to 88 of the Finance Act, 2021 which includes the substituted Sections 147 to 151 of the Income Tax Act, 1961.

43. It is settled law that the law prevailing on the date of issuance of the notice under Section 148 has to be applied. [See: Foramer Vs. CIT (2001) 247 ITR 436 (All.), affirmed by the Supreme Court in (2003) 264 ITR 566 (SC), Varkey Jacob Co. Vs. CIT and Anr. (2002) 257 ITR 231 (Ker), Smt. N. Illamathy vs. ITO (2020) 275 taxman 25/195 CTR 543 (Mad)(HC), RK Upadhyay v Shanabhai, (1987) 166 ITR 163 (SC); CIT v Rameshwar Prasad, (1991) 188 ITR 291 (All HC); Dr. Onkar Dutt Sharma v CIT, (1967) 65ITR 359 (All HC)].

44. This Court is of the view that had the intention of the Legislature been to keep the erstwhile provisions alive, it would have introduced the new provisions with effect from 1st July, 2021, which has not been done. Accordingly, the notices relating to any assessment year issued under Section 148 on or after 1st April, 2021 have to comply with the provisions of Sections 147, 148, 148A, 149 and 151 of the Income Tax Act, 1961 as specifically substituted by the Finance Act, 2021 with effect from 1st April, 2021.

46. Upon perusal of Section 3(1) of Relaxation Act, 2020, this Court is of the view that it extends only the time lines. Section 3(1) of the Relaxation Act, 2020 stipulates that where, any time limit has been stipulated in a specified Act which falls between the period 20th day of March, 2020 and 31st day of December, 2020 for the completion or compliance of such action as issuance of any notice under the provisions of the specified Acts and where completion or compliance of such action has not been made within such time, then the time limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Acts, stand extended. It is important to bear in mind that Section 3(1) of the Relaxation Act, 2020 does not empower the Central Government to postpone the applicability of any provision which has been enacted from a particular date. There is a difference between extension of time of an action which is getting time barred and applicability of a provision which has been enacted and notified by the Legislature. Relaxation Act, 2020 nowhere delegates power to the Central Government to postpone the date of applicability of a new law enacted by the Legislature. Relaxation Act, 2020 also does not put any embargo on the power of the Legislature to legislate.

47. Also, the impugned Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 are beyond the power delegated to the Government, as the Relaxation Act does not give power to Government to extend the erstwhile Sections 147 to 151 beyond 3 1st March, 2021 and/or defer the operation of substituted provisions enacted by the Finance Act, 2021. Accordingly, the provisions of Section 148A had to be complied with before issuing notices under Section 147 of the Income Tax Act, 1961 and the submission of the respondents- Revenue based on the judgment passed by Chhattisgarh High Court in Palak Khatuja Vs. UOI (supra) does not find favour with this Court. After all, it is settled law that Executive cannot make or change law of the land without specific Authority from Parliament to do so.

48. Consequently, the Relaxation Act, 2020 and Notifications issued thereunder can only change the time-lines applicable to the issuance of a Section 148 notice, but they cannot change the statutory provisions applicable thereto which are required to be strictly complied with. Further, just as the Executive cannot legislate, it cannot impede the implementation of law made by the Legislature.”

28. The learned Single Judge of this Court in case of BPIP Infra Private Limited (supra)2021( 12) TMI 207has noted the said decision of the Allahabad High Court in case of Ashok Kumar Agarwal (supra)2021(10) TMI 517and allowed the writ petitions of the assessees in similar circumstances. This judgment is of course in appeal before us.

29. A learned Single Judge of the Calcutta High Court in a recent judgment in case of Bagaria Properties and Investments Pvt. Ltd. Vs. Union of India (WPO No.244/2021) decided on 17.01.2022, has adopted the same view as of Allahabad and Delhi High Court and allowed the writ petition.

30. The sole dissenting view adopted is of a learned Single Judge of Chhattisgarh High Court in case of Palak Khatuja and Ors. Vs. Union of India and Ors., reported in (2021) 438 ITR 622. It was a case in which the learned Single Judge upheld the validity of the notice of reassessment on the ground that by virtue of notifications dated 31.03.2021 and 27.04.2021 the application of Section 148 of the Act which was originally existing before amendment was deferred, meaning the reassessment mechanism as prevailing prior to 31.03.2021 was saved by the notification.

31. We may now attempt to answer these questions ourselves with the aid of statutory provisions and law laid down in various decisions cited before us we may summarise certain principles applicable in the field of taxation and which principles would be invoked in the course of the judgment:

(i) A taxing statute must be interpreted strictly. Equity has no place in taxation nor while interpreting taxing statute intendment would have any place.

In case of State of W.B. Vs. Kesoram Industries Ltd. And Ors., (2004) 10 SCC 201, referring to Article 265 of the Constitution which provides that no tax shall be levied or collected except by authority of law, it was observed that in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted by any presumption or assumption. A taxing statute has to be interpreted in light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency. Before taxing any person it must be shown that he falls within the ambit of charging section by clear words used in the section and if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the tax payer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly.

A Constitution Bench in the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar And Company And Ors., (2018) 9 SCC 1, had reiterated these principles. It was a case where on a reference to the Larger Bench the Supreme Court was considering a question whether an ambiguity in a tax exemption provision or notification, the same must be interpreted so as to favour the assessee. Making a clear distinction between a charging provision of a taxing statute and exemption notification which waives a tax or a levy normally imposed, the Supreme Court observed as under:

“14. We may, here itself notice that the distinction in interpreting a taxing provision (charging provision) and in the matter of interpretation of exemption notification is too obvious to require any elaboration. Nonetheless, in a nutshell, we may mention that, as observed in Surendra Cotton Oil Mills Case, in the matter of interpretation of charging Section of a taxation statute, strict Rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favourable to the Assessee need to be applied. There is, however, confusion in the matter of interpretation of exemption notification published under taxation statutes and in this area also, the decisions are galore.

24. In construing penal statutes and taxation statutes, the Court has to apply strict Rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision making. Insofar as taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law. In other words, when the competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the legislature.”

(ii) Being the central legislation of pan-India effect and operating in the field of taxation, the view of another High Court would have considerable persuasive value. In other words, the High Court would have due regard to the view already expressed by another High Court and to the possible extent prefer consistency of views across the country over discord. Unless the view expressed by another High Court is plainly unacceptable to the Court, the High Court would lean in favour of the well considered view already expressed by another Court.

(iii) The speech made the Finance Minister on the floor of the House explaining the budgetary provisions would provide a useful tool in interpreting the taxing provisions particularly in case the dispute about their interpretation arises. When the Finance Minister who has piloted the budget in her speech explains the provisions contained in the Finance Bill and elaborates on the mischief which prevails and which is sought to be cured by substituting the existing statutory provisions, the explanation rendered by the Finance Minister has considerable importance in the context of correct interpretation of such provisions.

In case of Sole Trustee, Loka Shikshana Trust Vs. Commissioner of Income Tax, reported in (1975) 101 ITR 234 it was observed as under:

“It is true that it is dangerous and may be misleading to gather the meaning of the words used in an enactment merely from what was said by any speaker in the course of a debate in Parliament on the subject. Such a speech cannot be used to defeat or detract from a meaning which clearly emerges from a consideration of the enacting words actually used. But, in the case before us, the real meaning and purpose of the words used cannot be understood at all satisfactorily without referring to the past history of legislation on the subject and the speech of the mover of the amendment who was, undoubtedly, in the best position to explain what defect in the law the amendment had sought to remove. It was not just the speech of any member in Parliament. It was the considered statement of the Finance Minister who was proposing the amendment for a particular reason which he clearly indicated. If the reason given by him only elucidates what is also deducible from the words used in the amended provision, we do not see why we should refuse to take it into consideration as an aid to a correct interpretation. It harmonises with and clarifies the real intent of the words used. Must we, in such circumstances, ignore it?”

In case of K.P. Varghese Vs. Income Tax Officer, reported in (1981) 131 ITR 597 it was observed as under:

“Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Sole Trustee Loka Shikshana Trust v. CIT: [1975]101 ITR 234, the other in Indian Chamber of Commerce v. CIT: [1975]101 ITR 796 and the third in Additional CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1/[1980] 2 Taxman 501, where the speech made by the Finance Minister while introducing the exclusionary clause in Section 2 Clause (15) of the Act was relied upon by the Court for the purpose of ascertaining what was the reason for introducing that clause. The speech made by the Finance Minister while moving the amendment introducing Sub-section (2) clearly states what were the circumstances in which Sub-section (2) came to be passed, what was the mischief for which Section 52 as it then stood did not provide and which was sought to be remedied by the enactment of Subsection (2) and why the enactment of Sub-section (2) was found necessary. It is apparent from the speech of the Finance Minister that Sub-section(2) was enacted for the purpose of reaching those cases where there was under-statement of consideration in respect of the transfer or to put it differently, the actual consideration received for the transfer was 'considerably more' than that declared or shown by the assessee, but which were not covered by Subsection (1) because the transferee was not directly or indirectly connected with the assessee. The object and purpose of Sub-section (2), as explicated from the speech of the Finance Minister, was not to strike at honest and bonafide transactions where the consideration for the transfer was correctly disclosed by the assessee but to bring within the net of taxation those transactions where the consideration in respect of the transfer was shown at a lesser figure than that actually received by the assessee, so that they do not escape the charge of tax on capital gains by understatement of the consideration. This was real object and purpose of the enactment of Sub-section (2) and the interpretation of this sub-section must fall in line with the advancement of that object and purpose. We must therefore accept as the underlying assumption of Sub-section (2) that there is under-statement of consideration in respect of the transfer and Sub( section (2) applies only where the actual consideration received by the assessee is not disclosed and the consideration declared in respect of the transfer is shown at a lesser figure than that actually received.”

(iv) It is well accepted that reopening a completed assessment causes great hardship to the assessee and also brings uncertainty. In a judgment in case of Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, reported in [2013] 350 ITR 266(Guj), a Division Bench of Gujarat High Court had observed as under:

“41. The powers under Section 147 of the Act are special powers and peculiar in nature where a quasi-judicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds. Ordinarily, a judicial or quasi-judicial order is subject to appeal, revision or even review if statute so permits but not liable to be reopened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving a large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interests of the Revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to the entire original assessment, of course at the hands of the Revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts. Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that the power to reopening cannot be equated with review.”

32. The fact that under the Finance Act, 2021 the provisions for reassessment were substituted is beyond doubt. The notes on clauses for making relevant amendments clearly at every stage provide that the Bill proposes to substitute the existing provisions. For example it is stated that clause 35 seeks to amend Section 147 of the Act relating to income escaping assessment. Likewise under clause 36 Section 148 is proposed to be substituted so as to provide that before making the assessment, reassessment or recomputation under Section 147 and subject to the provisions of Section 148A the Assessing Officer shall serve on the assessee a notice along with a copy of order passed under clause (d) of Section 148. The Finance Act itself also refers to the substitution of Sections 147, 148 and 149 etc. along side insertion of Section 148A which as noted was being introduced for the first time. In the budged speech that the Finance Minister gave on the floor of the House it was explained that there was a proposal to reduce the time limit for reopening of the assessments. In the memorandum explaining the provisions in the Finance Bill, 2021, it was provided that the Bill proposes a completely new procedure for assessment of cases of reopening. It was pointed out that new Section 148A proposes issuance of notice and passing of the order by the Assessing Officer. It was further provided as under:

“Another restriction has been provided that the notice under section 148 of the Act cannot be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit prescribed under the provisions of clause (b), as they stood immediately before the proposed amendment.

Since the assessment or reassessment or recomputation in search or requisition cases (where such search or requisition is initiated or made on or before 31st March 2021) are to be carried out as per the provision of section 153A, 153B, 153C and 153D of the Act, the aforesaid time limitation shall not apply to such cases.”

33. In case of Government of India and Others Vs. Indian Tobacco Association, reported in (2005) 7 SCC 396, the Supreme Court considered the effect of substitution of a statutory provision by new one. It was observed as under:

“15. The word "substitute" ordinarily would mean "to put (one) in place of another"; or "to replace". In Black's Law Dictionary, 5th Edition, at page 1281, the word "substitute" has been defined to mean "to put in the place of another person or thing". or "to exchange". In Collins English Dictionary, the word "substitute" has been defined to mean "to serve or cause to serve in place of another person or thing"; "to replace (an atom or group in a molecule) with (another atom or group)"; or "a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague".

25. In Zile Singh v. State of Haryana and Ors. wherein the effect of an amendment in the Haryana Municipal Act, 1973 by Act No. 15 of 1994 whereby the word "after" was substituted by the word "upto" fell for consideration; wherein Lahoti, C.J. speaking for a three-Judge Bench held the said amendment to have a retrospective effect being declaratory in nature as thereby obvious absurdity occurring in the first amendment and bring the same in conformity with what the legislature really intended to provide was removed, stating: (SCC p. 12 paras 23-25)

"23. The text of Section 2 of the Second Amendment Act provides for the word ""upto"" being substituted for the word "after". What is the meaning and effect of the expression employed therein - "shall be substituted"?

24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. 'Substitution' has to be distinguished from 'supersession' or a mere repeal of an existing provision.

25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (See Principles of Statutory Interpretation, ibid, p.565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P., State of Rajasthan v. Mangilal Pindwal, Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael. In West U.P. Sugar Mills Association case a three-Judges Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centering around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case a three-Judge Bench of this Court emphasized the distinction between 'supersession' of a rule arid 'substitution' of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place."

34. In case of State of M.P. Vs. Kedia Leather & Liquor Ltd. and Others, reported in (2003) 7 SCC 389, the Supreme Court held as under:

“13. There is presumption against a repeal by implication; and the reason of this rule is based on the theory that the Legislature while enacting a law has a complete knowledge of the existing laws on the same subject matter, and therefore, when it does not provide a repealing provisions, the intention is clear not to repeal the existing legislation. (See: Municipal Council, Palai v. T.J. Joseph, Northern India Caterers (Private) Ltd. and Anr. v. State of Punjab and Anr., Municipal Corporation of Delhi v. Shiv Shanker and Ratan Lal Adukia and Anr. v. Union of India.) When the new Act contains a repealing section mentioning the Acts which it expressly repeals, the presumption against implied repeal of other laws is further strengthened on the principle expressio unius (persone vel rei) est exclusio alterius. (The express intention of one person or thing is the exclusion of another), as illuminatingly stated in Garnett v. Bradley. The continuance of existing legislation, in the absence of an express provision of repeal by implication lies on the party asserting the same. The presumption is, however, rebutted and a repeal is inferred by necessary implication when the provisions of the later Act are so inconsistent with or repugnant to the provisions of the earlier Act and that the two cannot stand together. But, if the two can be read together and some application can be made of the words in the earlier Act, a repeal will not be inferred. (See: A.G. v. Moore, Ratan Lal case and R.S. Raghunath v. State of Karnataka)”

35. In case of State of Rajasthan Vs. Mangilal Pindwal, reported in (1996) 5 SCC 60, it was observed that substitution of a provision results in repeal of the old provision and replacement by new provision. By repeal the provisions repealed ceased to exist with effect from the date of repeal but operation of the provision as it stood prior to repeal is not affected. It was held as under:

“9. As pointed out by this Court, the process of a substitution of statutory provision consists of two Steps first; the old rule is made to cease to exist and, next, the new rule is brought into existence in its place. [see Koteshwar Vittal Kamath v, K. Rangappa & Co., SCR at p. 48] In other words, the substitution of a provision results in repeal of the earlier provision and its replacement by the new provision. As regards repeal of a statute the law is thus stated in Sutherland on Statutory Construction:

"The effect of the repeal of a statute where neither a saving clause nor a general saving statute exists to prescribed the governing rule for the effect of the repeal, is to destroy the effectiveness of the repealed act in futuro and to divest the right to proceed under the statute, which, except as to proceedings past and closed, is considered as if it had never existed." [Vol. I, para 2042, pp.522-523]

10. Similarly in Crawford's Interpretation of Laws it has been said : "Effect of Repeal, Generally. - In the first place, an outright repeal will destroy the effectiveness of the repealed act in futuro and operate to destroy inchoate rights dependent on it, as a general rule. In many cases, however, where statutes are repealed, they continue to be the law of the period during which they were in force with reference to numerous matters." [pp.640-641]

11. The observations of Lord Tenterden and Tindal, C.J. referred in the abovementioned passages in Craies on Statute Law also indicate that the principle that on repeal a statute is obliterated is subject to the exception that it exists in respect of transactions past and closed. To the same effect is the Jaw laid down by this Court. [See :Qudrat Ullah v. Municipal Board. Bareilly, SCR at p. 539]

12. This means that as a result of repeal of a statute the statute as repealed ceases to exist with effect from the date of such repeal but the repeal does not affect the previous operation of the law which has been repealed during the period it was operative prior to the date of such repeal……….”

36. It can thus be seen that original provisions upon their substitution stood repealed for all purposes and had no existence after introduction of the substituting provisions. We may refer to Section 6 of the General Clauses Act, 1897 which provides interalia that where the State Act or Central Act or regulation repeals any enactment then unless a different intention appears repeal shall not revive anything not in force or existing at the time at which the repeal takes effect or affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder. Under the circumstances after substitution unless there is any intention discernible in the scheme of statute either pre-existing or newly introduced, the substituted provisions would not survive.

37. In this context we have perused the provisions of reassessment contained in the Finance Act, 2021. We have noticed earlier the major departure that the new scheme of reassessment has made under these provisions. The time limits for issuing notice for reassessment have been changed. The concept of income chargeable to tax escaping assessment on account of failure on the part of the assessee to disclose truly or fully all material facts is no longer relevant. Elaborate provisions are made under Section 148A of the Act enabling the Assessing Officer to make enquiry with respect to material suggesting that income has escaped assessment, issuance of notice to the assessee calling upon why notice under Section 148 should not be issued and passing an order considering the material available on record including response of the assessee if made while deciding whether the case is fit for issuing notice under Section 148. There is absolutely no indication in all these provisions which would suggest that the legislature intended that the new scheme of reopening of assessments would be applicable only to the period post 01.04.2021. In absence of any such indication all notices which were issued after 01.04.2021 had to be in accordance with such provisions. To reiterate, we find no indication whatsoever in the scheme of statutory provisions suggesting that the past provisions would continue to apply even after the substitution for the assessment periods prior to substitution. In fact there are strong indications to the contrary. We may recall, that time limits for issuing notice under Section 148 of the Act have been modified under substituted Section 149. Clause (a) of sub-section (1) of Section 149 reduces such period to three years instead of originally prevailing four years under normal circumstances. Clause (b) extends the upper limit of six years previously prevailing to ten years in cases where income chargeable to tax which has escaped assessment amounts to or is likely to amount to 50 lacs or more. Sub-section (1) of Section 149 thus contracts as well as expands the time limit for issuing notice under Section 148 depending on the question whether 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 be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. As per this proviso thus no notice under Section 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 would be in terms of the substituted Section 149(1) but without breaching the upper time limit provided in the original Section 149(1) which stood substituted. This aspect has also been highlighted in the memorandum explaining the proposed provisions in the Finance Bill. If according to the revenue for past period provisions of section 149 before amendment were applicable, this first proviso to section 149(1) was wholly unnecessary. Looked from both angles, namely, no indication of surviving the past provisions after the substitution and in fact an active indication to the contrary, inescapable conclusion that we must arrive at is that for any action of issuance of notice under Section 148 after 01.04.2021 the newly introduced provisions under the Finance Act, 2021 would apply. Mere extension of time limits for issuing notice under section 148 would n

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ot change this position that obtains in law. Under no circumstances the extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue, can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per the then prevailing provisions, would not be revived by virtue of the application of Section 149(1)(b) effective from 01.04.2021. All the notices issued in the present cases are after 01.04.2021 and have been issued without following the procedure contained in Section 148A of the Act and are therefore invalid. 38. The second question framed by us arises in this context. Would the explanation contained in both the notifications of CBDT dated 31.03.2021 and 27.04.2021 save the situation for the revenue? 39. It is well settled that there is presumption of constitutionality of a statute (refer to the Constitution Bench judgment in case of The State of Jammu & Kashmir, Vs. Triloki Nath Khosa and Ors., reported in AIR 1974 SC 1). The said principle of presumption of constitutionality also applies to piece of delegated legislation. In case of St. Johns Teachers Training Institute Vs. Regional Director, National Council For Teachers Education and Another, reported in (2003) 3 SCC 321, it was observed that it is well settled in considering the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the courts must adopt that construction which makes it valid. However it is equally well settled that the subordinate legislation does not enjoy same level of immunity as the law framed by the Parliament or the State Legislature. The law framed by the Parliament or the State Legislature can be challenged only on the grounds of being beyond the legislative competence or being contrary to the fundamental rights or any other constitutional provisions. Third ground of challenge which is now recognized in the judgment in case of Shayara Bano Vs Union of India reported in 2017 9 SCC 1 is of legislation being manifestly arbitrary. A subordinate legislation can be challenged on all these grounds as well as on the grounds that it does not conform to the statute under which it is made or that it is inconsistent with the provisions of the Act or it is contrary to some of the statutes applicable on the subject matter. In case of J.K. Industries Ltd. and Ors. Vs. Union of India and Ors., reported in (2007) 13 SCC 673, it was observed as under: “63. At the outset, we may state that on account of globalization and socio-economic problems (including income disparities in our economy) the power of Delegation has become a constituent element 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 at page 689, subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent Legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In addition, it may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is inconsistent with the provisions of the Act or that it is contrary to some other statute applicable on the same subject matter. Therefore, it has to yield to plenary legislation. It can also be questioned on the ground that it is manifestly arbitrary and unjust. That, any inquiry into its vires must be confined to the grounds on which plenary legislation may be questioned, to the grounds that it is contrary to the statute under which it is made, to the grounds that it is contrary to other statutory provisions or on the ground that it is so patently arbitrary that it cannot be said to be inconformity with the statute. It can also be challenged on the ground that it violates Article 14 of the Constitution.” 40. With this background we may revert to the Relaxation Act, 2020 and the two notifications issued by the CBDT. We may recall, under sub-section (1) of Section 3 of the Relaxation Act, 2020 while extending the time limits for taking action and making compliances in the specified Acts upto 31.12.2020 the power was given to the Central Government to extend the time further by issuing a notification. This was the only power vested in the Central Government. As a piece of delegated legislation the notifications issued in 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, 2020 the Government of India was authorized to extend the time limits by issuing notifications in this regard. Issuing any explanation touching the provisions of the Income Tax Act was not part of this delegation at all. The CBDT while issuing the notifications dated 31.03.2021 and 27.04.2021 when introduced an explanation which provided by way of clarification that for the purposes of issuance of notice under Section 148 as per the time limits specified in Section 149 or 151, the provisions as they stood as on 31.03.2021 before commencement of the Finance Act, 2021 shall apply, plainly exceeded its jurisdiction as a subordinate legislation. The subordinate legislation could not have travelled beyond the powers vested in the Government of India by the parent Act. Even otherwise it is extremely doubtful whether the explanation in the guise of clarification can change the very basis of the statutory provisions. If the plain meaning of the statutory provision and its interpretation is clear, by adopting a position different in an explanation and describing it to be clarificatory, the subordinate legislature cannot be permitted to amend the provisions of the parent Act. Accordingly, these explanations are unconstitutional and declared as invalid. 41. As noted, two Division Benches of Allahabad and Delhi High Courts have taken similar view. Two learned Single Judges of Calcutta and this High Court have followed this trend. Independently also we hold the same beliefs. As noted earlier we are conscious that Single Judge of Chhattisgarh High Court in Palak Khatuja (supra)(2021) 438 ITR 622.has taken a different view. The view of the High Court was that the impugned notices were valid since by virtue of notifications dated 31.03.2021 and 27.04.2021 the application of Section 148 which was originally existing before amendment was deferred. It was further observed as under: “Reading of the aforesaid notification would show that it was issued in exercise of power conferred under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and time for issuance of notice under Section 148, the end date was initially extended uptill on 30th day of April 2021 and subsequently again by notification dated 27th April, 2021 the time limit of 30th day of April 2021 was further extended up till 30th day of June, 2021. By effect of such notification, the individual identity of Section 148, which was prevailing prior to amendment and insertion of section 148A was insulated and saved uptill 30.06.2021.” With respect, we are unable to persuade ourselves to accept this analysis of the situation. In our understanding by virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act, 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021. 42. In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed. Pending applications if any stand disposed of.
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