S. 148A : Reassessment-Conducting inquiry, providing opportunity before the issue of notice-Limitation – Notices issued pursuant to the case of UOI v. Ashish Agarwal (2022) 444 ITR 1/ 213 DTR 217/ 326 CTR 473/ 286 Taxman / AIR 2022 SC 2781 (SC) – Notice issued on or after 01.04.2021, the period concerned is between 01.04.2021 to 30.06.2021-Relaxation Act will not apply – the law as per Finance Act, 2021 has to be followed. [S. 119, 147, 148, 148A(d), 149, 151, 151A, Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, S. 3(1), CBDT Notification, 31-3-2021, Art. 226]
In a group of matters, challenging the reassessment proceedings pursuant to the case of Ashish Agarwal, the following two questions were framed for the consideration of the Honourable High Court.
“Whether the reassessment proceedings initiated with the notice under Section 148 (deemed to be a notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, can be conducted by giving the benefit of relaxation/extension under the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act’ (TOLA)’ 2020 up to 30.03.2021, and then the time limit prescribed in Section 149 (1) (b) (as substituted w.e.f. 01.04.2021) is to be counted by giving such relaxation, the benefit of TOLA from 30.03.2020 onwards to the revenue.”

“Whether in respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, the benefit of TOLA’ 2020 will be available to the revenue, or in other words, the relaxation law under TOLA’ 2020 would govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act’ 2021, in such cases?”

It was held that No notice under Section 148 could be issued in a case for the assessment year 2013-14 and 2014-15 on or after 01.04.2021 being time-barred, on account of being beyond the time limit specified under the provisions of Section 149(1)(b) as they stood immediately before the commencement of the Finance Act’ 2021. For the assessment years 2015-16, 2016-17, and 2017-18, the contention is that the monetary threshold and other requirements of the Income Tax Act in the post-amendment regime, i.e. after the commencement of the Finance Act 2021 have to be followed. The validity of the jurisdictional notice under Section 148 is, thus, to be tested on the touchstone of compliances or fulfilment of requirements by the revenue as per Section 149(1)(b) and the first proviso to Section 149(1) inserted by the amendment under the Finance Act’ 2021, wef 01.04.2021.

The court clarified that there is no dispute about the fact that the notices issued under Section 148 after the amendment brought by the Finance Act 2021 i.e. on or after 01.04.2021 be treated as notices under Section 148-A as per the amended provisions. It has also been agreed by the counsel for the parties that the date of issuance of notice under Section 148 of the Income Tax Act (as per pre-amended provisions) shall be treated as the date of issuance of notice under Section 148-A (post amendment) and all notices issued under Section 148 of the Income Tax Act after 01.04.2021 shall be treated to be the notices under Section 148-A of the Income Tax Act, inserted by the Finance Act 2021, w.e.f. 01.04.2021. The jurisdictional notice under Section 148 after the amendment brought by the Finance Act 2021 will have to be issued after the conclusion of the preliminary enquiry required under Section 148-A.

It was argued by the Petitioners that:
(i) After the amendment brought by the Finance Act 2021, new/amended provisions will apply to reassessment proceedings.
(ii) Enabling Act (TOLA 2020) will not extend the time limit provided for initiation of reassessment proceedings under the unamended Sections 147 to 151 of the I.T. Act from 01.04.2021 onwards.

(iii) The result is that the revenue has to comply with all the requirements of the substituted/amended provisions of Sections 147 to 151A in the reassessment proceedings, initiated on or after 01.04.2021. The revenue will have to make all compliances under the amended provisions.

(iv) Simultaneously, all defences under the substituted/amended provisions will be available to the assessee.

(v) Regarding the impact of the Enabling Act (TOLA 2020) on the amendment by the Finance Act’ 2021, it was argued that no time extension under Section 3(1) of the Enabling Act (TOLA 2020) can be granted in the time limit provided under the substituted unamended provisions. The contention is that Section 3(1) of TOLA 2020 saved only the reassessment proceeding as they existed under the unamended law.

(vi) The scheme of assessment underwent a substantial change with the enforcement of the Finance Act 2021. The general provisions of the Enabling Act (TOLA 2020) cannot vary the requirements of the Finance Act 2021, which is a special provision as the special overrides general.

(vii) It was argued that reassessment notice under Section 148 can be issued only upon the jurisdiction being validly assumed by the assessing authority, for which the compliances of substituted provisions of Sections 149 to 151A have to be made by the revenue.

(viii) New/amended provisions benefit the assessee and provide certain pre-requisite conditions/monitory threshold etc. to be adhered to by the revenue to issue a jurisdictional notice under Section 148. The revenue has to meet a higher threshold to discharge a positive burden because of the substantive changes made in the new regime.

(ix) The pre-requisite conditions to issue a notice under Section 148 in the pre and post-amendment regime have been placed before us to demonstrate that for the reassessment notice after elapse of the period of three years but before 10 years from the end of the relevant assessment year, notice under Section 148 cannot be issued unless 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 assets, which has escaped assessment, amount to or is likely to amount to Rs.50 lacs rupees or more for that year.

(x) It was submitted that the monetary threshold for the opening of assessment after elapse of three years for a period up to ten years has, thus, been put in place.

(xi) Further, the first proviso to sub-section (1) of Section 149 has been placed to assert that the cases wherein notices were not issued within the period of six years as per clause (b) of sub-section (1) of Section 149 under the unamended provision, reassessment notices cannot be issued on or after 01.04.2021 after the commencement of the Finance Act 2021, as such cases have become time-barred.

(xii) It was argued that such cases cannot be reopened by giving an extension in the time limit by applying the Enabling Act (TOLA 2020) provisions.

(xiii) It was argued that the Finance Act 2021 had limited the applicability of the Enabling Act (TOLA 2020) and after amendment, the compliances/conditions under the amended provisions have to be fulfilled.

The issuance of notice under Section 148 as per the prescribed time limit in Section 149 was permissible until 30.06.2021. The extension of time granted by the subsequent notifications dated 31.03.2021 and 27.04.2021 would save all notices issued by the revenue after 01.04.2021, by applying the procedure under the amended provisions. The challenge to the validity of notices issued under Section 148, in the instant case, after the rejection of the objections filed by the petitioners under Section 148-A, cannot be sustained.

The Revenue contended that the Enabling Act 2020 was enacted by the Parliament to grant relaxation in the time limit provided in the ‘Specified Act’ defined therein, one of which is the Income Tax Act 1961. Sub-section (1) of Section 3 of the Act provides that the time limit specified or prescribed or notified under the Specified Act shall stand extended/relaxed for completion and compliance of such action, issuance of such notice, which falls during the period prescribed therein. Clause (c) of sub-section (1) of Section 3 is specific to the Income Tax Act 1961. Section 3(1)(c)(ii) contains a ‘Non-Obstante’ clause and provides that the time limit for completion and compliance of such action shall, notwithstanding anything contained in the Specified Act, shall stand extended to 31st March 2021 or such other date after 31.03.2021, as the Central Government may specify, by notification in this behalf. The notifications dated 27.02.2020, 31.12.2020, 31.03.2021 and 27.04.2021 have been issued in the exercise of the power under the said provision by the Central Government. The end date to which the prescribed time limit for completion and compliance of such action as per sub-section (1) of Section 3 of the Enabling Act 2020 was extended up to 31.03.2021 under the notification dated 31.12.2020. In partial modification of the notification dated 31.12.2020, the time limit specified in Section 149 for issuance of notice under Section 148 or sanctions under Section 151 of the Act 1961 has been extended up to 30.04.2021. Further, by the notification dated 27.04.2021 issued in partial modification of the previous notifications dated 31.12.2020, 22.02.2021 and 31.03.2021, the time limit was further extended up to 30.06.2021. The issuance of notice under Section 148 as per the prescribed time limit in Section 149 was permissible until 30.06.2021. The extension of time granted by the subsequent notifications dated 31.03.2021 and 27.04.2021 would save all notices issued by the revenue after 01.04.2021, by applying the procedure under the amended provisions. The challenge to the validity of notices issued under Section 148, in the instant case, after the rejection of the objections filed by the petitioners under Section 148-A, cannot be sustained.

It was argued that the Explanation attached to clause A(a) of the notification dated 31.03.2021 and the explanation clause A (b) of the notification dated 27.04.2021 though has been read down by this Court in Ashok Kumar Agarwal (supra) holding that the said explanations must be read as applicable to reassessment proceedings as may have been in existence on 31.03.2021, i.e. before enforcement of Finance Act’ 2021, but it was held that the notice to initiate reassessment proceedings after 01.04.2021 can be issued in accordance with the provisions of the I.T. Act as amended by Finance Act’ 2021. It was argued that the notices issued on or after 01.04.2021 under Section 148 of the Income Tax Act, for reassessment were issued in accordance with the substituted laws and not as per the pre-existing laws and the Enabling Act (TOLA 2020) was only applied for an extension in the timeline. The Enabling Act has an overriding effect over the Specified Act namely the Income-tax Act and has been enacted in the exigencies due to the spread of Covid 19, it will extend the time limit for issuance of notice/action under the I.T. Act. The CBDT Instructions dated 11.05.2022 has only clarified the manner in which the implementation of the judgement of the Apex Court is to be made. The extension of time granted by TOLA 2020 until 31.03.2021 and the subsequent notifications issued under sub-section (1) of Section 3 of the Enabling Act (TOLA 2020) to further extend the timeline up to 31.06.2021 would save all notices issued on or after 01.04.2021.

Honourable Court answered the two questions as under ;
(i) The reassessment proceedings initiated with the notice under Section 148 (deemed to be a notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, cannot be conducted by giving the benefit of relaxation/extension under the Taxation and Other Laws (Relaxation And Amendment of Certain Provisions) Act’ (TOLA) 2020 up to 30.03.2021, and the time limit prescribed in Section 149 (1)(b) (as substituted w.e.f. 01.04.2021) cannot be counted by giving such relaxation from 30.03.2020 onwards to the revenue.

(ii) In respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, the benefit of TOLA 2020 will not be available to the revenue, or in other words, the relaxation law under TOLA 2020 would not govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act’ 2021, in such cases.

(iii) The reassessment notices issued to the petitioners in this bunch of writ petitions, on or after 1.4.2021 for different assessment years (A.Y. 2013-14 to 2017-18), are to be dealt with, accordingly, by the revenue.

The Honourable Court held that The relaxation law under TOLA 2020 would not govern the time frame prescribed under the first 3 provisos to Section 149 of the Act as inserted by the Finance Act 2021. Therefore, the reopening of AY 2013-14 and 2014-15 would be time-barred. For AY 2015-16, 2016-17 and 2017-18, the monetary threshold and other requirements of the Income Tax Act in the post-amendment regime have to be followed. (WT No. 1086 of 2022 dated February 22, 2023) (AY 2013-14 to 2017-18)
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