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After the Delhi and Allahabad High Courts, the Rajasthan High Court is the latest to quash assessment notices issued under Section 148 of the Income tax Act after April 1, 2021, and also uphold the single judge bench ruling in a similar matter. Meanwhile, the Centre’s plea against Allahabad High Court is likely to be heard soon in the Supreme Court.
“In our understanding by virtue of notifications dated March 31, 2021, and April 01, 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 April 01, 2021,” said a division bench of Justices Samir Jain and Akil Kureshi. Further, it termed the notices impugned in the respective petitions as invalid and bad in law.
“The same are quashed and set aside,” it said.
Substitution of provisions
Moving against reassessment notices, the petitioners contend that since the notices are issued after April 01, 2021, the same could be done only as per the provisions contained in the Act effective from the date. They aubmit that since in the present cases the notices are issued under old provisions which have already been substituted, they are invalid. There were petitions by the Income Tax Department against the ruling of a single judge bench which quashed some of the notices earlier.
The litigation involves the substitution of provisions related with Sections 147 (income escaping assessment), 148 (issue of notice where income has escaped assessment), 149 (time limit for notice) and 151 (sanction for issue of notice) through Finance Act 2021. The act also inserted a new Section 148 A, which prescribes conducting inquiry, providing opportunity before issue of notice under Section 148.
This is the fourth ruling by High Courts on this issue. Three courts — Delhi, Allahabad and now Rajasthan — have quashed the notices while Chattishgarh High Court held them correct.
It may be noted that in 2020 the government had extended the due date for issue of notices from March 31 to June 30, 2020. Similarly, in 2021, the date was first extended to April 31 and then further to June 30, 2021. In petitions before the High Courts, it was argued that taxation and other laws (Relaxation and Amendment of Certain Provisions) Act, 2020, authorise the Central government to only extend the time limits and nothing more. It was further stated that the Income Tax Department cannot indirectly extend the operation of the old provisions of the Act beyond March 31, 2021, under the guise of a clarification under delegated legislation
Impact on Centre’s revenue
As the rulings will impact the Centre’s revenue, the Finance Ministry has filed a Special Leave Petition (SLP) against the ruling of Allahabad High Court. The petition was registered on Friday and the date of hearing is to be decided. In it, the Centre said that notices under Section 148, as it stood prior to the introduction of the Finance Act 2021, were issued across the country between April 1, 2021, and June 30, 2021. There are many cases pending before various High Courts challenging the notices and the “revenue implications are very high”.
If the Allahabad High Court ruling is not stayed then “it will be prejudicial to the interest of Central government,” the petition added.
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