Reassessment notice issued under old section 148 after 31.03.2021 invalid – High Court

Reassessment notice issued under old section 148 after 31.03.2021 invalid as reassessment provisions are substituted by Finance Act, 1921 with effect from 01.04.2021.

ABCAUS Case Law Citation
ABCAUS 3565 (2021) (12) HC

Important case law relied referred:
Union of India & Ors. Vs. S. Srinivasan, (2012) 7 SCC 683
Palak Khatuja Vs Union of India & Ors
Government of India & Ors. Vs. Indian Tobacco Association, (2005) 7 SCC 396
Gottumukkala Venkata Krishamraju Vs. Union of India & Ors., (2019) 17 SCC 590
PTC India Limited Vs. Central Electricity Regulatory Commissioner, (2010) 4 SCC 603
C.B. Richards Ellis Mauritius Ltd. Vs. Assistant Director of Income-tax, (2012) 208 Taxman 322 (Delhi)

In a recent judgment, Hon’ble High Court has quashed Reassessment notice issued under old section 148 after 31.03.2021 invalid as reassessment provisions under Sections 147, 148, 149 and 151 have been substituted by Finance Act, 1921 with effect from 01.04.2021.

The main argument of the Petitioners was that upon enforcement of the Finance Act, 2021, the pre-existing Sections 147 to 151 of the Act stood repealed and replaced by the Finance Act 2021. The entire statutory scheme of initiating, inquiring, conducting, and concluding the reassessment proceedings underwent a sea change. The act of substitution of the old provision obliterated from the statute book the pre-existing provisions pertaining to reassessment under the Act. The un-amended provision became dead and unenforceable, by that operation of law. Since the Enabling Act only sought to enlarge limitation with respect to the pre-existing provisions, it could not, and it did not resurrect the pre-existing provisions that were already dead.

It was submitted that the procedural amendments cannot recreate a non-existing substantive law. Reliance were placed on several judgments of Hon’ble Supreme Court.

Further it was submitted that the Finance Act, 2021 does not contain any saving clause as may allow the pre-existing provisions an extended life, after the enactment of Finance Act, 2021.

The Hon’ble High Court stated that 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.

The Hon’ble High Court opined that 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.

The Hon’ble High Court stated that the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (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 pre-existing provisions to pending proceedings. Looked in that manner, the laws are harmonized.

The Hon’ble High Court said that a reassessment proceeding is not just another proceeding emanating from a simple show cause notice. Both, under the pre-existing 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 re-assessment proceeding may ever be said to be pending before the assessing authority.

Further, the re-assessment notices had been issued after the enforcement date 01.04.2021. 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.

The Hon’ble High Court pointed out that 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.

Consequently, the reassessment notices in all the writ petitions were quashed. It was left open to the assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act as amended by Finance Act, 2021, after making all compliances, as required by law.

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