28 Ashok Kumar Agarwal vs. UOI [2021] 439 ITR 1 (All) A.Ys.: 2013-14 to 2017-18; Date of order: 8th October, 2021 Ss. 147, 148 and 148A of ITA, 1961
Reassessment – Notice u/s 148 – Validity – Effect of insertion of s. 148A by F.A. 2021 – Taxation and other laws (relaxation of certain provisions) Act, 2020 enabling certain actions of Department in view of pandemic – Notification of Finance Ministry under enabling Act – Notification could not save reassessment proceedings under unamended s. 148 instituted after 1st April, 2021 – Notices issued in pursuance of such reassessment proceedings – Not valid
Writ petitions were filed by individual petitioners to challenge the initiation of reassessment proceedings after 1st April, 2021 by issuing notice u/s 148 for different assessment years.
The Allahabad High Court held as under:
‘i) 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. By virtue of section 1(2)(a) of the Finance Act, 2021, the provisions of sections147, 148, 149, 151 (as those provisions existed up to 31st March, 2021) stood substituted and a new provision was enacted by way of section 148A which mandated that the A.O. before issuing any notice u/s 148 shall conduct an inquiry, if required with the prior approval of the specified authority and provide to an opportunity to the assessee of being heard.
ii) The Taxation and Other Laws (Relaxation of certain Provisions) Act, 2020 had been passed to deal with situations arising due to the pandemic. This enabling Act that was pre-existing had been enforced prior to enforcement of the Finance Act, 2021 on 1st April, 2021. In the 2020 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 31st March, 2021. Plainly, the 2020 Act is an enactment to extend timelines only. Consequently, it flows from the above that from 1st April, 2021 onwards, all references to issuance of notice contained in the 2020 Act must be read as a reference to the substituted provisions only. Equally, there is no difficulty in applying the pre-existing provisions to pending proceedings. Looked at in that manner, the laws are harmonised. 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 1st April, 2021, that proceeding must arise only upon jurisdiction being validly assumed by the assessing authority. Till such time jurisdiction is validly assumed by the assessing authority evidenced by issuance of the jurisdictional notice u/s 148, no reassessment proceedings may ever be said to be pending.
iii) The submission that the provision of section 3(1) of the 2020 Act gave an overriding effect to that Act and therefore saved the provisions as they existed under the unamended law, cannot be accepted. That saving could arise only if jurisdiction had been validly assumed before the date 1st April, 2021. In the first place section 3(1) of the 2020 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 Parliament in future. Even otherwise the word “notwithstanding” creating the non obstante clause does not govern the entire scope of section 3(1) of the 2020 Act. It is confined to and may be employed only with reference to the second part of section 3(1) of the 2020 Act, i.e., to protect proceedings already underway. 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. Hence, the 2020 Act only protected certain proceedings that may have become time-barred on 20th March, 2020 up to the date 30th June, 2021. Correspondingly, by delegated legislation incorporated by the Central Government, it may extend that time limit. That time limit alone stood extended up to 30th June, 2021.
By Notification No. 3814 dated 17th September, 2021 ([2021] 437 ITR (St.) 16)], issued u/s 3(1) of the 2020 Act, further extension of time has been granted till 31st March, 2022. In the absence of any specific delegation, to allow the delegate of 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 Parliament. Section 3(1) of the 2020 Act does not itself speak of reassessment proceeding or of section 147 or section 148 of the Act as it existed prior to 1st April, 2021. It only provides a general relaxation of the limitation granted on account of general hardship existing upon the spread of the Covid-19 pandemic. After enforcement of the Finance Act, 2021 it applies to the substituted provisions and not the pre-existing provisions.
iv) The mischief rule has limited application in the present case. Only in case of any doubt existing as to which of the two interpretations may apply or as to the true interpretation of a provision, the court may look at the mischief rule to find the correct law. However, where plain legislative action exists, as in the present case (whereunder Parliament has substituted the old provisions regarding reassessment with new provisions with effect from 1st April, 2021), the mischief rule has no application. There is no conflict in the application and enforcement of the 2020 Act and the Finance Act, 2021. Juxtaposed, if the Finance Act, 2021 had not made the substitution to the reassessment procedure, the Revenue authorities would have been within their rights to claim extension of time under the 2020 Act. However, upon that sweeping amendment made in Parliament, by necessary implication or implied force, it limited the applicability of the 2020 Act and the power to grant time extensions thereunder, to only such reassessment proceedings as had been initiated till 31st March, 2021. Consequently, the notifications had no applicability to reassessment proceedings initiated from 1st April, 2021 onwards. Upon the Finance Act, 2021 being enforced with effect from 1st April, 2021 without any saving of the provisions substituted, there is no room to reach a conclusion as to conflict of laws. It is for the assessing authority to act according to the law as it existed on and after 1st April, 2021. If the rule of limitation is permitted, it could initiate reassessment proceedings in accordance with the new law, after making adequate compliance therewith.
v) A delegated legislation can never overreach any Act of the principal Legislature. Secondly, it would be over-simplistic to ignore the provisions of either the 2020 Act or the Finance Act, 2021 and to read and interpret the provisions of the Finance Act, 2021 as inoperative in view of the fact and circumstances arising from the spread of the Covid-19 pandemic. Practicality of life de hors statutory provisions may never be a good guiding principle to interpret any taxation law. In the absence of any specific clause in the Finance Act, 2021 either to save the provisions of the 2020 Act or the notifications issued thereunder, by no interpretative process can those notifications be given an extended run of life beyond 31st March, 2020. They may also not infuse any life into a provision that stood obliterated from the statute with effect from 31st March, 2021. Inasmuch as the Finance Act, 2021 does not enable the Central Government to issue any notification to reactivate the pre-existing law (which that principal Legislature had substituted), the exercise by the delegate / Central Government would be de hors any statutory basis. In the absence of any express saving of the pre-existing laws, the presumption drawn in favour of that saving is plainly impermissible. Also, no presumption exists that by the notification issued under the 2020 Act the operation of the pre-existing provision of the Act had been extended and thereby the provisions of section 148A (introduced by the Finance Act, 2021) and other provisions had been deferred. Such notifications did not insulate or save the pre-existing provisions pertaining to reassessment under the Act.
vi) Accordingly, the Revenue authorities had admitted that all the reassessment notices involved in this batch of writ petitions had been issued after the enforcement date of 1st April, 2021. As a matter of fact, no jurisdiction had been assumed by the assessing authority against any of the assessees under the unamended law. Hence, no time extension could be made u/s 3(1) of the 2020 Act, read with the notifications issued thereunder. All the notices were invalid.’
