Section 148 read with section 148-A – Notice u/s 148 issued post 1st April, 2021 – Conditional legislation – The Notifications dated 31st March, 2021 and 27th April, 2021 whereby the application of section 148, which was originally existing before the amendment was deferred, meaning the reassessment mechanism as prevalent prior to 31st March, 2021 was saved by the Notification

Section 148 read with section 148-A – Notice u/s 148 issued post 1st April, 2021 – Conditional legislation – The Notifications dated 31st March, 2021 and 27th April, 2021 whereby the application of section 148, which was originally existing before the amendment was deferred, meaning the reassessment mechanism as prevalent prior to 31st March, 2021 was saved by the Notification

The petitioners filed their income tax return for A.Y. 2015-16 and F.Y. 2014-15. Subsequently, on the basis of some information available, an initial scrutiny was done; however, no concealment was found but again a notice u/s 148 was issued. It was submitted that on 30th June, 2021 when the notice u/s 148 was issued, the power to issue the notice was preceded by a new provision of law and thereby section 148 is to be read with section 148A. It was contended that as per the amended Finance Act, 2021, which was published in the Gazette on 28th March, 2021, sections 2 to 88 were notified to come into force on the first day of April, 2021 and accordingly the new section 148A was inserted which prescribed that before issuing the notice u/s 148, the A.O. was bound to conduct an inquiry giving an opportunity of hearing to the assessee with the prior approval of the specified authority and a show cause notice in detail was necessary specifying a particular date for hearing.

It was further submitted that since the operation of section 148A came into effect on 1st April, 2021, as such, the notice issued to the petitioner on 30th June, 2021 u/s 148, without following the procedure u/s 148A, that is, without giving an opportunity of hearing, would be illegal and contrary to the provisions of section 148A and it cannot be sustained. It was further submitted that although the Revenue has placed reliance on a certain Notification of the Ministry of Finance, but when the law has been enacted by the Parliament then in such a case the Notification issued by the Ministry of Finance would not override even to extend the period of operation of the section of the old Act of section 148. It was therefore submitted that the impugned notice is illegal and is liable to be quashed.

On its part, the Revenue contended that because of the pandemic and lockdown of all activities, including the normal working of the office, a lot of people could not file their returns and submit the necessary papers. As such, the Ministry of Finance, in exercise of its power under the Finance Act, issued the Notification whereby the application of the old provisions of section 148 was extended initially up to 30th April, 2021 and thereafter up to the 30th day of June, 2021. Therefore, the notice dated 30th June, 2021 would be within the ambit of the power of the Department in the extended time of its operation till 30th June, 2021. Thus, the notice u/s 148 is legal and valid.

The Court observed that the notice u/s 148 was issued for A.Y. 2015-16 on 30th June, 2021. The grievance of the petitioners was that the notice of like nature could have been issued till the cut-off date of 30th March, 2021 as subsequent thereto the new section 148A intervened before the issuance of notice directly u/s 148. The Finance Act, 2021 was Notified on 28th March, 2021 which purports that sections 2 to 88 shall come into force on the first day of April, 2021 and sections 108 to 123 shall come into force on such date as the Central Government notifies in the Official Gazette. The relevant part wherein section 148A is enveloped is covered u/s 42 of the Finance Act, 2021. By introduction of section 148A, it was 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, provide an opportunity of being heard, serve a show cause notice and prescribe the time. The question raised for consideration was whether, with the promulgation of the Act on the 1st day of April, 2021, the notice directly issued u/s 148 on 30th June, 2021 is valid or not as the bar of 148A was created by insertion of the section on 1st April, 2021.

The Court further observed that on account of the pandemic, Parliament had enacted the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020. In the Act, any time limit specified, prescribed or notified between 20th March, 2020 and 31st December, 2021 or any other date thereafter, after December, 2021, gave the Central Government the power to notify. The necessity occurred because of the Covid pandemic lockdown in the backdrop of the fact that few of the assessees could not file their returns. Likewise, since the offices were closed, the Department also could not perform the statutory duty under the Income-tax Act. Considering the complexity, the Parliament thought it proper to delegate to the Ministry of Finance the date of applicability of the amended section. The delegation is not a self-contained and complete Act and was only made in the interest of flexibility and smooth working of the Act, and the delegation therefore was a practical necessity. The Ministry of Finance having been delegated with such power, this delegation can always be considered to be a sound basis for administrative efficiency and it does not by itself amount to abdication of power.

Reading both the Notifications, dated 31st March and 27th April, 2021, whereby the application of section 148 which was originally existing before the amendment was deferred, meant thereby that the reassessment mechanism as prevalent prior to 31st March, 2021 was saved by the Notification. The Notification is made by the Ministry of Finance, Central Government considering the fact of lockdown all over India and it can be always assumed that the deferment of the application of section 148A was done in a controlled way. It is a settled proposition that any modification of the Executive’s decision implies a certain amount of discretion and has to be exercised with the help of the legislative policy of the Act and cannot travel beyond it and run counter to it, or change the essential features, the identity, structure or the policy of the Act. Therefore, the legislative delegation exercised by the Central Government by Notification to uphold the mechanism as it prevailed prior to March, 2021 is not in conflict with any Act and Notification by the Executive, i.e., the Ministry of Finance, and would be a part of legislative function.

The Court relied on the principle as laid down in the case of A.K. Roy vs. Union of India reported in AIR 1982 SC 710, wherein the Supreme Court held that the Constitution (Forty-Fourth) Amendment Act, 1978, which conferred power on the Executive to bring the provisions of that Act into force did not suffer from excessive delegation of legislative power. The Court observed that the power to issue a Notification for bringing into force the provisions of a constitutional amendment is not a constituent power, because it does not carry with it the power to amend the Constitution in any manner. Likewise, in this case, by the delegation to the Executive of the power to the Central Government to specify the date by way of relaxation of time limit, the main purpose of the Finance Act is not defeated. Therefore, it would be a conditional legislation. The Legislature has declared the Act and has given the power to the Executive to extend its implementation by way of Notification. The Legislature has resorted to conditional legislation to give the power to the Executive to decide under what circumstances the law should become operative or when the operation should be extended and this would be covered by the doctrine of the conditional legislation.

Thus, by the aforesaid Notifications, the operation of section 148 was extended, and thereby deferment of section 148A was done by the Ministry of Finance by way of conditional legislation in the peculiar circumstances which arose during the pandemic and lockdown and the Central Government cannot be said to have encroached upon the turf of Parliament.

By effect of such Notification, the individual identity of section 148, which was prevailing prior to the amendment and insertion of section 148A, was insulated and saved till 30th June, 2021.

Considering the situation for the benefit of the assessee and to facilitate individuals to come out of the woods, the time limit framed under the IT Act was extended. Likewise, certain rights which were reserved in favour of the Department were also preserved and extended at parity. Consequently, the provisions of section 148 which were prevailing prior to the amendment of the Finance Act, 2021 were also extended. The power to issue notice u/s 148 which was there prior to the amendment was also saved and the time was extended. As a result, the notice issued on 30th June, 2021 would also be saved. The petitions were dismissed accordingly.