Jayprakash Badrinarayan Somani v. The Principal, ChiefCommissioner, Income Tax, Pune and another)
Legal Reasoning
- 1 -IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABADWRIT PETITION NO.10321 OF 2022(Jayprakash Badrinarayan Somani Vs. The Principal, ChiefCommissioner, Income Tax, Pune and another)Mr.R.R.Chandak, Advocate for the Petitioner. Mr.Alok Sharma, Advocate for the Respondent / Income TaxDepartment.( CORAM : RAVINDRA V. GHUGE AND R.M. JOSHI, JJ.) DATE : FEBRUARY 22, 2024PER COURT : 1.We have heard the learned Advocates for the respectivesides for quite some time. The Respondent / Department opposes thecontentions of the Petitioner and prays that the Petition be dismissed.2.Considering that the Principal Seat has delivered ajudgment on 15.01.2024 in WP No.1945/2023 (The New IndiaAssurance Company Limited Vs. The Assistant Commissioner of IncomeTax and Others), we are referring to the short issue raised in thisPetition. It is undisputed that the impugned notice has been issuedafter the amendment to the Finance Act, on the basis of the provisionskhs/Feb.2024/10321
Legal Reasoning
- 2 -that existed before the amendment and the said notice is in relation tothe Assessment Year 2013-2014.3.The contention of the Department is that certain quantumof earning / transaction escaped assessment of the income. Hence, theAssessment Officer had issued notice for reopening the assessment forAssessment Year 2013-2014 with regard to the purported escapedincome assessment. By the judgment delivered in The New IndiaAssurance Company Limited (supra), this Court has come to aconclusion in paragraph Nos. 36 to 39 as under :-“36 Therefore, in the present case, as the foundation of the entirereassessment proceeding, viz., the notice issued in June 2021 itself wasbarred by limitation in view of non-applicability of NotificationNo.20/2021, the superstructure sitting thereon, viz., the reassessmentproceedings initiated pursuant to judgment in Ashish Agarwal will alsobe regarded as beyond time limit. Therefore, on this ground as well, theimpugned reopening notice dated 28th July 2022 issued for AY 2013-14 in petitioner's case is barred by limitation and deserves to bequashed and set aside. Alternatively, it is well settled that a noticeunder Section 148 of the Act cannot be issued in order to reopen theassessment of an assessee in a case where the right to reopen theassessment was already barred under the pre-amended Act on the datewhen the new legislation came into force. In CIT V/s. Onkarmalkhs/Feb.2024/10321 - 3 -Meghraj (HUF) the Hon'ble Apex Court held:"That raises the question whether that proviso could beapplied without reference to any period of limitation. It is awell-settled principle that no action can be commenced hasexpired. It is unnecessary to cite authorities in support ofthis position. Does the fact that the second proviso saysthat there is no period of limitation make a difference?xxxxxxxxxx.XXXXXXXXXX In J.P. Jani, Income-tax Officer v. InduprasadDevshanker Bhatt (1969) 72 1.T.R. 595; (1969) 1 S.C.R.714 (S.C.) this court held that the Income-tax Officercannot issue a notice under section 148 of the Income TaxAct, 1961, in order to reopen the assessment of an assesseein a case where the right ti reopen the assessment wasbarred under the 1922 Act at the date when the new Actcamne into force. It was held that section 297(2)(d) (ii) ofthe 1961 Act was applicable only to this cases where theright of the Income-tax Officer to reopen an assessmentwas not barred under the repealed Act. This decision isbroadly in line with the opinion of Das and Kapur JJ. inPrashar's case (1963) 49 1.T.R. (S.C.) 1; (1964) 1 S.C.R.29 (S.C.) xxxxxxxxxx.For AY 2013-14, the time limit to issue a notice underSection 148 of the Act had already expired on 1" April 2021. On thesaid date, the assessee had a vested right, which de hors the 1" provisokhs/Feb.2024/10321 - 4 -to the amended Section 149 of the Act, could not be taken away andthus, based on the well settled principles of law, the reopening of theAY 2013-14 after 31 March 2021 is invalid, without jurisdiction andbarred by limitation.37We shall deal with Mr. Sharma's submissions as under:(a) As regards reliance on the provisions of the LimitationAct, 1963, the provisions of the Limitation Act, 1963 do not apply tothe provisions of the Income Tax Act, 1961 and especially, not in thepresent case in view of the specific period provided for in the provisionsof the Act as well as TOLA. In any case, this defence of respondentscannot be sustained as they have not taken any such contention ineither the order passed under Section 148A(d) or in the affidavit inreply;(b) As regards applicability of Section 3 of TOLA -exclusion of Covid period, this argument is, in effect, nothing but thetheory of travel back in time which was urged by the Revenue tosupport the reopening notices issued between 1" April 2021 to 30thJune 2021 before this Court, as well as other High Courts [and whicheventually led to the judgment in Ashish Agarwal (Supra)]. As notedearlier, this Court and other Courts have already snubbed the relateback/travel back in time theory and also the Instruction No.1 of 2022;(c) As regards applicability of Notifications No.20 of 2021dated 31 March 2021 and No.38 of 2021 dated 27th April 2021khs/Feb.2024/10321 - 5 -extending the time limit even for AY 2014-15 and it is extended till 30June 2021, respondent, in other words, argues that the NotificationNo.20 of 2021 seeks to extend the time limit inter alia for issuing noticeunder Section 148 which was expiring on 31 March 2021 not onlyunder the provisions of the Act, but would also include the timeextension in the Act by virtue of TOLA. To put in another way, the timelimit expiring on 31 March 2021 specified in Notification No.20 of2021, according to respondents, would have to be read to includelimitation under the Act read with TOLA. As noted earlier, thiscontention is flawed inasmuch as it expands the scope of theNotification and violates its plain language, viz., the time limit,specified in, or prescribed or notified under the Income Tax Act falls forcompletion. The limitation under the Act (erstwhile Section 149) forreopening the assessment for the AY 2013-14 expired on 31 March2020. Hence, Notification No.20 of 2021 did not apply to the facts ofthe present case. Notification No.38 of 2021 dated 27th April 2021categorically uses the expression the time limit for completion of suchaction expires on the 30th day of April 2021 due to its extension by thesaid notifications, such time limit shall further stand extended to the30th day of June 2021. Hence, it is incorrect to say that 31 March 2021under the Act would mean under the Act, plus, extension by TOLA;(d) The submission that the Hon'ble Supreme Court, whiledeciding Ashish Agarwal (Supra), was conscious of the limitation of 6years expiring on 31 March 2021 under the pre-amendment provisionsin respect of AY 2013-14 if the Covid period was not excluded, despitewhich the Apex Court has stated that all notices issued should be readkhs/Feb.2024/10321 - 6 -to be issued under Section 148A to prevent the Revenue gettingremediless, is unacceptable. This argument clearly fails to appreciatethat the effect of Revenue's contention is that despite the substantivedefence available to the assessee in Section 149 of the amended Act, aswell as the express directions of the Hon'ble Supreme Court allowingthe assessee to take all defences available under the Act, the judgmentof Ashish Agarwal (Supra) would permit them to reopen theassessment of AY 2013-14 would not only make the defence expresslyavailable to the assessees useless and unusable, but would be contraryto well established principles of law. In Supreme Court Bar Association(Supra), the Hon'ble Supreme Court espoused that its powers conferredunder Article 142 of the Constitution of India, being curative in natureand even with the width of its amplitude, cannot be construed aspowers which authorise the Court to ignore the substantive rights of alitigant while dealing with a cause pending before it. Article 142 wouldnot be used to supplant substantive law applicable to a case or causeand it will not be used to build a new edifice where none existed earlierby ignoring express statutory provisions dealing with a subject andthereby to achieve something indirectly which cannot be achieveddirectly. In the present case, Revenue's argument, if accepted, would bein conflict with the above law as despite the express language of 1proviso to Section 149, reopening notice for the AY 2013-14 would bepermitted to be issued beyond 6 years on the pretext that the Hon'bleSupreme Court in exercise of its powers under Article 142 permittedthem to do so and otherwise, they would be remediless. On thecontrary, while permitting the Revenue to re- initiate the reassessmentproceedings, the Apex Court also granted liberty to assessees to raise allkhs/Feb.2024/10321 - 7 -defences available to the assessee including the defences under Section149 of the Act. The Apex Court observed that its order will strike abalance between the rights of the Revenue as well as the respectiveassessees. Moreover, in Siemens Financial (Supra), this Court hasalready considered a similar contention of the Revenue and held thatequity has no place in taxation or while interpreting taxing statute suchintendment would have any place and that taxation statute has to beinterpreted strictly. The Revenue also fails to appreciate that noparticular case was considered by the Hon'ble Supreme Court whiledeciding Ashish Agarwal (Supra).It is apposite to cite here an extract of the judgment of theHon'ble Supreme Court in Parashuram Pottery Works Co. Ltd V/s.Income Tax Officer, which reads as under:………..It has been said that the taxes are the price that wepay for civilization. If so, it is essential that those who areentrusted with the task of calculating and realising thatprice should familiarise themselves with the relevantprovisions and become well-versed with the law on thesubject. Any remissness on their part can only be at thecost of the national exchequer and must necessarily resultin loss of revenue. At the same time, we have to bear inmind that the policy of law is that there must be a point offinality in all legal proceedings, that stale issues should notbe reactivated beyond a particular stage and that lapse oftime must induce repose in and set at rest judicial andkhs/Feb.2024/10321 - 8 -quasi- judicial controversies as it must in other spheres ofhuman activity...".(e) The contentions that (i) the true meaning of ApexCourt order in Ashish Agrawal (Supra) is that the notices issued underSection 148, irrespective of the Assessment Year of the unamended Act,between 1st April 2021 to 30th June 2021 are to be treated as showcause notices without being hit by limitation, if issued on or before 30thMarch 2021 and (ii) the defence under Section 149 available to theassessee would mean that if the Revenue had issued any notice underSection 148 under the unamended Act during the period 1st April 2021to 30th June 2021 pertaining to AY 2013-14, the same would be barredby limitation under Section 149 in effect means the Civil Appeal of theRevenue in Ashish Agrawal (Supra) was dismissed, are completelyflawed. It completely fails to appreciate that the limitation period toissuance of reopening notices under Section 148 for all AssessmentYears prior to AY 2013-14 had already expired on 31 March 2019 orearlier. The provisions of TOLA obviously could not save such a timelimit and the Revenue could not have validly issued reopening noticesfor years prior to AY 2013-14 on or after 1st April 2019. Therefore, thedefence so expressly allowed to be taken by the Hon'ble Supreme Courtwould otherwise be unnecessary;(f) The submission that the Apex Court, in exercise ofpower under Article 142 of the Constitution, has deemed the noticesissued between 1st April 2021 to 30th June 2021 under Section 148A(b)of the Act issued within limitation and by following the manner ofkhs/Feb.2024/10321 - 9 -computation of limitation provided in TOLA, the days from 1st April2021 to 30th June 2021 would stand excluded and, therefore, thenotices could be deemed to be issued on 31st March 2021, we find it tobe rather fallacious. The fallacy of this contention of Revenue isconspicuous inasmuch as if the notices issued under Section 148between 1st April 2021 and 30th June 2021, which according to them,are deemed to be issued on 31st March 2021, then it is obvious that theprovisions of the new reassessment law introduced by the Finance Act,2021 cannot apply as they came into force w.e.f. 1st April 2021 andonwards. Ashish Agarwal (Supra) in no uncertain words stated that thenew provisions have to apply to all such notices. Therefore, theargument urged is completely contrary to law as well as the bindingdirections of the Hon'ble Supreme Court;(g) As regards reliance on Touchstone Holdings (Supra),the Hon'ble Delhi High Court held that the initial notice dated 29thJune, 2021 issued under Section 148 is within limitation. No findingson the validity or otherwise of the notice issued after May 2022pursuant to the judgment in Ashish Agarwal (Supra) is given.Moreover, in that case, petitioner did not argue that for AY 2013-14 thetime limit would have expired even under TOLA on 31st March 2021;(h) As regards Salil Gulati (Supra), the Delhi High Court,to reach its conclusion, has merely relied upon its earlier decision inTouchstone Holdings (Supra). It will be relevant to note that followingSalil Gulati (Supra), a similar view was taken by the Delhi High Courtin Yogita Mohan V/s. Income Tax Officer. Against the judgment, in ankhs/Feb.2024/10321 - 10 -SLP preferred by the assessee, the Apex Court has issued notice vide itsorder dated 20th February 2023. It should also be noted that the Hon'bleGujarat High Court in Keenara Industries (P) Ltd. V/s. Income TaxOfficer" and the Allahabad High Court in Rajeev Bansal V/s. Union ofIndia¹ have taken a view that notices issued for AY 2013-14 werebarred by limitation in view of the amended Section 149 of the Act.Subsequently, the Apex Court, in SLPs preferred by the Revenue, hasissued notice and stayed both the orders/judgments;(i) We are unable to comprehend the contention raisedthat if the notice dated 30th May 2022 under Section 148A(b) of the Actis valid in terms of Apex Court order in Ashish Agrawal (Supra), thenthe notice under Section 148 of the Act cannot be issued on 31st March2021 and respondent cannot be expected to do impossible. It hasnowhere been urged by petitioner that assessing officer ought tocomplete the proceedings before the show cause notice under Section148A(b) of the Act was issued. It is the case of petitioner that thereopening notice under Section 148 ought to have been issued within 6years from the end of the AY 2013-14. This limitation period, asextended by TOLA, expired on 31st March 2021. However, in thepresent case, the reopening notice has been issued in July 2022 and,therefore, beyond the statutory time limit. In any case, as stated above,the Hon'ble Supreme Court, while invoking powers under Article 142,consciously and categorically granted liberty to assessees to raise alldefences available to the assessee, including the defences under Section149 of the Act. This specific and express directions cannot be set atnaught. Accepting this contention of the Revenue would be a travestykhs/Feb.2024/10321
Decision
- 11 -of justice.38 In the circumstances, in our view, the notice issued underSection 148 of the Act, impugned in this petition, for AY 2013-14 isissued beyond the period of limitation.39 Having decided in favour of assessee/petitioner on thisissue of limitation, we are not discussing the other grounds of challengeraised in the petition. Petitioner may raise all those contentionsindependently in any other proceeding.”4.In view of the above, the Writ Petition is allowed. Theimpugned notice is quashed and set aside.5.We record that this order is restricted only to the point oflimitation since the impugned notice had been issued for theAssessment Year 2013-2014, after the amendment to the Finance Act on01.04.2021, and that too under the provisions existing prior to theamendment to the Finance Act. ( R.M.JOSHI, J. ) ( RAVINDRA V. GHUGE, J.)khs/Feb.2024/10321