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Bombay High Court Stay Order on Section 148 Notice Issued under Old Provisions after 01.04.2021

stay-order-section-148-notice-issued-under-old-provisions-after-01.04.2021

The Bombay High Court has issued a stay order and restrained the revenue from taking any action based on the notice issued under old provisions of section 148 of the Income-tax Act, 1961 (Act) on and after 1.4.2021. The order is issued in the case of Tata Communications Transformation Services Limited vs. ACIT 14(1)(2), Mumbai & Ors. in WP/1334/2021 on 05th July 2021. The matter will be listed for hearing on 2nd August 2021.


In the writ petition, the validity of the notice issued under the repealed section 148 of the Act is challenged before the Bombay High Court. An interim order is passed by the Hon’ble High Court and a  stay on notice issued under section 148 of the Act after March 31, 2021 without following the procedure laid down under section 148A of the Act which is effective from 1.4.2021 is granted.


The writ petition is filed by the petitioner Tata Communications Transformation Services Limited which is accepted by the High Court and restrained the income-tax department to take any further action on the basis of the notice so issued under the erstwhile section 148.



Finance Act, 2021 has revamped the provisions of section 147/148 of the Act and a new set of reassessment proceedings under section 147 have been introduced from 1st April, 2021. In view of technology-based information-driven assessment or reassessment or re-computation of income escaping assessment, to a large extent, there is a need to completely reform the system of assessment or reassessment or re-computation of income escaping assessment and the assessment of search-related cases. The Finance Act, 2021 has completely introduced a new procedure of assessment of such cases.


Under the old provisions of section 147, before assessment or reassessment or re-computation under this provision, a notice is required to be issued under section 148 of the Act, which can be issued only when there is a reason to believe that income has escaped assessment as per the information with the Assessing Officer in the case of the assessee for the relevant assessment year. Prior approval of specified authority is also required to be obtained before the issuance of such notice by the Assessing Officer. 


Under the new scheme, a new Section 148A is introduced in the Act to provide that before issuance of notice the Assessing Officer shall conduct enquiries, if required, and provide an opportunity of being heard to the assessee. After considering his reply, the Assessing Officer shall decide, by passing an order, whether it is a fit case for the issue of notice under section 148 and serve a copy of such order along with such notice on the assessee. The Assessing Officer shall before conducting any such enquiries or providing an opportunity to the assessee or passing such order obtain the approval of the specified authority. However, this procedure of enquiry, providing opportunity and passing an order, before issuing notice under section 148 of the Act, shall not be applicable in search or requisition cases.


Further, the time limit to issue a notice under section 148 is also substituted with a new set of section 149.


This amendment is applicable from 1.4.2021. Hence, any assessment/reassessment notice under section 148 can be issued only under the new provisions of section 147 from 1-4-2021.


CBDT has issued a Notification No. 20/2021 dated 31.03.2021 in which the last date to issue the notice of reassessment under section 148 is extended to 30th April 2021. Further, vide Notification No. 38/2021 dated 27.04.2021, the said date is further extended to 30.06.2021.


In the explanation to para A(a) of Notification No. 20/2021, it is stated that for the purposes of issuance of notice under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-tax Act, under this sub-clause, the provisions of section 148, section 149 and section 151 of the Income-tax Act, as the case may be, as they stood as on the 31st day of March 2021, before the commencement of the Finance Act, 2021, shall apply.


Thus, according to this explanation, a notice under section 148 can be issued under the old provisions of section 147/148 even after 31-3-2021.


Read more on the new provisions of section 147 in this article.


In this context, it is worth to be noted that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) has given the power to the government to extend the time limit of various compliances under the Income-tax Act and certain other Acts. It did not extend the power to substitute any provision of the enacted Act.


Finance Act, 2021 has already substituted the provision of section 147 with effect from 1-4-2021. Hence, though the time limit to issue the notice under section 148 is extended by the Notification N0. 20/2021 and 38/2021 but the proceedings are required to be carried out as per the new substituted provisions. There cannot be two parallel reassessment proceedings under the same statute.


The said notification was issued on the basis of the powers conferred to the government by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.


In this discussed case, the notice under section 148 is issued under the old provisions of section 148 of the Act after 1-4-2021 and hence the assessee has challenged the validity of the notice so issued as well as the Notification N0. 20/2021 which provides for a parallel regime of reassessment proceedings under section 147.


Read the case details.


Case Title

Tata Communications Transformation Services Limited vs. ACIT 14(1)(2), Mumbai & Ors.

Court

Bombay High Court

Appeal No./Citation

Writ Petition No. 1334 of 2021

Section covered

148

Order Result

Interim Order Passed

Date of judgment

5.7.2021


In this writ petition, the petitioner has challenged the validity of Notification No. 20/2021 dated 31-03-2021 issued by the CBDT by exercising the powers conferred by section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.


The said notification empowers the income-tax department to issue reassessment notice under old provisions of section 148 even from 1-4-2021. The explanation to para A(a) of the said notification extends the time limit to issue a notice under section 148 to 30.4.2021 which was further extended to 30.06.2021 for the due date which was expiring on 31.03.2021.


In this case, the notice of reassessment was issued on 07-06-2021 under the old provisions of section 148. The petitioner contends that the issue of such a notice is in contravention of the provisions of the Act as the provisions of section 148 were substituted by the Finance Act, 2021 w.e.f. 01-04-2021. Thus, notice under old provisions of section 148 can’t be issued on or after 01-04-2021.


Considering the facts of the case, the Bombay High Court has accepted the plea of the petitioner which challenged the notification allowing issue of section 148 notices after 31-03-2021 and restrained the department from taking any further action based on the said notice till 2nd August 2021.


Also See: Case of Sahil International vs. ACIT on the validity of notice issued under the repealed section 148 issued after 31.03.2021


Notice issued under section 148 without complying with the provisions of section 148A is challenged before the Calcutta High Court in the case of Bagaria Properties and Investments Private Limited vs. Union of India in WPO/244/2021 by an Order dated 15th July, 2021. In this case, petitioners have also challenged the constitutional validity of the provisions of The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020. Read the Order here.

Proceedings on the notice issued under section 148 after 31.03.2021 is also stayed in the case of Armada D1 Pte. Ltd. vs. DCIT in Writ Petition (L) No. 11766 of 2021 by the Bombay High Court vide an Order dated 03/06/2021. Read the Order here.

A similar stay from assessment proceedings under erstwhile section 148 is granted by the Hon’ble Delhi High Court in the case of Mon Mohan Kohli vs. ACIT in WP(C) 6176/2021 vide Order dated 07/07/2021. Read the Order here.


Read the full text of the Order dated 5.7.2021 of the Bombay High Court on Stay Order on proceedings when notice under section 148 is issued under old provisions on or after 01.04.2021 


IN THE HIGH COURT OF JUDICATURE AT BOMBAY 

ORDINARY ORIGINAL CIVIL JURISDICTION 


WRIT PETITION NO.1334 OF 2021 



Tata Communications Transformation Services Limited .Petitioner 


Versus


Assistant Commissioner of Income Tax 14(1)(2), Mumbai & Ors. .Respondents 


Mr.Jehangir Mistri, Senior Advocate a/w Mr. Harsh Kapadia for Petitioner. Mr. Suresh Kumar for Respondents


CORAM :- SUNIL P. DESHMUKH & 

ABHAY AHUJA, JJ. 

DATE :- 05 JULY, 2021 

(THROUGH VIDEO CONFERENCING)


P. C. :-


1. Mr. Jehangir Mistri, learned Senior Advocate appearing for petitioner vehemently contends that the impugned notice under section 148 of Income Tax Act, 1961 in the present matter issued on 21/05/2021 is absolutely untenable on various grounds. He submits several provisions of the Income Tax Act including those of section 148 and various other provisions have been substituted by the Finance Act, 2021 which has been enforced since 01/04/2021. When, effectively, the earlier provisions of various sections, inter alia, of 147, 148 etc. as were before 01/04/2021 stand substituted, in the circumstances, impugned notice dated 21/05/2021, which purports to invoke section 3(1) of The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020 and the notifications thereunder, is based on the non-existent earlier provisions of the Income Tax Act, 1961 (since been substituted under the provisions of Finance Act, 2021) and such a notice cannot be issued and the authority is not empowered to issue the same.


He refers to grounds ‘G’ to ‘N’ in the petition and contends that section 3 of The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020 and the Notification No.20/2021 dated 31st March, 2021, Notification No.38/2021 dated 27th April, 2021, Explanation to clause (A)(a) of Notification No.20/2021 and Explanation to clause (A)(b) of Notification No.30/2021 are ultra-vires the Income Tax Act, The Finance Act, 2020 and are unconstitutional, posing challenge to them urges for striking them down.


2. Issue notice to respondents and Attorney General of India.


3. Mr. Suresh Kumar, learned Counsel for the respondents waives service of notice and seeks time of four weeks to file reply.


4. Stand over to 02/08/2021.


5. Till the next date, no further action be taken based on the impugned notice.


(ABHAY AHUJA, J.) (SUNIL P. DESHMUKH, J.)


Download Copy of the Bombay High Court Order in WP No. 1334 of 2021 on Stay Order on proceedings when notice under section 148 is issued under old provisions on or after 01.04.2021 in pdf format.

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