Union of India & Ors. vs Rajeev Bansal

Income Tax Act, 1961 – Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 – Finance Act 2021 – Whether the directions in Ashish Agarwal will extend to all the reassessment notices issued under old regime: Held: The directions in Ashish Agarwal will extend to all the ninety thousand reassessment notices issued under the old regime during the period 01 April 2021 and 30 June 2021 – The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 01 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal, and the period of two weeks allowed to the assesses to respond to the show cause notices. [Para 114(f), 114(g)]

Income Tax Act, 1961 – Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 – Finance Act 2021 – What were the requirements for issuing reassessment notice under section 148 of the new regime:

Held: The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA – All notices issued beyond the surviving period are time barred and liable to be set aside. [Para 114(h)]

Income Tax Act, 1961 – Assessment as a quasi-judicial function:

Held: The assessing officers perform a quasi-judicial function during reassessment, the powers vested in them are regulated by law – The process of reassessment is generally preceded by administrative proceedings, which require the assessing officer to obtain the sanction of the specified authorities – The taxing statutes generally lay down the procedure for issuance of notice to the proposed assessee in respect of income or property proposed to be taxed – It also prescribes the authority and procedure for hearing any objections to the liability for taxation. [Para 27]

Income Tax Act, 1961 – Assessment as an issue of jurisdiction: Held: The Income Tax Act, 1961 also mandates assessing officers to fulfil certain pre-conditions before issuing a notice of reassessment – Section 149 requires assessing officers to issue a notice of reassessment under Section 148 within the prescribed time limits – Further, Section 151 requires assessing officers to obtain sanction of the specified authority before issuing notice under Section 148 – A statutory authority may lack jurisdiction if it does not fulfil the preliminary conditions laid down under the statute, which are necessary to the exercise of its jurisdiction – There cannot be any waiver of a statutory requirement or provision that goes to the root of the jurisdiction of assessment – An order passed without jurisdiction is a nullity – Any consequential order passed or action taken will also be invalid and without jurisdiction – Thus, the power of assessing officers to reassess is limited and based on the fulfilment of certain preconditions. [Paras 31, 32]

Interpretation of Statutes – Taxing statutes – Principles of strict interpretation and workability:

Held: Taxing statutes are interpreted by following the principles of strict interpretation – While interpreting a taxing statute, there is no room for any intendment – A taxing statute must be construed by having regard to the strict letter of the law – In a taxing statute, it is not possible to assume any intention or governing purpose more than what is stated in the plain language – A taxing statute can successfully impose liability on persons or property only if it frames appropriate provisions to that end – The courts cannot plug in a loophole in a taxing statute “by a strained construction in reference to the supposed intention of the Legislature” – Further, the considerations of equity or justice are not relevant in interpreting a taxing statute – It is a well-accepted rule of construction that in situations where the interpretation of taxing legislation is ambiguous or leads to two possible interpretations, the interpretation most beneficial to the subject of the tax should be adopted – It would not be an unjust result if a taxpayer escapes the tax net on account of the legislature’s failure to express itself clearly – A statute is designed to be workable – A statutory provision must be construed in a manner to make it workable to achieve the purpose of the legislation – A construction that fails to achieve the manifest purpose of legislation or reduces the statutory provisions to futility should be avoided. [Paras 35, 37]

Interpretation of statutes – Harmonious construction – Discussed. [Paras 39-43]

Income Tax Act, 1961 – First proviso to Section 149(1) of the new regime – Ingredients of the proviso:

Held: The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under the provisions of” 149(1)(b) of the old regime – Thus, a notice could be issued under Section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime. [Para 46]

Income Tax Act, 1961 – s.149(1) of the new regime – Position of law:

Held: (i) Section 149(1) of the new regime is not prospective – It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations – The Revenue can issue notices under Section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under Section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs. [Para 53]