[Income Tax Act] Bombay High Court quashes tax reassessment notices issued to Tata communications, others

The Bombay High Court on Tuesday quashed and set aside the notices against Tata Communications Transformation Services and other companies for income tax reassessment proceedings under Section 148 under the Income Tax Act (IT Act) initiated after April 1, 2021 [Tata Communications Transformation Services Ltd. v. Asst. Commissioner of IT & Ors and connected writs].The order came in a batch of petitions filed by various assessees challenging the validity of the assessment proceedings initiated against them after April 1, 2021, under the provisions of the IT Act as it existed prior to April 1, 2021, read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act of 2020.The provisions for reopening of the assessment under certain circumstances was amended by the Finance Act of 2021 with effect from April 1, 2021..The Bench noted that in March 2020, the country was hit by the COVID-19 pandemic which led to a nationwide lockdown putting the lives of citizens and the government machinery totally out of gear.To overcome the difficulties to adhere to the several statutory time limits, particularly in the context of tax collections, the Government of India had introduced the Relaxation Act..The petitioners pleaded that:Upon enactment of the Finance Act, 2021, the provisions contained in the Act pertaining to reassessment of income stood substituted by new set of provisions and upon such substitution the old provisions ceased to exist;The Relaxation Act merely authorised the government to extend the time limits contained in the specified Act and that did not include power to issue any explanation or clarification; the subordinate legislature could not revive the statutory provisions which had lapsed.Revenue authorities stated that:Substitution of old provisions for reopening of assessment would not obliterate the previous set of statutory provisions which could continue to operate for assessment years upto March 31 2021;Unprecedented situation required extraordinary measures and the Relaxation Act was framed giving extension of time limits for the benefit of both, actions that had to be taken by the Revenue as well as compliance which had to be made by the assessees..The Bench of Justices KR Shriram and NJ Jamadar held that notices issued under Section 148 of the Act after April 1, 2021 must comply with the amended provisions of law and cannot be sustained on the basis of the erstwhile provision.“It is well settled that the validity of a notice issued under Section 148 of the Act must be judged on the basis of the law existing on the date on which such notice is issued. Even the Revenue accepts this well settled position. …Therefore, any notice issued after April 1, 2021 must comply with the amended provisions of the Act which was amended with effect from April 1, 2021” the judgment held.The Bench also reasoned that the Relaxation Act merely extended the limitation provided in the specified Acts (including IT Act) for doing certain Acts which ought to be performed in accordance with the provisions of the specified Acts. Therefore, if there is an amendment in the specified Act, the amended provision of the specified Act would apply to the action of the authorities.With these observations, the Bench quashed and set aside the notices under challenge, but clarified that it will be open to the Assessing Officers to initiate fresh reassessment proceedings in accordance with the relevant provisions of the Act as amended by the Finance Act, 2021..Senior Advocates JD Mistri, Percy Pardiwalla, Firoze B Andhyarujina, BM Chatterji and Dr. K Shivaram appeared for the petitioners.Additional Solicitor General Anil C Singh with Advocates Shehnaz V Bharucha, Sham V Walve and Aditya Thakker appeared for the revenue authorities.Previously all High Courts except the Chhattisgarh High Court had held that the notices, as issued by revenue authorities, under Section 148 of the Act post April 1, 2021, are bad in law.[Read Judgment]