Facts of the Case

The present matter comprises a batch of writ petitions where various petitioners challenged reassessment notices issued under Section 148 of the Income Tax Act.

The notices were issued after 01.04.2021, i.e., after the amendments introduced by the Finance Act, 2021, which significantly altered the reassessment framework by introducing Section 148A and a new procedural regime.

The petitioners contended that despite the new law coming into force, the Income Tax Department issued reassessment notices under the old unamended provisions of Section 148, without following the mandatory procedure prescribed under Section 148A.

The Revenue justified its action by relying on certain notifications issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), claiming extension of the old regime.

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 under the old Section 148 are legally valid.
  2. Whether the Revenue can rely on TOLA notifications to continue applying the old reassessment provisions.
  3. Whether compliance with Section 148A procedure is mandatory for reassessment notices issued post amendment.

Petitioner’s Arguments

  • The petitioners argued that the Finance Act, 2021 substituted Sections 147 to 151, thereby introducing a completely new reassessment regime.
  • It was contended that Section 148A is mandatory, requiring:
    • Inquiry,
    • Opportunity of hearing,
    • Passing of order before issuing notice.
  • The reassessment notices issued under the old law after 01.04.2021 were without jurisdiction and void ab initio.
  • TOLA cannot override or defer the operation of a substituted statutory provision enacted by Parliament.

Respondent’s Arguments

  • The Revenue submitted that due to the pandemic, timelines were extended under TOLA, allowing issuance of notices under the old provisions.
  • It was argued that the notifications issued under TOLA validly extended the applicability of the old reassessment regime.
  • The Department claimed that such notices were protected by relaxation provisions and should be treated as valid.

Court’s Findings / Order

  • The Delhi High Court held that:
    • The Finance Act, 2021 brought into force a new reassessment regime w.e.f. 01.04.2021.
    • The old provisions ceased to exist and could not be invoked thereafter.
  • The Court observed that:
    • TOLA cannot override substantive statutory amendments made by Parliament.
    • The Revenue cannot continue using the old provisions when they have been substituted in entirety.
  • It was held that:
    • All reassessment notices issued after 01.04.2021 under the old Section 148 are invalid.
    • The mandatory procedure under Section 148A must be followed.
  • Consequently, the impugned notices were quashed.

Important Clarifications by the Court

  • Substitution of provisions means complete replacement, not mere amendment.
  • Delegated legislation (notifications) cannot override primary legislation.
  • The new reassessment framework ensures procedural safeguards and natural justice.
  • Any reassessment initiated post 01.04.2021 must strictly comply with Section 148A.

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice
  • Section 148A – Conducting Inquiry before Notice
  • Section 149 – Time Limits
  • Section 151 – Sanction for Issue of Notice
  • TOLA (Relaxation Act, 2020)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3969-DB/58927072022CW4962022_164800.pdf

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