The Orissa High Court held that amendments in Income Tax Act under Finance Act 2021 do not affect notices issued prior to April 1st, 2021. The appellant in the present appeal is StalcoConsultancy &Systems Private Limited
A distinction was made between notices issued on or after 1st April, 2021 and those issued prior thereto. It permitted the proceedings pursuant to notices issued on or after 1st April, 2021 to continue in terms of the amended provisions even while clarifying that the notices issued prior thereto, would have to abide by the provisions as they exist prior to the amendment.
The challenge in the present writ petition is to the notices, pertaining to the same Assessment Year (AY), dated 31st March, 2021, 1st April, 2021 and 5th April, 2021 issued by the Income Tax Department (Department) under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the Petitioner for AY 2013-14. The latter two notices were issued without withdrawing the first notice.
Sections 147 to 151 of the Act underwent amendments under the Finance Act, 2021 with effect from 1st April, 2021 which specified that no notice under section 148 shall be issued for the relevant assessment year if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c).
In the present case, the outer time limit of six years lapsed on 1st April, 2020 whereas the first of the impugned notices was issued only on 31st March, 2021. to overcome this plea of limitation, the Department in its counter affidavit has relied on the provisions of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (the 2020 Act) and to the Explanation added by the Central Board of Direct Taxes (CBDT) notification dated 27th July 2021.
The Department has contended that the question of complying with the said provision does not arise in view of the extension of the time limit by virtue of the 2020 Act of the initial notice issued on 31st March, 2021.
A Single Bench consisting of Justice M.S. Raman observed that “The judges held that as far as the notices dated 1st April, 2021 and 5th April, 2021 are concerned, they are bad in law for non-compliance with the mandatory requirements of prior enquiry by the Assessing Officer (AO) in terms of Section 148-A of the Act. Those notices were accordingly quashed. As regards the first notice dated 31st March, 2021, it was seen from the text of the notice itself that it has been issued more than six years after the closure of the relevant AY on 1st April, 2020 and therefore exceeds the time limits set under Section 149 of the Act.
“That period has not got extended by the 2020 Act. It was left open to the Department to initiate fresh proceedings under Section 147 of the Act against the Petitioner subject to complying with the legal requirements in terms of the amended Sections 147 to 151 as per the Finance Act, 2021” the Court said.
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