SEKAR REPORTER

Court News from Madras High Court

DR B RAMASWAMY Senior Standing Counsel Income Tax, Ministry of Finance, Government of India

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[2023] 158 taxmann.com 33 (Article)

[2023] 158 taxmann.com 33 (Article)©

Date of Publishing: January 2, 2024

Analysis of Section 148 and Recent Landmark Judgments of Honble Madras

High Court

DR B RAMASWAMY Senior Standing Counsel Income Tax, Ministry of Finance, Government of India

SECTION 148 AND 148A ANALYSIS SECTION 148:

Section 148 in The Income- Tax Act, 1995

148. 1 Issue of notice where income has escaped assessment 2

  • 3 ] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.]
  • 4 The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.]

SECTION 148A (AMENDED SECTION)

148. Issue of notice where income has escaped assessment.—1 [(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, 2 *** as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished undersection 139:] 3 [Provided that in a case—

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and Conducting inquiry, providing opportunity before issue of notice under section 148. 148A. The Assessing Officer shall, before issuing any notice under section 148,— (a) conduct any enquiry…; (b) provide an opportunity of being heard to the assessee…. (c)consider the reply of assessee…. (d) decide, on the basis of material available on record including reply of the assessee….

BACKGROUND OF THE PROBLEM:

  1. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (RAA), promulgated on 29th September 2020, was a legislative response to the challenges arising from the COVID-19 pandemic in meeting statutory and regulatory compliances. In recognizing the disruptions caused by the pandemic, the Act aimed to provide relief by extending the time limits specified in the Income Tax Act, 1961 (I.T. Act), for proceedings and compliance actions.
    1. A crucial provision of the RAA, outlined in sub-section 3(1), specifically addressed the time limits falling between the 20th day of March, 2020, and the 31st day of December, 2020. This provision allowed for the completion or compliance of various actions, such as proceedings, orders, notices, intimation, notifications, sanctions, or approvals, to be extended. Notably, it granted an initial extension until the 31st day of March, 2021, with a provision for the Central Government to further extend these deadlines through notifications for a date beyond the specified period.
    1. The empowering phrase “as the Central Government may, by notification, specify” underscored the delegation of legislative powers to the Central Government. It conferred the authority to legislate on the extension of timelines beyond the initial deadline of 31st March, 2021. This delegation of powers was significant as it allowed for flexibility in responding to the evolving circumstances of the pandemic.
    1. Of particular importance was clause (a) of sub-section 3(1), which granted the Central Government the authority to extend the time limits beyond the initial deadline. This extension applied to actions by any authority, commission, or tribunal under the specified Act, including the Assessing Officer. The delegation of powers was a key feature, enabling the government to adapt its response to the ongoing challenges posed by the pandemic.
    1. It’s noteworthy that the legislative action did not stand in isolation; it was part of a larger framework where the Central Government had already constituted the Central Board of Direct Taxes (CBDT) as a statutory entity under the Central Board of Revenue Act, 1963. The CBDT, being a constituent of the Central Government, was thus empowered by the delegated legislation to exercise control and perform duties in implementing the Relaxation and Amendment provisions.
    1. As the Act was enacted on 29th September 2020, the continued impact of the COVID-19 pandemic was acknowledged. Lockdown measures were being eased in phases, yet social distancing and precautionary protocols remained enforced across workplaces in the country. The legislative framework, therefore, provided a dynamic and adaptive approach to address the challenges posed by the pandemic on a legal and regulatory front. CBDT REGULATIONS:
  2. Amidst the unique and challenging circumstances triggered by the COVID-19 pandemic, the Central Board of Direct Taxes (CBDT), leveraging powers delegated by sub-section 3(1) of the Relaxation and Amendment Act, took crucial actions outlined in Notification No. 30/2021 and Notification No. 38/2021.
  3. In a demonstration of its authority, the CBDT, through Notification No. 30/2021 (S.O. 966(E) on 27.02.2021), extended the deadline for various actions, including reassessment proceedings, which were originally set to expire on 31.03.2021. This extension, valid until 30.04.2021, was a clear exercise of the powers delegated under the Relaxation and Amendment Act. A pivotal aspect causing legal contention emerged from the Explanation within this notification.
  4. The Explanation explicitly stated that the issuance of notices under section 148, adhering to the time limits specified in section 149, or the approval process under section 151 of the Income-tax Act, would follow the pre-existing regime as of 31st March 2021, before the enactment of the Finance Act, 2021.
  5. This alteration effectively prolonged the applicability of sections 148, 149, and 151 of the Income Tax Act until 30.04.2021, becoming a contentious point in ensuing legal debates. The controversy deepened with the subsequent observation by the CBDT. Recognizing the continued impact of the Second Wave of COVID-19 and the ongoing stress on completion and compliance systems, the CBDT, on 27.04.2021, issued Notification No. 38/2021 (S.O. 1432(E)).
  6. This notification extended the deadline for issuing notices under section 148 until 30.06.2021, allowing a further two-month window. The accompanying Explanation reiterated that the reassessment mechanism would adhere to the older system, devoid of the procedural framework introduced by section 148A.
  7. In essence, these legislative maneuvers by the CBDT, within the broader framework of the Relaxation and Amendment Act, showcased a responsive and adaptive approach to the evolving challenges posed by the pandemic, while simultaneously laying the groundwork for legal debates stemming from the alterations in the timelines and mechanisms within the Income Tax Act.  CBDT REGULATION POST ASHISH AGARWAL JUDGEMENT:
  8. The CBDT’s Instruction No. 01/2022, issued in response to the Supreme Court’s judgment in Ashish Agarwal, introduces complexities due to its wording. Paragraph 6.2 of the instruction outlines the treatment of impugned reassessment notices, but its language raises concerns as it appears to conflict with the limitation periods stipulated by Section 149 of the Income Tax Act after April 1, 2021, as per the Finance Act, 2021.
  9. According to the CBDT instruction, fresh notices under Section 148 can be issued for AY 2013-14 to AY 2015-16 only if the assessing officer possesses evidence indicating an income of Rs. 50 lakhs or more. For AY 2016-17 and AY 2017-18, fresh notices can be issued within three years from the end of the relevant assessment years with the specified authority’s approval.
  10. However, this conflicts with the first proviso to Section 149, which states that no notice under Section 148 can be issued after April 1, 2021, for assessment years beginning on or before April 1, 2021, if such notice could not have been issued at that time due to exceeding the time limit specified in the old provisions.
  11. The CBDT instruction overlooks this proviso, creating a mathematical calculation error. Specifically, for AY 2013-14 and AY 2014-15, irrespective of the income amount, no notice can be issued under Section 148 after April 1, 2021, as per the Finance Act, 2021. The instruction also erroneously includes AY 2016-17 and AY 2017-18 within the three-year mark, potentially leading to conflicting views.
  12. In summary, the CBDT Instruction No. 01/2022 raises concerns about its alignment with the new reassessment provisions and the Finance Act, 2021. The potential conflict introduced by the instruction may give rise to significant litigation challenges in the future.

ASSESSEE ARGUMENT POINTS BEFORE HIGH COURT WRITS:

  1. The petitioners, who are recipients of notices under section 148 for reassessment, contend that the issuance of reopening notices under the old regime after 01.04.2021, when the new regime had come into effect, is invalid.
    1. They challenge the constitutional validity of the Central Board of Direct Taxes’ (CBDT) notifications, specifically the Explanation to clause (A) of Notification No. 30/2021 and 38/2021, asserting that these explanations are ultra vires the Income Tax Act and are legally flawed.
    1. The petitioners argue that the notifications issued by the CBDT are ultra vires because they conflict with the Finance Act, 2021, which introduced amendments to the laws governing reassessment.
    1. They contend that the Relaxation and Amendment Act, intended for extending various time limits, cannot extend the power to substitute a provision (Amended Section 148 along with new provisions of section 148A) of the enacted Finance Act. According to the petitioners, the Relaxation and Amendment Act and the notifications cannot suspend the coming into effect and operation of the Finance Act, 2021.
    1. The petitioners argue that the CBDT, in issuing notifications, exceeded its authority in contravention of the amended law introduced by the Finance Act, 2021. They assert that the CBDT does not have the power to extend the due date for issuing notices under the old provisions of the Act beyond the scope delegated by the Relaxation and Amendment Act.
    1. Reference is made to the legal principle outlined in Addl. District Magistrate (Rev.), Delhi v. Siri Ram [Appeal (Civil) No. 6255 of 1955, dated 5-5-2000, emphasizing that rulemaking power should not go beyond the enabling Act and should not be inconsistent or repugnant to it.
    1. The petitioners contend that there is a case of unconstitutionality due to excessive delegation of law-making powers in the Relaxation and Amendment Act to the Executive (Central Government/CBDT). They argue that the legislature has excessively delegated its legislative function to the Central Government.
    1. Reference is made to the case of State of Tamil Nadu v. P. Krishnamurthy [Appeal (Civil) No. 5572 – 5644 of 2005, dated 24-3-2006] (SC), where it was held that the court, when considering the validity of subordinate legislation, must assess the nature, object, and scheme of the enabling Act. The court should determine whether the subordinate legislation conforms to the parent statute.
    1. The petitioners argue that the inconsistency or non-conformity of the rule (Explanation in the notifications) is not with reference to any specific provision of the enabling Act but with the object and scheme of the Parent Act. They emphasize the presumption in favor of constitutionality or validity of subordinate legislation as observed by the Hon’ble Apex Court. ARGUMENT OF DEPARTMENT IN THESE CASES:
    1. The Income Tax Department presents several arguments in defense of the Explanation and the legality of the notices issued under Section 148 for reassessment.
    1. Firstly, the Revenue contends that, in the absence of an extension of the time limit, the limitation for issuing notices under Section 148 would have expired for certain assessment years. The enactment of Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, extended the time limit for taking action under Section 148 until 30.06.2021. Therefore, the impugned notifications only signify the extension of the time limit for issuing notices under the old provisions of Section 148 until the specified date.
    1. Secondly, the Income Tax Department relies on Section 6 of the General Clauses Act, 1897.

According to this provision, the repeal of any enactment does not revive anything not in force at

the time of repeal, nor does it affect the previous operation of any repealed enactment or any rights, privileges, obligations, or liabilities acquired under it. The Department argues that even with the repeal of the old reopening regime, proceedings could be continued under the repealed enactment since they were already ongoing.

  • Thirdly, the Department asserts that the intention behind their argument is straightforward: if a provision is granted extra time and allowed to continue, then the associated old procedure (Old Regime mechanism, sans section 148A) would also be deemed allowed to persist.
    • Fourthly, the Department points out that the Ordinance empowers the Central Government to specify that the time limit for completion or compliance of old pending actions shall stand extended to a date beyond 31st March 2021. It emphasizes that the extension is not a repudiation of Section 148A but an allowance for the continuation of the old Section 148, which did not reference Section 148A.
    • Fifthly, the Department argues that the Hon’ble Apex Court in P. Krishnamurthy (supra) has established a presumption in favor of the constitutionality or validity of subordinate legislation. The Department contends that the subordinate legislation, in this case, conforms to the parent statute of the Income Tax Act, 1961.
    • Lastly, the Department responds to the petitioner’s reference to the ratio of Siri Ram, (supra) asserting that the notification did not go beyond the scope of the Income Tax Act. It argues that the Notification merely allows the issuance of notices under Section 148, which is within the scope of the amended Section 148. The Department insists that the Notifications grant only a procedural liberty in the operation of the Old Regime Section 148 and do not exceed the scope of the Income Tax Act, 1961. GOVERNING CASE LAW:

Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC)

  1. The Supreme Court validated reassessments made by Assessing Officers after April 1, 2021. The court emphasized the need to avoid rendering reassessment proceedings futile, considering the Finance Act, 2021, and the substituted sections 147 to 151 of the Income Tax Act. Acknowledging a bonafide mistake by the Revenue in issuing notices under the unamended Section 148, the court suggested that instead of quashing these notices, they should be deemed issued under Section 148A of the amended Act, allowing the Revenue to proceed with reassessment under the new provisions.
    1. The judgment, however, has sparked controversy due to several contentions. Firstly, the phrase “leeway must be shown” has raised concerns about departing from the strict interpretation of taxing statutes, potentially giving preferential treatment to the Revenue. Critics argue that such preferential treatment contradicts existing legal principles.
    1. Secondly, the court’s acceptance of a “bonafide mistake” by the Revenue has been contested. Critics question the characterization of a conscious action as a mistake, arguing that the Finance Act, 2021, is a legislative mandate that the Revenue must follow. Ignorance of the law is typically not considered an excuse, and providing leeway based on a mistake sets a potentially problematic precedent.
    1. Thirdly, the use of Article 142 of the Constitution, which grants the Supreme Court extraordinary powers, is debated. Critics argue that the use of this extraordinary power, especially in tax cases, should be sparing and limited to cases of manifest illegality or injustice. The contention is that the court’s intervention, based on Article 142, may have far-reaching consequences in future tax cases.
    1. Lastly, the court’s direction to dispense with the requirement of conducting an inquiry with prior approval under Section 148A, as a one-time measure, is viewed as a modification of the procedure. The court’s insistence on the assessing officer providing information and material to the assessees within specific timelines, not mentioned in the statute, is considered an injection of practicality into the process.
    1. The judgment’s impact on reassessments after April 1, 2021, is acknowledged, but its controversial aspects, such as the granting of leeway, acceptance of a bonafide mistake, use of Article 142, and modification of procedural requirements, are subjects of ongoing debate and scrutiny.

GOVERNING CASELAWS BEFORE THE ASHISH AGARWAL FOR OLD PROVISION:

  1. The pre-amended Section 147, effective until March 31, 2021, governed the reopening of assessments, stipulating that if no scrutiny assessment had been carried out, an assessment could be reopened within six years from the end of the Assessment Year. The Delhi High Court’s Full Bench in CIT v. Kelvinator of India Ltd. [2002] 123 Taxman 433/256 ITR 1 and the subsequent Supreme Court judgment in CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312/320 ITR 561 established that the Assessing Officer (AO) could only reopen assessments based on tangible material indicating income escapement, not merely due to a change of opinion.
    1. The Supreme Court emphasized that the power to reopen should not be based on a mere change of opinion, and the Assessing Officer must have tangible material for believing that income has escaped assessment. This principle served as a check against arbitrary use of the reopening provision under Section 147.
    1. Additionally, the proviso to Section 147 stated that, after scrutiny, assessments could be reopened within four years from the end of the Assessment Year if notice under Section 148 was issued. This provision acknowledged that the AO had already been given an opportunity to bring forth a case against the assessee.
    1. Several writs under Article 226 were filed challenging reassessment orders under Section 147, and the landmark judgment in GknDriveshafts (India) Ltd. v. ITO [2002] 125 Taxman 963/[2003] 259 ITR 19 (SC) laid down a procedure for reopening under Section 147. It mandated the AO to furnish reasons upon issuing a notice under Section 148, with the assessee entitled to file objections. The AO, in turn, was required to dispose of objections through a speaking order before proceeding with the assessment.
    1. Writs were commonly filed on reassessment orders, and the GKN Driveshaft procedure became standard practice. The new provisions in Section 148A, introduced by the Finance Act, 2021, codified the GKN Driveshaft procedure, among other sweeping changes in reassessment practices.

CASES FAVOURING THE ASSESSEE:

Amidst the confusion and legal challenges, several High Courts ruled in favor of the assessee, leading to the quashing of notices issued under the old provisions between April 1, 2021, and June 30, 2021. Notable cases include:

  1. In Ashok Kumar Agarwal v. Union of India [2021] 131 taxmann.com 22 (All.). The court held in favor of the assessee, emphasizing that the Finance Act of 2021, once in force, rendered the preamendment provisions obsolete. Reviving these provisions through CBDT notifications was considered inconsistent with the legislative mandate.
    1. In Vellore Institute of Technology v. CIT [2021] 127 taxmann.com 106/280 Taxman 402/436

ITR 483 : The Madras High Court supported the assessee’s position, highlighting that the Finance

Act of 2021 coming into effect extinguished the pre-amendment provisions, making any attempt to revive them through CBDT notifications legally untenable.

  • In Manoj Jain v. Union of India [2022] 134 taxmann.com 173 The court quashed notices issued under the old provisions during the specified period, emphasizing that executive discretion, as evidenced by CBDT notifications, should not override a clear legislative mandate, especially when amendments under the Finance Act of 2021 had taken effect.
    • In Mon Mohan Kohli v. Asstt. CIT [2021] 133 taxmann.com 166/441 ITR 207 (Delhi) :The Delhi High Court ruled in favor of the assessee, stating that the Finance Act of 2021 had nullified the pre-amendment provisions, and attempts to revive them through notifications were legally impermissible.
    • In Tata Communications Transformation Services v. Asstt. CIT [2021] 128 taxmann.com 247/281 Taxman 222 (Bom.): The Bombay High Court ruled in favor of the assessee, reiterating that the Finance Act of 2021 had nullified the pre-amendment provisions, making any attempt to revive them legally untenable.

These judgments collectively asserted that the Finance Act of 2021, upon coming into force, had effectively nullified the pre-amendment provisions, and attempts to revive them through CBDT notifications were legally inconsistent and unacceptable.

JUDGEMENTS IN FAVOUR OF REVENUE:

  1. In the case of PalakKhatuja v. Union of India [2021] 130 taxmann.com 44/[2022] 284 Taxman 27/438 ITR 622 (Chhattisgarh), the court ruled in favor of the Department, asserting the validity of notices issued under the old provisions from April 1, 2021. The court contended that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) was a conditional legislation enacted during the COVID-19 pandemic to provide flexibility. It emphasized that the TOLA’s applicability would extend beyond the enactment of the Finance Bill 2021.
    1. In T.M. SubashThangam v. ITO [2023] 156 taxmann.com 732 (Mad.), The court emphasized that it couldn’t delve into factual aspects under Article 226 of the Constitution. Considering that the petitioner had received orders under Section 148A(d) and notices under section 148, the court suggested cooperation with the ongoing proceedings initiated by the Department. Rejecting the prayer for mandamus, the court dismissed the writ petition. It directed the petitioner to respond to the notices, cooperate with the Department, and allow the assessment proceedings to proceed in accordance with the law. No costs were awarded.
    1. In Manas v. ITO [2023] 151 taxmann.com 410 (Mad.)The assessee’s claim of a spelling error in ‘yahoo’ and the denial of notice to the Gmail id were deemed misconceived and mischievous. The court emphasized the obligation for assessees to provide accurate credentials, including email ids, to the Income-tax department. The court criticized the assessee’s attempt to exploit a technical mistake in the order under section 148A(d) and concluded that the writ petition deserved dismissal.
    1. In the case of Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC), the Supreme Court overturned several favorable judgments made by various High Courts in favor of the assessee. The court ruled that the reassessments, which were previously challenged, would now be considered valid in the eyes of the law. PROBLEM FACED BY REVENUE:
    1. The procedural amendments, specifically Section 148A, are binding, emphasizing that the Income Tax Department must follow the procedure outlined in Section 148A.
    1. The court indicated that delegated legislation, such as the Notifications in question, cannot alter or postpone the implementation of a statutory provision. In this context, it implied that the Notifications could not have delayed the coming into force of Section 148A.
    1. The Section 6 of the General Clauses Act did not support the Department’s position. It suggested that the amended Section 148 (Old provision) did not continue to exist from April 1, 2021.
    1. Sending of notices under section 148 instead of section 148A when the new provision has been enacted and the Ashish Agarwal (Supra) judgement has been enacted.
    1. Not providing opportunity of hearing and natural justice. SOLUTION:
    1. Sending of notice and following procedure as per the law laid down in the Ashish Agarwal case (Cited Supra)
    1. Follwing procedure and sending notices as per the amended sections and noticing dates as per the judgement.
    1. Provide enough opportunity to the assesse and giving opportunity to submit documents.
    1. Making proper documentation of the same in orders passed by the department. Providing more details on the assesse’s actions and following of the dates as provided under the act and precedents.
REVENUE ARGUMENTASSESSEE ARGUMENT
The Income Tax Department presents several arguments in defense of the Explanation and the legality of the notices issued under Section 148 for reassessment.The petitioners, who are recipients of notices under section 148 for reassessment, contend that the issuance of reopening notices under the old regime after 01.04.2021, when the new regime had come into effect, is invalid.
Firstly, the Revenue contends that, in the absence of an extension of the time limit, the limitation for issuing notices under Section 148 would have expired for certain assessment years. The enactment of Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, extended the time limit for taking action under Section 148 until 30.06.2021. Therefore, the impugned notifications only signify the extension of the time limit for issuing notices under the old provisions of Section 148 until the specified date.They challenge the constitutional validity of the Central Board of Direct Taxes’ (CBDT) notifications, specifically the Explanation to clause (A) of Notification No. 30/2021 and 38/2021, asserting that these explanations are ultra vires the Income Tax Act and are legally flawed.
Secondly, the Income Tax Department relies on Section 6 of the General Clauses Act, 1897. According to this provision, the repeal of any enactment does not revive anything not in force at the time of repeal, nor does it affect the previous operation of any repealed enactment or any rights, privileges, obligations, or liabilities acquired under it. The Department argues that even with the repeal of the old reopening regime, proceedings could be continued under theThe petitioners argue that the notifications issued by the CBDT are ultra vires because they conflict with the Finance Act, 2021, which introduced amendments to the laws governing reassessment.
repealed enactment since they were already ongoing. 
Thirdly, the Department asserts that the intention behind their argument is straightforward: if a provision is granted extra time and allowed to continue, then the associated old procedure (Old Regime mechanism, sans section 148A) would also be deemed allowed to persist.They contend that the Relaxation and Amendment Act, intended for extending various time limits, cannot extend the power to substitute a provision (Amended Section 148 along with new provisions of section 148A) of the enacted Finance Act. According to the petitioners, the Relaxation and Amendment Act and the notifications cannot suspend the coming into effect and operation of the Finance Act, 2021.
Fourthly, the Department points out that the Ordinance empowers the Central Government to specify that the time limit for completion or compliance of old pending actions shall stand extended to a date beyond 31st March 2021. It emphasizes that the extension is not a repudiation of Section 148A but an allowance for the continuation of the old Section 148, which did not reference Section 148A.The petitioners argue that the CBDT, in issuing notifications, exceeded its authority in contravention of the amended law introduced by the Finance Act, 2021. They assert that the CBDT does not have the power to extend the due date for issuing notices under the old provisions of the Act beyond the scope delegated by the Relaxation and Amendment Act.
Fifthly, the Department argues that the Hon’ble Apex Court in State of Tamil Nadu v. P. Krishnamurthy and Ors. has established a presumption in favor of the constitutionality or validity of subordinate legislation. The Department contends that the subordinate legislation, in this case, conforms to the parent statute of the Income Tax Act, 1961.Reference is made to the legal principle outlined in Siri Ram (supra), emphasizing that rulemaking power should not go beyond the enabling Act and should not be inconsistent or repugnant to it. The petitioners argue that the inconsistency or non-conformity of the rule (Explanation in the notifications) is not with reference to any specific provision of the enabling Act but with the object and scheme of the Parent Act. They emphasize the presumption in favor of constitutionality or validity of subordinate legislation as observed by the Hon’ble Apex Court.
Lastly, the Department responds to the petitioner’s reference to the ratio of District Magistrate (Rev.) Delhi v. Siri Ram, asserting that the notification did not go beyond the scope of the Income Tax Act. It argues that the Notification merely allows the issuance of notices under Section 148, which is within the scope of the amended Section 148. The Department insists that the Notifications grant only a procedural liberty in the operation of the Old Regime Section 148 and do not exceed the scope of the Income Tax Act, 1961.The petitioners contend that there is a case of unconstitutionality due to excessive delegation of lawmaking powers in the Relaxation and Amendment Act to the Executive (Central Government/CBDT). They argue that the legislature has excessively delegated its legislative function to the Central Government.

CONCLUSION:

The issue involves a significant tax impact, potentially the highest ever. The quantum of alleged escaped income for five assessment years is immeasurable. Judicial precedents favor the validity of subordinate legislations, but the COVID-19 pandemic has introduced uncertainty. The Chhattisgarh High Court delivered a groundbreaking judgment. The controversy is expected to escalate, likely reaching the Supreme Court. Different High Courts may take varied stances, either quashing notices due to delegated legislation overreach or adopting a middle path, directing the Income Tax Department to follow Section 148A procedures. The doctrine of parity of rights is now in favor of the Revenue, and resolution of the controversy is anticipated promptly for clarity and justice.

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