Deferment of Section 148A of Income Tax Act done by Ministry of Finance by way of conditional legislation in peculiar circumstances of pandemic,can’t be said to have encroached upon turf of Parliament: Chhattisgarh HC

Read Judgment: Palak Khatujha vs. Union of India

Pankaj Bajpai

Raipur, September 8, 2021:The Chhattisgarh High Court has recently dismissed petitions against reassessment notices issued under the old regime and held that by extension notification issued by CBDT, “the individual identity of Section 148, which was prevailing prior to amendment and insertion of section 148A was insulated and saved up till June 30, 2021.”

The Single Judge Bench of Justice Goutam Bhaduri observed that deferment of Section 148A done by Ministry of Finance by way of conditional legislation in peculiar circumstances of pandemic & lockdown, cannot be said to have encroached upon turf of Parliament.

At the same time, discretion to be exercised by Ministry of Finance under delegated legislation with aid of legislative policy of Income tax Act, cannot travel beyond it, added the Bench.

The dispute arose pursuant to a reopening notice issued u/s 148 on the basis of some information available initially although no concealment was found during scrutiny. The assessee submitted that on the date when the notice u/s 148 was issued, the power to issue the notice was preceded with a new provision of law and thereby Section 148 was to read with Section 148-A of the Income Tax Act, 1961.

It was therefore submitted that notices u/s 148 for AY 2015-16 was issued on June 30, 2021 without adhering to the procedure u/s 148A and therefore, extension notifications would not over ride even to extend the period of operation of provisions of the old regime.

On the other hand, the Revenue submitted that because of pandemic and lock down many people could not file their return and submit the necessary papers, thus, the CBDT issued the notification for extending the application of old reassessment provisions initially upto April 30, 2021 which was further extended upto June 30, 2021 and therefore, such notice was within the ambit of Revenue’s power.

The High Court observed that for the reasons of lock down during pandemic as all the activities like filing of return, assessment were arrested, the parliament enacted the Taxation & Others Laws (Relaxation & Amendment of Certain Provisions) Act, 2020.

Under such Act, any time limit specified or prescribed or notified under specified Act between March 20,2020 to December 31, 2021 or other date thereafter, after December 2021, Central Government was given the power to notify, added the Court.

Justice Bhaduri found that the necessity occurred because of the Covid pandemic lock down in the backdrop of the fact that few of the assesses could not file their return. Likewise since the offices were closed, the department also could not perform the statutory duty under the Income Tax Act.

Considering the complexity, the Parliament thought it proper to delegate the Ministry of Finance, the date of applicability of the amended section. The delegation is not a self-contained and complete Act and is only been made in the interest of flexibility and smooth working of the Act, and the delegation therefore was a practical necessity, added Justice Bhaduri.

“Reading of both the notification dated March 31, 2021 and April 27, 2021 whereby the application of section 148 of the Income Tax Act, which was originally existing before the amendment was deferred meaning thereby the reassessment mechanism as prevalent prior to 31st March, 2021 was saved by the notification”, observed the Bench.

The High Court said that it is a settled proposition that any modification of the Executives implies certain amount of discretion and to be exercised with the aid of the legislative policy of the Act and cannot travel beyond it and run counter to it or certainly change the essential features, the identity, structure or the policy of the Act.

Therefore, the High Court concluded that this legislative delegation which is exercised by the Central Government by notification to uphold the mechanism as prevailed prior to March, 2021 is not in conflict with any Act and notification by executive i.e. Ministry of Finance would be the part of legislative function.

Under the circumstances by the notifications the operation of Section 148 of the Income Tax Act was extended, thereby deferment of Section 148A was done, added the Court.