Madras High Court
Ramachandran Shivan vs Income Tax Officer on 4 March, 2024
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
W.P.Nos.8570, 8577, 20384 & 20388 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 04.03.2024
CORAM :
THE HON'BLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
W.P.Nos.8570, 8577, 20384 & 20388 of 2023
and
W.M.P.Nos.8752, 8754, 8756, 8757, 19744, 19745, 19747, 19749 of
2023; 3904 & 3907 of 2024
Ramachandran Shivan ... Petitioner
(in all W.P's)
Versus
Income Tax Officer,
International Tax Ward Coimbatore,
May Flower Mid City Building,
1510, Trichy Road, Coimbatore,
Tamil Nadu – 641 018. ... Respondent
(in all W.P's)
Prayer in W.P.No.8570 of 2023 : Writ Petition filed under Article
226 of the Constitution of India, pleased to issue a Writ of Certiorari, to
call for the records on the file of the respondent and quash the impugned
order in ITBA/COM/F/17/2022-23/1044207945(1) dated 28.07.2022
passed under Section 148(A)(d) of the Income Tax Act, 1961 and
consequential notice under Section 148 of the Income Tax Act, 1961 in
ITBA/AST/M/148_1/2022-23/1044234851(1) dated 28.07.2022 for the
Assessment Year 2016-17 passed by the respondent as illegal and not in
accordance with law.
1/17
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
Prayer in W.P.No.8577 of 2023 : Writ Petition filed under Article
226 of the Constitution of India, pleased to issue a Writ of Certiorari, to
call for for the records on the file of the respondent and quash the
impugned order in ITBA/COM/F/17/2022-23/1044208968(1) dated
28.07.2022 passed under Section 148(A)(d) of the Income Tax Act, 1961
and consequential notice under Section 148 of the Income Tax Act, 1961
dated 28.07.2022 for the Assessment Year 2017-18 passed by the
respondent as illegal and not in accordance with law.
Prayer in W.P.No.20384 of 2023 : Writ Petition filed under
Article 226 of the Constitution of India, pleased to issue a Writ of
Certiorari, to call for the records on the file of the respondent and quash
the impugned order in ITBA/ AST/F/ 144C/ 2023-24/ 1053283750(1)
dated 29.05.2023 passed under Section 144C(1) of the Income Tax Act,
1961 as illegal and not in accordance with law.
Prayer in W.P.No.20388 of 2023 : Writ Petition filed under
Article 226 of the Constitution of India, pleased to issue a Writ of
Certiorari, to call for the records on the file of the respondent and quash
the impugned order in ITBA/AST/F/144C/2023-24/1053298317(1) dated
30.05.2023 passed under Section 144C(1) of the Income Tax Act, 1961 as
illegal and not in accordance with law.
In all W.P's:
For Petitioner : Mr. R. Sivaraman
For Respondent : Mr. D. Prabhu Mukunth Arun Kumar,
Junior Standing Counsel.
2/17
https://www.mhc.tn.gov.in/judis
W.P.Nos.8570, 8577, 20384 & 20388 of 2023
COMMON ORDER
Four writ petitions were filed by the petitioner/assessee in respect of
assessment years 2016-2017 and 2017-2018. In W.P.Nos.8570 & 8577 of
2023, orders issued under Section 148A(d) of the Income Tax Act, 1961
(the I-T Act) and notices issued under Section 148 thereof, in respect of
assessment years 2016-2017 and 2017-2018, respectively, are under
challenge. In W.P.Nos.20384 & 20388 of 2023, draft assessment orders
issued under Section 144B of the I-T Act, in respect of assessment years
2016-2017 & 2017-2018, respectively, are under challenge.
2. The petitioner is an individual engaged in the business of
manufacturing pumps and motors. Both in respect of assessment years
2016-2017 and 2017-2018, the petitioner had filed returns of income.
With a view to reopen the relevant assessment, notices under Section 148
of the I-T Act (pre-amended) were issued to the petitioner on 29.06.2021.
Such notices were challenged. Thereafter, based on the judgment of the
Hon’ble Supreme Court in Union of India v. Ashish Agarwal (Ashish
Agarwal), (2022) 138 taxmann.com 64 (SC) 2022 such notices were
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
directed to be deemed as notices under Section 148A(d) of the amended
I-T Act. In response, the petitioner submitted a reply to such notice in
respect of each assessment year. Thereafter, orders under Section 148A(d)
of the I-T Act were issued in July 2022. On the same day, notices under
Section 148 of the amended I-T Act were issued. Draft assessment orders
under Section 144B were issued thereafter and these four writ petitions
were filed in the said facts and circumstances.
3. Learned counsel for the petitioner challenges the impugned
orders and notices largely on the ground that approval of the specified
authority in terms of Section 151 of the I-T Act was not obtained. By
referring to Section 151, learned counsel points out that Section 151
provides for different specified authorities depending on the amount of
time that has lapsed from the end of the relevant assessment year. As
regards assessment years 2016-2017 and 2017-2018, which are relevant
for the present purpose, he submits that clause (ii) of Section 151 is
applicable and, in terms thereof, the specified authorities are the Principal
Chief Commissioner or Principal Director General or Chief Commissioner
or Director General. By referring to the notice under Section 148, he
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
points out that such notice was issued with the prior approval of the
Commissioner of Income Tax (International Taxes), Chennai, which
approval was accorded on 28.07.2022. Similarly, with reference to the
orders under Section 148A(d), he points out that such orders were issued
with the prior approval of the Commissioner of Income Tax (International
Taxes) Chennai. Learned counsel, therefore, contends that the specified
authority did not grant the approval. Learned counsel also referred to the
first proviso to Section 148 with regard to the requirement of prior
approval and submitted that the said proviso should be read along with
Explanation 3. With reference to Explanation 3 thereof, he pointed out that
it categorically prescribes that the specified authority for purposes of
Section 148 is the authority referred to in the proviso to Section 148 of the
I-T Act.
4. The judgment of the Division Bench of the Bombay High
Court in Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of
Income Tax (Siemens Financial Services), (2023) 154 taxmaan.com 159
(Bombay) was relied on to contend that the Division Bench of the Bombay
High Court dealt with the same questions of law in a fact situation that
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
was nearly identical to these cases. He relied on paragraphs 1 & 3 thereof
to point out that the said case pertained to assessment year 2016-2017. He
also relied on paragraphs 20 to 26, 28, 29 and 31 to 32 of the said
judgment. He pointed out that the Bombay High Court held categorically,
in paragraph 22, that sanction had not been granted by the authority
specified in Section 151 and, therefore, the orders under Section 148A(d)
and the notice under Section 148 were not valid. He also relied on the
judgment of the Delhi High Court in Twylight Infrastructure Private
Limited v. ITO, W.P.(c)No.16524 of 2022, judgment dated 05.01.2024
(Twylight Infrastructure) and pointed out that it was held that in the said
judgment at paragraphs 7 to 12.3 that it was necessary to obtain approval
under the amended Section 151 in respect of proceedings initiated after
such amendment came into force. Since approval was obtained from the
authority specified in clause (i) of Section 151 instead of clause (ii)
thereof, the Division Bench of the Delhi High Court held that the order
under Section 148 A(d) and notice under Section 148 were not valid.
5. As regards the applicability and impact of the Taxation and
Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
(TOLA), he submitted that the limited impact of the said enactment was to
extend the time limit for completion of proceedings, issuance of orders,
sanctions or approvals up to 31.03.2021. According to learned counsel,
even assuming without admitting that TOLA is applicable, its applicability
would have no impact on the specified authority for grant of sanction for
proceedings initiated under Section 148.
6. Mr. D. Prabhu Mukunth Arun Kumar, learned standing
counsel, made submissions in response and to the contrary. He pointed
out that Sections 147, 148, 149 and 151 constitute an interconnected
package of provisions, which cannot be interpreted in isolation. By
referring to unamended Section 147, he pointed out that the proviso
thereto fixes four years as the threshold for unconditional reassessment.
Upon expiry of the four year period, he pointed out that reassessment
proceedings cannot be initiated unless the conditions specified in such
proviso are satisfied. After referring to pre-amended Section 148, he
turned his attention to pre-amended Section 149. He pointed out that
clause (a)(i) thereof also prescribes a four year time limit for issuance of
notice under Section 148, unless the case falls within the clauses(b) or (c)
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
thereof. He then turned to the pre-amended Section 151 and pointed out
that said provision prescribes sanction by the officers specified therein if
more than four years have lapsed.
7. After dealing with the pre-amended provisions, he referred to
the amended provisions. In particular, he focused attention on the proviso
to sub-section (1) of Section 149. He pointed out that the time limit
prescribed in the pre-amended Section 149(1)(b) was made applicable by
the said proviso. As a consequence thereof, he contends that the
provisions of the pre-amended Section 151 become applicable. In support
of this contention, he relies upon sub-section 2 of the pre-amended Section
149, which makes express reference to the provisions of Section 151.
8. He also refers to the TOLA and points out that Section 3
thereof applies to the issuance of sanctions and approvals. As a
consequence of TOLA, he submits that the time limit in relation to grant
of sanction was extended to 31.03.2021. He also points out that such time
limits were thereafter extended up to 30.06.2021.
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
9. By placing the judgment of the Allahabad High Court in
Rajeev Bansal v. Union of India (Rajeev Bansal), (2023)147 taxmann.com
(549) (Allahabad), learned standing counsel pointed out that the
Allahabad High Court concluded that TOLA would not be applicable in
respect of the time frame prescribed under the first proviso to Section 149
as amended by the Finance Act, 2021. By also placing for consideration
the judgment of the Supreme Court of India in S.L.P.No.6706 of 2023,
learned counsel submitted that the judgment of the Allahabad High Court
in Rajeev Bansal was stayed by the Supreme Court. By referring to the
case details available in the website of the Supreme Court, learned counsel
points out that the judgment of the Bombay High Court in Siemens
Financial Services has been tagged with the S.L.P. arising out of the
judgment in Rajeev Bansal and that both these matters are pending
consideration before the Supreme Court. Therefore, he contends that
sanction was accorded by the specified authority and that pre-amended
Section 151 applies in such regard.
10. The primary ground of challenge is by relying on Section 151
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
of the I-T Act. Therefore, I begin by setting out amended Section 151
which is as under:
“Sanction for issue of notice:
151. Specified authority for the purposes of section
148 and section 148A shall be,—
(i) Principal Commissioner or Principal
Director or Commissioner or Director, if three
years or less than three years have elapsed from
the end of the relevant assessment year;
(ii) Principal Chief Commissioner or
Principal Director General or Chief
Commissioner or Director General, if more than
three years have elapsed from the end of the
relevant assessment year:
[Provided that the period of three years for the purposes of clause (i)
shall be computed after taking into account the period of limitation as
excluded by the third or fourth or fifth provisos or extended by the sixth
proviso to sub-section (1) of section 149.]”
The undisputed factual position in this case is that the amendments to
relevant provisions, such as Sections 148, 148A, 149 and 151, were
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
effected by the Finance Act 2021 with effect from 01.04.2021. The order
under Section 148A(d) was issued, thereafter, on 28.07.2022 with the
prior approval of the Commissioner of Income Tax (International Taxes)
Chennai. Likewise, the notice under Section 148 was also issued on
28.07.2022 with the prior approval of the same authority. In this factual
context, the question that arises for consideration is whether the amended
Section 151 is applicable to these cases.
11. Learned standing counsel relied on the proviso to Section 149
to contend that the pre-amended Section 151 would apply. Section 149
(1), in relevant part, is as under :
“ 149. Time limit for notice.
(1) No notice under section 148 shall be
issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the
relevant assessment year, unless the case falls
under clause (b);
(b) if three years, but not more than ten years, have
elapsed from the end of the relevant assessment
year unless the Assessing Officer has in his
possession books of account or other documents or
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
evidence which reveal that the income chargeable
to tax, represented in the form of—
(i) an asset;
(ii) expenditure in respect of a transaction or in
relation to an event or occasion; or
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is
likely to amount to fifty lakh rupees or more:]
Provided that no notice under section 148
shall be issued at any time in a case for the relevant
assessment year beginning on or before 1st day of
April, 2021, if [a notice under section 148 or
section 153A or section 153C could not have been
issued at that time on account of being beyond the
time limit specified under the provisions of clause
(b) of sub-section (1) of this section or section
153A or section 153C, as the case may be], as they
stood immediately before the commencement of
the Finance Act, 2021:
....
(2) The provisions of sub-section (1) as to
the issue of notice shall be subject to the
provisions of section 151.” (emphasis added).
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
12. A proviso has the effect of qualifying the principal clause by
carving out exceptions, imposing conditions relating thereto, or whittling
down or even expanding the scope thereof. The scope and ambit of a
proviso should be construed primarily from text, albeit by placing such
text in context. The following may be gleaned from the proviso to sub-
section(1) of Section 149: it applies to assessment years commencing prior
to 01.04.2021, i.e. assessment years before the amendments came into
effect; and the time limits under Section 149(1)(b), Section 153A or 153C,
as the case may be, as it stood before the commencement of the Finance
Act, 2021, apply to notices under Section 148 in respect of cases
pertaining to assessment years beginning on or before 01.04.2021. Since
the disputes pertain to assessment years 2016-2017 and 2017-2018, the
proviso undoubtedly applies to these cases. What are the implications of
the application of the proviso? In my view, as a consequence of the
proviso, the time limit specified in the pre-amended Section 149 (1)(b)
becomes applicable and the time limit prescribed therein was four years
and not more than six years. What is the corollary thereof?
13. The orders and notices are challenged herein not on the
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
ground that the time limit under pre-amended Section 149 does not apply,
but on the ground that sanction was not granted by the specified authority.
Therefore, it remains to be considered as to whether the application of the
proviso to Section 149 has the effect of incorporating by reference pre-
amended Section 151. In order to substantiate the contention that pre-
amended Section 151 gets incorporated by reference, learned standing
counsel relied on sub-section 2 to the pre-amended Section 149. It should
be noticed that the proviso to sub-section (1) of the amended Section 149
does not even incorporate the whole of pre-amended Section 149. It
merely makes the time limit prescribed therein applicable to the issuance
of notices for reassessment in respect of any assessment year beginning
before 01.04.2021. A fortiori the proviso certainly does not incorporate
pre-amended Section 151 by reference and make it applicable.
14. The next question to be examined is the impact of the TOLA.
Undoubtedly, TOLA extended the time limits under specified enactments,
including the I-T Act. As per clause (a)(ii) of sub-section(1) of Section 3
thereof, time limits for grant of sanction or approval were also extended.
Since the petitioner does not challenge the sanction with respect to the
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
time limit, clause(a) of sub-section(1) of Section 3 is immaterial. Indeed,
TOLA, which extends the time limits for completion of specified tasks up
to 31.03.2021, itself becomes irrelevant because of the nature of the
challenge in these writ petitions.
15. In Siemens Financial Services, the Division Bench of the
Bombay High Court concluded, in substantially similar facts and
circumstances, that the amended Section 151 and not the pre-amended
Section 151 would apply. For reasons set out above, I concur with the
conclusion in Siemens Financial Services and Ganesh Das Khanna v.
ITO (2023) 156 taxmann.com 417 (Delhi), as subsequently followed in
Twylight Infrastructure. Consequently, the validity of sanction for issuing
the orders under Section 148A(d) and the notices under Section 148
should be tested with reference to amended Section 151. If so tested, it is
evident that sanction was not granted by an authority specified under
clause (ii) of Section 151. Hence, the orders under Section 148A(d) and
the notices under Section 148 are quashed. As a corollary, the draft
assessment orders under Section 144B/144C cannot survive and are also
quashed.
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W.P.Nos.8570, 8577, 20384 & 20388 of 2023
16. These Writ Petitions are allowed on the above terms. There
will be no order as to costs. Consequently, the connected miscellaneous
petitions are also closed.
04.03.2024
Index : Yes
Speaking Order : Yes
Neutral Case Citation: Yes
klt
To
Income Tax Officer,
International Tax Ward Coimbatore,
May Flower Mid City Building,
1510, Trichy Road,
Coimbatore,
Tamil Nadu – 641 018.
https://www.mhc.tn.gov.in/judis
W.P.Nos.8570, 8577, 20384 & 20388 of 2023
SENTHILKUMAR RAMAMOORTHY,J
klt
W.P.Nos.8570, 8577, 20384 & 20388 of 2023
and
W.M.P.Nos.8752, 8754, 8756, 8757,
19744, 19745, 19747 & 19749 of 2023;
3904 & 3907 of 2024
04.03.2024
https://www.mhc.tn.gov.in/judis
