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Friends, all of us have seen the Hollywood block buster movie- ‘Avengers Endgame’. In the movie, the Avengers enter the Quantum Realm with the help of Pym Particles, and travel back in time, to prevent Thanos from getting the infinity stones, in order to make good the wrong, which Thanos has done in the past.
This fictional time travelling concept has been made a characteristic and a highlighting feature in many Hollywood Movies, including the likes of Avengers Endgame, but surprisingly and interestingly, this imaginary time travelling concept, has now been tried to be visualised, in the Income Tax Act, by the CBDT Instruction No. 1/2022 dated 11.5.2022, perceived to be containing the guidelines for the uniform implementation of the hon’ble Supreme Court judgement in the case of Union of India vs. Ashish Agarwal (2022 SCC Online SC 543), on validity of reassessment notices issued under the unamended section 148 of the Income Tax Act, on or after 1.4.2021 till 30.6.2021, when the amended reassessment provisions under substituted sections 147-151 of the Act, have already come into force, as per the Finance Act, 2021.
In Para 6.1 of the said CBDT Instruction, which perhaps, constitutes the core of this Instruction, it has somehow been interpreted that,
“Decision of the Hon’ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point.”
So, based on this premise of the reassessment notices, travelling back to their original dates, and the simultaneous applicability of TOLA extensions and the amended limitation period in section 149, as per the Finance Act, 2021, it has been directed in Para 6.2 of the Instruction, that the impugned reassessment notices are to be dealt with as under:
AY 2016-17, AY 2017-18: Fresh Notice u/s 148 can be issued in these cases, with the approval of the specified authority, since they are within a period of three years from the end of the relevant assessment years.
Thus, it has been directed in para no. 6.2 of the CBDT Instruction, that the impugned re-assessment notices for AY 2016-17 and AY 2017-18, are to be considered as issued within a period of three years from the end of the relevant assessment year and hence are to be covered in the amended section 149(1)(a) of the Income Tax Act.
It is presumed that such re-assessment notices for AYs 2016-17 and 2017-18, will travel back in time to their original dates, when these were supposed to be issued, and as such their issuance dates will be deemed as 31.3.2020 and 31.3.2021, respectively, and not their actual issuance dates, which undisputedly are, on or after 1.4.2021.
CBDT Instruction, further goes to the extent of presuming, that since the dates 31.3.2020 and 31.3.2021, falls in the period of TOLA extensions, and as such, will be considered as valid dates, even in the amended re-assessment regime, and then the amended limitation period of three years as per section 149(1)(a) is to be applied.
However, as a matter of fact. there is no whisper or mention, leave aside any direction, in the entire SC judgement, in respect of impugned reassessment notices, travelling back in time, to their original dates, when, they were supposed, to be issued.
In fact, to the contrary, in the SC judgement, it has been clearly stipulated that the actual issuing dates of such impugned reassessment notices, i.e., on or after 1.4.2021, shall be the dates of issuance of such notices and the only relaxation is that now such notices shall be considered as deemed show cause notices under newly inserted section 148A(b) of the Income Tax Act, as per the Finance Act, 2021.
The SC Judgement clearly lays down that the actual issuance dates of impugned reassessment notices which undisputedly are, on or after 1.4.2021, are only to be considered for determination of eligibility criteria of their sustainability by applying the substituted re-assessment provisions of sections 147-151 of the Income Tax Act, as per the Finance Act, 2021, applicable w.e.f. 1.4.2021.
Thus, it has been clearly laid down that the impugned re-assessment notices will not travel back or forward, they will remain, where they are, and as they stand in the new reassessment regime as per the Finance Act 2021, applicable w.e.f. 1.4.2021, on the actual dates of their issuance, therefore, they will be governed by the substituted provisions of sections 147-151, including the amended time barring limitation period stipulated in section 149 of the Act.
To the contrary, the CBDT Instruction surprisingly throws out an 360 degrees upside down amazing interpretation of the SC judgement that the impugned re-assessment notices as well as the substituted legislative provisions of sections 147-151 of the Act, as per the Finance Act 2021, will travel back in time, and will be applicable in the pre-amended re-assessment regime existing on or before 31.3.2021, when infact the Finance Act 2021, has not even come in force. However, this imaginary notion has no legal sanctity and place in the real world of Tax Laws, governed solely by the legislative provisions, enacted by the Parliament of India.
In its judgement, the hon’ble Supreme Court, has clearly held that:
“Thus the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.”
“However, at the same time, the judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 of the IT Act. The Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated.”
“…….Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defenses, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law.”
Thus, the SC judgement has nowhere in its entire judgement, has directed or allowed the fictional concept of impugned re-assessment notices travelling back in time, to their original dates, and as such the actual dates of issuance of such notices, i.e., on or after 1.4.2021, shall have only to be considered, for determining their eligibility criteria, of three years, as per the provisions of amended section 149(1)(a), and clearly, such impugned re-assessment notices for AYs 2016-17 and 2017-18, issued on or after 1.4.2021, can by no stretch of imagination, be considered as falling within a period of three years from the end of the relevant assessment year. It is an undisputed fact that w.e.f. 1.4.2021, only Notices u/s 148, issued for AY 2018-19 and onwards, can qualify the limitation period of three years, as per section 149(1)(a) of the Act.
Thus, since the revenue authorities, being not so advanced as the avengers, themselves couldn’t travel back in time, to make good the wrong which has been done, i.e., to reissue impugned reassessment notices on or before the statutory limitation period date of 31.3.2021, the CBDT Instruction brings out an altogether new, innovative and revolutionary concept of time travel in the Income Tax Act, so as to enable the sustainability of the impugned reassessment notices for AY 2016-17 and 2017-18, by considering them as issued within a period of three years from the end of the relevant assessment year as per section 149(1)(a) of the Act.
This fictional and imaginary concept of time travel has been visualised in the CBDT Instruction, so as to do away with the more stringent eligibility criteria of establishment of escapement of income, in excess of Rs. 50 lakhs, represented in the form of an asset, in an assessment year, as per section 149(1)(b) of the Act, which in fact is the correct eligibility criteria for the sustainability of such impugned reassessment notices for AYs 2016-17 and 2017-18, as per the lawful application of the legislative provisions and correct interpretation of the hon’ble Supreme Court judgement.
Friends, summing up my analysis and discussion, with a Poem titled, “CBDT Instruction: Notices Travelling Back in Time, Triggering Litigation Bells to Chime”.
In this Poem, I have tried to critically examine the underlying presumptions of time travel of reassessment notices, second time reliance on TOLA extensions and the perceived applicability of amended limitation period of section 149 of the Income Tax Act, from backdate, even when the Finance Act, 2021 has not come in force, in the CBDT Instruction No. 1/2022 dated 11.5.2022, in light of the judgement of the hon’ble Supreme Court, in the case of Union of India vs. Ashish Agarwal, on validity of reassessment notices issued under unamended section 148 on or after 1.4.2021 till 30.6.2021.
Continuing with my poetic spirit, I have also tried to explain the valid timelines of such impugned reassessment notices, as per the correct interpretation of the said SC judgment.
So, my Poem goes like this:
CBDT Instruction: Notices Travelling Back in Time, Triggering Litigation Bells to Chime!!
"On 11.5.2022, CBDT issues an Instruction,
Containing Guidelines for SC-148 Judgement Implementation.
Directing Instructions to be adopted in a Uniform Manner,
CBDT Instruction tries to serve as an Explainer.
However, on some aspects, Instruction appears to be Self-serving,
Making the Assessees, again Nerving.
First Time it was a Bonafide Mistake,
Second Time it’s a Deliberate Take.
Notices for AYs 2013-14 & 2014, Restored
Proviso to Section 149, completely Ignored.
Instruction says Notices for AYs 2013-14, 2014-15 & 2015-16 will Survive,
If the Escaped Income in Asset, exceeding Rs. 50 lakhs, is Derived.
Notices for AYs 2016-17 & 2017-18 will Travel Back in Time,
Triggering More Litigation Bells to Chime.
And will be considered as Issued within 3 Years,
With TOLA extensions getting Reappeared.
Let us Understand SC Judgement Interpretation,
By way of a Correct Summation.
Proviso to section 149, comes in support of Assessees’ Luck,
Notices for AY 2013-14 & 2014-15, shall get Struck.
Notices for AY 2015-16, 2016-17 & 2017-18 shall only Survive,
If the Escaped Income in Asset, exceeding Rs. 50 lakhs, is Derived.
To Reduce Litigations, these Amendments, were Strived,
Ironically, increased Litigations, are now to be Contrived."
[By Mayank Mohanka]
For related queries, the author Mr. Mayank Mohanka, FCA can be reached at mayankmohanka@gmail.com
