Delhi HC quashes initiation of reassessment notices

Facts & Background of the Case:

• In a recent judgement of Hon’ble High Court of Delhi in the case of Mon Mohan Kohli Vs. ACIT and other appellants it was held that the initiation of reassessment proceedings is invalid as the same is barred by limitation under the erstwhile provisions of reassessment. Further, the court has held that the extension of time limit granted vide notification dated 31 st March and 27th April 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void and in the absence of any saving clause in the erstwhile provision, such notices issued are invalid, hence liable to be quashed.
• As a background, the income tax department issued notice(s) to appellant(s) under Section 148 of the Income Tax Act, 1961 between the period from 1st April, 2021 to 30th June, 2021 to initiate the reassessment proceedings following the erstwhile provisions dealing with reassessment. The appellant(s) filed writ petition(s) with the Hon’ble High Court of Delhi challenging the legality and validity of the extension of time limit as well as the reassessment notices issued pursuant thereto. The appellant(s) contended that once the Parliament had exercised its powers of legislation (enactment of Finance Act, 2021), then any action, such as issuance of Notifications dated 31st March, 2021 and 27th April, 2021 is contrary to said legislation, taken by any other agency/wing of the Government was bad in law as the same fell foul of the doctrine of ‘Occupied Field’. They submitted that the entire law stood substituted and was specifically made applicable from a particular date. Accordingly pursuant to the Legislature occupying the field governing initiation of reassessment proceedings, no authority was vested in Government to issue the Notifications dated 31st March, 2021 and 27th April, 2021, so as to disturb/intrude into the field occupied by the Legislature.

Decision of the Court:

• The Hon’ble High Court of Delhi held that the impugned Explanations in the Notifications dated 31st March, 2021 and 27th April, 2021 are not conditional legislation and are beyond the power delegated to the Government as well as ultra vires the parent statute i.e., the Relaxation Act.
• Accordingly, the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961 are quashed and such notices issued are invalid, hence liable to be quashed.

Case Law: MON MOHAN KOHLI Vs. ACIT (W.P.(C) 6176/2021)

Deepak Avasthy, SW India