The Delhi High Court on Wednesday quashed all the re-assessment notices issued by the I-T Department after March 31 this year under a provision of the Income Tax Act. The court, which passed a common judgement in a batch of 1,346 petitions, was dealing with a question as to whether the government or executive can make or change a law by way of Explanations to Notifications without specific authority from the legislature to do so and whether they can impede the implementation of law made by the legislature.

The petitions were filed by assessees seeking quashing of the re-assessment notices issued post March 31, 2021 by the Income Tax Department under Section 148 of the Income Tax Act, 1961, which grant power to an assessing officer to either assess or re-assess any taxable income that may have gone under the radar, and has not been assessed as per the stipulated guidelines of the Act.

A bench of Justices Manmohan and Navin Chawla declared two explanations to the notifications of March 31, 2021 and April 27, 2021 to be ultra vires the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and held that they are and null and void.

"Consequently, the impugned reassessment notices issued under Section 148 of the Income Tax Act, 1961, are quashed and the present writ petitions are allowed. If the law permits the respondents/revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the petitioners have a grievance, they shall be at liberty to take their remedies in accordance with law," the bench said, in its 106-page judgement.

The court said it was of the view that as the legislature has introduced the new provisions, Sections 147 to 151 of the Income Tax Act, 1961 by way of the Finance Act, 2021 with effect from April 1, 2021 and as Section 147 is not even mentioned in the Explanations, the reassessment notices relating to any assessment year issued under Section 148 after March 31, 2021 had to comply with the substituted sections.

The court clarified that the power of reassessment that existed prior to March 31, 2021 continued to exist till the extended period, that is, till June 30, 2021; however, the Finance Act, 2021 has merely changed the procedure to be followed prior to issuance of notice with effect from April 1 this year.

"This court is of the opinion that Section 3(1) of Relaxation Act empowers the government/executive to extend only the time limits and it does not delegate the power to legislate on provisions to be followed for initiation of reassessment proceedings," the bench said.

"In fact, the Relaxation Act does not give power to the government to extend the erstwhile Sections 147 to 151 beyond March 31, 2021 and/or defer the operation of substituted provisions enacted by the Finance Act, 2021," the bench said.

The court said the argument of the IT Department that the substitution made by the Finance Act, 2021 is not applicable to past assessment years, as it is substantial in nature is contradicted by the respondents' own circular of 1989 and its own submission that from July 1, 2021, the substitution made by the Finance Act, 2021 will be applicable.

"Revenue cannot rely on COVID-19 for contending that the new provisions Sections 147 to 151 of the Income Tax Act, 1961 should not operate during the period April 1, 2021 to June 30, 2021 as Parliament was fully aware of COVID-19 Pandemic when it passed the Finance Act, 2021," it said.