Extended Time Limit Provided by TOLA isn’t Applicable for Sanction of Notice u/s 151 | HC

Case Details: Siemens Financial Services (P.) Ltd. v. DCIT - [2023] 154 taxmann.com 159 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram & Dr N. K. Gokhale, JJ.
  • Mr P. J. Pardiwalla, Sr. Adv. & Mr Jeet Kamdar for the Petitioner.
  • Suresh Kumar & Ms Mohinee Chougule for the Respondent.

Facts of the Case

Assessee was a Non-Banking Finance Company and classified as an Asset Finance Company. On June 2021, it received Section 148 notice stating that there was reason to believe that income chargeable to tax for AY 2016-2017 had escaped.

Later, Assessing Officer (AO) referred order of the Supreme Court in the case of Union of India vs. Ashish Agarwal (2022) 138 taxmann.com 64 (SC) and treated section 148 notice as show cause notice in terms of Section 148A(b). Later, an order was passed under section 148A(d).

Assessee contented that the Finance Act 2021 amended section 151, which provides for sanction for issue of notice. AY 2016-2017, three years elapsed on 31st March 2020; hence, the provisions of amended Section 151(i) and 151(ii) would have to be fulfilled, which have not been complied with. The matter reached before the Bombay High Court.

High Court Held

The Bombay High Court held that the Taxation and Other Laws (Relaxation and Amendment of certain provisions) Act, 2020 [TOLA] provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action, such as completion of any proceedings or passing of any order or issuance of any notice, fell between the period 20th March 2020 to 31st December 2020, the time limit for completion of such action stood extended to 31st March 2021.

Thus, TOLA only seeks to extend the limitation period and does not affect the scope of section 151. AO cannot rely on the provisions of TOLA and the notifications issued thereunder as Finance Act, 2021, amended section 151, and the provisions of the amended section would have to be complied with by AO, w.e.f., 1st April 2021.

Hence, the Assessing Officer cannot seek to take the shelter of TOLA as subordinate legislation cannot override any statute enacted by the Parliament. Further, the notification extending the dates from 31st March 2021 till 30th June 2021 cannot apply once the Finance Act 2021 is in existence.

The sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained; therefore, the sanction must be obtained by applying the amended section 151(ii). Since the sanction was obtained in section 151(i), the impugned order and notice were bad in law and should be quashed and set aside.