Rule of Retrospectivity Ignored | Whether Judgment in Ashish Agarwal Per Incuriam?

Sanjay Bansal & Amit Parsad – [2022] 138 taxmann.com 451 (Article)

Introduction

The Hon’ble Supreme Court of India in the case of Union of India v. Ashish Agarwal, through an act of judicial legislation while exercising power under Article 142 of the Constitution of India has given a judicial burial to the controversy arising as a result of notices under Section 148 of the Income Tax Act, 1961 issued to the assessee’s after the provisions of Section 148A had been brought on the statute book with effect from 01.04.2021.

The significant question which arises for deliberation is whether the provisions of Section 147 of the Act which was in force up to 31.03.2021 are substantive in nature and reopening of the assessment for the assessment years prior thereto cannot be subject to new provisions of Section 147 of the Act introduced with effect from 01.04.2021, even if the notices issued under Section 148 of the Act for the assessment years prior to 01.04.2021 are deemed to be notices issued under Section 148A.

Principles governing retrospectivity:

It is a settled principle of law that the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, and any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year.10 Assessment creates a vested right and power to open an assessment is not a matter of procedure.11 Any amendment that comes into force after 1st of April, of the year of assessment, will not be applicable, even if the assessment is actually made after the amendment comes into force.12 At the same time, it is now well settled that where a statutory provision which is not expressly made retrospective by the Legislature seeks to affect vested rights and corresponding obligations of parties, such provision cannot be said to have any retrospective effect by necessary implication.13 It is also well settled that a change in law of procedure operates retrospectively unlike the law relating to vested rights. If an amendment is made in procedure it will apply to all pending actions which can be taken thereunder. Prior to 01.04.2021, the substantive provisions of Section 147 conferring power on the Assessing Officer to open an assessment made under Section 143(1) and/or 143(3) of the Act was subject to certain jurisdictional conditions mentioned therein and the basic condition being recording of ‘reason to believe’ governing the reopening of the assessment under Section 147 of the Act which was in force up to 31.03.2021. Under the garb of reopening the assessment review is not permissible and/or reopening of assessment on the basis of ‘mere change of opinion’ cannot be per se reason to reopen. There should be tangible material which comes into the possession of the Assessing Officer subsequent to the proceedings under Section 143(1) or 143(3) of the Act warranting the exercise of power of reassessment under the Act. The earlier provisions of Section 147 of the Act existing up to 31.03.2021 has been substituted by removing the word ‘reason to believe’ thereby conferring power on the Assessing Officer to issue notice for reassessment on the receipt of ‘information’ in view to provisions of Section 148 to 153 of the Act.

Article 142 invoked erroneously:

Not only the judgment rendered in the case of Ashish Agarwal (supra) ignores the principle of retrospectivity dealt in extensio by the five judges constitutional bench of the Hon’ble Supreme Court in the case of Vatika Townships P. Ltd. (supra) and the substantive nature of the provisions of Section 147 of the Act flowing from the vested right which comes to be created once an assessment is finalised and the consequences governing the power of reassessment as a result therefrom, but the same which is a result of invocation of the powers under Article 142 of the Constitution is yet again in warfare with the judgment rendered by the Constitutional Bench in the case of Supreme Court Bar Association v. Union of India17 on the issue of invocation of powers under Article 142 of the Constitution.

Concept of ‘Per Incuriam’:

‘Per Incuriam’ literally means ‘through want of care’. According to the Black’s Law Dictionary, per incuriam means ‘through inadvertence’. Per Incuriam refers to a judgment of a court which has been decided without reference to a statutory provision or earlier judgment which would have been relevant. Per Incuriam can be said to be an exception and/or relaxation to the rule of judicial precedent i.e., Stare Decisis. English Courts have developed the principle of per incuriam by giving relaxation to the rule of stare decisis. In Morelle Ltd v. Wakeling30, Lord Evershed MR stated that

“the only case in which decisions should be held to have been given per incuriam are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned.”

The principle of per incuriam has been accepted, approved and adopted by the Hon’ble Supreme Court of India while interpreting Article 141 of the Constitution of India which embodies the doctrine of precedents as a matter of law. In. Narmada Bachao Andolan31 v. State of Madhya Pradesh the Hon’ble Supreme Court observed, ‘per incuriam’ are those decisions given in ignorance or forgetfulness of some statutory provision or authority binding on the Court concerned, or a statement of law caused by inadvertence or conclusion that has been arrived at without application of mind or proceeded without any reason so that in such a case some part of the decision or some step in the reasoning on which it is based, is found, on that account to be demonstrably wrong.

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