In a major relief to the Income Tax Department, the Supreme Court has ruled that Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA) is applicable to income tax act beyond specified date.
The Chief Justice DY Chandrachud remarked that that ITO Surat by Gujarat High Court, Rajeev Bansal judgement by Allahabad High Court, Siemens vs DCIT Bombay High Court judgement, Ambika Anand Orissa High Court judgement, Twilight industries, Ganesh Das Khanna from Delhi High Court were set aside.
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Background
The dispute arose in during the Covid-19 pandemic, when the government notified the temporarily extension of the previous regulations governing the reopening of old tax returns. As the result of the notification both the old and new tax laws on reassessment were viewed as concurrently valid, leading to a flood of notices and over 10,000 writ petitions, many of which faced challenges from tax authorities in the Supreme Court.
Relevant Provisions
TOLA had come to be promulgated to overcome the insurmountable difficulties which beset the initiation of action and compliance with statutory timelines on account of the COVID-19 pandemic which had broken out in March 2020 and raged across the country. The provisions of TOLA thus provided an extended lifeline for the issuance of notices, the grant of sanction and other statutory compliances contemplated under the Act.
Section 151, pre-Finance Act 2021, categorised the approval liable to be accorded based upon the period within which a reassessment action was proposed to be initiated when computed from the end of the relevant AY. While sub-section (1) catered to situations where a notice for reassessment was sought to be issued after the expiry of four years from the end of the relevant AY and thus required that action be preceded by approval being obtained from the Principal Chief Commissioner and the other authorities, sub-section (2) constituted the residuary clause and pertained to cases falling within its ambit where approval was to be obtained from the JCIT.
Subsequently, by virtue of Finance Act 2023, the phrase “where there is no Principal Chief Commissioner or Principal Director General” was deleted from Section 151 as it exists and a proviso had been inserted clarifying that the period of three years for the purpose of Section 151(i) would be computed in light of the Third, Fourth, Fifth and Sixth Provisos to Section 149(1) of the Act.
Section 151 has been further reframed by virtue of Finance Act 2024 to define the ‘specified authority’ for sanction for issuance of notice to be the Additional Commissioner/ Additional Director/ Joint Commissioner/ Joint Director. However, in the present batch of writ petitions, we are concerned with the provisions of Section 151 as it stood immediately before and after the promulgation of Finance Act 2021.
Conclusion
The judgement would impact the 90,000 reassessment notices.
Is TOLA Applicable beyond 1 April 2021?
In a major relief to the Income Tax Department, the Supreme Court has ruled that Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA) is applicable to income tax act beyond specified date i.e. 1 April 2021.