Lead Advertising v Union of India and Others

**IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. THURSDAY, THE 20[TH] DAY OF OCTOBER 2022 / 28TH ASWINA, 1944 WP(C) NO. 30620 OF 2021** ## **PETITIONER:** LEAD ADVERTISING, IST FLOOR, NO. 56/176A, K C ABRAHAM MASTER ROAD, PANAMPILLYNAGAR, KOCHI 36 ERNAKULAM 682 017, REP. BY ITS PARTNER SRI.K.V. KRISHNA KUMAR, S/O. G.S. KRISHNAN NAIR (LATE), AGED 54 YEARS, KRISHNAKAVYA, VILLA NO.6, BLOOMSBERRY VILLA, CHAKKARAPPARAMBU, ERNAKULAM- 28. BY ADVS. RAVI KRISHNAN PARVATHY GIRI **RESPONDENTS:** 1 UNION OF INDIA, REPRESENTED BY THE SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI -110 001. 2 THE CENTRAL BOARD OF DIRECT TAXES, REPRESENTED BY ITS CHAIRPERSON, NORTH BLOCK, NEW DELHI- 110 001. 3 THE NATIONAL FACELESS ASSESSMENT CENTER, MAYUR BHAWAN, CONNAUGHT LANE, BARAKHAMBA, NEW DELHI-110 001 REPRESENTED BY THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (NAFAC). 4 ADDITIONAL /JOINT /DEPUTY / ASSISTANT COMMISSIONER OF INCOME TAX/ INCOME - TAX OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE (NATIONAL E -ASSESSMENT CENTRE), NEW DELHI-110 001. 5 THE PRINCIPAL CHEIF COMMISSIONER OF INCOME TAX KERALA), CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI- 682 018. BY ADVS.PREMSANKAR R CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 20.10.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(c)No.30620/2021 2 ## **C.R.** ## **JUDGMENT** The petitioner has approached this Court being aggrieved by the fact that proceedings have been initiated against the petitioner under Section 148 of the Income Tax Act, 1961 (as it stood before 01.04.2021), despite the fact that, notice under Section 148 of the Income Tax Act was received by the petitioner only after 01.04.2021. The petitioner has a case that the proceedings are in violation of the principles of natural justice. It is also contended that the ‘National Faceless Assessment Scheme’ is ‘ _ultra vires the Constitution and hence void’._ 2. The petitioner, a partnership firm, is an asessee under the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). It received Ext.P.2 notice dated 30.3.2021 issued under Section 148 of the Act. The notice pertains to the assessment year 2015-16. According to the petitioner, the said notice was received by the petitioner only on 15.4.2021. This was followed by Ext.P.3 notice issued on 14.9.2021 under Section 142(1) of the Act calling for information from the petitioner for finalizing the assessment. The petitioner responded to this notice by submitting Ext.P.4 reply. A further notice (Ext.P.5) was issued under the same provision on 23.11.2021. Thereafter the petitioner received Ext.P.6 notice calling upon the petitioner to register itself W.P.(c)No.30620/2021 3 on the e-filing portal of the Income Tax Department to enable issuance of notices etc. by electronic means. The petitioner has therefore approached this Court raising the contentions already noticed above and impugning the Ext.P.2, P.3, P.5 and P.6 notices issued to the petitioner. 3. Mr.Ravikrishnan, the learned counsel appearing for the petitioner submits that going by the judgment of the Supreme Court in _**Union of India & Ors. v. Ashish Agarwal, 2022 SCC OnLine SC 543**_ (judgment dated 04-05-2022 in Civil Appeal No. 3005/2022 and Connected Cases), the proceedings could have been continued only under the amended provisions of the Income Tax Act, as brought into force with effect from 01.04.2021. It is submitted that if the amended provisions were to apply, the petitioner would have to be issued the show cause notice prior to initiation of proceeding under Section 148 of the Income Tax Act. It is submitted that the amendments brought into force with effect from 01-04-2021 are only curative and therefore there must be deemed to have retrospective effect. He relies on _**Craies on Statute Law[1]** ,_ to contend that statutes passed to protect the public from some _‘evil’_ or _‘abuse’_ should be held retrospective. He also placed reliance on the article “ _**The Supreme Court and the Constitutionality of Retrospective Legislation**_ ”[2] , to contend that since the amendments brought in are curative, it should be held retrospective. It is submitted that > 1. S.G.G. EDGAR, CRAIES ON STATUTE LAW 395 (6th ed. 1963). > 2. Charles B. Hochman, _The Supreme Court and the Constitutionality of Retrospective Legislation_ , 73 HARV. LAW REV. 692, 704 -705 (1959 -1960). W.P.(c)No.30620/2021 4 the Supreme Court in **Ashish Agarwal (supra)** has clarified that in respect of all notices issued after 01.04.2021, the amended provisions will apply and therefore, the petitioner is entitled to a declaration that the proceedings shall be continued against the petitioner only under the amended provisions of the Act. The learned counsel also places reliance on the judgment of the Supreme Court in _**Allied Motors (Pvt.)Ltd. v. Commissioner of Income Tax, Delhi, AIR 1997 SC 1361**_ to contend that when the amendment is curative, it has to apply retrospectively and will apply to all pending matters, notwithstanding the fact that the amendment was brought into force only from a particular date. 4. Mr.Christopher Abraham, the learned Standing Counsel appearing for the respondent department contends that the Supreme Court in _**Ashish Agarwal (supra)**_ has clearly held that the procedure contemplated by the amended provisions of the Act would apply only in respect of notices issued after 01.04.2021 and not to notices issued before that date. It is submitted that, in the facts of the present case, the notice under Section 148 of the Act was issued on 30.03.2021 by e-mail, by uploading the same in the portal of the petitioner and also by dispatching the same by post. It is submitted that this is sufficient to establish that the notice was issued prior to 01.04.2021 and was therefore not governed by the amended provisions of the Act. The learned Standing Counsel also refers to the statement filed in this W.P.(c)No.30620/2021 5 Court by the respondent department where it is stated as follows:- _“.....The petitioner partnership firm is in the business of running an advertising agency. The assessing officer found that in spite of having total turnover of Rs.43116691/- out of which Rs.37792797/- was reflected in the petitioner's 26AS account in the previous year relevant to AY 2015-16, the petitioner had not filed his return of income for that AY. Further as per information available from Tax Payer Annual Summary in Insight Portal of the Income Tax Department the petitioner had deposited cash aggregating to Rs.13095000/- in its account with UCO Bank, Ernakulam Main Branch. Therefore as the assessing officer had reason to believe that income liable to tax had escaped assessment for AY 2015-16 Ext. P2 notice u/s 148 was issued requiring the petitioner to file its return of income within 30 days. This notice dated 30.03.2021 was delivered to the petitioner's e-mail ID on 30.03.2021. The View/Enter Dispatch details as entered in the ITBA(Income Tax Business Application - Home Page) is produced and marked as Annexure A. The same was also shared with E-proceedings on 30.03.2021. Simultaneously a hard copy of the notice u/s 148 was also issued to the petitioner which the petitioner admits to have received on 15.04.2021. In the above facts and in view of Section 282 of the Income Tax Act it is submitted that Exhibit P2 notice should be considered to have been issued to the petitioner on 30.03.2021 itself”._ It is submitted that there is absolutely no merit in the contentions taken and that the Writ Petition is liable to be dismissed. 5. The learned counsel appearing for the petitioner states that the notice sent by e-mail and the notice stated to have been uploaded in the portal of the petitioner were not received by the petitioner. It is submitted that the W.P.(c)No.30620/2021 6 e-mail address to which the notice was sent was the erstwhile e-mail address of the petitioner which was no longer in use and the petitioner had updated the new e-mail address in the e-filing portal of the Income Tax Department. It is submitted that taking into consideration the aforesaid facts, the notice received by the petitioner by post alone could be taken into consideration and since the same was received only on 15.04.2021, the petitioner is clearly governed by the declaration contained in **Ashish Agarwal (supra)** and therefore the assessment can be completed only by following the procedure under the amended provisions of the Act. 6. Having heard the learned counsel appearing for the petitioner and the learned Standing Counsel appearing for the respondent Department, I am of the view that the Writ Petition is liable to be dismissed. The reasons which compel me to take such a view are the following :- (i) It is clear from the decision of Supreme Court in **Ashish Agarwal(supra)** that the amended provisions of the Act (as brought into force with effect from 01.04.2021) would apply only in respect of notices issued on or after 01.04.2021. It was held:- _“22. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section_ W.P.(c)No.30620/2021 7 _148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.”_ It is the specific case of the respondent department that the notices in this case were issued on 30.03.2021 (i) by e-mail, (ii) by uploading the same on the portal of the petitioner and (iii) by regular post. Therefore I have no reason to hold that the notices issued by the respondent department were not issued on 30.03.2021. The provisions of Section 282 of the Income Tax Act which deal with service of notice reads as follows:- _“282.Service of notice generally_ _(1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as "communication") may be made by delivering or transmitting a copy thereof, to the person therein named, -_ _(a) by post or by such courier services as may be approved by the Board; or_ _(b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purpose of service of summons; or_ _(c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or_ _(d) by any other means of transmission of documents as provided by rules made by the Board in this behalf._ _(2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named._ _Explanation.- For the purposes of this section, the expressions "electronic mail" and "electronic mail message" shall have the meanings as assigned to them in Explanation to section_ W.P.(c)No.30620/2021 8 _66A of the Information Technology Act, 2000 (21 of 2000)._ Taking into consideration the provisions of Section 282 of the Income Tax Act, it must be held that, in the facts of the present case, the notice issued to the petitioner under Section 148 of the Income Tax Act was issued on 30.03.2021 and not on any later date; (ii) The submission of the learned counsel appearing for the petitioner with reference to the decision of the Supreme Court in **Allied Motors (supra),** that the provisions of the Income Tax Act as amended from 01.04.2021 should apply, cannot be accepted, as I have no reason to hold that the amendments were merely curative requiring an interpretation that those provisions will apply to all pending proceedings with retrospective effect. The passage from _**Craies on Statute Law,**_ **(supra)** which was relied on, by the learned counsel for the petitioner reads as under:- _“If a statute is passed for the purpose of protecting the public against some evil or abuse, it may be allowed to operate retrospectively, although by such operation it will deprive some person or persons of a vested right. Thus, in R. v. Vine it was held that Section 14 of the Wine and Beer House Amendment Act, 1870, which enacted that “every person convicted of felony shall be for ever disqualified from selling spirits by retail,” applied to a person who, after having been so convicted, had obtained a licence to sell spirits, and was actually holding it at the time when the Act came into force. The intention of the Act was construed to be to protect the public from having inns kept by persons of bad character, although this might have a retrospective effect. It_ W.P.(c)No.30620/2021 9 _must, however, be observed that Lush J. dissented from the judgment of the majority of the Court. “This is therefore,” said he, “a highly penal enactment. The sound and well-established canon of construction is that such an enactment is to be read as prospective, unless a contrary intention be clearly established from the language used. Now, I cannot collect any indication of an intention to make the enactment retrospective....This is, therefore, the very case in which the above canon of construction applies.”_ The amendments in question (brought into force from 1.4.2021) cannot be termed as ones “ _passed for the purpose of protecting the public against some evil or abuse”._ Therefore that principle has no application here. The article, on which reliance was placed by the learned counsel for the petitioner entitled “ _**The Supreme Court and the Constitutionality of Retrospective Legislation**_ **(supra)** speaks about the two kinds of curative statutes that are normally deemed retrospective. It states (to the extent deemed relevant):- _“….....................However, when dealing with curative statutes, the Court has consistently held that the legislative purpose is of itself sufficient to justify the concomitant retroactivity. There are basically two kinds of curative statutes, although they are closely related. The first category includes those statutes which ratify prior official conduct of government officers who have acted without the requisite authority……_ _……The other kind of curative statute is one which is designed retroactively to cure defects in an administrative system……._ _....................., when the Commissioner of Internal Revenue permitted the statute of limitations to run on certain claims per taxes upon the mistaken assumption that the limitations period would not bar subsequent collections by distraint, as opposed to_ W.P.(c)No.30620/2021 10 _judicial proceedings, a curative statute was permitted to cure such “defects in the administration of government.” In this case the Court stated the general rule applicable to this kind of curative statute:_ _Where the asserted vested right, not being linked to any substantial equity, arises from the mistake of officers purporting to administer the law in the name of the Government, the legislature is not prevented from curing the defect in administration simply because the effect may be to destroy causes of action which would otherwise exist._ _The Court's favorable treatment of curative statute is probably explained by the strong public interest in the smooth functioning of government. It is necessary that the legislature should be able to cure inadvertent defects in the statutes or their administration by making what has been aptly called “small repairs.”_ A reading of the amendments brought into the scheme for assessing incomes which have escaped assessment (w.e.f 1.4.2021) does not suggest in any manner that they are ‘curative’. The amendments in question do not in any manner relate to defects caused due to official conduct of the officers of the department, who have acted without or beyond authroity. There seem to be no defects in the admininstration that is sought to be cured, by the amendments in question. Therefore, the amendments do not fall within any of the categories of curative statutes mentioned by the learned author. [Pls see _**Empire Industries Ltd. v. Union of India**_ , (1985) III SCC 314, where the above article has been referred to by the Supreme Court]. The amendments 11 W.P.(c)No.30620/2021 made by the Finance Act, 2021, that revamped existing assessment provisions in question are clearly not curative in nature and thus, are not required to be interpreted as retrospective in operation. (iii) There is absolutely no ground made out to hold that the proceedings are vitiated on account of violation of principles of natural justice. The petitioner has not been denied any opportunity to take part in the proceedings. (iv) No grounds have been made out to strike down the provisions which introduced the National Faceless Assessment Scheme. Statutory provisions can be challenged only on three specific grounds - (i) violation of fundamental rights; (ii) lack of legislative competence and (iii) on the ground of violation of the basic structure doctrine. The possible fourth ground is the principle of “ _manifest arbitrariness_ ” developed in _**Shayara Bano**_ & _**Ors v. Union of India & Ors.; (2017) IX SCC 1.**_ None of these grounds have been made out. For all these reasons, the Writ Petition fails and it is accordingly dismissed. **Sd/-** **GOPINATH P. JUDGE** ats W.P.(c)No.30620/2021 12 ## **APPENDIX OF WP(C) 30620/2021** ## PETITIONER EXHIBITS Exhibit P1 A TRUE COPY OF THE DEED OF PARTNERSHIP DATED 15.4.1998. - Exhibit P2 A TRUE COPY OF THE NOTICE DATED 30.3.2021 ISSUED FROM THE OFFICE OF INCOME TAX OFFICER, KOCHI. - Exhibit P3 TRUE COPY OF THE NOTICE ISSUED FROM THE OFFICE OF INCOME TAX OFFICER, KOCHI DATED 14.9.2021. - Exhibit P4 TRUE COPY OF THE REPLY GIVEN TO EXHIBIT P2 TO INCOME TAX OFFICER, KOCHI, - Exhibit P5 TRUE COPY OF THE NOTICE DATED 23/11/2021 ISSUED TO THE PETITIONER. - Exhibit P6 TRUE COPY OF THE NOTICE FROM 4TH RESPONDENT ISSUED TO THE PETITIONER. ## RESPONDENTS' ANNEXURE Annexure A COPY OF "THE VIEW/ENTER DISPATCH DETAILS AS ENTERED AS IN THE ITBA (INCOME TAX BUSINESS APPLICATION -HOME PAGE)"