The Unfortunate Invocation Of Article 142 - Supreme Court Decision On The Reassessment Notices
The recent topic of debate has been qua the judgement recently delivered by a division bench of the Supreme Court, authored by Hon'ble Justice M.R. Shah. In the judgment titled Union of India v. Ashish Agarwal, in a batch of 24 Appeals, the Supreme Court modified/reversed the 6 High Courts' ruling wherein all the High Courts had quashed the reassessment notices issued by the government/revenue department under Section 148 holding them to be illegal/ultra vires/bad in law in view of the amendment by the Finance Act, 2021, as they were mandated to be issued under the new law/provisions of the newly inserted Section 148A of the Act.
I am deliberately keeping myself away from the merits of the matter, upon which better legal minds have argued and written upon, both before and after the rendering of the decision under discussion here. But I certainly intend to provide my view on the bewildering use of Article 142 in the judgment. The order under discussion has been "passed in exercise of powers under Article 142 of the Constitution of India".
Shorn of the legal controversy on merits, it is stated that the power under Art. 142 and the manner in which it has been exercised by the Hon'ble Court, certainly travels beyond the scope and ambit of Article 142 itself.
It is to be noted that the Court has held in para 23 of the Judgment that, "due to a bonafide mistake" the Revenue issued the reassessment notices under the unamended Section 148, and "There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced".
At the very outset, these few lines of the ratio raise up a variety of issues.
I. NOT A 'MISTAKE'
Firstly, this is not a 'mistake'; what is pertinent to note here that what has been tacitly referred to as a mere 'mistake' by the Department in issuing the said notices, instead was a conscious exercise of power knowing full well the legal ambit of the same. The same is also recorded in para 13 of the judgement where the Court observed, "Despite the substituted sections 147 to 151 of the Income Tax Act, 1961 by the Finance Act, 2021 coming into force on 1 April, 2021, according to learned ASG, the Revenue issued approximately 90,000 reassessment notices to the respective assessees under the erstwhile sections 148 to 151 thereof by relying on explanations in the Notifications dated 31 March, 2021 and 27 April, 2021."
The Court could not have thereafter in the given circumstances proceeded to call it a "bonafide mistake/belief" in hindsight retrospectively. A deliberate conscious act of proceeding in 1 direction cannot by any stretch of imagination be classified as a 'mistake'. The doctrine of election clearly stipulates that a party is estopped from taking the unelected stand as an afterthought and cannot wriggle out of or change its elected stand. This basic principle of interpretation has been unfortunately overlooked. In fact, Ignorantia juris non excusat, the ignorance of law is no excuse.
It must be stated that this approach is a slippery slope; Permitting such a reasoning today is moving one step closer to making it an acceptable practice, where the Government can always take shelter under this judgment to argue that all ultra vires/illegal actions under other provisions/laws are a result of a 'bonafide mistake' and should be classified as legal.
It is also baffling that how can the department itself be unsure; the government is the draftsman. Had it been the Assessee – would it have been allowed – the answer is no, as is evident from the past decisions; then why such preferential treatment to the government on one hand and such step-motherly treatment to the Assessee/s.
II. Article 142 – Supplement NOT SUPPLANT the Statutory provision
Secondly, even otherwise, Article 142 powers are not there to offset the effects of the mistakes of 1 party, notwithstanding even assuming if it is a bonafide one.
Article 142 powers ought to be exercised sparingly, if at all, and certainly cannot be exercised to correct the mistakes of one party, notwithstanding even if it is the government. The Supreme court had observed in Postmaster General v. Living Media India Ltd. that "The government departments are under a special obligation to ensure that they perform their duties with diligence and commitment", and no better or favourable treatment can be granted to the government departments.
The constitutional bench in the landmark judgement of Supreme Court Bar Association SCBA v. UOI, while interpreting the powers of Article 142, unequivocally held that –
"The powers conferred on the Court by Article 142 being curative in nature cannot be construed as powers which authorise the Court to ignore the substantive rights of a litigant while dealing with a cause pending before it. THIS POWER CANNOT BE USED TO "SUPPLANT" SUBSTANTIVE LAW APPLICABLE TO THE CASE or cause under consideration of the Court. Article 142, even with the width of its amplitude, cannot be used to build a new edifice where none existed earlier, by ignoring express statutory provisions dealing with a subject and thereby to achieve something indirectly which cannot be achieved directly. … It is a "problem-solver in the nebulous areas" but the substantive statutory provisions dealing with the subject-matter of a given case cannot be altogether ignored by the Supreme Court, while making an order under Article 142. Indeed, these constitutional powers cannot, in any way, be controlled by any statutory provisions but at the same time these powers are not meant to be exercised when their exercise may come directly in conflict with what has been expressly provided for in a statute dealing expressly with the subject." (Paras 47 and 48)
The judgment of the Court under discussion in Ashish Agarwal (supra) unnoticed this binding constitutional bench decision of SCBA v. UOI which had 2 categorical findings that Article 142 power cannot be used to "supplant" substantive law applicable to the case and it cannot be used to build a new edifice where none existed earlier, by ignoring express statutory provisions dealing with a subject.
What cannot be done directly cannot be achieved indirectly, but which is what has exactly happened through the judgment in Ashish Agarwal (supra).
III. Some LEEWAY must be shown - ? Why this preferential yardstick ?
The finding by Hon'ble J. Shah, that 'some leeway must be shown' by the High Court to the department is very unfortunate, since this was a legal matter which was required to be adjudicated as per the provisions of the law. There is no question of any preferential treatment to be given to one party over the other, in complete disregard of the law as it stands.
The further ruling that, "Instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A."
And observing that "…Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the Finance Act 2021…"
Respectfully stated, the constitutional high courts of the country cannot 'construe' something, against and contrary to the provisions of law, and thus cannot be faulted for having done so, by following the letter of the law.
The observation of the Court that the 'high courts could have done so' is even more jaw-droppingly unfair, for the same reason since the High Courts cannot possibly turn a blind eye to the legal provisions It is reiterated that all parties are equal and under the Constitution no High Court can be asked/directed to mould the provisions to favor one party knowingly. All the 6 the High Courts have taken the same view on merits after considering the law as it stands. The 'complete justice' has to be done 'between the parties' and not 'to one party'. There cannot be a different yardstick to be used for the revenue department.
The Constitution bench decision in SCBA v. UOI (supra) has been followed by several decisions of the Apex Court in Union of India v. Shardindu, State of Karnataka v Umadevi & A. Jidernrant v. Jubilee Hills, observing that the residuary power of Article 142 has to be exercised sparingly in cases of manifest illegality, manifest want of jurisdiction, or for some palpable injustice and certainly cannot be used to bypass the provisions of any Statute. In fact ironically, the decision in Ashish Agarwal, has caused palpable injustice to over 90,000 Assessees, by striking down the High Courts' decisions which had struck down the unlawful notices for manifest want of jurisdiction.
The observations of the Hon'ble Supreme Court are an anathema to the basic legal principle that what is without jurisdiction is always without jurisdiction, notwithstanding that it allegedly results in the person or even the government, becoming remediless. The consequential quantum/volume of notices, arising from the illegality cannot be the reason to force-turn an illegality into a legal one; It may be 1 re-assessment notice or 90000 – an illegality remains an illegality. As stated by the Hon'ble Courts on umpteenth occasions, that an ultra vires / jurisdiction-less Order is void ab initio.
Furthermore, as is well-settled law that Courts can only interpret the provision and statutory law and cannot modify or add to the language exemplified therein; even the doctrine of casus omissus does not permit it. It is trite law that Legislator's domain cannot be trespassed and the grandeur provision of Article 142 cannot be mis-utilized in such a manner so as to defeat the very purpose for which the Article stands for. In DDA v. Skipper Construction it was observed by the Apex Court itself, that the very fact that the power is conferred only to SC and no one else, is itself an assurance that it will be used with due restraint and circumspection.
IV. 'DISPENSING' of enquiry under S. 148A(a)
What is quite astounding is that in the same judgement which heaped praises on the newly inserted procedure u/s 148A in the preceding paras of the judgment, (in fact referring to it as a 'game-changer'), that same procedure has conveniently been given a go by in the subsequent paras, as is evident from a bare perusal of Para 23(ii), where the Court directed that – "The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one-time measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts."
So, in essence, not only have the illegal notices become suddenly legal, but even the mandatory procedure prescribed as a safeguard, also is to disregarded.The Department/government has in fact been allowed to take benefit from their own wrong. The illegal notices have been force-deemed legal and all the re-assessment proceedings have to be defended by all the Assessees and adding insult to injury, even the additional safeguards of pre-investigation have also been conveniently "dispensed with".
The aforesaid observations and findings have been passed stating that this was done to balance the assess and revenue rights, which is respectfully confounding given that there is absolutely no relief to the Assessee at all and the only beneficiary from the judgment is the Department/government.
V. SIX (6) HIGH COURTS; 11 MONTHS
In fact, what is queer is that the Hon'ble Court itself has accepted the reasoning of the High
Courts – "In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021. (para 23)". There is not a whisper of any cogent observations or legal findings qua refuting or disproving the High Courts' finding.
Take for example the decision of Hon'ble Delhi High Court in the case of Mon Mohan Kohli v. ACIT, where the Hon'ble High Court after having painstakingly heard several counsels from both sides over the course of several months had delivered a comprehensive judgment having meticulously analysed the law and the legal framework provided under the laws passed by the very government in Appeal. The final finding of the Court was –
"101. The argument of the respondents 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 Respondents' own Circular 549 of 1989 and its own submission that from 1st July, 2021, the substitution made by the Finance Act, 2021 will be applicable.
102. 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 1st April, 2021 to 30th June, 2021 as Parliament was fully aware of Covid-19 Pandemic when it passed the Finance Act, 2021. Also, the arguments of the respondents qua non-obstante clause in Section 3(1) of the Relaxation Act, 'legal fiction' and 'stop the clock provision' are contrary to facts and untenable in law.
103. Consequently, this Court is of the view that the Executive/Respondents/Revenue cannot use the administrative power to issue Notifications under Section 3(1) of the Relaxation Act, 2020 to undermine the expression of Parliamentary supremacy in the form of an Act of Parliament, namely, the Finance Act, 2021. This Court is also of the opinion that the Executive/Respondents/Revenue cannot frustrate the purpose of substituted statutory provisions, like Sections 147 to 151 of Income Tax Act, 1961 in the present instance, by emptying it of content or impeding or postponing their effectual operation."
This Finding as well the other High Courts finding have been completely disregarded. The government's civil appeal against the High Court's decisions had to meet the strict criteria of appeal under the Constitution before the Supreme Court. And if the Hon'ble Court is unable to draw out any mistake in the High Court's Order under Appeal, it should not resort to article 142. This is not a humanitarian crisis that Supreme Court has to provide some equitable relief, instead has to be adjudicated on legal points. There is no Equity about a tax
Reiterating, there are 6 High Courts (Delhi, Bombay, Madras, Rajasthan, Calcutta & Allahabad) who have discussed the legal impediments over several months leading to the quashing of the impugned reassessment notices, vide speaking judgments. The judicial time of all the high courts is entirely and completely wasted, if the entire reasoning is to be hurriedly overlooked by adopting the approach of simply invoking Article 142.
In conclusion, the queer invocation of Article 142 is certainly not the Answer, but instead raises a lot of Questions, some of which have been discussed above.
The author is the founder partner of DRSB Law Chambers, Oxford Alumnus and practicing at the Supreme Court of India and Delhi High Court.
 2022 SCC Online SC 543, delivered on 04.05.2022.
 (2012) 3 SCC 563
 (1998) 4 SCC 409
 (2007) 6 SCC 276; See also Prem Chand Garg v. Excise Commissioner, AIR 1963 SC 996 & Chandrakant Patil v. State (1998) 3 SCC 38.
 (2006) 4 SCC 1.
 (2006) 10 SCC 96
 Some were common.
 (1996) 4 SCC 622.
 Para 17 to 20
 W.P.(C) 6176/2021 and other writ petitions. Judgment delivered on 15.12.2022.
 Changed from the SLPs after admission / leave granted.
 Mon Mohan Kohli v. ACIT (Delhi HC) Judgment passed by the Hon'ble High Court of Delhi in W.P.(C) No. 6176/2021 dated 15.12.2021; Tata Communications Transformation Services v. ACIT (Bombay HC) Judgment passed by the Hon'ble High Court of Bombay in Writ Petition No. 1334 of 2021 dated 29.03.2022; Ashok Kumar Agarwal v. UOI (Allahabad HC) Judgment passed by the Hon'ble High Court of Allahabad at Allahabad in Writ Tax No. 524/2021 dated 30.09.2021; Bpip Infra Pvt. Ltd. v. Income Tax Officer (Rajasthan HC) Judgment in S.B. Civil Writ Petition No. 13297/2021 passed by the Hon'ble High Court of Rajasthan at Jaipur dated 25.11.2021; Bagaria Properties & Investment Pvt. Ltd. v. UOI (Calcutta HC) Judgment passed by the Hon'ble High Court of Calcutta in W.P.O No. 244/2021 dated 17.01.2022; Manoj Jain v. UOI (Calcutta HC) Judgment passed by the Hon'ble High Court of Calcutta in W.P.A. No. 11950 of 2021 dated 17.01.2022; Sudesh Taneja v. ITO (Rajasthan HC) Judgment passed by the Hon'ble High Court of Rajasthan in D.B. Civil Writ Petition No. 969 of 2022 dated 27.01.2022; Vellore Institute of Technology v. CBDT (Madras HC) Judgment passed by the Hon'ble High Court of Madras in W.P. No. 15019/2021 dated 04.02.2022;