Source – Delhi High Court

Why in News?

Recently, the Delhi High Court in the matter of Triveni Enterprises Limited v. Income Tax Officer & Anr., has upheld the constitutional validity of Section 115BBE of the Income Tax Act. 1961 (IT Act).

What was the Background of Triveni Enterprises Limited v. Income Tax Officer & Anr. Case?

• Before the Delhi High Court, the present writ petitions have been filed challenging the orders dated 25^th July 2022 passed under Section 148A(d) of the IT Act for the Assessment years 2015-16, 2016-17, 2017-18 and further challenging the notices dated 25^th July 2022 issued under Section 148 of the IT Act.
• The petitioner further challenges the constitutional validity of Section 115BBE of the IT Act states that the issue of constitutional validity of Section 115BBE cannot be adjudicated upon by the Appellate Authority.
• The learned counsel for the petitioner states that the notices issued under section 148 of the IT Act have been issued after three years from the end of the relevant assessment years and that too could have been issued after obtaining the sanction from the Principal Chief Commissioner of Income Tax and not from the Principal Commissioner of Income Tax as has been done in the present cases.
• The High Court dismissed the present writ petitions and pending applications.

What were the Court’s Observations?

• The bench of Acting Chief Justice Manmohan and Justice Mini Pushkarna has observed that Statutory Acts and their provisions are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is an apprehension of misuse of Statutory Provision or the possibility of abuse of power.
• It must be presumed, unless the contrary is proved, that the administration and application of a particular law would be done not with an evil eye and an unequal hand.
• The court stated that Section 115BBE of the IT Act cannot be held unconstitutional and the Act provides complete machinery for the assessment or reassessment of tax.

What are the Relevant Legal Provisions of IT Act, 1961 Involved?

• This Act came into force on the 1^st April 1962 and provides for levy, administration, collection and recovery of Income Tax.
• This Act consolidates and amends the law relating to income tax and super-tax.

Section 148 & 148A of IT Act

• Section 148 of this Act deals with the issue of notice where income has escaped assessment.
• Section 148A of this Act, introduced in the Budget of 2021, has ushered in a significant change in the realm of taxation in India.
  • This section empowers Income Tax officers to initiate reassessment proceedings when they suspect that a taxpayer may have concealed income during any assessment year.
• Section 148A(d) of this Act is limited to the existence or otherwise of information which suggests that income chargeable to tax has escaped assessment.

Section 115BBE of IT Act

• Section 115BBE of this Act deals with the tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. It states that-

(1) Where the total income of an assessee,—

(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or

(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) and clause (b)of sub-section (1).