1. The power to tax is an incident of Sovereignty and since the Constitution of India being supreme law of the land all other laws including Income Tax Act, Goods and Service Tax Act and others are subordinate to the Constitution. The Apex Court in India Cement Limited v. State of Tamilnadu (7 Judge Bench) 188 ITR 690 (SC) observed that the Constitution is “the mechanism under which the laws are to be made and not merely an act which declares, what the laws is to be”.
2. The most important provision of the Constitution relating to Taxation is Article 265, which states “no tax shall be levied or collected except by authority of law”. So therefore, not only the levy but the collection of tax, must be under the authority of some law.
3. Article 14 of the Constitution of India provides that the states shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. The Supreme Court ruled that taxing statutes can be held to contravene Article 14, if it purports to impose on the same class of persons or property similarly situated, an incidence of taxation which leads to obvious inequality. It is also well settled that in a taxing statute, the legislature enjoys much greater latitude for selection of subjects of taxation as also for classification and that the legislative dispensations are based on an interaction of diverse economic, social and policy considerations. The legislature is competent to classify persons or properties into different categories and tax differently and if the classification thus made is rational the taxing statutes cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. To pass the test of permissible classification two conditions must be fulfilled (1) The classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (2) the differentia must have a rational nexus to the object sought to be achieved by the statutes.
4. Rules of limitation are founded on considerations of public policy and is viewed by some as an “infamous power created by positive law to decrease litigation and encourage dishonest defences”. The law of limitation affords a guarantee to the litigant public that after the lapse of a particular period of time prescribed by the law, the cause of action rests. The object of rules of limitation is preventive not curative. They interpose a statutory bar after a certain period and give a quietus to suits, appeals or other remedies to enforce an existing right. Limitation does not affect a Court’s jurisdiction it merely regulates the time within which courts powers are to be invoked and hence it does not take away any powers of the Court either. Law of limitation limits the time after which suits or other proceedings cannot be maintained in a Court of Justice. It is procedural in character and simply prescribes that the remedy could be exercised only up to a certain period and not thereafter.
5. Latches, means doing nothing. Lapse of time or delay in suing, unaccounted for by disability or ignorance or other circumstances constitute latches. Delay in seeking an equitable remedy is technically known as latches and will disentitle the claimant to come in and establish his claim even if the claim is not disputed. Latches however has not the effect of cutting short any allowable statutory period.
6. Limitation is founded on consideration of public policy, whereas the doctrine of latches is based on equitable considerations. Limitation rests upon express law whereas latches depends upon general principles. Rules of limitation are inflexible whereas latches represent conclusions drawn from the facts of each particular case. Latches may be adopted to the facts of a case whereas limitation however is a matter of inflexible law irrespective of whether there is latches or not. A positive law of limitation applies even when there is no actual latches.
7. There are three related and familiar propositions of the law of limitation namely (1) limitation does not extinguish the right but also bars the remedy (2) only where a remedy becomes barred under the law of limitation, a subsequent change in law giving a longer period of limitation will not by itself revive or rather recreate the remedy, (3) the law of limitation to apply is the law in force at the time the proceedings in question is instituted. We have the Law of Limitation Act, 1963 and section 29(2) has been made applicable to Special or Local Laws.
8. The dominant purpose in construing a statute is to ascertain the intention of the Parliament. One of the well recognized canons of construction is that the Legislature speaks its mind by use of correct expression and unless there is any ambiguity in the language of the provision, the Court should adopt literal construction, if it does not lead to an absurdity.
9. No canon of construction of a statute is more firmly established than this that the purpose of interpretation is to give effect to the intention underlying the statute and therefore unless the grammatical construction leads to an absurdity, it is safe to give words their natural meaning because the former is presumed to use the language which convey the intention.
10. The rules of limitation are not meant to destroy the rights of parties; they are meant to see that the parties do not resort to dilatory tactics but seek their remedy within a time fixed by the Legislature. The time must therefore be deemed to run from the moment when there is knowledge and not from any hypothetical point on the assumption of knowledge.
11. The outbreak of COVID-19 pandemic has impacted businesses, financial markets and economies all over the world including India. COVID-19 pandemic created uncertainty and stress for all sectors for reasons beyond their control. All markets closed, all factories, enterprises, in fact everything came to a stand-still. Major economies world over announced bailout packages, regulatory relaxations under various laws. Unprecedented lockdown across the country was announced by the Hon’ble Prime Minister on 24th March, 2020 taking into consideration the spreading of deadly virus – Corona inter alia effecting people of all classes.
12. The Government of India including Finance Ministry came into action immediately and taking into consideration that financial year was coming to a close and various compliances and time bound actions are to be taken by everyone made several regulatory relaxations under Direct Taxes, Indirect Taxes, Insolvency and Bankruptcy Code as also several other laws impacting all class of citizens.
13. H.E. The President of India in exercise of the powers conferred under Article 123(1) of the Constitution promulgated “The Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020” which stands published in The Gazette of India on 31st March, 2020 by which both under Direct and Indirect Taxes the timelines/limitations were relaxed and extended.
14. The Hon’ble Apex Court having inherent powers under Article 142 Suo-moto taking into consideration hardships being faced by litigants / lawyers and others on account of Lockdown extended time lines / limitations from 15th March 2020 till further orders under various laws in “Suo Moto Writ Petition (Civil) No(s) 3/2020, heard by the Bench of Hon’ble The Chief Justice of India Mr. Justice S.A. Bobde, Hon’ble Mr. Justice L. Nageswara Rao and Hon’ble Mr. Justice Surya Kant, it passed the following order: –
“UPON hearing the counsel, the Court made the following Order: This Court has taken Suo Moto cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions / applications / suits / appeals / all other proceedings within the period of limitation prescribed under the general Law of Limitation or under Special Laws (both Central and/or State).
To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.
We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and Authorities.
This order may be brought to the notice of all High Courts for being communicated to all subordinate Courts/ Tribunals within their respective jurisdiction.
Issue notice to all the Registrars General of the High Courts, returnable in four weeks.”
15. Thereafter the Supreme Court in the same petition (supra) on 6th May 2020 on application having being moved extended the scope of its order dated 23.3.2020 under the Arbitration and Conciliation Act, 1996 and Under Section 138 of the Negotiable Instrument Act, 1881.
16. The order of Court dated 6.5.2020 reads as under: –
“In view of this Court’s earlier order dated 23.03.2020 passed in Suo Moto Writ Petition (Civil) No.3/2020 and taking into consideration the effect of the Corona Virus (COVID 19) and resultant difficulties being faced by the lawyers and litigants and with a view to obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunal across the country including this Court, it is hereby ordered that all periods of limitation prescribed under the Arbitration and Conciliation Act, 1996 and Under Section 138 of the Negotiable Instruments Act 1881 shall be extended with effect from 15.03.2020 till further orders to be passed by this Court in the present proceedings.
In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown.”
17. The Andhra Pradesh High Court in the case of Walchandnagar Industries Limited v. Commercial Tax Officer in Writ Petition No.8425/2020 and 8451/2020 vide judgement dated 11.5.2020 taking into consideration that ex-parte assessment order was made by the VAT/ Commercial Taxes Authorities during the period of Lockdown despite repeated request by the assessee that it’s industry is based at Pune and its offices are situated in other states and because of the prevalent pandemic Covid-19, they are unable to comply or to file reply. Surprisingly despite the VAT Commercial Tax Authority having noticed the decision of order of the Supreme Court of India dated 23.3.2020, disagreed with the order passed by the Hon’ble Supreme Court of India and passed assessment orders ex-parte. The Andhra Pradesh High Court quashed and set aside the assessment orders even without hearing the respondents namely Commercial Taxes Authorities and observed as under: –
The impugned order dated 17.04.2020 and the consequential order 23.04.2020 are both set aside.
Therefore, both writ petitions are allowed, with the following directions:
1) Immediately after the pandemic situation eases and the restrictions are lifted on the movement of men and material etc., 1st respondent is directed to issue a notice to the petitioner giving him two weeks’ time to appear along with his reply and all his documents.
2) In view of the fact that the petitioner is aware of the case set up against him, he is directed to use the interim period to prepare his counter and also his objections to the extent possible.
3) 1st respondent is therefore, directed to give two weeks’ notice, after the Central Government relaxes the lock down in India, fix a suitable date for the appearance of the petitioner and for disposal of the matter. It is made clear that if the petitioner seeks time or otherwise tries to delay the matter, 1st respondent is at liberty to proceed strictly in accordance with law.
With these directions, the writ petitions are allowed. No costs.
Consequently, miscellaneous petitions, pending if any, in the writ petition shall stand closed.”
18. It would be appropriate to quote Article 141 and 142 of the Constitution of India: –
“Law declared by Supreme Court to be binding on all Courts”
The law declared by the Supreme Court shall be binding on all Courts within the territory of India.
“Enforcement of decrees and orders of Supreme Court and orders as to discovery, etc.”
(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or orders so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and until provision in that behalf is so made, in such manner as the President may by order prescribe.
(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself.
19. Taking into consideration the orders of the Apex Court dated 23.3.2020 and 6.5.2020 and Article 141 and 142, it is patent that the Supreme Court of India has inherent and absolute powers as is necessary for doing complete justice in any case or matter pending before it and any decree so passed or order so made shall be enforceable throughout the Territory of India, as may be prescribed. The Indian Judiciary and the Constitution of India believe that every citizen of India must get “complete justice”. The Apex Court on its own took pragmatic and practical view and stepped in the shoes of a litigant and taking into consideration that the litigant or/and lawyers cannot come and attend to or/and file their petition applications/ suits/appeals within the period of limitation, in all such proceedings suspended the period of limitation irrespective of the limitation prescribed under the General Law or Special Laws till further order / orders. In effect, the Law of Limitation stands suspended by the Apex Court from 15.3.2020 till further orders and which is binding on all Courts, Tribunals and Authorities throughout India.
20. The Andhra Pradesh High Court (supra) had taken into consideration the order of Supreme Court of India has rightly quashed and set aside the assessment orders to be made afresh and denovo after the lockdown was to be lifted.
21. In my view, any order passed by any authority on or after 15.3.2020 is illegal, is arbitrary, is bad in law and without jurisdiction and bereft of any valid reasons, violative of principle of natural justice and violative of Articles 14 and 265 of the Constitution of India.
22. In my view, the Andhra Pradesh High Court was rather soft on the assessing officer / VAT officials, who passed assessment order during the period of lockdown knowing fully well about the judgment / orders of the Supreme Court of India dated 23.3.2020 and stern action or contempt proceedings ought to have been initiated against the assessing officer for violating the statutory orders of the Supreme Court of India. Be that as it may, even till today, the order dated 23.3.2020 and 6.5.2020 passed by the Supreme Court has not yet been modified or any fresh order has been passed, therefore, I carry a view that the Law of Limitation is still suspended and the litigants are entitled to get benefit as still the situation with regard to Covid-19 virus is not yet over and at many places there are several restrictions and even “Lockdown” and the litigants / lawyers may not be able to strictly comply with the various timelines prescribed under the General Law or/and Special Laws specified under the Limitation Act or/ and other Laws both Central and States. Therefore, since the order of the Apex Court still holds good, therefore, the period of limitation in all proceedings gets extended, irrespective of the time lines fixed by the Union Finance Ministry under the Taxation Laws, namely relating to filing of appeals, revisions and other time bound periods specified.
23. The questions may arise in the mind about time lines fixed and extended from time to time by the Union Finance Ministry and as to what happens for proceedings whose due dates were prior to lockdown periods but could not file return, applications and as to whether for computing period of limitation for delay, the period of lockdown would be condoned, say in GST the power to condone delay is for specified periods only. The next question could be as to on what matters the order/directions of Supreme Court apply. Whether any penal provisions apply for delay due to lockdown. Whether coercive recovery action can be taken for non-payment due to lockdown period.
24. In the light of the specific orders of Hon’ble Supreme Court of India dated 23.3.2020 and 6.5.2020 (supra) Articles 141 and 142 of the Constitution of India (supra) and judgment of Andhra Pradesh High Court, it can be opined that the directions of the Hon’ble Supreme Court relates to all laws general or special both Central and/or States and it relates to petitions/applications/suits/appeals/all other proceedings wherever the period of limitation stands prescribed, whether condonable or not and the same would mean that in effect “law of limitation” under all acts (including Taxation laws) gets suspended from 15th March 2020 onwards; therefore the tax payer or as the case may be, can certainly take advantage and get benefitted for the period of lockdown and this period would be excluded for all purposes irrespective of whether delay is condonable or not for specified periods by the authorities under the Taxation laws. In case someone wants to file old returns of which due date was over one, is entitled to file subject to payment of late fees which in my view would be excluding the period of lockdown i.e. one may exclude the period of lockdown and then deposit late fee. The authorities are bound by the specific orders of Supreme Court as it is law of the land and applies to all Courts, Tribunals and Authorities and authorities would cover and mean all quasi-judicial or/and other authorities situate within the territories of India who gets some power under the various Acts/Laws.
25. As expressed hereinabove the orders of Supreme Court applies to all proceedings under all laws and wide enough to cover Acts/ Statutes and all Authorities governed by the Constitution of India before whom matters are pending/may be pending or otherwise.
26. No penalty can be imposed by any authority particularly by the Taxation authorities during the period of lockdown. Any adverse order/findings with reference to the period of lockdown would be carrying the ire of contempt of the orders of the Supreme Court of India and would be contemptuous.
27. Irrespective of the above once Union Finance Ministry has extended various time lines from time to time coupled with the fact that “The Taxation and other Laws (Relaxation of certain provisions) Ordinance 2020 was promulgated, therefore the Taxation Authorities are bound by the relaxations made/granted by the Union Finance Ministry from time to time. The authorities are not required to take coercive action for recovery of Non-payment of dues, due to lockdown periods and should act liberally and grant due benefits to all who have suffered on account of Covid-19 pandemic.
TIMELINES EXTENDED BY THE UNION FINANCE MINISTRY FROM TIME TO TIME DURING COVID-19.
28. To ease out situation and hardships to the tax-payer, the following steps have been taken from time to time by the Finance Ministry so as to mitigate the hardship and it would be appropriate to refer to the important timelines/limitations fixed by the Finance Ministry:-
(i) Income Tax Return for the FY 2018-19 belated and revised (AY 2019-20)
• Due date is extended from 31st March 2020 to 31st July 2020
(ii) Income Tax Return for the FY 2019-20 (AY 2020-21)
• For Non-Auditable Assessee – Due date is extended from 31st July 2020 to 30th November 2020
• For Auditable Assessee – Due date is extended from 31st October 2020 to 30th November 2020
(iii) Tax & Statutory Audit for the FY 2019-20 (AY 2020-21)
• Due date is extended from 30th September, 2020 to 31st October 2020
(iv) TDS & TCS Return of Qtr. IV for the FY 2019-20 (AY 2020-21)
• Due date is extended from 31st May 2020 to 31st July 2020
(v) Due date for deposit of TDS/TCS for the month of May 2020
• Due date is 7th June 2020
(vi) Online submission of form 15G/15H
• Due date is extended from 30th April 2020 to 30th June 2020 (Payer, who had not deducted tax on the basis of said forms shall require to report details of such payment/credits in the TDS Statement for the quarter ending 30th June 2020 in accordance with relevant rules (Rule 31A)
(vii) Linking PAN with Aadhar
• Due date is extended from 31st March 2020 to 31st March 2021
(viii) Date for making investments & payments for claiming deduction under Section 80C/80D/80G
• Date of making investment & payment under Section 80C (LIC, PPF, NSC etc.), 80D (Mediclaim), 80G (Donations) extended from 31st March 2020 to 31st July 2020 for FY 2019-20
(ix) Date for making investments / claiming deduction from Capital gains for Financial Year 2019-20, date extended to 30th September 2020
(x) Where any time limit falls during the period from 20th March 2020 to 31st December 2020 for the completion of the following actions and where completion of such action has not been made within such time then the time limit for completion of such action has been extended to 31st March 2021 namely:
• Completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval, by any authority, commission or Tribunal.
• Filing of any appeal, reply, application or furnishing of any report, document, return, statement, etc.
• Beginning of manufacture or production of articles or things or providing any services referred to in Section 10AA, in a case where letter of approval, required to be issued in accordance with the provisions of the SEZ Act has been issued on or before the 31 March 2020.
Reduction in Interest Rate-
• Where any due date specified under the Act for payment of any amount towards tax or levy, by whatever name called:
• Falls during the period from 20th March to 29th June 2020,
• And such amount has not been paid within such date, but has been paid on or before 30th June 2020, then:
• The rate of interest payable for the period of delay shall not exceed 0.75% per month or part thereof.
• No penalty shall be levied & no prosecution shall be sanctioned.
• Note: The term ‘Period of delay’ has been defined to mean the period between the due date and the date on which the amount has been paid.
(xi) The timelines for various other compliances following between 20th March 2020 and 31st December 2020 has been extended to 31st March 2021 namely:-
• Issuance of notices falling within the above period, say notice for reopening of assessment under Section 147 of domestic tax laws, penalty notices, issuance of the questionnaire under on-going assessments;
• Issuance/processing of intimations under Section 143(1)/200A of the Income Tax Statute;
• Issuance of orders for completion of any proceedings under Direct Tax Laws;
• Submission of statement (in Form No. 49C) by Non-Resident having a liaison office in India;
• Filing of applications by the taxpayers under various provisions of the statute (such as revision applications/interest or penalty waiver applications) etc.
29. All the above measures are applicable mutatis mutandis to the applicable provisions under the Wealth-tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT Law, Equalization Levy Law, Vivad Se Vishwas Law (the due date for making payment without additional amount under “Vivad Se Vishwas” Scheme stands extended to 31st December, 2020).
30. Reduction in Rates of “Tax Deduction at Source” and “Tax Collected at Source” – The TDS/TCS rates for all non-salaried payment to residents stands reduced by 25% of the specified rates for the remaining period of Financial Year 2020-21 so as to provide overall liquidity of about 50000 crores.
31. GOODS AND SERVICE TAX (GST)
(i) Due date for GSTR – 3B
• Turnover in preceding FY < 5.00 crore
Feb. 20 – 30 June 2020
Mar. 20 – 05 July 2020
Apr. 20 – 09 July 2020
May 20 – 15 September 2020
June 20 – 25 September 2020
July 20 – 29 September 2020
Aug 20 – 03 October 2020
(ii) Due date for GSTR – 3B
• Turnover in preceding FY > 5.00 crore
Feb. 20 – 24 June 2020
Mar. 20 – 24 June 2020
Apr. 20 – 24 June 2020
May 20 – 27 June 2020
June 20 – 20 July 2020
July 20 – 20 Aug 2020
Aug 20 – 20 Sep 2020
(iii) Due date for GSTR – 1 Quarterly
Jan – March 20 – 17th July 2020
April to June 20 – 03rd Aug 2020
(iv) Due date for GSTR – 1 Monthly
Mar. 20 – 10 July 2020
Apr. 20 – 24 July 2020
May 20 – 28 July 2020
June 20 – 05 Aug 2020
July 20 – 11 Aug 2020
(v) GSTR 9/9C Annual return for FY the 2018-19
• Due date is extended from 30.06.2020 to 30.09.2020
(vi) Input GST credit – restriction rule of 10% with reference to GSTR 2A
• The said condition shall not apply to input tax credit availed by the registered persons in the returns in FORM GSTR-3B for the month of February, March, April, May, June, July and August, 2020, but that the said condition shall apply cumulatively for the said period and that the return in FORM GSTR-3B for the tax period of September, 2020 shall be furnished with cumulative adjustment of input tax credit for the said months in accordance with the 10% condition
(vii) Measures for Trade facilitation:
• Reduction in Late Fee for past Returns:
Late fee for non-furnishing FORM GSTR-3B for the tax period from July 2017 to January 2020 has been reduced / waived as under:-
(a) ‘NIL’ late fee if there is no tax liability;
(b) Maximum late fee capped at ₹ 500/- per return if there is any tax liability.
The reduced rate of late fee would apply for all the GSTR-3B returns furnished between 01.07.2020 to 30.09.2020.
• Relief for small taxpayers for late filing of returns for February, March & April 2020 Tax periods:
For small taxpayers (aggregate turnover upto ₹ 5 crore), for the supplies effected in the month of February, March and April, 2020, the rate of interest for late furnishing of return for the said months beyond specified dates (staggered upto 6th July 2020) is reduced from 18% per annum to 9% per annum till 30.09.2020. In other words, for these months, small taxpayers will not be charged any interest till the notified dates for relief (staggered upto 6th July 2020) and thereafter 9% interest will be charged till 30.09.2020.
• Relief for small taxpayers for subsequent tax periods (May, June & July 2020):
In wake of COVID-19 pandemic, for taxpayers having aggregate turnover upto ₹ 5 crore, further relief provided by waiver of late fees and interest if the return in FORM GSTR-3B for the supplies effected in the Month of May, June and July, 2020 are furnished by September, 2020 (staggered dates to be notified).
• One-time extension in period for seeking revocation of cancellation of registration:
To facilitate taxpayers who could not get their cancelled GST registrations restored in time, an opportunity is being provided for filing of application for revocation of cancellation of registration up to 30.09.2020, in all cases where registrations have been cancelled till 12.06.2020.
32. Central Excise, Customs and Service Tax
• Original due date between 20.03.2020 to 30.08.2020 with reference to “Furnishing of any report, document, return or statement. Filing of any appeal, reply or application. Issuance of any order, notice, intimation, notification, sanction or approved” shall stand extended to 31st August 2020 under relevant sections of Central Excise Act 1944, Customs Act 1962, Customs Tariff Act 1975 and Finance Act 1994.
33. Company Law
• The Mandatory requirement of holding Board Meeting of the Board of the Companies within the intervals provided in section 173 of the Companies Act 2013 (120 Days) stands extended by a period of 60 days till next two quarters i.e. till 30th September. Accordingly, as a one-time relaxation the gap between two consecutive meetings of the Board may extend to 180 days till the next two quarters instead of 120 days as required in Companies Act 2013. (Notification dated 24.03.2020).
• As per Companies Fresh Start Scheme (CFSS) 2020, file Form DIR-3KYC/DIR-3KYC-Web shall be filed without additional fees till 30.09.2020.
• As per Rule 4 of The Companies (Meetings of Board and its power) Rules 2014 all board meetings shall be held through video conferencing or other audio-visual means, which would include following matters:
o The approval of the annual financial statements;
o The approval of the Board’s report;
o The approval of the prospectus;
o The Audit Committee Meetings for [consideration of financial statement including consolidated financial statement if any, to be approved by the board under sub-section (1) of Section 134 of the Act]; and
o The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
• No additional fee shall be charged for late filing during a moratorium period (01.04.2020 to 30.09.2020) in respect of any document, return, statement etc. required to be filed in MCA system irrespective of its due date.