2018 (6) TMI 366 - AT - Income Tax

Assessee's Appeals Allowed: Reassessment Void Ab Initio

The Tribunal allowed the appeals of the assessee, holding that the reassessment proceedings initiated by the AO were barred by limitation and thus void ab ... Reopening of assessment - notice barred by limitation - non-residents have not filed their respective individual returns of income by disclosing the incomes from the long term capital gains - scope of amendment to sub section 149(3) - Held that:- The assessment year involved is 2007-08 and the time limit for issue of notice u/s 148 was barred by limitation on 31.10.2010. The amendment to sub section 149(3) has come into force from 01.04.2012 i.e. after expiry of time limit for issue of notice u/s 148 in the case of the assessee. Therefore, we hold that the amendment is not applicable for enlargement of the time limit for issue of notice u/s 148 and the case is squarely covered by the decision of Madhucon Sino Hydro JV Vs. DCIT [2015 (7) TMI 840 - ITAT HYDERABAD] and case of S.S.Gadgil (1997 (12) TMI 4 - SUPREME COURT). Therefore, respectfully following the view taken by the Coordinate Bench, Hyderabad, we hold that reassessment proceedings initiated by the AO in this case is also barred by limitation. - Decided in favour of assessee. Issues Involved:1. Validity of notice under section 148 and whether it is barred by limitation.2. Validity of the order under section 147 read with section 143(3) and whether it is barred by limitation.3. Whether the Assessing Officer (AO) erred in passing an order under section 147 without disposing of objections to reopening.4. Rejection of reverse indexation adopted by the assessee for fair market value determination.5. Charging of interest under sections 234A, 234B, and 234C.Issue-wise Detailed Analysis:1. Validity of Notice under Section 148:The assessee argued that the notice issued under section 148 was barred by limitation, contending that the time limit for the assessment year 2007-08 expired on 31.03.2010. The amendment to section 149(3) effective from 01.07.2012, which extended the time limit to six years, could not be applied retrospectively. The CIT(A) upheld the validity of the notice, citing the explanation to section 149(3) which clarified that the amendment applied to any assessment year beginning on or before 01 April 2012. However, the Tribunal found that the amendment could not revive a time-barred issue, referencing the decisions of the ITAT Hyderabad Bench and the Supreme Court in S.S. Gadgil vs. Lal & Co. The Tribunal concluded that the reassessment proceedings were barred by limitation and thus void ab initio.2. Validity of the Order under Section 147 read with Section 143(3):The Tribunal noted that the AO issued the notice under section 148 on 24.03.2014, which was beyond the original two-year limit that expired on 31.03.2010. The Tribunal reiterated that the amendment extending the time limit to six years could not be applied retrospectively to revive a time-barred assessment. Consequently, the order under section 147 read with section 143(3) was also considered barred by limitation and void ab initio.3. Objections to Reopening:The assessee contended that the AO passed the order under section 147 without first disposing of the objections raised to the reopening, making the entire assessment null and void. The CIT(A) held that no objection was raised to the reopening. Given the Tribunal's conclusion that the reassessment proceedings were barred by limitation, this issue became moot and was not further adjudicated.4. Rejection of Reverse Indexation:The AO rejected the reverse indexation method adopted by the assessee for determining the fair market value of the asset as of 01.04.1981, and the CIT(A) confirmed this rejection. However, since the Tribunal quashed the notice under section 148 and the consequent assessments, this issue was not adjudicated further.5. Charging of Interest under Sections 234A, 234B, and 234C:The assessee challenged the charging of interest under sections 234A, 234B, and 234C. The CIT(A) confirmed the levy of interest. Nonetheless, as the Tribunal found the reassessment proceedings to be void ab initio, this issue was also considered unnecessary to adjudicate.Conclusion:The Tribunal allowed the appeals of the assessee, holding that the reassessment proceedings initiated by the AO were barred by limitation and thus void ab initio. Consequently, the notice under section 148 was quashed, and the remaining grounds were deemed unnecessary to adjudicate. The order was pronounced in the open court on 6th June 2018.