Reassessment time-barred under Section 149; amendment cannot revive long-expired limitation, reassessment set aside after AO concession

HC held reassessment for the relevant year was time-barred and the Revenue lacked jurisdiction to reopen it. Applying Supreme Court precedents, the court ruled the return became barred on the statutory cut-off and a later amendment to Section 149 could not revive limitation expired years earlier. The AO's concession that the assessee was a non-resident reinforced that the then applicable limitation regime governed. The petition was allowed and reassessment proceedings set aside in favour of the assessee.

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Issues Involved:
1. Validity of reassessment notice under Section 148 of the Income Tax Act, 1961.
2. Applicability of the limitation period for reassessment under Section 149 of the Income Tax Act, 1961.
3. Impact of amendments to Section 149 by the Finance Act, 2012 on concluded assessments.
4. Petitioner's residential status and its effect on the reassessment.

Detailed Analysis:

1. Validity of Reassessment Notice under Section 148:
The petitioner challenged the reassessment notice dated 24.03.2015 issued under Section 148 of the Income Tax Act, 1961, for the assessment year 1998-99. The petitioner argued that the notice was time-barred and the Revenue had no jurisdiction to initiate reassessment proceedings. The petitioner contended that the reassessment was based on a suspicion that income had escaped assessment, which is not a valid ground for reopening a concluded assessment.

2. Applicability of the Limitation Period for Reassessment under Section 149:
The petitioner argued that the reassessment notice was barred by the limitation period prescribed under Section 149. Initially, Section 149 allowed reassessment within ten years from the end of the relevant assessment year, which was later reduced to six years by the Finance Act, 2001. Therefore, for the assessment year 1998-99, the limitation period expired on 31.03.2005. The petitioner contended that the reassessment notice issued in 2015 was beyond this limitation period.

3. Impact of Amendments to Section 149 by the Finance Act, 2012:
The Revenue argued that the reassessment notice was valid under the amended Section 149 (1)(c), introduced by the Finance Act, 2012, which extended the limitation period to sixteen years for income related to any asset located outside India. However, the petitioner argued that the amendment could not revive the limitation period for assessments that had already attained finality. The petitioner relied on the Supreme Court's decisions in K.M. Sharma vs. Income Tax Officer and S.S. Gadgil v. Lal & Co., which held that amendments to limitation periods cannot retrospectively reopen assessments that had already become time-barred.

4. Petitioner's Residential Status and its Effect on the Reassessment:
The petitioner, a senior citizen, was a non-resident/not ordinarily resident in India from AY 1984-85 to AY 2003-04. The petitioner clarified during search proceedings that he did not maintain any foreign bank accounts in his individual capacity but had settled an offshore trust with income earned outside India. The Revenue, however, contended that the petitioner failed to provide evidence of his non-resident status or the sources of income used to settle the trust. The Revenue argued that the reassessment was justified as the petitioner had financial interests in the offshore trust, which were not disclosed.

Conclusion:
The court held that the reassessment notice and subsequent proceedings were barred by limitation. The court emphasized that the law of limitation confers certainty and finality to legal proceedings and prevents reopening of concluded assessments unless the amended provision is expressly retrospective. The court found that the amendment to Section 149 by the Finance Act, 2012, could not retrospectively extend the limitation period for assessments that had already attained finality. The court quashed the reassessment notice and all consequent proceedings, allowing the petition without costs.

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