Treaty-based limitation extension fails where DTAA information request covers periods outside the valid exchange window.

Under the India-Switzerland DTAA, a request for information can extend the limitation period for assessment only within the years covered by the treaty amendment and notification. A reference seeking information for periods before 1 April 2011 was treated as invalid for those earlier years, so it could not support extension of time under Explanation IX to section 153B. On that basis, the reassessment under section 153A read with section 143(3) was time-barred and quashed. The connected penalty under section 271(1)(c) also failed because it was entirely dependent on the assessments and could not survive once the assessments were set aside.

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Issues: (i) Whether the reassessment made under section 153A read with section 143(3) of the Income-tax Act, 1961 was barred by limitation because the reference to the Swiss authorities under the India-Switzerland DTAA could not validly extend time under Explanation IX to section 153B; (ii) Whether the penalty imposed under section 271(1)(c) could survive once the assessments were quashed.

Issue (i): Whether the reassessment made under section 153A read with section 143(3) of the Income-tax Act, 1961 was barred by limitation because the reference to the Swiss authorities under the India-Switzerland DTAA could not validly extend time under Explanation IX to section 153B.

Analysis: The assessment orders were passed after the ordinary limitation period. The Revenue relied on a request for information sent under the exchange-of-information article of the India-Switzerland DTAA and on the extended time contemplated by Explanation IX to section 153B. The relevant treaty amendment and the notification giving effect to it showed that exchange of information applied only to fiscal years beginning on or after 1 April 2011. The departmental request sought information for a much longer period, including years prior to that date. On that basis, the reference was not valid for the earlier period and could not furnish a lawful foundation for extending the limitation period for completion of assessment.

Conclusion: The reassessments were barred by limitation and were liable to be quashed.

Issue (ii): Whether the penalty imposed under section 271(1)(c) could survive once the assessments were quashed.

Analysis: The penalty was wholly dependent on the assessments. Once the underlying assessments were set aside as time-barred, the basis for the penalty ceased to exist.

Conclusion: The penalty could not survive and was directed to be deleted.

Final Conclusion: The appeals succeeded because the assessments were held to be time-barred, and the connected penalty fell with the assessments.

Ratio Decidendi: An extension of limitation for completing assessment cannot rest on a reference that is invalid for the relevant period under the applicable treaty and notification; where the assessment is quashed, a consequential penalty based on it also fails.

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