2024 (7) TMI 1224 - AT - Income Tax

Reassessment proceedings under Section 147 quashed for exceeding Section 149 time limits despite Finance Bill 2021 amendments

Australia and New Zealand Banking Group Limited Versus Deputy Commissioner of Income Tax (International Taxation) – Circle 2 (1) (2)

The ITAT Mumbai held that reassessment proceedings initiated under Section 147 were invalid as they exceeded the time limit prescribed under Section 149. ... Validity of impugned proceedings u/s 147 - Time limit for notice u/s 149 - proceedings have been initiate beyond the time limit prescribed under provision of Section 149 - HELD THAT:- In the memorandum explaining the provisions in the Finance Bill, 2021, it has been interalia explained that another restriction has been provided that the notice under section 148 of the Act cannot be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit prescribed under the provisions of clause (b), as they stood immediately before the proposed amendment. In our understanding of the law, for the relevant provisions of Section 149 of the Act read with the memorandum explaining the provisions, what could not be done earlier, cannot be done even after the amendment. Meaning thereby that if in the erstwhile provisions, the notice is barred by limitation then, in the amended provision also, the said notice is barred by limitation. Thus, we hold that the impugned notice and the proceedings have been initiated beyond the time limit prescribed under the provisions of Section 149 of the Act making the impugned proceedings vitiated and liable to be quashed - Decided in favour of assessee. Issues Involved:1. General grievance regarding assessed total income.2. Invalidity of impugned proceedings under section 147 of the Income Tax Act.3. Arguments on the merits of the case.4. Erroneous computation of total income.5. Short grant of TDS credit.6. Non-grant of advance tax credit.7. Non-grant of credit for regular assessment tax paid.8. Levy of interest under section 234A of the Act.9. Levy of interest under section 234B of the Act.Detailed Analysis:General Grievance:The assessee contended that the total income was incorrectly assessed at Rs. 337,44,96,176, including an addition of Rs. 3,35,17,724, which was higher than the returned income of Rs. 3,26,88,17,417. This ground was deemed general and required no separate adjudication.Invalidity of Impugned Proceedings (Grounds 2 to 5):The assessee challenged the validity of the assessment order, arguing that the proceedings were initiated beyond the time limit prescribed under Section 149 of the Income Tax Act. The assessee also contended that the notice under Section 148 was issued without the mandatory Document Identification Number, in contravention of Circular No. 19/2019, and failed to specify the nature of the information suggesting income had escaped assessment. The Tribunal examined the provisions of Section 149 and relevant judicial decisions, including the Bombay High Court's rulings in Godrej Industries Ltd. and Hexaware Technologies Ltd. It concluded that the impugned notice and proceedings were initiated beyond the permissible time limit, making them vitiated and liable to be quashed.Arguments on Merits (Grounds 6 to 8):The assessee argued that the interest earned by its foreign branch on Foreign Currency External Commercial Borrowing Loans (ECB loans) granted to Indian borrowers was not taxable in India under Section 5(2) of the Act. The assessee contended that the loan agreements were entered into outside India, and the proceeds were used for investments in subsidiaries outside India. The Tribunal did not delve into the merits of these arguments, as it had already quashed the assessment order on procedural grounds.Erroneous Computation of Total Income (Ground 9):The assessee claimed that there was a double addition of INR 2,44,08,767 related to interest income from Ranbaxy Ltd., which had already been considered in the original assessment order. This issue was not separately addressed due to the quashing of the assessment order.Short Grant of TDS Credit (Ground 10):The assessee contended that there was a short grant of TDS credit amounting to Rs. 19,34,713. This issue was not separately addressed due to the quashing of the assessment order.Non-Grant of Advance Tax Credit (Ground 11):The assessee argued that it was not granted credit for advance tax paid amounting to Rs. 33,40,78,758. This issue was not separately addressed due to the quashing of the assessment order.Non-Grant of Credit for Regular Assessment Tax Paid (Ground 12):The assessee contended that it was not granted credit for tax paid during regular assessment amounting to Rs. 1,59,91,956. This issue was not separately addressed due to the quashing of the assessment order.Levy of Interest under Section 234A of the Act (Ground 13):The assessee argued that the levy of interest under Section 234A amounting to Rs. 32,53,03,275 was erroneous, as the return of income was filed within the due date. This issue was not separately addressed due to the quashing of the assessment order.Levy of Interest under Section 234B of the Act (Ground 14):The assessee contended that the levy of interest under Section 234B amounting to Rs. 41,09,09,400 was erroneous. This issue was not separately addressed due to the quashing of the assessment order.Conclusion:The Tribunal quashed the impugned assessment order, holding that the proceedings were initiated beyond the time limit prescribed under Section 149 of the Income Tax Act, making them vitiated and liable to be quashed. Consequently, the Tribunal did not find it necessary to address the merits of the case or the other grounds of appeal. The appeal of the assessee was allowed.