AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 1025
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....case, Ld CIT(A) has erred in holding that the notice issued u/s 148 of the IT Act 1961 on 16.02.2016 for AYs 2001­02 was barred by limitation without appreciating the fact that assessee had bank deposits in a foreign country and in that case, sixteen years from the end of the relevant assessment year is the time limit for re­opening assessment as per Section 149(1)(c) of the Act. 2. That the Ld CIT(A) has erred in law by saying that as per the Finance Act, 2012 as enacted by the Parliament, Section 149(1)(c) was made effective prospectively from 01.07.2012 and thereby also has erred in law by observing that there was nothing expressly provided by the amending Act which indicate Legislative mind to make the provision applicable to those proceedings which had become barred by limitation on 01.07.2012. 3. That the Ld CIT(A) has erred in law in holding that the provision u/s 149(1)(c) are retroactive in operation in as much as they are applicable for AY' 2006­07 onwards and in such sense, the assessment order passed u/s 147 on 10/11/2017 for AYs 2001­02 was void abinitio. 4. That, the order of the Ld. CIT CA) is otherwise bad in law and ne....
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....07­08 substantially represented amounts transacted in the said account in the prior years and therefore the AO agreed that only the net accretions in the said account during the relevant years were assessable as assessee's income. Based on AO's report, ld. CIT(A) allowed substantial relief to the assessee in these two years. On verification of these bank statements, the AO had however noted that various sums totalling about USD 9,00,000 were deposited in the HSBC Account during FYs 2000-01, 2001-02 & 2004-05. Besides from the investments made out of these deposits, the Bank had earned income which was credited in the said bank account in all the financial years commencing from FY 2000-01 and onwards. Since the said Bank account appearing in the assessee's name was never disclosed in the returns furnished by the assessee for any of these years, the AO initiated reassessment proceedings u/s 148 of the Act for the AYs 2001-02 to 2005-06 as well as 2008-09 to 2011-12. Before the notice u/s 148 dated 1602-2016 was issued, the reasons were recorded, which read as under:- "Shri Bishwanath Garodia had submitted his return of income in response to notice u/s 153A of the Income&....
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....he Act and therefore proceedings u/s 147 were ab initio void. The AO however rejected the objections put forth and proceeded to complete the assessments u/s 147/143(3) for the AYs 2001-02 to 2005-06. Taking note of the entries in the bank statements, the AO concluded that the deposits and the accretions in assessee's undisclosed bank account during FY 2001-02 totalled US$ 1,55,113.90 and this being undisclosed, the AO added an amount of Rs. 72,34,512/- as concealed income of assessee. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and raised before him a legal plea that re-opening by the AO was bad in law by raising various grounds, which are reproduced as under: " 1. For that on the facts and in the circumstances of the case, the AO was unjustified in law and on facts in initiating reassessment proceedings for the A. Y. 2001­02 without satisfying the conditions precedent. 2. For that on the facts and in the circumstances of the case, the assessment proceedings u/s 147 be held to be bad in law since proceedings were initiated much after the expiry of limitation period prescribed in Sec. 149(1) of the Act. 3. For that on the facts an....
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....e (c) was enacted by the Legislature through Finance Act, 2012. By enacting clause (c) in Section 149(1), the Legislature enlarged the period of limitation upto 16 years for assessing any income escaping assessment and which an assessee derived in relation to any asset located outside India. I note that even though the Finance Bill, 2012 was presented in the Parliament on 29th February 2012 and the Bill was enacted into Finance Act, 2012 in May 2012 yet clause (c) of Section 149(1) was made effective prospectively from 01.07.2012. The Notes on Clauses stated that the amended provisions came in force with effect from 01.07.2012. I therefore note that the amending Act being Finance Act, 2012 by which clause (c) was enacted and inserted in Section 149(1), particularly prescribed that the amending law came into effect on 01.07.2012 and there was nothing in the amending Act which indicated the Legislative intent to make the said provision operative retrospectively. In this regard the Ld. AR of the appellant brought to my attention the provisions of Finance Bill, 2012 by which amendments were proposed to be made in the Income­tax Act, 1961 to amend several Sections with retrospective....
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....ny manner shows that the Legislature intended, to make the provisions of Section 149(1)(c) applicable retrospectively. On the contrary I note that even though the Finance Act, 2012 was passed by the Legislature and approved by the President in May 2012, Section 149(1)(c) was made applicable prospectively from 01.07.2012. These facts considered cumulatively therefore leads to conclusion that the Legislature did not intend to make the amended provision applicable retrospectively." 7. Thereafter, the ld. CIT(A) referred to the decisions of the Hon'ble Supreme Court in J.P Jani ITO Vs. Induprasad D. Bhatt reported in 72 ITR 595(SC), in the case of S.S. Gadgil Vs. Lal & Co. reported in 50 ITR 231, and in the case of Union of India Vs. Uttam Steels Ltd reported in 319 ELT 598 as well as the decision of the Hon'ble Jurisdictional Calcutta High Court in the case of CIT Vs. Manik Chand Nahata reported in 78 ITR 204 (Cal.) and held as under:- "11. Applying the ratio laid down in the foregoing judgments to the facts of the appellant's case, then I find that search under Section 132 was conducted against the appellant on 28.07.2011 but the notices u/s 148 initiating the re­asse....
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....ffective from 01.07.2012 and as such there was no overlapping period. In the circumstances therefore the proceedings u/s 147 which became time barred prior to 1st July 2012, could not be revived by the amendment in Section 149(1)(c). I am therefore of the considered opinion that since in the present case, the assessment was reopened by the Ld. AO only on 16.02.2016, the same was barred by limitation. Accordingly I hold that the proceedings were without jurisdiction and consequently therefore the assessment order passed u/s 147 was ab initio void. The order u/s 147/143(3) dated 10.11.2017 is therefore cancelled. Ground Nos. 1 to 4are therefore allowed." 8. The ld. CIT(A) concluded that since the legal issue had been answered in favour of assessee, there was no point in adjudicating other grounds which became only academic. Aggrieved by this action of the ld. CIT(A), the Revenue is now before us in these appeals assailing the action of ld. CIT(A) deciding the aforesaid legal issue in favour of assessee, whereas the assessee is in cross objection(s) challenging the action of the ld. CIT(A) in not deciding the other grounds of appeal. 9. The learned DR challenging the impugned ac....
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....assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. Explanation.­In determining income chargeable to tax which has escaped assessment for the purposes of this sub­section, the provisions of Explanation 20f section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub­section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non­resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of t....
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....ovision applicable to those proceedings which had become barred by limitation as on 01/0712012 i.e. the date when the amended provisions came into force. I agree with the observations of the judicial forums that period of limitation is always part of procedural law and therefore such provisions are generally retro­active in operation. In fact the provisions of Section 149(1)(c) are retro­ active in operation in as much as they are not applicable only to proceedings for A Y. 2012­ 13 and onwards but they are applicable to all such proceedings which the Ld. AO. could have legally taken for reopening of assessment as on 01/07/2012. For example, as on 1st July 2012, the Ld. A O. could have reopened the assessments commencing on or after 1st April 2006 i.e. AY. 2006­07 and onwards. As per the law in force as on 01/04/2006 i.e. for AY. 2006­07, the assessment could have been reopened only upto a period of six years from the end of the relevant assessment year. However, since the Ld. A O. could have reopened the assessment for AY. 2006­07 as on 1st July, 2012, the extended period of sixteen years became available for AYs 2006­07 and onwards and in such sense, t....
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....applicable prospectively and not retrospectively. In particular, he submitted that nowhere in the amending Act of 2012 the legislature had disclosed its mind or intention to make the law applicable retrospectively so as to disturb the proceedings which had become dead by the time the Finance Bill, 2012 was made into Finance Act, 2012. The ld. AR pointed out that by the time the clause (c) of Section 149(1) became operational on 01-07-2012, the reassessment proceedings for and upto AY 2005-06 had become time barred and therefore when the Legislature did not specifically provide for the said clause to come into effect retrospectively, the same could not be given effect for authorizing the AO to re-open the assessments for AYs 2001-02 to 2005-06 in February 2016. In support of his contention, the ld. AR relied on the judgment of the Hon'ble Delhi High Court in the case of Brahm Dutt Vs ACIT (260 Taxman 380) involving similar facts. He further pointed out that the SLP filed by the Revenue against the said judgment was dismissed by the Hon'ble Supreme Court in its judgment dated 05.07.2019 in SLP No. 20207/2019. The ld. AR also relied on the judgment of the Hon'ble Supreme Court in the ....
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....st day of April, 2012." 13. We note that prior to enactment of clause (c) in Section 149(1), the proceedings for reassessment could be initiated at any time before the end of six years from the end of the relevant assessment year and not beyond. Accordingly the proceedings under Section 147 for the AY 2001-02 could not have been initiated anytime on or after 01-04-2008. In so far as AY 2005-06, no proceedings under Section 147 could have been initiated on or after 01-04-2012. We thus find that when clause (c) of Section 149(1) became operational on 01-07-2012, the reassessment proceedings, as per the law then existing had already become time barred or closed. As such as per the provisions of the Act as on force on 31-03-2012, the assessee had obtained a vested right, as provided by Section 149(1) of the Act. From the language employed by the Legislature while enacting clause (c) in Section 149(1), we find that legislative mind to make the said provision applicable retrospectively so as to revive proceedings which had already become time barred, is nowhere discernible. Nowhere either in the amendment Act or in Notes on Clauses, it is apparent that the Parliament while enacting....
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.... the same. Applying these judicial principles to the present case, we note that the Parliament in its wisdom while enacting clause (c) in Section 149(1) made the same operational prospectively from 01-072012. Nowhere in the language used by the Parliament, it disclosed its mind that the said provision was intended to revive or reopen the proceedings which had attained finality prior to the date on which the amended provision came into operation. In the circumstances in absence of any clear mandate by the Parliament, the Revenue cannot press into service the provisions of the Explanation to claim that even the proceedings which had attained finality or where the proceedings u/s 147 had become time barred, the same stood revived because of the Explanation. 15. We find that in the impugned order the ld. CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of J.P. Jani ITO Vs Induprasad D. Bhatt (supra). In the decided case the assessee had claimed that his assessment was reopened by the Ld. AO by taking benefit of the extended period of limitation which was provided for in Section 148 under the 1961 Act whereas the period of limitation under the Income Tax Act 192....
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.... the High Court by the grant of a writ." (emphasis supplied by us) 16. This principle was reiterated by the Honble Apex Court in its judgment in the case of Union of India Vs Uttam Steels Ltd (319 ELT 598). In this case it was the assessee's plea that the amended provisions of Section 11B of the Central Excise Act, 1944 which granted additional time for preferring refund claim should be made available to the assessee even though within the original limitation period the assessee had failed to furnish such claim and the time limit for making such claim had expired prior to the amending Act becoming operational. The assessee's plea for extension of limitation period was resisted by the Revenue but was allowed by the Hon'ble High Court. On appeal by the Revenue, the Hon'ble Supreme Court held as follows: "10. We have heard the learned counsel for the parties and Shri Bagaria, the learned amicus curiae at some length. There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself h....
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....nto force. It follows therefore that the notices dated 13­111963 and 9­1­1964 issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court4 by the grant of a writ." 10.3 In New India Insurance Co. Ltd v. Smt Shanti Misra, Adult 1975 2 SCC 840, this Court said: (SCC p. 846, para 7) "7. ... '(2) ... The new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation.'" 10.4 Similarly in T. Kaliamurthi v. Five Gori Thaikkal Wakf 2008 9 SCC 306, this Court said: (SCC p. 322, para 40) "40. In this background, let us now see whether this section has any retrospective effect. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This would mean that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of the enact....
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....g how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [1870] LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity i....
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.... proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors 18. The Constitution Bench of the Hon'ble Supreme Court while adjudicating the matter also took note of the fact that the same Finance Act, 2002 carried out some other amendments to the Income-tax Act, 1961 which were given retrospective operation by the Parliament. However the proviso to Section 113, was made effective prospectively from 01-06-2002. The relevant discussion in the said judgment is as follows: "d) There are some other circumstances which reflect the legislative intent. The problem which was highlighted in the Con....
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....contrary, specific stipulation is added making the provision effective from 1st June, 2002. 19. In the present case we note that the Finance Act, 2012, by which clause (c) was enacted in Section 149(1), also made several other amendments in the Income-tax Act, 1961 and these were made applicable with retrospective effect. For instance, Sections 2(14) & 2(47) which define the words 'capital asset' & 'transfer' were amended with retrospective effect from 01-04-1962. Similarly amendments in Section 9(1)(vi) & 9(1)(vii) enlarging the definition of income deemed to accrue in India by way of 'royalty' and 'fees for technical services' were made effective retrospectively from 01-04-1976. These amendments were also closely linked with foreign sources of income or transactions between the non-residents. However the Legislature in its wisdom made the foregoing amendments with retrospective effect, whereas the amendment in Section 149(1) by inserting clause (c) was made effective prospectively from 01-07-2012. We therefore find merit in the ld. AR's submission that legislative intent to make the clause (c) of Section 149(1) applicable retrospectively so as to revive close proceedings wa....
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....t and loss account at its choice either in terms of its governing Act or as per terms of Section 115JB of the Act. Secondly, by virtue of this explanation if an anomaly which we have noticed is sought to be removed, we do not think that the legislature has achieved such purpose. In plain terms, this is not a case of retrospective legislative amendment. It is stated to be clarificatory amendment for removal of doubts. When the plain language of sub­section (2) of Section 115JB did not permit any ambiguity, we do not think the legislature by introducing a clarificatory or declaratory amendment cure a defect without resorting to retrospective amendment, which in the present case has admittedly not been done. 21. We note that the language of Explanation (3) to Section 115JB is somewhat similar to the language of the Explanation below Section 149. In both places it is provided that the Explanation is inserted "for removal of doubts" and the Explanation is applicable to assessment years beginning on or before 01-04-2012. Yet the Hon'ble Bombay High Court held that since the principal provision of the Act was not amended retrospectively, by applying the Explanation (3), the princip....
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....mined the validity of the retrospective amendment of a statute in light of Article 19(1)(g) of the Constitution of India, i.e. a fundamental right to practice any profession, or to carry on any occupation, trade or business. The court said: "In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental rights under article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statute struck­down by courts for certain defects; the period of such retroactivity, and the decree and extent of any unforeseen or unforeseeable financial burden imposed for the past period etc." 18. In Govinddas v. ITO [1976] 103 ITR 123 the Supreme Court held that Section 171 (6) of the Income Tax Act was prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Act came into force and observed that: "11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrosp....