TaxTMI 
TaxTMI 
2020 (1) TMI 772
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....c) of the I. T. 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 0-1.07.2012. 3.that the Ld. CIT(A) has erred in law in holding that the provision u/s. 149(1)(c) are retro-active in operation inasmuch as they are applicable for AY 2006-07 onwards and in such sense, the assessment order passed u/s. 147 on 19.01.2015 for AY 2005-06 was void ab initio." 3. The sole issue involved in the grounds of appeal of Revenue is against the action of the Ld. CIT(A) in holding that the proceedings u/s. 147 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") become time barred prior to 01.07.2012 could not be revived by the amendment in section 149(1)(c) of the Act. Therefore, according to him the assessment reopened by the AO on 19.08.2013 was barred by limitation and accordingly, the Ld. CIT(A)....
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....ring the year under consideration. It was also noted that the said deposit were not reflected in the balance sheet of the assessee and not offered to tax as income for the year in his return of income. In view of the above, the AO issued notice u/s. 148 on 19.08.2013 seeking to reopen the assessment for the AY 2005-06 and required the assessee to furnish a return of income in response to the said notice. In the objections, the assessee challenged the validity of the notice issued u/s. 148 arguing that the proceedings u/s. 147 for the AY 2005-06 had become time barred on 31.03.2012 and hence, the notice u/s. 148 issued on 19.08.2013 was without jurisdiction and ab initio void. According to the assessee the clause (c) of sec. 149(1) inserted by the Finance Act, 2012 extending the time limit for reopening of assessment from six years to sixteen years could not come to the rescue of the AO for the assessment year 2005-06 since the proceedings u/s. 147 for the relevant year had become time barred on 31.03.2012 whereas section 149(1)(c) of the Act came into force w.e.f. 01.07.2012. In support of this proposition the assessee relied on the judgment of Hon'ble Supreme Court in the case of ....
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....e reassessment proceedings In the were initiated only on 19.08.2013 I.e. after the proceedings had become time barred. In the course of appellate proceedings the Ld. AR of the appellant made extensive arguments claiming that in terms of Section 149 as was In force, the assessment proceedings for AY 2005-06 could not be reopened by the Department after 01.04.2012 by taking recourse to extended limitation period prescribed in Section 149(1)(c) of the Act. 3. From the submissions of the Ld. AR, I thus note that the only material issue to be decided in the present appeal is whether the initiation of reassessment proceedings u/s 148 on 19.08.2013 could be said to be within the period of limitation as prescribed in Section 149 of the Act or whether on the facts obtained in the present case it can be said that the reassessment proceedings had become time barred on 31.03.2012 and therefore Initiation of proceedings u/s 147 on 19.08.2013 was hit by the law of limitation. 4. Section 149(1) of the Income-tax Act, 1961 as now in force reads as follows: (1) No notice under section 148 shall be issued 47 for the relevant assessment year,- (a) if four years hav....
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....ents were made effective retrospectively from 01.04.1976. Unlike, the foregoing amendments which were specifically made effective retrospectively, the amendment in Section 149(1) was made effective prospectively from 01.07.2012. In the above factual background therefore it is necessary to ascertain whether the Ld. AO could be held to be justified in reopening the assessment for AY 2005-06 which became time barred on 31.03.2012 and on that date admittedly clause (c) of Section 149(1) was not in force. 6. Provisions of the Income-tax Act, 1961, as were in force on 31.03.2012; assessment of any assessee could be reopened by the ld. AO under Section 147 of the Act by issuing notice u/s 148 within the time prescribed in Section 149 of the Act. As per Section 149, no assessment could be reopened after the expiry of period of six years from the end of the relevant assessment year. As such the assessment for AY 2005-06 could have been legally reopened at any time till 31.03.2012 and not thereafter. From the facts on record it Is evident that no notice u/s 148 was issued by the Ld. AO for AY 2005-06 till 31.03.2012 even though the search in the appellant's case was conducted on....
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....he assessee. The AAC allowed the appeal and set aside the assessment order on the ground that there was no valid service of notice. The order of AAC was passed on 05.01.1963 by which time the Income-tax Act, 1922 was repealed and Income-taxAct, 1961 had come in force with effect from 01.04.1962. Under the Income-tax Act, 1961 the period of limitation was enlarged from 8 years to 16 years and therefore taking benefit of the enlarged period the Ld. AO issued a show cause on 04.01.1963 and subsequently issued the notice u/s 148 of the new Income-tax Act, 1961 on 13.11.1963. The assessee challenged the validity of the notice and the consequent reassessment proceedings by filing a civil application. The Hon'ble Gujarat High Court allowed the assessee's plea challenging the validity of the notice and held that on true construction of Section 297(2)(d)(ii) of the 1961 Act, the ITO could not issue a notice u/s 148 in order to reopen the assessment in a case where the right to reopen the assessment was barred under the old Act at the time when the new Act came into force. According to High Court when the period for reopening the assessment under Section 34(1)(a) of the old ....
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....l Vs Lal & Co. (50 ITR 231) is also relevant in deciding this issue. In that case while completing the assessment for AY 1954-55, the Ld. AO found that the assessee had business connections with non-residents and therefore an SCN was issued on 12.03.1957 directing the assessee to show cause why it should not be treated as an agent of non-resident parties for AY 1954-55. The assessee not only denied that it was an agent of non-residents but also contended that the action under Section 43 was time barred. The Ld. AO however issued notice u/s 34 of the 1922 Act on 27.03.1957 treating the assessee to be agent of non-residents after rejecting assessee's contention that proceedings had become time barred. Relying on proviso to Section 34(1)(b)(iii) inserted by Finance Act, 1956; the ITO held that the Legislature had extended the time limit in clear and express terms to cover action u/s 34 against agents of nonresidents. The reopening was challenged in writ petition before the High Court. The Bombay High Court held that on the date when the notice u/s 34 was Issued, by the reason of the proviso the notice was out of time and the period provided thereby could not be extended b....
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....tion 116 of the relevant Act. Subsequent to filing of claim, the Finance Act, 2000 amended Section 116 extending the period for furnishing rebate claims from six months to one year. The said Section became effective from 12.05.2000. The assessee pleaded that under the amended provisions of Section 116, the claim furnished was within period of limitation and therefore the rebate claim should be allowed. The assessee's contention was accepted by appellate authorities including High Court, but on appeal the Supreme Court overruled the judgment of the High Court and held that since the period of limitation prescribed in Section 11B had already expired prior to amendment coming into effect, the amendment Act did not and could not revive dead proceedings. In arriving at such conclusion, the Apex Court relied on numerous judgments rendered on the subject. The relevant findings of the Apex Court were 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 ....
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....open the assessment was barred under the old Act at the date when the new Act came into force. It follows therefore that the notices dated 13-11-1963 and 9-1-1964 Issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court by the grant of a writ." 10.3 In New India Insurance Co. Ltd v. SmtShaatlMisra, 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 Kallamurthi y. Five GoriIhalkkalWakf 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 t....
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....in accordance with the provisions of the respective enactments before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226-and of this Court under Article 32-cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of section 11-b. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it. The said enactments including section ll-b of the central excises and salt act and section 27 of the customs act do constitute 'law' within the meaning of article 265 of the constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under th....
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....e held to be illegal and Invalid and must be struck down." 11. Applying the ratio laid down In the foregoing judgments to the facts of theappellant's case, then I find that search under Section 132 was conducted against the appellant on 22.09.2011 but the notice uls 148 initiating the re-assessment proceedings for AY 2005-06 was issued on 19.08.2013. As per Section 149(1) as was in force till 31.03.2012, the assessment for AY 2005-06 could have been validly reopened by the Ld. AD at any time till 31.03.2012. Admittedly no notice uls 148 was Issued till then. It is true that Finance Bill, 2012 Introduced in Parliament in February 2012 proposed to insert clause (c) in Section 149(1) by which period of limitation for Issuance of notice uls 148 was extended upto sixteen years. However as per the Finance Act, 2012 as enacted by the Parliament, Section 149(1)(c) was made effective prospectively from 01.07.2012. The Notes on Clauses specifically stated that the amended provisions were to come in force with effect from 01.07.2012. I therefore find that there was nothing expressly provided by the amending Act which indicated Legislative mind to make the provision appli....
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....ohanka [since deceased) and his wife JayashreeJayakarMohanka jointly hold a bank A/c. No. 5091415336, maintained with HSBC, Switzerland. The A/c. was opened on 06.08.2014 and having deposits in US$ which was equivalent to Rs. 84,07,136/- in INR. A search and seizure u/s 132 of the I. T. Act, 1961 was conducted on 22.09.2011 when Smt. JayashreeJayakarMohanka admitted that the account was opened by her husband. She also admitted the fact when her statement was recorded u/s 131 on 18.11.2011. Re- assessment proceeding was initiated by issuing notice u/s 148 on 19.08.2013. Assessment was completed u/s 147/ 143(3) on 19.01.2015 when the aforesaid amount of Rs. 84,07,136/- was added as undisclosed income. Assessee preferred appeal. Ld. CIT(A) vide order dated 28.02.2018 in Appeal No., 932/DCIT. CC-4(4)/CIT(A)-21/KoI/2014-15 has held that the notice u/s 148 was time barred and therefore, assessment order u/s 147 Was void ab initio. The moot point in this case appeared to be the validity of the reassessment proceedings u/s 147 for AY 2005-06 of the captioned assessee in the light of the amended provision u/s 149(1) of the Income Tax Act w.e.f. 01.07.2012 and on the view o....
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....d/expanded power to the tax authority. The Ld. CIT(A) has rightly commented that the period of limitation is always part of procedural law and therefore such provisions a reretro-active in operation. However, if the opinion of the Ld. (IT(A) that since the legislature did not expressly provide that the new provision u/s 149(1)(c) should be applicable in the cases which were previously barred by limitation as on 01.07.2012, therefore, the proceedings for AY 2005-06 cannot be revived under the new law as per the fresh provision u/s 149(1)(c) appear to be illogical and erroneous, Because, if such view is accepted then it would mean that in spite of the new law as per the fresh provision u/s 149(1)(c), the department cannot proceed beyond six years, and that would render the law ineffective and meaningless. This could not have been the legislative intension to bring into force the new provision u/s 149(1)(c) to tackle the monster of foreign black money. In view of the above, it is felt that the decision given by the Ld. CIT(A) is not based on correct appreciation of law and of fact, and therefore, it is prayed before the Hon'ble ITAT, Kolkata that the decision made by....
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....ant findings of this Tribunal is reproduced hereunder: "12. We have heard the rival submissions and perused the orders of the authorities below. We have also critically examined the applicable legal provisions as also the judicial decisions relied upon by both the parties. The facts of the case are in narrow compass which are not disputed by either of the parties. The preliminary question to be decided first is whether the initiation of reassessment proceedings by the AO for the AYs 200-02 to 2005-06 on 16-02-2016 was legally sustainable. If answer to this question is against the Revenue and in favour of the assessee, then the grounds raised in cross objections become academic. In order to understand the issue we may, at the cost of repetition, refer to the provisions of Section 149 which read as follows: " (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant 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 chargea....
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....spective effect, in terms of which any assessment for and upto sixteen years before 01-07-2012 could be reopened. 14. In order to verify the correctness of this contention, it is therefore relevant to understand the function which an Explanation performs in a fiscal statute. It is judicially held that an Explanation cannot be read in isolation. Intention of an explanation is that in case if any provision of the principal act is not clear then it shall be made clear because of the Explanation. However for the purpose of taking an action or for the purpose of interpreting the law, the foundation is the main section and the Explanation is only a subordinate part. The object of the Explanation is to understand the relevant provision of the Act in its true light but the Explanation does not ordinarily enlarge the scope of the original section which it explains. The Explanation should therefore be read so as to harmonize with and clear up an ambiguity, if any, in the main section and it should not be so construed as to widen the ambit of the Section to which it is appended. It is an error to explain the Explanation with the aid of the Section to which it is appended and any such....
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....t came into force. It was opined that it was not permissible to construe sections 297(2)(d)(ii ) of the new Act as reviving the right of the ITO to reopen the assessment which was already barred under the old Act. The reason was that such a construction of section 297(2)(a )(ii) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well-known rule of interpretation that, unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time. The language of the new section must be read as applicable only to those cases where the right of the ITO to reopen the assessment was not barred under the repealed section. The new statute does not disclose in express terms or by necessary implication that there was a revival of the right of the ITO to reopen an assessment which was already barred under the old Act. It must be held that, on a ....
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....e end of the year of assessment. But authority of the Income Tax Officer under the Act before it was amended by the finance act of 1956 having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to section 18 of the finance act, 1956, only a limited retrospective operation i.e up to 1-4-1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income Tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided, become barred." 10.2 To similar effect is the judgment in ITO v. InduprasadDevshanker Bhatt AIR 1969 SC 778. The Court held: (AIR p. 783, par....
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....ment and not six months. This, however, is subject to the rider that the claim for rebate should not be made beyond the original period of six months. On the facts of the present case, since the claims for rebate were made beyond the original period of six months, the respondents cannot avail of the extended period of one year on the subsequent amendment to Section 11- B."(emphasis supplied) 17. As regards the Revenue's contention that the proviso or Explanation to the principal provision of the statute should be given retrospective operation, we find that similar contention was considered and negated by the Constitution Bench of the Hon'ble Supreme Court in the case of CIT Vs Vatika Township Pvt Ltd (supra). In this case the Hon'ble Apex Court was called upon to interpret whether the proviso to Section 113 enacted by the Finance Act, 2002 levying surcharge on the tax payable under block assessment, was clarificatory and therefore retrospective in operation or whether it was applicable prospectively. The Division Bench of the Hon'ble Supreme Court in its earlier judgments had held the said proviso to be retrospective in operation because in its opinion the said proviso was....
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....s dicta, a little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India v. Indian Tobacco Association [2005] 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra [2006] 6 SCC 286. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be ....
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..... It can be seen from the same notes that few other amendments in the Income Tax Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F is amended "so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract." This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts: (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. Thus, it was a conscious decision of the legislature, even when the legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of th....
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....uch company." By enacting this Explanation, liability to pay tax on book profit under Section 115JB was sought to be fixed on the companies carrying on the business of banking, insurance or electricity. Relying on Explanation (3), the Revenue sought to justify the assessment of book profit in the hands of a nationalized Bank for the AY 2005-06. It was argued by the Revenue that the Explanation (3) made the provisions of Section 115JB applicable to assessees carrying on banking business for the AYs beginning on or before 01-04-2012. While dealing with the Revenue's argument with regard to retrospective application of Section 115JB because of Explanation (3) inserted by the Finance Act, 2012; the Hon'ble High Court observed as follows: "This explanation starts with the expression "For the removal of doubts". It declares that for the purpose of the said section in case of an assessee-company to which second proviso to section 129 (1) of the Companies Act, 2013 is applicable, would have an option for the assessment year commencing on or before 1st April, 2012 to prepare its statement of profit and loss either in accordance with the provisions of schedule III to the Co....
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....ssessee challenged the legality of the notice u/s 148 and consequent proceedings by filing writ petition. Before the Hon'ble Delhi High Court, the Revenue pleaded that the provisions of Section 149(1)(c) were intended to be retrospective in operation and therefore the proceedings under Section 148 were validly initiated and consequently therefore the writ petition was liable to be dismissed. The Hon'ble Delhi High Court took note of the Revenue's averments in the following words: "11. It is submitted that the intent and purpose behind the 2012 amendment of the Act was to empower the revenue to reopen assessments beyond a particular period: in this case, by 16 years, if it is revealed that the assessee held asset abroad. Given this relevant condition, the assessee could not complain that as regards matters that had not been disclosed, reassessment proceedings were validly instituted." 23. We thus note that before the Hon'ble Delhi High Court, the Revenue had particularly argued that the provisions of Section 149(1)(c) were enacted to empower the Revenue to reopen the assessments for a period of sixteen years prior to 01-07-2012 and such amendment being retrospectiv....
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....strued as prospective only." In CIT v. Scindia Steam Navigation Co. Ltd [1961] 42 ITR 589, it was held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law upsetting the position and imposing tax liability after that date, even if made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year. These principles were reiterated in CIT v. Vatika Township (P.) Ltd [2014] 49 taxmann.com 249/227 Taxman 121/367 ITR 466 (SC). 19. In view of the above discussion, it is held that the petition has to succeed; the impugned reassessment notice and all consequent proceedings are hereby quashed and set aside. The writ petition is allowed; however without order on costs." 24. We further note that the Revenue's SLP against the decision of the Hon'ble Delhi High Court was dismissed by the Hon'ble Supreme Court on 05-07-2019. We also find that following the judgment of the Hon'ble Delhi High Court (supra), the coordinate Benches of this Tribunal in the following cases similarly quashe....
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....otal income of Rs. 46,65,327/- . Thereafter, notices u/s. 143(2) and 142(1) of the Act were issued on 26.03.2013 and in compliance thereof the Ld. AR of the assessee appeared and furnished details, statement and computation from which the AO found that five bank accounts were undisclosed. On examination of the said bank statements, the AO noted that an amount of Rs. 46,84,050/- was credited in the assessee's bank account on 31.03.2006 and since the said credit did not appear in his books of accounts, the assessee was show caused to explain as to why it should not be added under Sec. 68 of the Act. The explanation put forth by the assessee was that the sum of Rs. 46,84,050/- reflected in the bank statement on 31.03.2006 did not represent fresh deposit or new investment but the same represented maturity proceeds of the investment in bonds made for which the necessary entry in the bank statement appeared on 07.12.2004 and therefore did not constitute undisclosed income of the assessee for the relevant year. The AO however did not accept the explanation and added the said sum by way of unexplained cash credit in AY 2006-07. Being aggrieved, the assessee preferred an appeal before the L....
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....tating that the credit on 31.03.2006 represented the redemption proceeds of the investment originally made on 07.12.2004. The relevant security purchase & redemption voucher accompanied the confirmation issued by the HSBC, Geneva. 3. On giving due consideration to the submissions of rival parties and the facts and material available on record, it is noted that Shri Lalit Mohanka maintained a bank account with HSBC, Geneva. In the assessment proceedings the appellant obtained and furnished the bank statements of the aforesaid bank account from the date on which the account was opened to the date of closure. I find that the Indian tax authorities had also obtained authenticated information regarding the bank account from the Swiss authorities. The Ld. AO had carried out a detailed analysis of the entries in the bank statements and taxed the deposits, interest income and capital gain as per law in the respective years to which it pertained. Accordingly even in the assessment year in question i.e. AY 2006-07, the Ld. AO had assessed the relevant deposits, interest income etc. pertaining to this year which has been elaborately discussed in the assessment order. The limited disp....
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....aw. 6. The third & last objection of the Ld. AO to justify the impugned addition is that the appellant has never offered the investment made in FY 2004-05 to tax suomoto but disputed the validity of reassessment proceedings for the earlier AY 2005-06 on technical grounds, In my considered view however this objection is of no relevance. The taxability of any sum is not dependent on the fact whether the assessee has accepted the same as his/her income or not. At the same time, it is also relevant to mention that any item of income can be assessable to tax only in the year in which it is legally chargeable to tax under the provisions of the Act. In the present case the facts on record prove beyond doubt that the deposit/investment was made in FY 2004-05 and therefore as per law the sum was legally chargeable to tax only in AY 2005- 06, The fact that the appellant has challenged the validity of assessment order passed for AY 2005- 06 will not make any difference nor shall it have any bearing to bring to tax the said sum in the relevant AY 2006-07, In the circumstances this objection of the Ld. AO to justify the addition of Rs. 46,84,050/- is held to be unjustified. 7.....