TaxTMI 
TaxTMI 
2025 (5) TMI 1338
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....eals under Section 260A of the Income Tax Act, 1961 [the Act] assailing the orders passed by the learned Income Tax Appellate Tribunal [ITAT] allowing the respective appeals preferred by the respondents [Assessees]. 2. The present batch of appeals concerns three Assessees namely Smt. Sneh Lata Sawhney, Smt. Sangeeta Sawhney and Sh. Praveen Sawhney. ITA No. 216/2023 concerns Late Sh. B.L. Sawhney and Smt. Sneh Lata Sawhney is arrayed as the respondent in the said appeal being the legal heir of the deceased assessee, Sh. B.L. Sawhney. 3. The Assessees had filed their respective appeals against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] in respect of appeals emanating from the assessment orders [quantum appeals] as well as the orders passed in the penalty proceedings [penalty appeals]. It is material to note that the assessments made in the case of Smt. Sneh Lata Sawhney and Smt. Sangeeta Sawhney were made on protective basis. However, in the case of Sh. Praveen Sawhney and in the case of Sh. B.L. Sawhney (since deceased), the assessment has been made on substantive basis. 4. The Assessees are related and the questions involved are identical and therefore....
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....0 Smt. Sangeeta Sawhney 73/2024 2008-09 18.05.2023 Penalty 21 Smt. Sangeeta Sawhney 74/2024 2010-11 18.05.2023 Penalty 22 Smt. Sangeeta Sawhney 76/2024 2007-08 18.05.2023 Penalty 23 Smt. Sangeeta Sawhney 75/2024 2009-10 18.05.2023 Penalty 24 Sh. Praveen Sawhney 88/2024 2006-07 18.05.2023 Penalty 25 Sh. Praveen Sawhney 89/2024 2011-12 18.05.2023 Penalty 26 Sh. Praveen Sawhney 90/2024 2009-10 18.05.2023 Penalty 27 Sh. Praveen Sawhney 94/2024 2007-08 18.05.2023 Penalty 28 Sh. Praveen Sawhney 92/2024 2008-09 18.05.2023 Penalty 29 Sh. Praveen Sawhney 93/2024 2010-11 18.05.2023 Penalty 6. For the purpose of disposal of the present batch of appeals, we refer to the facts as relevant in ITA No. 782/2023. This appeal assails the order dated 18.05.2023 [impugned order] passed by the learned ITAT in a batch of appeals including ITA No. 1539/Del/2017, which was preferred by Parveen Sawhney [hereafter the Assessee] in respect of the Assessment Year [AY] 2006-07. 7. The impugned order passed by the learned ITAT is a....
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....merits of the case, thereby deleting the penalty imposed vide penalty order passed under Section 271 (1) (c) of the Act? II. Whether on facts and circumstances of the case, the ITAT is correct in not allowing extension of the time-barring date, when a valid reference was sent by competent authority to Swiss authorities as per the provisions of the Act and DTAA between India and Switzerland, thereby deleting the penalty imposed as assessment order being held as time barred?" 12. By a subsequent order dated 12.11.2024, this court had held that the appeals being [ITA Nos. 69/2024, ITA 72/2024, ITA 73/2024, ITA 74/2024, ITA 76/2024, ITA 75/2024, ITA 88/2024, ITA 89/2024, ITA 90/2024, ITA 92/2024, ITA 93/2024 and ITA 94/2024] would be heard on the questions of law as noted in the order dated 30.01.2024 passed in ITA Nos. 72-76/2024. PREFATORY FACTS 13. The Assessees have succeeded in their respective appeals before the learned ITAT on the ground that the assessment orders from which the appeals emanate were passed beyond the period as stipulated under Section 153B of the Act. As noted above, unless the context indicates otherwise, we shall refer to the facts as obtaini....
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.... the learned ITAT raising several grounds including that the assessment order had been passed beyond the period of limitation as prescribed under Section 153B of the Act. The learned ITAT accepted the said contention and allowed the appeals on 18.05.2023. In view of its decision that the assessment order dated 04.03.2015 was barred by the limitation, the learned ITAT did not examine the other grounds as raised by the Assessee on merits of the said issues. RIVAL STANDS 22. It was the Revenue's case before the learned ITAT that the assessment order was not barred by limitation as the period for passing the assessment order under Section 153B of the Act was extended in terms of Clause (ix) of the Explanation to Section 153B of the Act. The Revenue contends that in terms of Clause (ix) of the Explanation to Section 153B of the Act, the period commencing from the date on which a reference was made for request for information by an authority competent under the agreement referred to in Section 90 or Section 90A of the Act - in this case the Indo-Swiss DTAA - and ending with the date on which the information is last received or a period of one year, whichever is less, is required to....
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....ess; or *** *** *** shall be excluded" 28. In the present case, there is no dispute that in fact the Revenue had made a reference under Section 90 of the Act to the concerned Swiss authorities. The impugned order sets out the letters dated 14.05.2013 and 11.06.2013, which were relied upon by the Revenue to establish that such a reference was made. 29. The letter dated 14.05.2013 is addressed by the Commissioner of Income Tax (Central)-1, New Delhi to the Under Secretary of the Foreign Tax and Tax Research Division-IV [FT&TR] of the Central Board of the Direct Taxes, [CBDT], Department of Revenue forwarding the proforma/checklist for seeking information to the FT&TR Section of the CBDT in relation to "Swiss Tax Authority under DTAA". 30. We consider it apposite to refer to the letter dated 11.06.2013 sent by the Under Secretary of FT&TR-III (2) confirming that the request for information as sought by the AO was made to the concerned authorities of the Swiss Confederation under "Exchange of Information Article of Indo-Switzerland Double Taxation Avoidance Agreement". The same is set out below: - "Sir / Madam, Sub: Request for information u....
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....ing to the learned ITAT, the reference made by the Revenue was invalid as it was not covered under Article 26 of the Indo-Swiss DTAA and the benefit of Clause (ix) of the Explanation to Section 153B of the Act was not available in case of any invalid reference. 34. The learned ITAT noted that the Notification dated 27.12.2011 [Notification No. S.O. 2903(E)] is clear that the Indo-Swiss DTAA can be made applicable only for the information that relates to fiscal year beginning on or after 01.04.2011. Since the information sought by the Revenue was relevant to the period from 01.04.1995 to 31.03.2012, the learned ITAT held that the reference was invalid. 35. The learned ITAT referred to the decision of the Rajasthan High Court in Commissioner of Income-tax v. Bajrang Textiles (2007) 294 ITR 561 and the decision of the Allahabad High Court in Sadana Electric Stores v. CIT (2013) 219 Taxman 294 and on the strength of these decisions held that the invalid reference would not extend the period of the limitation as prescribed under Section 153B of the Act. The learned ITAT also referred to earlier decision of its coordinate bench in Consulting Engineering Services (India) Pvt. Limite....
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....s of the said Agreement shall be given effect to in the Union of India. AGREEMENT BETWEEN THE REPUBLIC OF INDIA AND THE SWISS CONFEDERATION FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME--THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE SWISS FEDERAL COUNCIL Desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income, Have agreed as follows: *** *** *** Article 24 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as is necessary for carrying out the provisions of this Agreement in relation to the taxes which are the subject of this Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes which are the subject of this Agreement. No information as aforesaid shall be exchanged which would disclose any trade, business, industrial or professional secret or ....
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.... November 1994 (hereinafter referred to as "the Agreement"), have agreed as follows: *** *** *** Article 14 Article 23 to 27 of the Agreement shall become Articles 25 to 29." 41. The Supplementary Protocol did not amend the contents of Article 24 of the Indo-Swiss DTAA, as notified by the Notification dated 21.04.1995. However, Article 24 was re-numbered as Article 26 in terms of Article 14 of the Supplementary Protocol. 42. Subsequently, the Government of India and the Swiss Confederation entered into an agreement [Amending Protocol] on 30.08.2010, whereby the Indo-Swiss DTAA, as amended by the Supplementary Protocol signed at New Delhi on 16.02.2000 was amended. Thereafter, a Notification dated 27.12.2011 [S.O. 2903 (E)] was published by the Government of India in exercise of its powers under Section 90 of the Act. The relevant extract of the said notification is set out below: "MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 27th December, 2011 (INCOME-TAX) S.O. 2903 (E). - Whereas a Protocol amending the Agreement between the Republic of India and the Swiss Confederation for the avoid....
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.... to as "Amending Protocol") to amend the Agreement between the Contracting Parties for the Avoidance of Double Taxation with respect to Taxes on Income, signed at New Delhi on 2 November 1994, as amended by the supplementary Protocol signed at New Delhi on 16 February, 2000 (hereinafter referred to as "the Agreement"); Have agreed as follows: *** *** *** ARTICLE 8 Article 26 (Exchange of information) of the Agreement shall be deleted and replaced by the following Article: "Article 26 Exchange of information 1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes covered by the Agreement insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities ....
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....closure of information covered by this paragraph, notwithstanding paragraph 3 or any contrary provisions in its domestic laws." **** ***** ***** ARTICLE 14 1. The Government of the Contracting States shall notify each other through diplomatic channels that all legal requirements and procedures for giving effect to this Amending Protocol have been satisfied. 2. The Amending Protocol, which shall form an integral part of the Agreement, shall enter into force on the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect: (a) in India, In respect of income arising in any fiscal year beginning on or after the first day of April next following the calender year in which the Amending Protocol entered into force; and (b) in Switzerland, in respect of income arising in any fiscal year beginning or or after the first day of January next following the calender year in which the Amending Protocol entered into force. : 3. Notwithstanding paragraph 2 of this Article, with respect to Article 26 of the Agreement, the exchange of information provided for in this Amending ....
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....d deleted and was replaced by Article 26 as set out in the Amending Protocol. Further, paragraph 2 of Article 14 of the Amending Protocol expressly stipulated that the Amending Protocol would form an integral part of the Indo-Swiss DTAA and would be applicable on the date of the notifications confirming that all legal requirement for giving effect to the Amending Protocol were satisfied. However, paragraph 3 of Article 14 of the Ameding Protocol makes it explicitly clear that notwithstanding anything contained in paragraph 2 of Article 14 of the Amending Protocol, Article 26 of the Indo-Swiss DTAA would be applicable only for information that relates to any fiscal year beginning on or after first day of January of the year following the date on which the Amending Protocol was executed. Since the Amending Protocol was signed on 30.08.2010, Article 26 would be effective only for exchange of information that relates to the following fiscal year, that is, commencing 01.04.2011. Thus, Mr Rai's contention that the Indo-Swiss DTAA contained provisions regarding exchange of information even prior to the Amending Protocol and therefore, the request for information relating to a period prior....
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....ision. 25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p. 565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P. [West U.P. Sugar Mills Assn.v. State of U.P., (2002) 2 SCC 645], State of Rajasthan v. Mangilal Pindwal [State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60], Koteswar Vittal Kamath v. K. Rangappa Baliga & Co. [Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., (1969) 1 SCC 255] and A.L.V.R.S.T. Veerappa Chettiar v. I.S. Michael [A.L.V.R.S.T. Veerappa Chettiar v. I.S. Michael, 1962 SCC OnLine SC 318 : 1963 Supp (2) SCR 244 : AIR 1963 SC 933]. In West U.P. Sugar Mills Assn. case [West U.P. Sugar Mills Assn. v. State of U.P., (2002) 2 SCC 645], a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and makin....
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....er of 1119, cannot be held to be revived. This argument ignores the distinction between supersession of a rule, and substitution of a rule. In A.T.B. Mehtab Majid & Co. (Firm) [A.T.B. Mehtab Majid & Co. (Firm) v. State of Madras, (1963) 14 STC 355 : 1962 SCC OnLine SC 51], the new Rule 16 was substituted for the old Rule 16. The process of substitution consists of two steps. First, the old rule it made to cease to exist and, next, the new rule is brought into existence in its place. Even if the new rule be invalid, the first step of the old rule ceasing to exist comes into effect, and it was for this reason that the court held that, on declaration of the new rule as invalid, the old rule could not be held to be revived." (emphasis in original)" 53. We may also note the decision of the Supreme Court in Firm A.T.B. Mehtab Majid & Co. v. State of Madras & Another 1962 SCC OnLine SC 51. In its decision, the Supreme Court had observed as under: "......It has been urged for the respondent that if the impugned rule be held to be invalid, old rule 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been subst....
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....13, the Federal Revenue Administration (FRA) had made a request to the bank to furnish the relevant documents and also informed 'X' of the same. 'X' had opposed the request and on 23.07.2013, referred the matter to the Federal Administrative Court. The rough and ready translation [Freely translated through https://www.onlinedoctranslator.com/en/translate-french-to-english_fr_en] of the relevant extract of the said decision is set out below: "6.2.4.2 It follows that Art. 26 para. 1 CDI IN-CH [Indo-Swiss DTAA], as amended by the Protocol of 30 August 2010, applies - pursuant to Art. 14 para. 3 of the Protocol - at most the reports relating to the "fiscal year" ("fiscal year") beginning on first January of the civil year following the signing of the Memorandum of Review. ... CDI IN-CH is defined, the "fiscal year" ("fiscal year") corresponds to the previous year ("previous year"), excluding the "financial year immediately preceding the assessment year". By virtue of Indian law, the tenure of which is confirmed by Art. 14 para. 2 of the Protocol of 30 August 2010, the "previous year" beginning on 1st April of each civil year. This therefore means that the new art. 26 ....
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....he competent authorities under Article 26 of the Indo-Swiss DTAA for information, which was prior to 01.04.2011, was not maintainable. 60. Having stated the above, the next question required to be addressed is whether by virtue of Clause (ix) of the Explanation to Section 153B of the Act, the period for completion of the assessment would stand extended notwithstanding that the request for information made by the Revenue Authority for a period prior to 01.04.2011, was not maintainable. 61. The learned ITAT had referred to the earlier decisions in the context of extension of limitation under Clause (ii) of Explanation to Section 153B of the Act. In terms of the said Clause as was in force prior to Amendment Act, 17 of 2013 coming into force, the period commencing from the date when the Assessing Officer directs an assessee to get his accounts audited under Section 142(2A) of the Act and ending on the day on which the assessee is required to furnish the audit report, is required to be excluded for the purposes of computing the time limit as provided under Section 153B of the Act for completion of the assessment under Section 153A of the Act. 62. It is material to note that Cl....
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....ed in the present appeal. 65. In VLS Finance Limited and Anr. v. Commissioner of Income Tax and Anr. (2016) 12 SCC 32, the Supreme Court considered a case where the Assessing Officer had issued a direction under Section 142(2A) of the Act for conduct of a special audit on 29.06.2000, which was received by the assessee on 19.07.2000. The assessee had challenged the same by filing a writ petition and had secured an interim order dated 24.08.2000 staying the directions for conduct of a special audit. Thereafter, the assessee succeeded in its petition and the directions to conduct a special audit, which were issued on 29.06.2000 were set aside by a judgment dated 15.12.2006. In the aforesaid context, one of the questions that arose for consideration of the Supreme Court was whether the period between 24.08.2000 (the date on which the interim order was granted) and 15.12.2006 (the date on which the petition was allowed) was required to be excluded for calculation of the period of limitation for framing the assessment order. The said question was considered in the context of Explanation (1) to Section 158BE of the Act, which is para materia to Clause (ii) of the Explanation to Section....
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....rim stay was granted." 66. It is material to note that Clause (ii) of Explanation 1 to Section 158BE of Act was also similar to Clause (ii) of the Explanation to Section 153B of the Act. The Supreme Court directed that the period during which a stay order was granted, that is, from 24.08.2000 till 15.12.2006 when the judgment setting aside the direction issued under Section 142 (2A) of the Act was delivered, was to be excluded for computing the period available for passing the assessment order. However, it is material to note, that the period from 29.06.2000 till 24.08.2000; that is, the date of issuance of the order till the date of passing the stay order was not excluded. Although there is no discussion on this issue, it is implicit that the exclusion on account of direction to conduct a special audit, would not be applicable if the said direction is found to be invalid. 67. In Sahara India (Firm), Lucknow v. CIT & Anr. (2016) 12 SCC 32, the Supreme Court considered the question whether an assessee was required to be afforded a hearing before issuance of a direction for conduct of a special audit under Section 142 (2A) of the Act. The Supreme Court held in the affirmative. ....
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....ssued under Section 142(2A) of the Act that were issued prior to the court handing down its ruling - the assessments made would have to be set aside as fresh assessments would be barred by limitation. It is in the aforesaid view that the learned ASG had made a request for prospective ruling, which was acceded to by the Supreme Court. It is implicit that if the directions issued under Section 142 (2A) of the Act were held to be invalid, the benefit of exclusion of the period under Clause (ii) of the Explanation to Section 153B of the Act would not be available. 69. In Principal Commissioner of Income-tax v. Vilson Particle Board Industries Limited (2020) 423 ITR 227, the Bombay High Court following the decision in Sahara India (Firm), Lucknow v. CIT & Anr. upheld the decision of the learned ITAT setting aside the assessment order as barred by limitation, a consequence of the directions under Section 142(2A) of the Act being vitiated. The relevant extract of the ITAT's order as noted by the Bombay High Court is reproduced below: "8. .....Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (supra), we hold that where no show cause....