TaxTMI 
TaxTMI 
2025 (6) TMI 244
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...., Advs. Mr. Indruj Singh Rai, Mr. Sanjeev Menon, Mr. Rahul Singh, Mr. Anmol Jagga & Mr. Gaurav Kumar, Advs. JUDGMENT VIBHU BAKHRU, J 1. These petitions impugn separate notices [impugned notices] issued under Section 148 of the Income Tax Act, 1961 [the Act], whereby the concluded assessments of the petitioners for various years were sought to be re-opened. A tabular statement setting out the dates of the impugned notices and the assessment years in these batch of petitions, is set out below: W.P. (C). No. Assessment Year Petitioners Date of impugned notice under section 148 [limitation as per section 149] 2068 of 2015 1997-98 U.K. Paints (Overseas) Ltd. 27.03.2014 [31.03.2004] 11219 of 2015 1998-99 U.K. Paints (Overseas) Ltd. 27.03.2015 [31.03.2005] 9189 of 2016 1999-00 U.K. Paints (Overseas) Ltd. 31.03.2016 [31.03.2006] 12406 of 2018 2001-02 U.K. Paints (Overseas) Ltd. 26.03.2018 [31.03.2008] 13184 of 2019 2002-03 U.K. Paints (Overseas) Ltd. 15.03.2019 [31.03.2009] 444 of 2022 2003-04 U.K. Paints (Overseas) Ltd. 20.09.2020 and 20.01.2021 [31.03.2010] 688 of 2022 2004-05 U.K. Paint....
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.... accordingly, the Assessee contends that it would be apply only to cases where the limitation for re-opening the assessment had not already expired. 5. The Revenue counters the same and contends that Section 149 (1) (c) of the Act would be applicable retrospectively. Thus, the assessments for the assessment years could be opened even where the same stood concluded by expiry of the limitation as was applicable prior to insertion of said Clause (c). 6. As stated above, the principal question to be addressed is whether the impugned notices are barred by time insofar as they pertain to assessment years in respect of which income escaping assessment could not be assessed or re-assessed under Section 147 of the Act on account of the period for re-opening such assessments having expired prior to the insertion of clause (c) in sub-section (1) to Section 149 of the Act. 7. Section 147 of the Act enables the Assessing Officer [AO] to initiate proceedings of assessment or re-assessment. In terms of Section 147 of the Act as was in force at the material time, the AO could assess or reassess income for an assessment year where the original assessment had been concluded, provided the AO....
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....to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section." 10. Section 149 of the Act was substituted by virtue of the Finance Act, 2001 (Act 14 of 2001) with effect from 01.06.2001 to read as under: "149. Time limit for notice.- (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); (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. Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of Section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of Section 151. (....
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....necessary for his assessment, for that assessment year. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed; or (ii) suc....
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....as escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the followi....
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....come chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year). Explanation.-For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of Section 148-A have not been complied with." 17. Section 149 of the Act was also amended by the Finance Act, 2012 (Act 23 0f 2012) vide which Clause (c) was introduced with effect from 01.07.2012. Section 149 of the Act as in force with effect from 01.07.2012 is set out below: "149. Time limit for notice.- (1) No notice under Section 148 shall be issued for the relevant assessment year,- (a....
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....ocated outside India, which was chargeable to tax but had escaped assessment till the expiry of sixteen years from the relevant assessment year. 20. As noted above, it is contended on behalf of the petitioners that clause (c) of Section 149 (1) of the Act was not operative retrospectively and therefore, would be applicable only in respect of those assessment years in respect to which assessments had not been concluded. 21. The Revenue contends to the contrary. According to the Revenue, the operation of clause (c) could not be curtailed by excluding the assessment years in respect of which the limitation to re-open the assessments had expired prior to the introduction of clause (c), that is, prior to 01.07.2012. The Revenue's contention rests on Explanation to Section 149 of the Act, whereby it is clarified that the provisions of sub-sections (1) and (3) of Section 149 of the Act as amended by Finance Act, 2012 (Act 23 of 2012) was also applicable for any assessment year beginning on or before 1st day of April, 2012. 22. The question whether clause (c) of Section 149 (1) of the Act as introduced with effect from 01.07.2012 was operative retrospectively was considered by the....
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....e, filed letter requesting the assessing officer to initiate proceedings for subsequent assessment years for bringing to tax interest component relatable to the said assessment years. The assessee was, however, issued notices under section148 of the Act for fifteen assessment years, viz., assessment years 1968-69 to 1971-72 and assessment years 1981-82 to 1992-93 which were challenged on the ground of limitation. This court declined to exercise jurisdiction; on appeal, the Supreme Court held that the provision regulating period of limitation ought to receive strict construction. The Supreme Court held that the law of limitation was intended to give certainty and finality to legal proceedings and therefore, proceedings, which had attained finality under the existing law due to bar of limitation, could not be held to be open for revival unless the amended provision was clearly given retrospective operation so as to allow upsetting of proceedings, which had already been completed and attained finality. The observations of the Supreme Court are reproduced hereunder: "10. The main question that has been raised on behalf of the learned counsels appearing for the parties is wheth....
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....ction (1). The provision in sub-section (1), therefore, can have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under section 149. 14. To hold that the amendment to sub-section (1) would enable the authorities to reopen assessments, which had already attained finality due to bar of limitation prescribed under section 149 as applicable prior to 1.4.1989, would amount to give sub section (1) a retrospective operation which is neither expressly nor impliedly intended by the amended sub-section. 15. On behalf of the assessee before the High Court and in this Court reliance has been placed on the provisions contained in sub-section (2) of section 150. It is submitted that the provision contained in sub-section (2) of section 150 is in the nature of clarification or Explanation to sub section (1). Sub-section (2) makes it clear that the embargo of period of limitation lifted under sub section (1) for proposed reassessments based on order in proceedings under appeal, reference or revision, as the case may be, would not apply to assessments which have attained finality due to bar of li....
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....ading whole of amended sub-section (1) into sub-section (2) and coming to the conclusion that reassessment proposed on the basis of order of Court in proceedings under Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on expiry of period of limitation under Section 149 of the Act. On a combined reading of sub-section (1) as amended with effect from 1.4.1989 and sub-section (2) of Section 150 as it stands, in our view, a fair and just interpretation would be that the Authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under Section 149. 19. This Court took similar view in the case of S.S. Gadgil (supra) in somewhat comparable situation arising from the retrospective operation given to Section 34 (1) of Income Tax Act, 1922 as amended with retrospective effect from 1.4.1956 by the Finance Act of 1956. In the case of S.S. Gadgil (supra) admittedly under clause (iii) of the proviso to Section 34 (1) of the Indian Income Tax Act, 1922, as it then stood, a notice of assessmen....
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....ax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub-section (1) of Section 150, as amended with effect from 1.4.1989, does not enable the Authorities to reopen assessments, which have become final due to bar of limitation prior to 1.4.1989 and this position is applicable equally to reassessments proposed on the basis of Orders passed under the Act or under any other law." 14. The ratio of K.M Sharma and S.S. Gadgil, in the opinion of this court covers the facts of this case. Reassessment for 1998-99 could not be reopened beyond 31.03.2005 in terms of provisions of Section 149 of the Act as applicable at the relevant time. The petitioner's return for assessment year 1998-99 became barred by limitation on 31.03.2005. The question of revival of the period of limitation for reopening assessment for AY 1998-99 by taking recourse to the subsequent amendment made in Section 149 of the Act in the year 2012, i.e., more than 8 years after expiration of limitation on 31.03.2005, has been dealt with by the Supreme Court in K.M. Sharma (supra)". 24. As noted above, this Court found that the decision of K.M. Shar....
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....n imposed for the past period etc." 18. In Govinddas v Income Tax Officer AIR 1977 SC 552 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, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effe....
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....n under Section 147 (a) of the new Act. The said notice was set aside, inter alia, on the ground that the assessments under the Indian Income Tax Act, 1922 (which was in force prior to the Act coming into force), could not be re-opened under the provisions of the Act. 29. In S.S. Gadgil v. Lal & Co. the Supreme Court considered the question whether concluded assessments could be reopened under Section 34 of the Indian Income Tax Act, 1922. The said section prescribed a limitation period of one year for assessment or reassessment in cases where income had escaped assessment in the hands of a person deemed to be an agent of a non-resident. By virtue of the Finance Act, 1956, this limitation period was extended to two years. The Court examined whether the Income Tax Officer could issue a notice for assessment or reassessment of such a person after the limitation period had already expired, prior to the amended provision coming into force. In the aforesaid context the Supreme Court held as under: "13. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non-resident party under the Income Tax Act before it w....
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....n those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective, unless it is otherwise provided by express words or by necessary implication. 33. In that case, the question that fell for consideration of the Supreme Court was whether sub-section (10) of Section 35 of the Indian Income Tax Act, 1922, which came into force on 1st April, 1956 could apply where a company declares dividends by availing wholly or partly an amount of rebate of income tax, which was allowed in earlier years. The first paragraph of the said decision, which sets out the issue considered by the Court, is set out below: "This appeal on a certificate of fitness granted by the High Court of Bombay raises a question of interpretation of sub-section (10) of section 35 of the Indian Income tax Act, 1922. This sub-section is one of a group of sub-sections substituted or inserted in the said section by section 19 of the Finance Act, 1956 (18 of 1956). By section 28 of the said Finance Act, sub-section (10) of section 35 of the Income tax Act, 1922, came into force on April 1, 1956. The short question before us is, whether on its true constructi....
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....hey would, therefore, clearly include a year before the sub-section came into force. But it is said that these words should in view of the rule be read as not including a year before the sub-section came into force as they also include years subsequent to the coming into force of the sub-section and are therefore ambiguous." 36. Hidayatullah, J. penned down the majority opinion observed as under: "The purport of this new sub-section was the recall of rebate which had been allowed in any of the assessments for the years April 1, 1948, to March 31, 1956, under certain circumstances. At the very start, the sub-section takes one to assessment years to which section 28 which prescribed the commencement as April 1,1956, did not take one to. We do not accept the argument of the learned counsel for the assessee company that the mention of the years is merely a repetition of a historical facts for ready reference. The words "in any of the assessments for the years etc." show in respect of which assessments rectification would be possible. The years are mentioned individually by using the word any. The law speaking in 1956 was thus speaking of all the assessment years in....
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....f the period aforesaid but not after the expiration of eight years from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion." 41. The Supreme Court referred to the decision in the cases of Commercial Tax Officer & Others v. Biswanath Jhunjhunwalla & Anr. and Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. S.G. Mehta, Income Tax Officer and Anr. and as stated earlier distinguished the decisions in S.S. Gadgil v. Lal & Co. and J.P. Jani, Income-Tax Officer, Circle IV Ward G, Ahmedabad & Anr. v. Induprasad Devshanker Bhatt. We consider it apposite to refer to the following extract from the said decision: "25. The two decisions in the cases of Ahmedabad Manufacturing & Calico Printing Co. Ltd. [AIR 1963 SC 1436 : 1963 Supp (2) SCR 92 : (1963) 48 ITR 154] and Biswanath Jhunjhunwalla [(1996) 5 SCC 626] are more closer to the issue involved in the present case before us. They laid down that it is the language of the provision that matters and when the meaning is clear, it has to be given full effect. In both these cases, this Court held that the proviso which amended the existing provision gave it retrospectivity. W....
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....ndition precedent to reopen the assessment. It is not disputed that a fiscal statute can have retrospective operation. If we accept the interpretation given by the respondents, the proviso added to sub-section (2) of Section 21 of the Act becomes redundant. Commencement of the Act can be different than the operation of the Act though sometimes, both may be the same. The proviso now added to sub-section (2) of Section 21 of the Act does not put any embargo on the Commissioner of Sales Tax not to reopen the assessment if the period, as prescribed earlier, had expired before the proviso came into operation. One has to see the language of the provision. If it is clear, it has to be given its full effect. To reassure oneself, one may go into the intention of the legislature in enacting such provision. The date of commencement of the proviso to Section 21 (2) of the Act does not control its retrospective operation. Earlier the assessment/reassessment could have been completed within four years of that particular assessment year and now by the amendment adding the proviso to Section 21 (2) of the Act it is eight years. The only safeguard being that it is after the satisfaction of the Comm....