TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1754
X X X X Extracts X X X X
X X X X Extracts X X X X
....4 24.12.2019 153A r.w.s 144 6. 1383/Del/2024 2016-17 30.01.2024 24.12.2019 153A r.w.s 144 7. 1384/Del/2024 2017-18 30.01.2024 24.12.2019 144 2. At the time of hearing, it was stated that the issues involved in all captioned appeals filed by the assessee, for Assessment Years 2011-12 to 2017-18 are common, interlinked and arising from the search action on the assessee. Hence, all these cases have been heard together and accordingly, adjudicated by this common order. 3. First we take appeal of the assessee in ITA No.1378/Del/2024 [Assessment Year 2011-12]. ITA No.1378/Del/2024 [Assessment Year 2011-12] 4. Brief facts of the case are that the assessee filed his return of income u/s 139 of the Act on 30.12.2011, declaring total income of INR 2,44,620/-. The return was processed u/s 143(1) of the Act on 09.03.2012 at INR 2,44,620/-. A search and seizure action u/s 132 of the Act was carried out in AMQ Group of cases on 27.02.2017 and at the residential premises of the assessee was searched on 28.02.2017. As a consequence, notice u/s 153A of the Act was issued on 27.11.2017 and duly served by Speed Post to the assessee. In response one Shri Hardik Choudhary, CA appeared....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red in law while upholding the addition made by the Ld. Assessing Officer of Rs. 1,00,000 u/s 80C of the Act without appreciating the submissions made by the appellant. As such, the addition of Rs. 1,00,000/- is bad in law and may please be deleted. 6. That the Ld. Commissioner of Income Tax (Appeals) has erred in law while upholding the addition made by the Ld. Assessing Officer of Rs. 60,000 u/s 69C of the Act without appreciating the submissions made by the appellant. As such, the addition of Rs. 60,000/- is bad in law and may please be deleted. 7. That the assessee craves leave to add, delete or/and modify any of the ground of appeal at the time of hearing. 6. In support to the Ground of appeal No.1, the ld. AR of the assessee invited our attention to the provisions of section 153B providing time limit for making assessment for search & seizure cases. The section 153B is reproduced as under: 153B.(1) Notwithstanding anything contained in section 153, the Assessing Officer, shall make an order of assessment or reassessment, (a) in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years) referred to in clause (b)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....curring after that date. The relevant extract of Paragraph 5 of the DTAA Protocol is reproduced as below: 5. With reference to Article 26 (Exchange of Information) of the Agreement, it is understood that: (a) information exchanged shall not be disclosed to any third jurisdiction. (b) the competent authority of India may disclose information to: (i) Parliamentary Committees; (ii) Special Investigation Team (SIT) constituted by Government; and (iii) any other oversight bodies mutually agreed upon in writing. (c) the requested Contracting Party shall disclose any information that precedes the date on which the Agreement has effect for the taxes covered by the Agreement, insofar the information is for esecably relevant for a fiscal year or taxable event following that date. 9. In the instant case, the reference related to the assessment years prior the DTAA, the request falls outside the permissible scope of Article 26 read with Protocol. Ld. AR submits that the Explanation to Section 153B allows exclusion of time for exchange of information under treaties referred in Section 90/90A. However, since the DTAA was not applicable to the assessment years in question, the refe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onfirming that all legal requirement for giving effect to the Amending Protocol were satisfied. However, paragraph 3 of Article 14 of the Amending 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 to 01.04.2011 would be valid, is unmerited. 47. It is material to note that by virtue of Article 8 of the Amending Protocol, Article 26 of the Indo-Swiss DTAA as amended by the Supplementary Protocol was deleted. Thus, Article 26 (which was earlier numbered as Article 24) of the Indo-Swiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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 making the new rule operative. In Mangilal Pindwal case [State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60], this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 7. 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 substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid......" 54. Although the said decisions were rendered in the context of legislative amendments; the enunciated principles of construction are instructive. In the case of agreements, substitution of a covenant would no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decision is set out below: "6.2.4.2 It follows that Art. 26 para. 1 CDI IN-CH9, 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 CDI CH-IN is applicable at the earliest to reports relating to the "previous year" having commenced on 1st April 2011 (corresponding to the "fiscal year" 2011/2012), which will be taxed during the "assessment year" 2012/2013. This provision shall remain without retroactive effect. More specifically, the retroactive effect of the new Art. 26 of INCH CDI is limited to the fiscal year in which followed the date of signature of the Protocol of 30 Augu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing that the request for information made by the Revenue Authority for a period prior to 01.04.2011, was not maintainable. ITA No.782/2023 & Connected Cases Page 40 of 47 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 Clause (ii) of Explanation was amended by virtue of the Amendment Act [Act 17 of 2013] to also cater to a situation where the direction issued by the AO for conduct of a special audit was challenged before a court. The amended clause also provided that where the direction was challenged before a court, the period commencing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terim 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 material to Clause (ii) of the Explanation to Section 153B of the Act. The said explanation provides for an exclusion of the period during which the assessment proceedings are stayed by any order or injunction of any court. In the aforesaid context, the Supreme Court observed as under: "21. We, therefore, agree with the High Court that the special audit was an integral step towards assessment proceedings. The argument of the appellants that the writ petition of the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded 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.11, 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. However, pending consideration of the challenge to orders issued without following the rule of audi alteram partem, the time period for passing the assessment order had lapsed. In the aforesaid back drop, the Supreme Court also issued directions for saving the period of limitation. The relevant extract of the said decision is set out below: "36. The next crucial question is that keeping in view the fact that the time to frame fresh assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Limited12, 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 notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and....