2004 (11) TMI 52 - HC - Income Tax

Law applicable - Whether proceedings for imposing tax or reopening assessment for the assessment years which have attained finality under the existing law due to bar of limitation can be revived by the amendment of law which has no express provision of retrospective effect - At the time of issuance of the impugned notices and at the time of amendment, the right to initiate proceedings u/s 147 was extinguished for certain assessment years as per the old provision. When the new Act came into force, there was no cause of action of issuing a further notice to review old matters which have attained finality under the then existing law due to limitation and therefore the new Act cannot be applied. The provision for limitation is not a mere procedure and unless it is made retrospectively, it cannot be acted upon retrospectively for reviving any barred and extinguished assessments on the date when the Act came into force.

Issues Involved:
1. Whether proceedings for imposing tax or reopening assessment for the assessment years which have attained finality under the existing law due to bar of limitation can be revived by the amendment of law which has no express provision of retrospective effect.

Issue-wise Detailed Analysis:

1. Applicability of Amended Law to Barred Assessments:
The primary issue revolves around whether the amendment to the Income-tax Act, effective from April 1, 1989, can revive tax assessments that had already become final due to the bar of limitation under the previous law. The appellant, an unregistered firm, received compensation for a rubber estate acquired by the Government and filed returns in 1990 for the assessment years 1979-80 to 1984-85. The Department accepted returns for the period from 1985-86 onwards but rejected those for 1979-80 to 1984-85 as time-barred, issuing notices under section 148 for reopening the assessment.

2. Interpretation of Section 147 and Section 149 Pre- and Post-Amendment:
The court examined the provisions of section 147 before and after the amendment. Before the amendment, section 147(a) allowed reopening assessments if there was an omission or failure by the assessee to disclose fully and truly all material facts. Section 147(b) allowed reopening based on information in the possession of the Assessing Officer. Post-amendment, section 147 allowed reopening if the Assessing Officer had reasons to believe that income had escaped assessment, with a proviso limiting action to within four years unless there was a failure by the assessee to disclose material facts.

3. Time Limit for Issuing Notices under Section 149:
Section 149 before amendment set an eight-year limit for issuing notices under section 148 for cases falling under section 147(a) and a four-year limit for section 147(b). Post-amendment, the limit extended to ten years for demands exceeding Rs. 50,000. The court noted that the assessee had disclosed all material facts, and thus, section 147(b) applied, making the notices time-barred under the old law.

4. Legal Precedents and Interpretation:
The court referred to several legal precedents, including S. S. Gadgil v. Lal and Co. [1964] 53 ITR 231, where the Supreme Court held that the right to assess or reassess cannot be revived by an amendment unless expressly made retrospective. The court also cited K. M. Sharma v. ITO [2002] 254 ITR 772 (SC), which emphasized that fiscal statutes regulating limitation periods must be strictly construed and cannot retrospectively reopen assessments that have attained finality.

5. Application of Amended Provisions:
The court concluded that the amended provisions of sections 147 and 149 could not apply retrospectively to revive assessments that had become final due to the bar of limitation under the old law. The amendment did not expressly provide for retrospective application, and thus, assessments barred by the old law could not be reopened.

Conclusion:
The court allowed the appeal, setting aside the impugned judgment. It held that the assessment orders for periods where liability was extinguished could not be reopened under the extended limitation period of the amended provision. The court clarified that notices issued for assessment years not time-barred under the old law when the amended section came into force were valid.

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