2014 (9) TMI 171 - HC - Income Tax

Validity of notice for reopening of assessment u/s 148 - Time-barred notice Invocation of extended period of limitation as provided u/s 149(1)(c) Held that - Assessee during the proceedings had taken the specific stand that it was an Indian company and that it has no foreign asset and no foreign income and that Section 149(1)(c) of the Act had no application - It is clear from both the letter dated 16.09.2013 as well as the order dated 19.12.2013 that there is no reasoning indicated as to how Section 149(1)(c) has been invoked other than simply re-producing the contents of Section 149(1)(c) - neither the letter dated 16.09.2013 nor the order dated 19.12.2013 nor the counter affidavit filed by the revenue controvert the statement made by the petitioner that it has no asset located outside India thus, the question of deriving an income from any such asset also does not arise - it will have to be accepted that the petitioner does not have any asset outside India and, the question of the petitioner having any income in relation to such an asset would not arise - The very condition precedent for issuing a notice u/s 148 read with Section 149(1)(c) invoking the extended period of limitation of sixteen years is that the income which has escaped assessment must have relation to any asset located outside India - This pre-condition is not satisfied - there is a complete bar to the issuance of such a notice beyond the period of four years thus, the notice for reopening of assessment is set aside Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Timeliness of the notice under Section 148 concerning the assessment year 2006-07.
3. Application of Section 149(1)(c) for extending the limitation period to sixteen years.
4. Compliance with the procedural requirements under Sections 147 and 149 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 13.06.2013 issued under Section 148, claiming it was time-barred and lacked jurisdiction. The Assessing Officer's order dated 19.12.2013 rejecting the objections raised by the petitioner was also contested. The petitioner argued that the reasons for the belief that income had escaped assessment were not valid and that the notice was issued beyond the permissible period.

2. Timeliness of the Notice Under Section 148:
The petitioner contended that the notice was issued for the assessment year 2006-07 after the maximum period of six years had expired on 31.03.2013. The notice was issued on 13.06.2013, making it time-barred. The petitioner emphasized that the initial notice did not reference Section 149(1)(c) but was later justified under this provision after the petitioner raised the issue of limitation.

3. Application of Section 149(1)(c):
The petitioner argued that Section 149(1)(c), which extends the limitation period to sixteen years for income related to assets located outside India, was not applicable. The petitioner asserted that it was an Indian company with no foreign assets or income, thus making the reliance on Section 149(1)(c) misplaced. The Assessing Officer's letters and the impugned order did not provide reasoning for invoking Section 149(1)(c) other than reproducing its contents.

4. Compliance with Procedural Requirements:
The court examined the procedural requirements under Sections 147 and 149. It was noted that for the extended period of sixteen years to be invoked under Section 149(1)(c), the income that escaped assessment must relate to assets located outside India. The court found that the petitioner had no such assets, and therefore, the pre-condition for invoking the extended limitation period was not satisfied. The court highlighted that the Assessing Officer failed to provide any reasoning or evidence to counter the petitioner's claim of having no foreign assets.

Conclusion:
The court concluded that the notice issued under Section 148 was time-barred as the pre-condition for invoking Section 149(1)(c) was not met. The impugned notice dated 13.06.2013, the order dated 19.12.2013, and all subsequent proceedings were set aside. The writ petition was allowed, and the court clarified that the decision was based on the recorded reasons and the context of the plea of limitation. There was no order as to costs.