2019 (1) TMI 156 - HC - Income Tax

Reopening of assessment - limitation of four years - exception to exclude the time during which the Court stayed the proceedings - time limit for completion of the assessment, reassessment, and recomputation - Held that - The notice u/s 148 may be issued at any time for assessing, or reassessing, or recomputing. If that notice is issued based on any finding or direction, or order by any authority in any proceeding under this Act, it may be based on a Court s order in any proceeding under any other law. That exception apart under Section 150, I find no other. In other words, Section 149 does not control this provision if the proceedings have judicial or quasijudicial backing. In fact, the Department s defence, filed as its counsel s statement, too admits that Section 149 has no statutory exception to exclude the time during which the Court stayed the proceedings. It places on the record that there is no statutory support for such a claim unlike that available under Section 153, which specifically provides for the exclusion of the period during which the assessment proceeding is stayed by order of injunction of any court. Then it adds, the present claim is, therefore, made on the basis of equitable consideration. I am afraid once a statute governs a field of activity, then equity has no role to play; equity yields to a statute. Under these circumstances, hold that the proceedings the Department initiated against the petitioner could not be sustained. - decided in favour of assessee

Summary

Issues:
1. Interpretation of Section 147 and Section 149 of the Income Tax Act regarding income escaping assessment and time limits for notice issuance.
2. Examination of whether equity can supplant statute in the context of reassessment proceedings.
3. Analysis of the impact of judicial intervention on the time limit for completion of assessment, reassessment, and recomputation under Section 153.

Detailed Analysis:

Issue 1: Interpretation of Sections 147 and 149
The judgment delves into the statutory provisions of Sections 147 and 149 of the Income Tax Act. Section 147 empowers the Assessing Officer to assess or reassess income that has escaped assessment, subject to certain limitations. The proviso to Section 147 imposes a four-year limitation from the end of the relevant assessment year for taking action under this section. However, exceptions exist, such as when the assessee fails to disclose material facts necessary for assessment. Section 149 sets the time limit for issuing notices under Section 148, barring notice issuance after four years unless specific conditions are met, extending to six or sixteen years in certain cases.

Issue 2: Equity vs. Statute
The Department invoked the equity principle to justify exceeding the time limit under Section 149 for issuing a notice under Section 148. The petitioner argued that unless expressly saved as in Section 153, the Department cannot defeat the accrued rights of the assessee. The judgment emphasizes that once a statute governs a field of activity, equity yields to the statute. The court concluded that the absence of a statutory exception in Section 149 to exclude the period of stay during assessment proceedings signifies legislative intent, and equitable considerations cannot override statutory provisions.

Issue 3: Impact of Judicial Intervention
Section 153 of the Act deals with the time limit for completing assessment, reassessment, and recomputation. The judgment highlights that the first explanation to Section 153 excludes the period during which assessment proceedings are stayed by court order. However, Section 149 lacks a similar exception. The court notes that Section 150 allows notice issuance based on judicial or quasi-judicial findings, indicating that Section 149 does not control this provision. Consequently, the court held that the Department's proceedings against the petitioner, initiated beyond the time limit under Section 149, could not be sustained, and the writ petition was allowed as prayed for.

In conclusion, the judgment provides a detailed analysis of the statutory provisions under the Income Tax Act, emphasizing the importance of adhering to statutory limitations and the limited role of equity in overriding statutory provisions.