2020 (1) TMI 772 - AT - Income Tax

Reopening of assessment u/s 147 - notice barred by limitation or not - as per revenue assessee had bank deposits in a foreign country an in that case, sixteen years from the end of the relevant assessment year is the time limit for reopening assessment as per section 149(1)(c) - HELD THAT - As decided in SRI BISWANATHGARODIA AND (VICE-VERSA) 2019 (11) TMI 1025 - ITAT KOLKATA identical issue was involved and this Tribunal upheld the order of Ld. CIT(A) holding the proceedings initiated u/s 148/147 in respect of AYs 2005-06 and earlier, after 1st April 2012 to be time barred. CIT(A) was justified in holding that the notice dated 19.08.2013 issued u/s 148 in respect of AY 2005-06 was time barred and consequently therefore the order dated 19.01.2015 passed by the AO being ab initio void was therefore rightly cancelled. We also note that the decision of this Tribunal is in consonance with the decision of the Hon ble Delhi High Court in the case of BrahmDatt Vs UOI 2018 (12) TMI 832 - DELHI HIGH COURT . During the course of appellate hearing, the ld. AR also brought to our attention that not only the SLP preferred by the Revenue has been dismissed by the Hon ble Supreme Court 2019 (7) TMI 351 - SC ORDER but even the review petition filed by the Department before the Hon ble Delhi High Court was dismissed. For the reasons set out in foregoing therefore we find no reason to interfere with the order of the Ld. CIT(A). Addition u/s 68 - CIT-A deleted addition on admission of additional evidence - violation of Rule 46A - HELD THAT - DR was unable to pin point what additional evidence was produced by the assessee before the Ld. CIT(A) which influenced his decision. CIT, DR did not bring to our attention any particular document, which in his opinion constituted fresh or new evidence within the ambit of Rule 46A. Remand report was called for prior to adjudication of the appeal and in that view of the matter it was imperative for the Revenue to point out the specific document or evidence which was in the nature of additional evidence, not available with the AO. In the remand report the AO admitted that the explanation put forth in appeal was also made in the course of assessment and, after examining the entries in the bank statement, he admitted that there was prima facie connection between the entries made in the bank statement on 07.12.2004 and 31.03.2006, because the narration of the entries was identical. At the time of hearing of appeal, the ld. AR filed before us copies of the relevant bank statements for the months of December 2004 and March 2006. From the entries in the bank statements, it was clearly discernible that the sum of USD 105000 was invested in December 2004 in Bonds yielding coupon rate of 2.5% and having maturity date of 31.03.2006. We also note that the coupon interest on such bond was assessed as income in the impugned order. The entries in the bank statement by itself made it abundantly clear that the investment in bonds made on 07.12.2004 was redeemed on 31.03.2006 and proceeds were credited to the bank account on maturity. On these facts therefore, we hold that the ld. CIT(A) was right in concluding that the credit on 31.03.2006 related to the investment made in earlier FY 2004-05 and therefore no addition was permissible in the relevant AY 2006-07. As noted from the remand report another grouse of the AO was that the assessee was resisting the addition made even in AY 2005-06 on the technical ground of limitation. On realizing the possibility that the said sum may escape assessment even in AY 2005-06 on technical grounds, the AO justified the addition in the AY 2006-07 being the year in which the investment was redeemed. We are however unable to agree with the said contention because it is a trite law that any income can be assessed to tax only in the right year in which it is taxable and not in any other year. The said sum of USD 105000 was invested in FY 2004-05 and in the income-tax assessment for AY 2005-06, the AO had assessed the source of such investment u/s 68 of the Act, in the order passed u/s 147 of the Act. In that view of the matter, the impugned addition in AY 2006-07 constituted double taxation of the same sum, which is impermissible in law. We therefore see no reason to interfere with the order of the Ld. CIT(A). The Revenue s appeal for AY 2006-07 is therefore dismissed.

Summary

Issues involved:

1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for AY 2005-06.
2. Applicability of the amendment to Section 149(1)(c) of the Income Tax Act, 1961.
3. Deletion of addition of ?46,84,050/- by the CIT(A) in AY 2006-07.
4. Alleged violation of Rule 46A of the Income Tax Rules, 1962 by the CIT(A).

Issue-wise detailed analysis:

1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for AY 2005-06:

The primary issue was whether the reassessment proceedings initiated under Section 148 on 19.08.2013 for AY 2005-06 were time-barred. The CIT(A) held that the proceedings initiated by the AO were barred by limitation as the period for reopening the assessment had expired on 31.03.2012. The CIT(A) observed that the amendment to Section 149(1)(c) by the Finance Act, 2012, which extended the time limit for reopening assessments to sixteen years, was effective prospectively from 01.07.2012 and did not revive proceedings that had already become time-barred. The CIT(A) relied on the Supreme Court judgment in S. S. Gadgil Vs. Lal & Co (53 ITR 231), which held that an amendment cannot revive a right to reopen an assessment that was already barred by limitation.

2. Applicability of the amendment to Section 149(1)(c) of the Income Tax Act, 1961:

The CIT(A) held that the amendment to Section 149(1)(c) was not retrospective and could not be applied to assessments that had already become time-barred before the amendment came into force on 01.07.2012. The CIT(A) noted that the Finance Act, 2012 specifically made the amendment effective prospectively and did not indicate any legislative intent to apply it retrospectively. The CIT(A) also referred to various judgments, including the Supreme Court's decision in Union of India Vs Uttam Steels Ltd (319 ELT 598), which held that an amendment extending the period of limitation cannot revive proceedings that were already time-barred.

3. Deletion of addition of ?46,84,050/- by the CIT(A) in AY 2006-07:

The CIT(A) deleted the addition of ?46,84,050/- made by the AO under Section 68 of the Act. The CIT(A) found that the amount credited in the bank account on 31.03.2006 represented the redemption proceeds of an investment made on 07.12.2004 and did not constitute fresh income for AY 2006-07. The CIT(A) relied on the confirmation from HSBC, Geneva, and other supporting documents provided by the assessee, which established that the credit was related to the redemption of an earlier investment. The CIT(A) held that the addition was unjustified as the investment was made in FY 2004-05 and was already considered in the assessment for AY 2005-06.

4. Alleged violation of Rule 46A of the Income Tax Rules, 1962 by the CIT(A):

The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A. However, the CIT(A) had called for a remand report from the AO before adjudicating the appeal. The AO, in the remand report, admitted the connection between the entries in the bank statement but justified the addition on other grounds. The CIT(A) considered the remand report and the confirmation from HSBC, Geneva, and concluded that the credit was related to the earlier investment. The Tribunal found no specific evidence presented by the Revenue to prove that the CIT(A) admitted fresh evidence in violation of Rule 46A and upheld the CIT(A)'s order.

Conclusion:

The Tribunal dismissed the Revenue's appeals for both AY 2005-06 and AY 2006-07. For AY 2005-06, the Tribunal upheld the CIT(A)'s decision that the reassessment proceedings were time-barred and the notice under Section 148 was invalid. For AY 2006-07, the Tribunal upheld the deletion of the addition of ?46,84,050/- by the CIT(A), finding that the credit in the bank account was related to the redemption of an earlier investment and not fresh income for the relevant year. The Tribunal also found no violation of Rule 46A by the CIT(A).