2023 (4) TMI 554 - AT - Income Tax

Reopening of assessment - reassessment as barred by limitation - Addition of undisclosed Foreign Asset - HELD THAT - Hon ble High Court in the case of Jayashree Jayakar Mohankar 2022 (7) TMI 1395 - CALCUTTA HIGH COURT held that proceedings initiated by AO u/s 147/148 of the Act had become time barred prior to 01.07.2012 and which could not have been revived by Section 149(1)(c). CIT(A) has rightly decided the legal issue raised by the assessee in accordance to the ratio laid by the Hon ble Delhi High Court in Brahma Datt Vs. ACIT 2018 (12) TMI 832 - DELHI HIGH COURT which decision was challenged by the department before the Hon ble Supreme Court without any success because SLP was dismissed 2019 (7) TMI 351 - SC ORDER . Appeals filed by the revenue dismissed.

Summary

Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Applicability of Section 149(1)(c) of the Income Tax Act, 1961, as amended by the Finance Act, 2012, for reopening assessments beyond the limitation period.

Issue-wise Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147 of the Income Tax Act, 1961:

The assessment for AY 1999-2000 was reopened by issuing a notice under Section 148 of the Income Tax Act, 1961, dated 27.03.2015. The reason for reopening was based on incriminating documents found during a search action on the assessee's father, which revealed undisclosed foreign assets and investments. The AO formed the belief that the assessee had foreign assets that were not declared in her return, leading to the conclusion that income had escaped assessment.

The AO relied on Section 149(1)(c) of the Act, which allows reopening of assessments up to sixteen years if income related to any asset located outside India has escaped assessment. However, the CIT(A) held that the reopening was beyond the limitation period of six years and thus illegal. The CIT(A) relied on the judgment of the Hon'ble Delhi High Court in the case of Brahmdatt vs. ACIT, which held that Section 149(1)(c) applies prospectively and cannot be used to reopen assessments that had already become time-barred before the amendment came into effect.

2. Applicability of Section 149(1)(c) of the Income Tax Act, 1961, as Amended by the Finance Act, 2012:

The CIT(A) observed that the amendment to Section 149(1)(c) came into effect on 01.07.2012, while the time limit for issuing a notice under Section 148 for AY 1999-2000 expired on 31.03.2006. Therefore, the extended period of sixteen years provided by the amendment could not be applied retrospectively to revive the time-barred assessment.

The CIT(A) cited the judgment of the Hon'ble Delhi High Court in Brahmdatt vs. ACIT, which was upheld by the Hon'ble Supreme Court, confirming that the amendment to Section 149(1)(c) cannot be applied to assessments that had already become final due to the expiry of the limitation period under the previous law.

The ITAT Mumbai, in line with the CIT(A) and the Delhi High Court's judgment, dismissed the revenue's appeal, holding that the reopening of the assessment was time-barred and the amendment to Section 149(1)(c) could not be applied retrospectively. The ITAT also referred to similar decisions in other cases, including the Hon'ble Calcutta High Court's judgment in the case of Jayashree Jayakar Mohankar, which supported the same legal position.

Conclusion:

The ITAT Mumbai upheld the CIT(A)'s decision, confirming that the reopening of the assessment for AY 1999-2000 was time-barred and that the amendment to Section 149(1)(c) could not be applied retrospectively. Consequently, the appeals filed by the revenue for both AY 1999-2000 and AY 2004-05 were dismissed.