2016 (10) TMI 98 - HC - Income Tax

Validity of reopening of assessment - period of limitation - expiry of issue of notice - Held that - The petitioner filed a return of income on 21.08.2007. As per the then prevailing proviso to section 143(2), the Assessing Officer could not serve the notice on the assessee after expiry of twelve months from the end of the month in which the return was furnished. The outer limit as per this provision worked out to 31.08.2008. This proviso was, however, substituted w.e.f. 01.04.2008 which provided that no such notice could be served after expiry of six months from the end of the financial year in which the return was furnished. Thus, from computing the period of limitation from the end of the month during which the return was filed it was shifted to a period of six months from the end of financial year in which the return was furnished thereby bringing a greater uniformity of the last date for issuing the notice in case of commonly placed class of assessees. Whatever be the legislative philosophy for making such a change, one thing that cannot be denied is that the substitution had to take effect from 01.04.2008. We may record that the Finance Act 2008 received assent of the President on 10.05.2008 and was published in official gazette on the same day. By 10.05.2008 therefore, this provision formed part of the statute and was given effect of 01.04.2008. For two reasons the contention of the petitioner cannot be accepted that such a provision cannot be applied to the petitioner. Firstly, on the date when such notice was being issued, the amended provision had already come into force. More particularly, this amendment was made effective from 01.04.2008 by the law which was passed on 10.05.2008 and thus, both the events took place long before the last date for serving of notice in case of the petitioner as per the unamended provision. We may recall, as per the unamended provision such a notice could be served latest by 31.08.2008. Long before that, the statutory provision underwent a change by virtue of which such a notice could be served latest by 30.09.2008. The Assessing Officer was, thus, authorized to issue such a notice as per the amended provision. He was not bound by the unamended provision since the same had already been amended long before the final date for serving of notice even as per the unamended provision had expired. This is therefore, not a case where a vested right is being taken away by amendment in the statute. The notice under section 143(2) of the Act had not yet become time barred by the time amendment in the statute took place. - Decided against assessee

Summary

Issues:
Challenge to notice under Section 143(2) of the Income Tax Act, 1961 based on limitation period before and after amendment by Finance Act, 2008.

Analysis:
1. The petitioner contested a notice dated 18.09.2008 issued by the Assessing Officer under Section 143(2) of the Income Tax Act, 1961. The key issue revolved around the limitation period for issuing the notice, comparing the provision before and after the amendment by the Finance Act, 2008. The petitioner argued that the limitation period in force at the time of filing the return should apply, emphasizing that retrospective amendments cannot infringe on vested rights. This argument was supported by a Supreme Court decision (K.M.Sharma vs. Income Tax Officer, 254 ITR 772).

2. Conversely, the Revenue's counsel contended that the extended limitation period post-amendment should govern the case, citing a Division Bench decision of the Punjab & Haryana High Court (Amarjit Singh Tut vs. Union of India, 347 ITR 585). The crux of the matter lay in determining whether the Assessing Officer was bound by the pre-amendment limitation provision or could rely on the amended provision post-01.04.2008.

3. Section 143 of the Act deals with assessment procedures, with subsection (2) empowering the Assessing Officer to issue a notice if necessary to verify the income reported by the assessee. The proviso to subsection 2 sets the time limit for issuing such notices, with the language and duration of the limitation period evolving over time through legislative amendments.

4. The Court analyzed the changes in the proviso to section 143(2) pre and post the Finance Act, 2008 amendment. The amendment shifted the limitation period calculation from twelve months from the return filing month to six months from the end of the financial year. The judgment emphasized that the amended provision was already in force when the notice was issued, rejecting the petitioner's argument that it infringed on vested rights.

5. The Court referred to the Punjab & Haryana High Court's decision in Amarjit Singh Tut, which upheld the application of the extended limitation period post-amendment to pending proceedings. It clarified that the limitation law is procedural and prospective, not reviving barred actions but applying to pending cases.

6. The Court distinguished the present case from the Supreme Court decision in K.M. Sharma, highlighting the different factual and legal contexts. In K.M. Sharma, the Court addressed reopening assessments based on amended provisions, emphasizing the prospective nature of limitation laws and the need for clarity and finality in legal proceedings.

7. Ultimately, the Court dismissed the petition, affirming the application of the extended limitation period post-amendment to the notice issued by the Assessing Officer. The ruling discharged the rule and vacated any interim relief granted, concluding the detailed analysis of the issues at hand.