2019 (11) TMI 1025 - AT - Income Tax

Reopening of assessment u/s 147 - recourse to the provisions of Section 149(1)(c) - HELD THAT - We note that the language of Explanation (3) to Section 115JB is somewhat similar to the language of the Explanation below Section 149. In both places it is provided that the Explanation is inserted for removal of doubts and the Explanation is applicable to assessment years beginning on or before 01-04-2012. Yet the UNION BANK OF INDIA, MASHREQ BANK PSC, BANK OF INDIA, M/S THE NEW INDIA ASSURANCE CO. LTD., CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK 2019 (5) TMI 355 - BOMBAY HIGH COURT held that since the principal provision of the Act was not amended retrospectively, by applying the Explanation (3), the principal provisions of Section 115JB cannot be made applicable to banking companies retrospectively. In our considered opinion, the same principle applies to the present appeals as well. Issue involved in the present appeal is squarely dealt with by the Hon ble Delhi High Court in the case of Brahm Datt Vs UOI 2018 (12) TMI 832 - DELHI HIGH COURT . In this case a search was conducted against the assessee in July 2011. In the statement recorded during the course of search the assessee had admitted of settling a substantial amount on a trust established outside India in the year 1998. The assessee admitted that he was one of the beneficiary of the Trust which had a bank account with HSBC, Geneva, Switzerland. Based on such information, the Revenue reopened his income-tax assessment for AY 1998-99 taking recourse to the provisions of Section 149(1)(c) of the Act. The assessee challenged the legality of the notice u/s 148 and consequent proceedings by filing writ petition. We further note that the Revenue s SLP against the decision of the Hon ble Delhi High Court was dismissed by the Hon ble Supreme Court 2019 (7) TMI 351 - SC ORDER . We also find that following the judgment of the Hon ble Delhi High Court (supra), the coordinate Benches of this Tribunal in the following cases similarly quashed the reassessment proceedings u/s 148 which were initiated for assessment years prior to AY 2006-07 taking aid of Section 149(1)(c)

Issues Involved:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Interpretation of Section 149(1)(c) of the Income Tax Act as amended by the Finance Act, 2012.
3. Retrospective vs. prospective application of the amended provisions.
4. Legal principles regarding the revival of time-barred proceedings.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:

The primary issue was whether the notice issued under Section 148 for the Assessment Year (AY) 2001-02 was barred by limitation. The notice was issued on 16.02.2016, and the assessee argued that it was beyond the permissible time limit prescribed under Section 149 of the Act. The Assessing Officer (AO) initiated reassessment proceedings based on undisclosed foreign bank accounts, which the assessee had not disclosed in their returns. The AO's action was contested on the grounds that the reassessment proceedings were initiated after the limitation period had expired.

2. Interpretation of Section 149(1)(c) of the Income Tax Act:

The Finance Act, 2012 amended Section 149(1)(c) to extend the limitation period for reassessment to sixteen years in cases involving undisclosed foreign assets. The CIT(A) held that this amendment was prospective, effective from 01.07.2012, and did not apply to cases where the limitation period had already expired before this date. The CIT(A) observed that the legislative intent was not to apply this provision retrospectively, as evidenced by the prospective application date mentioned in the Finance Act, 2012.

3. Retrospective vs. Prospective Application of the Amended Provisions:

The CIT(A) relied on various judicial precedents, including the Supreme Court's decisions in J.P. Jani ITO vs. Induprasad D. Bhatt and Union of India vs. Uttam Steels Ltd, to conclude that the amendment to Section 149(1)(c) could not revive time-barred proceedings. The principle established was that unless explicitly stated, amendments to fiscal statutes are presumed to be prospective. The CIT(A) noted that the Finance Act, 2012, while making several amendments with retrospective effect, specifically made the amendment to Section 149(1)(c) prospective from 01.07.2012.

4. Legal Principles Regarding the Revival of Time-Barred Proceedings:

The CIT(A) concluded that the reassessment proceedings for AYs 2001-02 to 2005-06 were time-barred as of 31.03.2012, and the amendment to Section 149(1)(c) could not revive these proceedings. The Tribunal upheld this view, stating that the legislative intent was clear in making the amendment prospective. The Tribunal also referred to the Delhi High Court's decision in Brahm Datt vs. ACIT, where it was held that the amendment to Section 149(1)(c) did not have retrospective effect and could not be used to reopen assessments that had become time-barred before the amendment came into force.

Conclusion:

The Tribunal dismissed the revenue's appeals, agreeing with the CIT(A) that the reassessment proceedings initiated under Section 148 for AYs 2001-02 to 2005-06 were barred by limitation and thus void ab initio. The Tribunal also dismissed the cross-objections filed by the assessee as academic in nature, given the primary issue was resolved in the assessee's favor. The Tribunal's decision was based on the interpretation that the amendment to Section 149(1)(c) was prospective and did not revive time-barred proceedings.

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