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2020 (1) TMI 20 - HC - Income TaxReopening of assessment - notices issued to 'representative assessee' as per the provisions of Section 160 - HELD THAT - The notice dated 14.03.2005 under Section 148 of the IT Act was issued within the prescribed period of limitation as obtained on the date of its issuance. Section 149(3) of the IT Act, inter alia, provides that if the person on whom a notice under section 148 is to be served is a person treated as the agent of the NRI under section 163, then, the notice on such agent of the NRI, shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. In this case, however, from the clarification contained in the communication dated 21.6.2006, it is apparent that the notice issued to Mr. P.P. Mahatme, was not in his capacity as the agent of the NRI-Assessee, but the same was issued to him as the power of attorney holder of the NRI-Assessee. In such a situation, the period of limitation for issuance of the notice was always 6 years. Therefore, the notice dated 14.03.2005 being within 6 years from the end of relevant assessment year, which is 1999-2000, was well within the period of limitation, as then prevalent. The provisions of Section 149(3) of the IT Act were amended by the Finance Act, 2012 with effect from 1/7/2012. The amendment extended the period of limitation for issuance of notice under Section 148, even upon the agent of the NRI, from 2 years to 6 years. Looking to the width of the aforesaid explanation, it is not possible to accept Mr. Naniwadekar's contention that the extended period of limitation will apply only to the assessments for the Assessment Year 2010-11 or 2011-12. The explanation refers to any assessment year beginning on or before the 1st day of April, 2012. The explanation has been introduced specifically for the purpose of removal of doubts or to clarify the position with regard to the applicability of the amended provisions. First substantial question of law is required to be answered against the Appellant and in favour of the Revenue. Transfer of assets attracting tax on capital gains - family arrangement approved by the Civil Court - HELD THAT - The findings of fact, in the present case, concurrently recorded by all the three authorities indicate that there was no issue of any 'preexisting right' as between the Appellants, Cristovam and Alvaro, who are alleged to have usurped the immovable property belonging to the Appellants. In fact, the record which has been assessed in detail by the the Commissioner of Income-tax (Appeals), establishes that the properties of Xavier Pinto were allocated to his three sons Jose, Rosario and Antonio who, in turn, had one son each by name of Alvaro, Cristovam and Anthony. Anthony migrated to England along with his father Antonio. Margaret (present assessee) is the wife of Anthony. They had three daughters Lorna, Julia and Siobhan who are the Appellants in the connected Appeals. Since there was already a partition of the properties owned by Xavier Pinto between his three sons Jose, Rosario and Antonio sometime in 1950s, obviously Alvaro and Cristovam had no right whatsoever in the immovable properties exclusively belonging to Antonio and after his demise, his son Anthony. After demise of Anthony, the properties were exclusively inherited by the present Appellants, who are the wife and daughter of said Anthony. In the present case, there is clear and cogent material available on record to establish that Cristovam and Alvaro had no right in the immovable property which was the subject matter of dispute and consequently the settlement between the Appellant and the said two persons can hardly be described as a family settlement. The settlement may be enforceable inter-parties now that the same is incorporated in the consent terms, based upon a consent decree may have been issued. However such settlement, cannot be called as a family settlement or family arrangement. Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement and on such basis, it cannot be held that the consideration received as a result of such settlement, does not constitute capital gain. Decided in favour of the Revenue and against the Assessee.
Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961. 2. Taxability of the amount received under a family settlement as capital gains. Detailed Analysis: 1. Validity of the Notice Issued Under Section 148 of the IT Act: Clarification and Supplementation of Reasons: The appellant argued that the issuance of a communication dated 21.06.2005, which clarified that the notice dated 14.03.2005 should be read as addressed to Mr. P.P. Mahatme as the power of attorney holder of the assessee, amounted to impermissible supplementation of reasons. The court noted that this ground had already been rejected in previous writ petitions and that the communication merely clarified the capacity in which the notice was issued, without adding or supplementing the original reasons. The principle in Hindustan Lever Ltd. was not applicable as there was no addition to the reasons for reopening the assessment. Limitation Period: The appellant contended that the notice dated 14.03.2005 was barred by the limitation period prescribed under Section 149(3) of the IT Act. The court clarified that the notice was issued to Mr. P.P. Mahatme as the power of attorney holder, not as the agent of the NRI-assessee, thus the applicable limitation period was six years, not two. The court further stated that the amendment to Section 149(3) by the Finance Act, 2012, which extended the limitation period, applied retrospectively to any assessment year beginning on or before 1st April 2012. The court distinguished the ruling in Uttam Steel Limited, noting that the explanation to Section 149 provided an express provision for retrospective application. Conclusion: The court held that the notice dated 14.03.2005 was issued within the prescribed period of limitation and was valid. The first substantial question of law was answered against the appellant and in favor of the Revenue. 2. Taxability of the Amount Received Under a Family Settlement: Nature of the Settlement: The appellant argued that the amount received under the family settlement was not taxable as capital gains. The court noted that the three authorities (Assessing Officer, Commissioner of Income-tax (Appeals), and ITAT) had concurrently held that the settlement was not a bona fide family settlement involving preexisting rights. The court emphasized that the findings of fact indicated that there was no issue of any preexisting right between the appellants and the other parties involved in the settlement. Distinguishing Precedents: The court distinguished the present case from the decisions in Sachin P. Ambulkar, Kale and others, and Kay Arr Enterprises, noting that those cases involved settlements among family members with preexisting rights. The court also referenced B.A. Mohota Textiles Traders (P.) Ltd. and Banarsi Lal Aggarwal, where similar claims of family settlements were not accepted. Conclusion: The court held that the settlement in question did not qualify as a bona fide family settlement and the amount received was taxable as capital gains. The second substantial question of law was answered against the appellant and in favor of the Revenue. Final Judgment: The appeal was dismissed, and both substantial questions of law were decided in favor of the Revenue. There was no order as to costs.
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