2022 (2) TMI 274 - AT - Income Tax

Reopening of assessment u/s 147 - Period of limitation - Notice beyond the period of four years from the end of the relevant assessment as barred by limitation - HELD THAT - As notice issued is time-barred - on a proper construction of sec 297(2)(d)(ii) of the new Act, the ITO cannot issue a notice under s. 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force - thus we find that the notice issued in the case of the assessee is time-barred and same is not valid. Therefore we don't find any infirmity in the decision of learned CIT(A) and accordingly the appeal of the Revenue stand dismissed. Income already offered made protective again in the case of the assessee - HELD THAT - As interest income from the bank account which has already been shown by the son of Shri Ravichandra V. Mehta to whom the account belonged cannot be added in the income of Shri Ravichandra V. Mehta. Addition of interest income of the foreign bank on estimated bases at the rate of 10% on protective basis and substantive addition was made in the hand of father of the assessee Shiri Ravichandra V. Mehta - HELD THAT - AO has not given any basis to compute the interest income on estimated bases at the rate of 10% is without disproving the facts and material furnished by the assessee, therefore the action of the learned CIT(A) is not justified which is also demonstrated from the dissatisfaction of the learned CIT(A) shown on the action of the assessing officer as elaborated above in this order. Therefore this appeal of the assessee is allowed.

Summary

Issues Involved:
- Legality of notice under Section 148 of the Income Tax Act.
- Application of the amended Section 149(1)(c) of the Income Tax Act.
- Taxability of undisclosed foreign bank accounts and interest income.
- Validity of reopening assessments beyond the limitation period.
- Double taxation of the same income.

Detailed Analysis:

Legality of Notice under Section 148:
The primary issue revolved around whether the notices issued under Section 148 were valid, given they were issued beyond the limitation period prescribed under the pre-amended Section 149. The Tribunal found that the notices issued for the assessment years 1998-99 to 2004-05 were barred by limitation as per the pre-amended provisions of Section 149, which did not allow reopening beyond four or six years from the end of the relevant assessment year. The Tribunal relied on the decisions of the Hon'ble Gujarat High Court in the case of Induprasad Bhatt Vs. J.P. Jani (58 ITR 559) and the Hon'ble Supreme Court in J.P. Jani Vs. Induprasad Devshankar Bhatt (72 ITR 595), which held that amendments to the law cannot revive the time limit for issuing notices that had already expired.

Application of Amended Section 149(1)(c):
The Tribunal examined whether the amended Section 149(1)(c), which extended the limitation period to 16 years for income related to assets located outside India, could be applied retrospectively to revive expired time limits. The Tribunal concluded that the amendment could not revive the time limits that had already expired before the amendment came into effect on 1st July 2012. This conclusion was supported by the Hon'ble Supreme Court's decisions in S.S. Gadgil vs. Lal & Co. (53 ITR 231) and K.M. Sharma vs. ITO (254 ITR 772), which emphasized that amendments to procedural laws cannot retrospectively extend limitation periods for actions that were already time-barred.

Taxability of Undisclosed Foreign Bank Accounts and Interest Income:
The Tribunal addressed the issue of taxability of interest income from undisclosed foreign bank accounts. The Assessing Officer had added interest income from foreign accounts on a protective basis in the hands of the assessees, while substantively adding it in the hands of Shri Ravichandra V. Mehta. The Tribunal found that the interest income from the foreign accounts should be taxed in the hands of the individuals who actually owned the accounts and had declared the income in their returns. This was supported by the Tribunal's earlier decisions in the cases of Shri Balkrishna R. Mehta and Shri Jawahir Mehta, where it was held that the income from the foreign accounts belonged to them and should be taxed accordingly.

Validity of Reopening Assessments Beyond Limitation Period:
The Tribunal quashed the reopening of assessments for the years 1998-99 to 2004-05, holding that the notices issued under Section 148 were beyond the limitation period prescribed under the pre-amended Section 149. The Tribunal emphasized that the amendment to Section 149(1)(c) could not retrospectively extend the limitation period for actions that were already time-barred. This decision was consistent with the Hon'ble Delhi High Court's ruling in Brahm Datt vs. ACIT (100 taxmann.com 324), which held that subsequent amendments could not revive expired limitation periods.

Double Taxation of the Same Income:
The Tribunal addressed the issue of double taxation, where the same income was being taxed both in the hands of Shri Ravichandra V. Mehta and his sons. The Tribunal held that the income from the foreign accounts, which had already been declared and taxed in the hands of Shri Balkrishna R. Mehta and Shri Jawahir Mehta, could not be taxed again in the hands of Shri Ravichandra V. Mehta. This principle was supported by the Hon'ble Gujarat High Court's decisions in M.R. Shah Logistics Pvt. Ltd. vs. DCIT (308 CTR 493) and B. Nanji Enterprise Ltd. vs. DCIT (84 taxmann.com 155), which emphasized that the same income could not be taxed twice.

Conclusion:
The Tribunal dismissed the appeals of the Revenue for the assessment years 1998-99 to 2004-05, holding that the notices issued under Section 148 were barred by limitation and invalid. The Tribunal allowed the appeals of the assessees, holding that the interest income from the foreign accounts should be taxed in the hands of the individuals who owned the accounts and had declared the income. The Tribunal also quashed the reopening of assessments beyond the limitation period and addressed the issue of double taxation, ensuring that the same income was not taxed twice.