2023 (2) TMI 961 - AT - Income Tax

Reopening of assessment u/s 147 - period of limitation extended to 16 years - validity of notice for the period which has been expired already income escaped pertained to assets located outside India - Revenue reopened the case as per the limitation prescribed for issuing notice u/s 148 as per the provision of Section 149(1)(c)of the Act, which prescribed limit for reopening cases up to 16 years till the impugned assessment year - whether the learned CIT(A) was right in holding that the notice issued in the present case under Section 148 of the Act for reopening the case of the assessee was well beyond the prescribed period of limitation as prescribed under Section 149 ? - HELD THAT - In the impugned assessment year pertaining to AY 2004- 05, the limitation prescribed under the unamended Section 149 of the Act expired on 31.03.2011. The amended provision under sub-clause (c) to Section 149(1) of the Act extending the limitation to 16 years was brought on the Statute on the 1st of July, 2012 by the Finance Act, 2012 and the notice under Section 148 in the present case was issued on 27.03.2015; therefore, as per the facts of the present case also when the amendment extending limitation for issuing notice under Section 148 of the Act was brought on the Statute, the limitation for issuing notice in the present case already stood expired. Therefore, the proposition laid down by the Hon ble Delhi High Court in the case of Braham Dutta 2018 (12) TMI 832 - DELHI HIGH COURT that in such cases the retrospectivity of the amended provision would not apply to empower the Assessing Officer to extend limitation, which limitation already stood exhausted in his hands, would apply. Decided against revenue.

Summary

Issues Involved:
1. Validity of proceedings under Section 147 of the Income-tax Act, 1961.
2. Limitation period for issuing notice under Section 148.
3. Applicability of the extended limitation period introduced by Finance Act, 2012.
4. Assessment of undisclosed foreign bank accounts and corresponding income.

Issue-wise Detailed Analysis:

1. Validity of proceedings under Section 147 of the Income-tax Act, 1961:
The core issue was the legality of the reassessment proceedings initiated under Section 147. The CIT(A) quashed the reassessment proceedings, holding that the conditions for reopening the case under Section 147 were not fulfilled. The Tribunal upheld this decision, agreeing that the notice issued under Section 148 was beyond the prescribed limitation period.

2. Limitation period for issuing notice under Section 148:
The reassessment proceedings were initiated by issuing a notice under Section 148 on 27.02.2015 for AY 2004-05. The pre-amended Section 149 prescribed a maximum limit of six years for reopening cases. Thus, the limitation period expired on 31.03.2011. The Tribunal noted that the extended limitation period of 16 years introduced by the Finance Act, 2012, could not be applied retrospectively to cases where the original limitation period had already expired.

3. Applicability of the extended limitation period introduced by Finance Act, 2012:
The Finance Act, 2012, introduced an extended limitation period of 16 years for cases involving income related to assets located outside India. However, the Tribunal held that since the original limitation period had expired before the amendment came into effect, the extended limitation could not be applied retrospectively. This conclusion was based on precedents set by the Hon'ble Delhi High Court in Braham Dutt vs. ACIT and the Hon'ble Supreme Court in K.M. Sharma vs. ITO.

4. Assessment of undisclosed foreign bank accounts and corresponding income:
The case involved undisclosed foreign bank accounts held by the assessee's family, including the assessee, his father, and his grandfather. The substantive addition of interest income from these accounts was made in the hands of the grandfather, while a protective addition was made in the hands of the assessee. The Tribunal noted that since the reassessment order in the case of the father, where the substantive addition was made, had been set aside, the protective addition in the assessee's case could not survive.

Conclusion:
The Tribunal dismissed the appeal of the Revenue, upholding the CIT(A)'s decision to quash the reassessment proceedings. The Tribunal emphasized that the notice issued under Section 148 was beyond the prescribed limitation period, and the extended limitation period introduced by the Finance Act, 2012, could not be applied retrospectively. Consequently, the reassessment order was deemed invalid. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 22/02/2023 at Ahmedabad.