2023 (10) TMI 197 - AT - Income Tax

Validity of Reassessment proceedings - period of limitation to issue notice - scope of amendment to section 149 by Finance Act 2012, which extended limitation for reopening assessment to sixteen years - HELD THAT - As relying on Brahm Dutt 2018 (12) TMI 832 - DELHI HIGH COURT the first issue before Hon ble High Court was, as to whether AY 1998-99 could not have been reopened beyond 31.03.2005 in terms of provisions of section 149 as applicable at relevant time. Hon ble High court answered in affirmative. The second issue before the Hon ble High Court was as to whether subsequent amendment to section 149, by Finance Act, 2012, which extended limitation for initiation of reassessment proceedings to sixteen years, could not be resorted to for reopening concluded proceedings in respect of which limitation had already expired/lapsed before amendment became effective. Hon ble High Court answered in affirmative. DR has placed vehement reliance on the order of ITAT Mumbai in the case of Dilip J. Thakkar 2022 (3) TMI 1307 - ITAT MUMBAI and the ld. AR has pressed into service judgment of Hon ble jurisdictional High Court of Delhi in the case of Brahm Dutt (supra) which has binding effect on all the authorities below including this Tribunal. Therefore, binding preposition rendered by Hon ble jurisdictional High Court (supra) has rightly been followed by the ld. CIT(A). We are unable to see any ambiguity and perversity or any other valid reason to interfere with the findings recorded by the ld. CIT(A) while quashing the reassessment notice u/s. 148 and impugned reassessment order u/s. 147 r.w.s. 143(3) of the Act by relying ratio of the judgment of Hon ble jurisdictional High Court of Delhi in the case of Brahm Dutt vs. ACIT (supra). Accordingly, ground no.1 of Revenue is dismissed. Income taxable in India - interest income earned by the non-resident assessee from Standard Chartered Bank, New Jersey Foreign Branch - As per provision of section 5(2) of the Act which is charging section for non-resident, Indian income of non-resident is taxable under the provisions of Income Tax Act 1961, and any other income earned outside India is not taxable in India. As per said legal position the interest income earned by the non-resident assessee from Standard Chartered Bank, New Jersey Foreign Branch is not taxable in India as the same has been accrued to non-resident assessee from the deposits in the bank situated outside India and thus the same interest income cannot be deemed as received or deemed to be received in India or accrue or arises or deemed to be accrue or arise in India and thus the ld. CIT(A) was correct and justified in holding that the same was not liable to tax in India in the hands of non-resident Indian assessee. Accordingly, no interference is called for in the conclusion drawn by the CIT(A) on merits and thus the ground no. 2 of Revenue is dismissed.

Summary

Issues involved:
The issues involved in this judgment are (1) retrospective nature of an amendment to section 149(1) of the Income-tax Act, 1961, and (2) tax liability of a non-resident individual for income earned outside India.

Issue 1 - Retrospective Nature of Amendment to Section 149(1):
The appeal was filed by the Revenue against the order of CIT(A)-23 for AY 2003-04. The Revenue contended that the CIT(A) erred in quashing the assessment order based on a decision of the Delhi High Court without considering the retrospective nature of the amendment to Sec 149(1) by the Finance Act, 2021. The Revenue argued that the amendment was retrospective, as held by ITAT Mumbai in a specific case, and thus the reassessment order should not have been quashed. However, the Assessee Representative supported the CIT(A)'s decision, citing the finality of the assessment for AY 2003-04 before the amendment came into effect. The ITAT upheld the CIT(A)'s decision, emphasizing the binding effect of the Delhi High Court's judgment on the matter.

Issue 2 - Tax Liability of Non-Resident Individual:
Regarding the tax liability of a non-resident individual for income earned outside India, the Revenue contended that the interest income earned by the non-resident assessee from a foreign bank should be taxable in India. However, the ITAT explained that as per the provisions of the Income Tax Act, income earned outside India by a non-resident individual is not taxable in India. Therefore, the interest income accrued from a foreign bank to the non-resident individual was correctly held by the CIT(A) as not liable to tax in India. Consequently, the ITAT dismissed the appeal of the Revenue.

Separate Judgment:
No separate judgment was delivered by the judges in this case.