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TMI Blog2019 (2) TMI 1730X X X X Extracts X X X X X X X X Extracts X X X X ..... and set aside. - Appeals of the assessee are allowed. - ITA No (s) 409/RJT/2017, 450/RJT/2017, 410/RJT/2017 And ITA No (s) 451/RJT/2017 - - - Dated:- 25-2-2019 - SHRI MAHAVIR PRASAD, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER For The Assessee : Shri Deepak R. Shah For The Revenue : Shri Jitendrakumar, CIT-DR ORDER PER MAHAVIR PRSAD, JUDICIAL MEMBER: These captioned cross-appeals have been filed by the Assessee and the Revenue against each other against the separate orders of the Commissioner of Income Tax (Appeals) Ahmedabad-13, [CIT(A) in short] vide appeal no.CIT(A)-13/Int.Taxn./Ahd/414 415/2016-17, dated 29/09/2017 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(hereinafter referred to as the Act ) and assessment order u/s.143(3) r.w.s.147 of the Act both dated 27.2.2015 relevant to Assessment Years (AYs) 1996-97 1997-98 respectively. 2. The issue involved in both these cross-appeals raised by the assessee and the revenue are common, therefore both have been clubbed together for the purpose of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical reasons for all these orders. For the sake of brevity, the reasons recorded for AY 1996-97 are extracted herein The assessee has not filed the return of income for A1996-97 On perusal of documents/records forwarded by the DDIT (Inv.)-I, Rajkot, it is noticed that the assessee has opened a bank account No.130756 on 3rd June, 1970 in the joint name of himself and Shri Balkrishna Ravichandra Mehta and Jawahar Ravichandra Mehta with HSBC Republic Bank, (Suisse), A.A. Geneva. The said account number was changed into account No.432541 on 04.07.2000. Therefore, it is clear that the assessee was holding the said bank account during the period F.Y. 1995-96 relevant to AY 1996-97. 3. During the course of statement recorded u/s.132(4) of the I.T.Act during the course of search from Shri Ravichandra V.Mehta in reply to question No.13 he has submitted that the return of income has not been filed by him from 1994 to 1997. In his statement Shri Ravichandra Mehta in reply to question No.12 has submitted that there was a balance of ₹ 1 crore dollar in the said account in the year 1997. 4. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re income chargeable to tax has escaped assessment, namely:- Therefore, as the assessee is having a bank account with HSBC Republic Bank (Suisse) S.A., Geneva and having substantial amount deposited in the said account during the relevant previous financial year, the same represents asset located outside India, within the meaning of explanation 2(d) to section 147 of the I.T. Act. Since these asset has not been disclosed to the Department, the income chargeable to tax had escaped assessment within the meaning of section 147 of the I.T. Act. Again as per section 149(1)(c) of the I.T. Act, no notice shall be issued if more than 16 years have elapsed, as can be seen from the language of the Act, which is reproduced herein below: 149(1) No notice under section 148 shall be issued for the relevant assessment year.- ( c) If your years, but not more than sixteen years, have elapsed from the end of the relevant assessment years unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. In the present case it is seen that provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing search that he had settled an offshore trust, Assessing Officer issued notice under section 148 in March, 2015 thereby proposing to tax amount of US $ 2-3 million contributed by assessee for settling a trust in foreign country Whether assessment for subject assessment year could not have been reopened beyond 31-3-2005 in terms of provisions of section 149 as applicable at relevant time - Held, yes 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 for reopening concluded proceedings in respect of which limitation had already expired/lapsed before amendment became effective Held, yes Whether thus, impugned reassessment notice and all consequent proceedings were to be quashed and set aside Held, year [Paras 14, 15, 16 an 19] [In favour of assessee] 8. On the other hand, Ld.DR relied upon the finding of Ld.CIT(A) extracted hereinabove. 9. We have considered rival submissions and gone through the impugned order and the case-laws relied upon by the Ld.AR. The assessee has not challenged the vires of the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident on 27th March, 1957, and that notice related to the asst. yr. 1954-55. Under cl. (iii) of the proviso to s. 34(1), as it stood prior to its amendment by the Finance Act, 1956, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident after the expiry of one year from the end of the year of assessment. The right to commence a proceeding for assessment against the assessee as agent of a non-resident for the asst. yr. 1954-55, therefore, ended on 31st March, 1956, under the new Act before its amendment in 1956. This provision was, however, amended by the Finance Act, 1956, and under the amended provision the period of limitation was extended to two years from the end of the assessment year. The amendment was made on 8th Sept., 1958, but was given effect to from 1st April, 1956. Since the time within which notice could be issued against a person deemed to be an agent of a non-resident was extended to two years from the end of the assessment year, it was contended on behalf of the ITO that the notice issued by him was within the terms of the amended provision and was, therefore, a valid notice. Now the notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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. It follows, therefore, that the notice dt. 13th Nov., 1963, and 9th Jan., 1964, issued by the ITO, Ahmedabad, were illegal and ultra vires and were rightly quashed by the Gujarat High Court by the grant of a writ. For the reasons expressed, we hold that the judgment of the High Court of Gujarat dt. 14/15th Dec., 1964, is correct and this appeal must be dismissed with costs. 7. In view of the above decision, since the assessment could not have been reopened for Assessment Years 1996-97 to 2005-06, which has become barred by limitation on 31st March 2012, the Amending Act being Finance Act, 2012 inserting sub clause (c) Section 149 (1) w.e.f. 01-07-2012 cannot give a fresh lease of life for reopening the same which has already become barred by limitation on 31.12.2012. In view of the above, the Notice issued u/s.148 being beyond the limitation prescribed u/s.149 is bad in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The main question that has been raised on behalf of the learned counsels appearing for the parties is whether the provisions of sub-section (1) of section 150 as amended can be availed for reopening assessments, which have attained finality and could not be reopened due to bar of limitation, that was attracted at the relevant time to the proposed reassessment proceedings under the provisions of section149. 11. The submission made on behalf of the appellant is that neither the provisions of sub-section (1) nor sub-section (2) can be read as giving more than intended operation to the said provision. The provisions, it is argued, do not permit the authorities to reopen assessments, which have become final and reassessment of which had become barred by time before 1.4.1989 when section 150(1) was amended Reliance is placed on the decision in S.S. Gadgil v. Lal Co. [1964] 53 ITR 231. 12. The learned counsel appearing on behalf of the department has made an effort to persuade this Court to accept his construction of the provisions of section 150(1)and (2). It is argued that it is for the specific purpose of assessing income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessments based on order in proceedings under appeal, reference or revision, as the case may be, would not apply to assessments which have attained finality due to bar of limitation applicable at the relevant time. 6. The High Court rejected the above contention of the assessee on the ground that on the amendment introduced with effect from 1.4.1989 in sub-section (1), which enables reopening of assessment based on any Order of 'Court in any proceedings in any law', there is no corresponding amendment made in subsection (2) of Section 150 to bar reassessment based on Order of Court passed in any proceedings in any law in cases where prescribed period of litigation for reassessment had already expired. 17. We do not find the above reasoning of the High Court is sound. The plain language of sub-section (2) of Section 150 clearly restricts application of subsection (1) to enable the Authority to reopen assessments which have not already become final on the expiry of prescribed period of limitation under Section 149. As is sought to be done by the High Court, sub-section (2) of Section 150 cannot be held applicable only to reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1.4.1956 by the Finance Act of 1956. In the case of S.S. Gadgil (supra) admittedly under clause (iii) of the proviso to Section 34(I) of the Indian Income Tax Act, 1922, as it then stood, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident under Section 43, after the expiry of one year from the end of the year of assessment. The Section was amended by Section 18 of the Finance Act, 1956, extending this period of limitation to two years from the end of the assessment year. The amended was given retrospective effect from April 1, 1956. On March 12, 1957, the Income Tax Officer issued a notice calling upon the assessee to show cause why, in respect of the assessment year 1954-55, the assessee should not be treated as an agent under Section 43 in respect of certain non- residents. The case of the assessee, inter alia, was that the proposed action was barred by limitation as right to commence proceedings of assessment against the assessee as an agent of non-resident for the assessment year 1954-55 ended on 31.3.1956, under the Act before it was amended in 1956. This Court in the case of S.S. Gadgil (supra) accepted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent amendment made in Section 149 of the Act in the year 2012, i.e., more than 8 years after expiration of limitation on 31.03.2005, has been dealt with by the Supreme Court in K.M. Sharma (supra). 15. The AO has conceded in the order rejecting the petitioner s objection that It is also found that the assessee was a non-resident as contended by him, in the AY 1998-99. In the circumstances, there can be no question about the applicability of the then existing provision- Section 149 (b), which stated that the normal time limit for reopening assessment was four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. 16. It has been said that the government in all its actions is bound by rules fixed and announced beforehand--rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one's affairs on the basis of this knowledge (Ref. FA Hayek, Road to Serfdom , 1944). In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. In Commissioner of Income Tax v Scindia Steam Navigation Co. Ltd AIR 1961 SC 1633, it was held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law upsetting the position and imposing tax liability after that date, even if made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year. These principles were reiterated in Commissioner of Income Tax v Vatika Township (P) Ltd [2014] 49 taxmann.com 249/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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