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TMI Blog2019 (11) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT] . In this case a search was conducted against the assessee in July 2011. In the statement recorded during the course of search the assessee had admitted of settling a substantial amount on a trust established outside India in the year 1998. The assessee admitted that he was one of the beneficiary of the Trust which had a bank account with HSBC, Geneva, Switzerland. Based on such information, the Revenue reopened his income-tax assessment for AY 1998-99 taking recourse to the provisions of Section 149(1)(c) of the Act. The assessee challenged the legality of the notice u/s 148 and consequent proceedings by filing writ petition. We further note that the Revenue s SLP against the decision of the Hon ble Delhi High Court was dismissed by the Hon ble Supreme Court [ 2019 (7) TMI 351 - SC ORDER] . We also find that following the judgment of the Hon ble Delhi High Court (supra), the coordinate Benches of this Tribunal in the following cases similarly quashed the reassessment proceedings u/s 148 which were initiated for assessment years prior to AY 2006-07 taking aid of Section 149(1)(c) - I.TA No.1672 to 1674/Kol/2018, I.TA No.1861 & 1862/Kol/2018, C.O. No. 87 , 88 & 89/Kol/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. 3. Brief facts of the case as noted from the orders of the authorities below are that, for the AY 2001-02, a return of income was filed u/s 139 on 19-10-2001 declaring total income of ₹ 5,49,880/- which was processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). A search u/s 132 was thereafter conducted against Mangal Steel Group, to which the assessee belongs, on 28-07-2011. Although in the said search no material was found in relation to an account maintained with HSBC Bank, Geneva Switzerland, assessee s statement with reference to such bank account was recorded u/s 132(4) because the Department was in possession of certain information about such an account. In the proceedings which followed the search, the assessee denied ownership of such bank account but in the assessments framed u/s 153A/143(3) for the AYs 2006-07 2007-08, the then AO on the basis of information available with him made additions to the total income towards undisclosed investment being funds invested in HSBC Bank A/c which was not disclosed in the assessee s tax returns for the said years. Being aggrieved by these assessments, appeals were filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on 28.07.2011. Sri Garodia was confronted with the evidence regarding having undisclosed bank accounts in HSBC Bank, Geneva, Switzerland at the time of search during the course of recording of statement u/s 132 of the Income tax Act. In the statement he had accepted to the existence of bank account in his name at HSBC Bank, Geneva, Switzerland. At the time of assessment proceedings Sri Garodia however denied the existence of the bank accounts completely which was taken under oath u/s 131 of the Income tax Act. Assessment u/s 153AI143(3) was completed on 31.12.2014 for both the assessment years 2006 07 and 2007 08 computing total income of Rs,46648560 and ₹ 97702290 including the undisclosed balances in the bank accounts at HSBC Bank, Geneva, Switzerland. During penalty proceedings he submitted copy of petition filed before Id. CIT (Appeals) enclosing copy of paper book filed before Ld. CIT (Appeals) where he accepted that he had bank accounts in HSBC Bank, Geneva, Switzerland. Upon receipt of direction from Ld. CIT (Appeals), the bank accounts were sent to the Swiss Tax autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO ought to have appreciated that the limitation period extended by enactment of Clause (c) of Sec. 149(1) of the Act did not have any application to the appellant's case since such amended provision came in force much after the period of limitation had expired and in that view of the matter the dead proceedings could not be revived by an amendment which came into force after 1st April, 2012. 4. For that on the facts and in the circumstances of the case, the assessment order be held to be ab initio void as it has been passed after the period of limitation which expired on 31.12.2016 because the AO was not entitled to have recourse to provisions of Explanation 1 (x) of Sec. 153 of the Income Tax Act. 5. The ld. CIT(A) in his impugned order observed that the material issue to be decided in Ground Nos. 1 to 4 is whether the initiation of reassessment proceedings u/s. 148 on 16.02.2016 could be said to be within the period of limitation as prescribed in Section 149 of the Act or whether on the facts obtained in the present case it can be said that the reassessment proceedings had become time barred on or before 31.03.2012 and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several Sections with retrospective effect. For example, the Sections 2(14) 2(47) defining the expressions 'capital asset' 'transfer' were amended and the amended provisions were made effective retrospectively from 01.04.1962. Similarly amendments were carried out in Section 9(1)(vi) 9(1)(vii) enlarging the definition of income deemed to accrue in India by way of 'royalty' and 'fees for technical services' and the amendments were made effective retrospectively from 01.04.1976. Unlike, the foregoing amendments which were specifically made effective retrospectively, the amendment in Section 149(1) was. made effective prospectively from 01.07.2012. In the above factual background therefore it is necessary to ascertain whether the Ld. AO could be held to be justified in reopening the assessment for AY 2005 06 which became time barred on 31.03.2012 and on that date admittedly clause (c) of Section 149(1) was not in force. 6. Provisions of the Income tax Act, 1961, as were in force on 31.03.2012; assessment of any assessee could be reopened by the Ld. AO under Section 147 of the Act by issuing notice u/s 148 within the time presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 but the notices u/s 148 initiating the re assessment proceedings for AYs 2001 02 to 2005 06 were issued on 16.02.2016. As per Section 149(1) as was in force till 31.03.2012, the assessment for AY 2005 06 could have been validly reopened by the Ld. AO at any time till expiry of six years from end of the relevant assessment year. Admittedly no notice u/s 148 was issued till then. It is true that Finance Bill, 2012 introduced in Parliament in February 2012 proposed to insert clause (c) in Section 149(1) by which period of limitation for issuance of notice u/s 148 was extended upto sixteen years. However as per the Finance Act, 2012 as enacted by the Parliament, Section 149(1)(c) was made effective prospectively from 01.07.2012. The Notes on Clauses specifically stated that the amended provisions were to come in force with effect from 01.07.2012. I therefore find that there was nothing expressly provided by or in the amending Act which indicated Legislative mind to make the provision applicable to those proceedings which had become barred by limitation as on 01.07.2012 i.e. the date when the amended provisions came into force. I agree with the observations of the judicial forums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned DR challenging the impugned action of the ld. CIT(A) first drew our attention to para 11 of the impugned order of the ld. CIT(A). She pointed out that the assumption of the ld. CIT(A) that clause (c) in section 149(1) of the Act, as enacted by the Finance Act, 2012 and made effective from 1-7-2012, is to be construed as prospective in operation, is misplaced and erroneous. According to the ld. DR the very assumption of the ld. CIT(A) that the said amendment was prospective in nature was patently erroneous for the reason that he did not take into consideration the Explanation below Section 149, which reads as under:- Explanation for the removal of doubts, it is hereby clarified that provisions of subsection (1) and (3) has amended by the Finance Act, 2012 shall also be applicable for any assessment year beginning on/before 1st day of April, 2012. 10. Referring to the said explanation the ld. DR submitted that the ld. CIT(A) was wrong to hold that clause (c) of section 149(1) of the Act is prospective in nature when the Explanation had employed the words for removal of doubt(s) which means if there is any doubt, it has to be unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as the agent of a non resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation. For the removal of doubts, it is hereby clarified that the provisions of sub sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. (b). Therefore, the ld. DR submitted that the Commissioner of Income Tax(Appeals)'s order in disposing the matter of applicability of time limit has not considered Explanation 2 to be read with section 149(1 )(c). The decision of CIT(A) is based on interpretation of judicial pronouncement that proceedings available to the AO. for action in the Financial Year 2016 were barred and could not be revived by the amendment in section 149(1)(c). The said amendment of Sec. 149(1)(c) bringing into ambit sixteen long years has been promulgated for only this reason that on the date of reopenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 as on 1st July, 2012, the extended period of sixteen years became available for AYs 2006 07 and onwards and in such sense, the amendment was retro active in operation. As per the principle laid down in the judgments cited above, I however find that the assessments for and upto AY 2005 06 had become time barred as on 31/0312012. ( d) It is the argument of the Revenue that, the provision of Sec. 149(1 )(c), being retro active in operation, and being fully applicable, on the date of Reopening, the A.O. is entitled to reopen 16 years backwards from the year of issuing notice. Therefore, the reopening in this case upto Assessment Year 2001 02 should be held valid and as per the provision of Law. She therefore urged that the impugned order of ld. CIT(A) ought to be reversed. 11. Per contra, Shri Damle, ld. AR fully supported the orders of the Ld. CIT(A). The ld. AR took us through the provisions of Section 149 and drew our attention to the fact that clause (c) was inserted in section 149(1) by the Finance Act, 2012. He particularly emphasised on the fact that although the Finance Bill, 2012 was presented in the Parliament on 29-02- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in its judgment dated 05.07.2019 in SLP No. 20207/2019. The ld. AR also relied on the judgment of the Hon ble Supreme Court in the case of CIT Vs Vatika Township Ltd (367 ITR 466) in which the Constitution Bench of the Hon ble Supreme Court laid down parameters to be applied while interpreting retrospective operation of a fiscal statute. The ld. AR also relied on the decision of the Hon ble Bombay High Court in the case of ACIT Vs Union Bank of India (263 Taxman 385) in which the Hon ble High Court interpreted an analogous amendment to Section 115JB carried out by the same Finance Act, 2012 making the Explanation (3) applicable to assessment years commencing on or before 01-04-2012. The Ld. AR therefore strongly urged us to uphold the order of ld. CIT(A). 12. We have heard the rival submissions and perused the orders of the authorities below. We have also critically examined the applicable legal provisions as also the judicial decisions relied upon by both the parties. The facts of the case are in narrow compass which are not disputed by either of the parties. The preliminary question to be decided first is whether the initiation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said provision applicable retrospectively so as to revive proceedings which had already become time barred, is nowhere discernible. Nowhere either in the amendment Act or in Notes on Clauses, it is apparent that the Parliament while enacting clause (c) in Section 149(1) intended to bestow on the tax authorities powers to revive the proceedings which had already become time-barred/closed at the time when the amended provisions of Section 149(1)(c) became operational on 01-07-2012. In this regard, we note that the ld. DR per se never questioned the judicial principle that an amendment in fiscal statute is generally prospective in nature. However relying heavily on the Explanation appended to the Section 149, the Revenue has tried to make out a case that the amended provision of Section 149(1)(c) brought into effect prospectively, had retrospective effect, in terms of which any assessment for and upto sixteen years before 01-07-2012 could be reopened. 14. In order to verify the correctness of this contention, it is therefore relevant to understand the function which an Explanation performs in a fiscal statute. It is judicially held that an Explanation cannot be read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d D. Bhatt (supra). In the decided case the assessee had claimed that his assessment was reopened by the Ld. AO by taking benefit of the extended period of limitation which was provided for in Section 148 under the 1961 Act whereas the period of limitation under the Income Tax Act 1922 Act [referred to in the judgment (infra) as old Act] had already expired. It was assessee s contention that even though the period of limitation for reopening of assessment was expanded in Section 148 of the Income Tax Act 1961 Act, the said provision did not revive the proceeding for reassessment which had already become time barred before the amended provisions of Section 148 of the Income-tax Act, 1961[referred to in the judgment (infra) as new Act] came into force. While upholding the High Court s decision quashing the notice issued u/s 148, the Supreme Court s held as under: It was admitted in this case that the right of the ITO to reopen the assessment for the year 1947 48 was barred under the old Act before the new Act came into force. It was opined that it was not permissible to construe sections 297(2)(d)(ii ) of the new Act as reviving the right of the ITO to reopen the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aria, the learned amicus curiae at some length. There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself have been a dead claim in the sense that it was time barred before an amending Act with a larger period of limitation comes into force. A number of judgments of this Court have recognised the aforesaid proposition: 10.1 Thus, in S.S Gadgil v. Lal and Co. AIR 1965 SC 171, this Court stated: (AIR p. 177, para 13) 13. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non resident party under the Income Tax Act before it was amended, ended on 31 3 1956. It is true that under the amending act by section 18 of the finance act, 1956, authority was conferred upon the Income Tax Officer to assess a person as an agent of a foreign party under Section 43 within two years from the end of the year of assessment. But authority of the Income Tax Officer under the Act before it was amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This would mean that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of the enactment as also to proceedings commenced thereafter, notwithstanding that the cause of action may have arisen before the new provisions came into force. However, it must be noted that there is an important exception to this rule also. Where the right of suit is barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right. [Emphasis given by us] 10.5 For the latest exposition of the same rule see Thirumalai Chemicals Ltd. v. Union of India2011 6 SCC 739, SCC at para 29. 11. The effect of the amendment of Section 11 B on 12 5 2000 is that all claims for rebate pending on this date would be governed by a period of one year from the date of shipment and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re [1870] LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision in L'Office Cherifien des Phosphates v. Yamashita Shinnihon Steamship Co. Ltd. [1994] 1 AC 486. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter also took note of the fact that the same Finance Act, 2002 carried out some other amendments to the Income-tax Act, 1961 which were given retrospective operation by the Parliament. However the proviso to Section 113, was made effective prospectively from 01-06-2002. The relevant discussion in the said judgment is as follows: d) There are some other circumstances which reflect the legislative intent. The problem which was highlighted in the Conference of Chief Commissioners on the rate of surcharge applicable is noted above. In view of the aforesaid difficulties pointed out by the Chief Commissioners in their Conference, it becomes clear that as per the provisions then enforced, levy of surcharge in the block assessment on the undisclosed income was a difficult proposition. It is for this reason retrospective amendment to Section 113 was suggested. Notwithstanding the same, the legislature chose not to do so, as is clear from the discussion hereinafter. Notes on Clauses appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that this amendment will take effect from 1st June, 2002 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made effective retrospectively from 01-04-1976. These amendments were also closely linked with foreign sources of income or transactions between the non-residents. However the Legislature in its wisdom made the foregoing amendments with retrospective effect, whereas the amendment in Section 149(1) by inserting clause (c) was made effective prospectively from 01-07-2012. We therefore find merit in the ld. AR s submission that legislative intent to make the clause (c) of Section 149(1) applicable retrospectively so as to revive close proceedings was not apparent. 20. Before us, the ld. AR bolstered his argument by making reference to the judgment of the Hon ble Bombay High Court in the case of CIT Vs Union Bank of India (supra). He submitted that the Finance Act, 2012 inserted Explanation (3) to Section 115JB which reads as follows: Explanation 3 For the removal of doubts, it is hereby clarified that for the purposes of this section, the assessee, being a company to which the proviso to sub section (2) of section 211 of the Companies Act, 1956(1 of 1956) is applicable, has, for an assessment year commencing on or before the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt cure a defect without resorting to retrospective amendment, which in the present case has admittedly not been done. 21. We note that the language of Explanation (3) to Section 115JB is somewhat similar to the language of the Explanation below Section 149. In both places it is provided that the Explanation is inserted for removal of doubts and the Explanation is applicable to assessment years beginning on or before 01-04-2012. Yet the Hon ble Bombay High Court held that since the principal provision of the Act was not amended retrospectively, by applying the Explanation (3), the principal provisions of Section 115JB cannot be made applicable to banking companies retrospectively. In our considered opinion, the same principle applies to the present appeals as well. 22. We further find that the issue involved in the present appeal is squarely dealt with by the Hon ble Delhi High Court in the case of Brahm Datt Vs UOI (supra). In this case a search was conducted against the assessee in July 2011. In the statement recorded during the course of search the assessee had admitted of settling a substantial amount on a trust established outside India in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g statute struck down by courts for certain defects; the period of such retroactivity, and the decree and extent of any unforeseen or unforeseeable financial burden imposed for the past period etc. 18. In Govinddas v. ITO [1976] 103 ITR 123 the Supreme Court held that Section 171 (6) of the Income Tax Act was prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Act came into force and observed that: 11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several 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 prospective ..... X X X X Extracts X X X X X X X X Extracts X X X X
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