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TMI Blog2020 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2005 being within 6 years from the end of relevant assessment year, which is 1999-2000, was well within the period of limitation, as then prevalent. The provisions of Section 149(3) of the IT Act were amended by the Finance Act, 2012 with effect from 1/7/2012. The amendment extended the period of limitation for issuance of notice under Section 148, even upon the agent of the NRI, from 2 years to 6 years. Looking to the width of the aforesaid explanation, it is not possible to accept Mr. Naniwadekar's contention that the extended period of limitation will apply only to the assessments for the Assessment Year 2010-11 or 2011-12. The explanation refers to any assessment year beginning on or before the 1st day of April, 2012. The explanation has been introduced specifically for the purpose of removal of doubts or to clarify the position with regard to the applicability of the amended provisions. First substantial question of law is required to be answered against the Appellant and in favour of the Revenue. Transfer of assets attracting tax on capital gains - family arrangement approved by the Civil Court - HELD THAT:- The findings of fact, in the present case, concur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N T : (Per M.S. Sonak, J.) Heard Mr. Mihir Naniwadekar with Mr. Purushottam Karpe for the Appellant and Ms. Amira Razaq, Standing Counsel for the Respondent. 2. This Appeal was on board for final hearing, along with Tax Appeals No.3/2012, 9/2012 and 10/2012. All these appeals involve identical issues of both, law and fact. However, the learned Counsel for the parties requested that this Appeal be treated as the lead Appeal. The learned Counsel for the parties agree that the decision in this Appeal will govern the fate of the remaining three appeals, as well. 3. This Appeal was admitted on 13.2.2012, on the following substantial questions of law : i. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding on a perverse view that the change of position by mere clarification by the Assessing Officer regarding status of the assessee, which is contrary to the reasons recorded under Section 148(2) and rule of law laid down by the jurisdictional High Court could give jurisdiction to issue the impugned notice under Section 148, which is otherwise barred by limitation? ii. Whether on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estioning the notices dated 14.03.2005, under Section 148 of the IT Act, inter alia, on the ground that the same were barred by limitation as prescribed under Section 149(3) of the IT Act. These petitions were dismissed by Judgment and Order dated 27/03/2006. 9. As against the aforesaid, the Appellants instituted Special Leave Petition before the Hon'ble Supreme Court, which came to be disposed of by order dated 17.07.2006, which reads as follows : The short question which is involved in this special leave petition is whether the petitioner herein is assessable under Income Tax Act as the agent of N.R.I. Assessee or whether the income tax assessment should be done only qua the N.R.I. Assessee. The order of assessment has been passed. It is the case of the N.R.I. Assessee that the assessment is time barred. However, the assessee has not moved in appeal before the appellate authority. Therefore, we direct the petitioner herein/ N.R.I. Assessee to move in appeal within four weeks. Delay, if any, stands condoned. The objection as to limitation will also be decided by the appellate authority. 10. The Hon'ble Apex Court by the aforesaid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of India and ors. vs. Uttam Steel Limited (2015) 13 SCC 209. 16. Mr. Naniwadekar submits that the notices dated 14.03.2005 issued under Section 148 are vitiated because it is settled law that the reasons in support of such notice cannot be supplemented at a later stage, even by filing an affidavit or producing any additional material. He submits that the notice under Section 148 requires sanction and such a sanction is issued to the reasons recorded for reopening of the assessment which accompany the notice under Section 148 of the IT Act. If such reasons are permitted to be supplemented, as has been done in the present matter by issuance of the communication dated 21.06.2005, then the principle that the reasons cannot be permitted to be supplemented or the principle that no fresh reasons can be stated, will stand breached. He submits that this is yet another reason for setting aside the notice dated 14.03.2005 issued under Section 148 of the IT Act. In support of this contention, he relies on Hindustan Lever Ltd. vs. R.B. Wadkar 268 ITR 332. 17. Mr. Naniwadekar, without prejudice to the aforesaid, submits that even, otherwise, this is a clear case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2005 merely clarified that the notices were served upon Mr. P.P. Mahatme in his capacity as the power of attorney holder for the Assessee and not as the representative assessee. She, therefore, submits that there is no any infirmity whatsoever in the notice dated 14.03.2005 issued under Section 148 of the IT Act. 20. Ms. Razaq submits that once it is accepted that the notices were issued to Mr. P.P. Mahatme only as the power of attorney holder on behalf of Assessees who are NRIs, the period of limitation which will apply, is six years and not merely two years as urged on behalf of the Appellant. She submits that in any case, the amendment of 2012, when read with the Explanation, makes it clear that the notice issued on 14.03.2005, was well within the prescribed period of limitation. She submits that the explanation makes it clear that the amendment of 2012 will be applicable for any assessment year beginning on or before the 1st day of April 2012. She, accordingly, submits that the first substantial question of law be decided against the Appellant and in favour of the Revenue. 21. Ms. Razaq submits that this is not at all a case of any bonafide family settlement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation prescribed under Section 149(3) of the IT Act. It is further urged that the notice, which was already barred by limitation in terms of law in force in the year 2005, cannot be revived by virtue of an amendment which came into force on 1.7.2012, in which the period of limitation was extended from two years to six years. In support of this precise contention, reliance was placed on Uttam Steel Limited (supra). 25. On the first aspect as aforesaid, we note that this was precisely the challenge raised by the Appellants by instituting Writ Petitions No.70/2006, 71/2006, 72/2006 and 73/2006, in which, the notice dated 14.03.2005 was squarely challenged. This ground was specifically rejected in the Judgment and Order dated 27/03/2006. Thereafter, the Appellants instituted Special Leave Petition, in which, liberty was granted to the Appellants to raise the issue of limitation. There was no specific liberty granted to the Appellants to question the notice dated 14.03.2005 on the ground that the communication dated 21.6.2005 amounts to supplementing or adding to the reasons accompanying the notice dated 14.03.2005. Thus, we are not too sure whether the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 being within 6 years from the end of relevant assessment year, which is 1999-2000, was well within the period of limitation, as then prevalent. 28. The provisions of Section 149(3) of the IT Act were amended by the Finance Act, 2012 with effect from 1/7/2012. The amendment extended the period of limitation for issuance of notice under Section 148, even upon the agent of the NRI, from 2 years to 6 years. 29. Explanation to Section 149(3) again introduced by the Finance Act, 2012, reads as follows : 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 . 30. Looking to the width of the aforesaid explanation, it is not possible to accept Mr. Naniwadekar's contention that the extended period of limitation will apply only to the assessments for the Assessment Year 2010-11 or 2011-12. The explanation refers to any assessment year beginning on or before the 1st day of April, 2012. The explanation has been introduced specifically for the purpose of rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in this case, is not a family settlement as such, so as to regard the income derived therefrom by the Appellant as inexigible to capital gains tax. 36. The family settlement referred to in Sachin Ambulkar (supra) was a settlement amongst family members in the context of their 'preexisting right'. In this context, the ITAT whose decision was questioned by the Revenue in the case of Sachin Ambulkar (supra), had held that since the settlement 'only defines a preexisting joint interest as separate interests, there is no conveyance, if the arrangement is bonafide' . Since there is no conveyance, there is no need for registration of such arrangements, when orally made, even if later on reduced to writing. The ITAT, thereafter, followed the decision of the Hon'ble Apex Court in the case of Maturi Pullaiah vs. Maturi Narasinham, reported in AIR 1966 SC 1836 and held that where there is no transfer of assets in the family arrangement and the amount received by the Assessee is part of the family arrangement and not towards the transfer of any capital assets, such amount cannot be regarded as a capital gain and no capital gains tax liability arises. In Sachin Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record to establish that Cristovam and Alvaro had no right in the immovable property which was the subject matter of dispute and consequently the settlement between the Appellant and the said two persons can hardly be described as a family settlement. The settlement may be enforceable inter-parties now that the same is incorporated in the consent terms, based upon a consent decree may have been issued. However such settlement, cannot be called as a family settlement or family arrangement, as is understood in the case of Kale and others (supra) or in the case of Sachin Ambulkar (supra). Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement and on such basis, it cannot be held that the consideration received as a result of such settlement, does not constitute capital gain. 40. The decision in the case of Kay Arr Enterprises (supra), also relies upon the decisions in Kale and others (supra), and Maturi Pullaiah (supra). Again, in the said case as well, the view taken is that the family settlement was nothing, but a realignment of preexisting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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