SANJAY JAIN,BHILWARA, RAJASTHAN vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 7, NEW DELHI

The captioned appeals are filed by the assessee against the respective orders passed by Ld. Commissioner of Income Tax(Appeals)-24, New Delhi [“Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the respective assessment orders pertaining to Assessment Years 2011-12 to 2017-18 respectively which is tabulated as under:-

1383/Del/2024 2016-17 30.01.2024 24.12.2019 153A r.w.s 144 7. 1384/Del/2024 2017-18 30.01.2024 24.12.2019 144 2. At the time of hearing, it was stated that the issues involved in all captioned appeals filed by the assessee, for Assessment Years 2011-12 to 2017-18 are common, interlinked and arising from the search action on the assessee. Hence, all these cases have been heard together and accordingly, adjudicated by this common order.

First we take appeal of the assessee in [Assessment Year 2011-12]. [Assessment Year 2011-12] 4. Brief facts of the case are that the assessee filed his return of income u/s 139 of the Act on 30.12.2011, declaring total income of INR 2,44,620/-. The return was processed u/s 143(1) of the Act on 09.03.2012 at INR 2,44,620/-. A search and seizure action u/s 132 of the Act was carried out in AMQ Group of cases on 27.02.2017 and at the residential premises of the assessee was searched on 28.02.2017. As a consequence, notice u/s 153A of the Act was issued on 27.11.2017 and duly served by Speed Post to the assessee. In response one Shri Hardik Choudhary, CA appeared on behalf of the assessee and filed a letter dated 04.10.2018 enclosing copy of acknowledgement of original return filed by the assessee on 27.02.2014. However, since no power of attorney was filed by Shri Hardik Choudhary, no cognizance of the return filed by him was taken and notices were issued to the assessee but remained non- complies. The AO in para 5 of the order observed that FT & TR reference was made to the Competent authority of Hongkong on 04.12.2018 requesting for supply of information related to assessee and accordingly the limitation was extended for one year i.e. upto 31.12.2019. Thereafter the assessment was completed by making additions /disallowances of INR 1,60,000/- in the order passed u/s 153A r.w.s. 144 of the Act dt. 24.12.2019. Against this order of AO, an appeal was preferred before ld. CIT(A) who vide impugned order dt. 31.01.2024 dismissed the appeal of the assessee.

Aggrieved by the said order, assessee filed the present appeal before the tribunal wherein the following grounds of appeal are taken by the assessee:-

It is submitted by ld. AR that as per above section, assessment has to be completed within 21 months from the end of the financial year in which the last authorization for search u/s 132 of the Act was issued. In the present case, as observed in para 1 of the assessment order, the only search warrant was issued on 28.020.2017 in the case of assessee. Thus, the due date from passing the assessment order as per section 153B was 31.12.2018. However, the said limitation was extended for one year for the reason that the FT& TR reference was made to the competent authority of Hong Kong.

According to the ld. AR, the AO used the reference made by the competent authority of India to the Competent Authority of Hong Kong on 04.12.2018 seeking information for AYs 2011-12 to 2017-18. However, under Article 26 of the Agreement For Exchange of Information Page | 5 with respect to Taxes With Foreign Countries Hong Kong (hereinafter referred to as "DTAA"), which came into force on 30.11.2018, such requests are permissible only if the information pertains to fiscal matters arising post the effective date, i.e., for FY 2019-20 and onwards. For this he invites our attention to Paragraph 5 of the DTAA Protocol which is available at paper book pages 240, information requests for periods prior to 30.11.2018 must be forcibly relevant to a taxable event occurring after that date. The relevant extract of Paragraph 5 of the DTAA Protocol is reproduced as below: 5. With reference to Article 26 (Exchange of Information) of the Agreement, it is understood that: (a) information exchanged shall not be disclosed to any third jurisdiction. (b) the competent authority of India may disclose information to: (i) Parliamentary Committees; (ii) Special Investigation Team (SIT) constituted by Government; and (iii) any other oversight bodies mutually agreed upon in writing. (c) the requested Contracting Party shall disclose any information that precedes the date on which the Agreement has effect for the taxes covered by the Agreement, insofar the information is foresecably relevant for a fiscal year or taxable event following that date.

In the instant case, the reference related to the assessment years prior the DTAA, the request falls outside the permissible scope of Article 26 read with Protocol. Ld. AR submits that the Explanation to Section 153B allows exclusion of time for exchange of information under treaties Page | 6 referred in Section 90/90A. However, since the DTAA was not applicable to the assessment years in question, the reference made cannot justify an extension of the time limit under Section 153B. He thus, prayed that in the instant case the time limit for passing the assessment order expired on 31.12.2018, not 31.12.2019. Hence, the impugned assessments are barred by limitation and liable to be quashed.

In this regard, reliance is placed on the following judicial pronouncements:- * CIT v. Sneh Lata Sawhney, 2025 SCC OnLine Del 3372 * Subhash Sathe v. ACIT, Central Circle-6, in 2773/DEL/2016.

Per contra, the Ld. Department's Representative relying on the orders of the Ld. CIT(A) in the Appeals filed by the Assessee and relying on the assessment order in the Appeals filed by the Department, sought for dismissal of the Appeals of the Assessee and allowing of appeals of the Department.

We have heard both the parties and perused the material available on record. The Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Central-1, Vs. Sneh Lata Sawhney (supra) held that the exclusion as provided under Explanation (ix) to Section 153B (which was numbered as Clause (viii) at the material time) is applicable only if a reference for exchange of information has been made as per Section 90/90A of the Income Tax Act, 1961. Where the request is not made in terms of the India-Hongkong DTAA, it was contrary to the limitations as expressly specified under Article 26 of the Protocol and thus, the period of limitation to frame the assessment could not be extended on the basis of such Reference. The relevant Paragraphs of the Judgment are reproduced as under:- “45. In view of the aforesaid contention, we are required to examine the import of substitution of Article 26 of the Indo- Swiss DTAA by virtue of Article 8 of the Amending Protocol. And, whether the said Article, as it existed prior to 30.08.2010, survived for the purposes of exchange of information relating to the period prior to 01.04.2011.

It is clear from Article 8 of the Amending Protocol that Article 26 of the Indo-Swiss DTAA as amended by the Supplementary Protocol stood deleted and was replaced by Article 26 as set out in the Amending Protocol. Further, paragraph 2 of Article 14 of the Amending Protocol expressly stipulated that the Amending Protocol would form an integral part of the Indo- Swiss DTAA and would be applicable on the date of the notifications confirming that all legal requirement for giving effect to the Amending Protocol were satisfied. However, paragraph 3 of Article 14 of the Amending Protocol makes it explicitly clear that notwithstanding anything contained in paragraph 2 of Article 14 of the Amending Protocol, Article 26 of the Indo-Swiss DTAA would be applicable only for information that relates to any fiscal year beginning on or after first day of January of the year following the date on which the Amending Protocol was executed. Since the Amending Protocol was signed on 30.08.2010, Article 26 would be effective only for exchange of information that relates to the following fiscal year, that is, commencing 01.04.2011. Thus, Mr. Rai’s contention that the Indo-Swiss DTAA contained provisions regarding exchange of information even prior to the Amending Protocol and therefore, the request Page | 8 for information relating to a period prior to 01.04.2011 would be valid, is unmerited.

It is material to note that by virtue of Article 8 of the Amending Protocol, Article 26 of the Indo-Swiss DTAA as amended by the Supplementary Protocol was deleted. Thus, Article 26 (which was earlier numbered as Article 24) of the Indo-Swiss DTAA as it existed prior to 30.08.2010 ceased to exist, any request under that Article cannot be made after 30.08.2010. The only agreement that existed between the Swiss Confederation and India in respect of exchange of information under the Indo-Swiss DTAA is embodied in Article 26 as was substituted by the Amending Protocol.

By virtue of the Amending Protocol, the Indo-Swiss DTAA stood novated insofar as the provision regarding exchange of information is concerned. It is well settled that novation discharges the original contract. Thus, for all intents and purposes, Article 26 as it existed prior to 30.08.2010, ceased to exist. It is also well settled that the effect of substitution of an agreement obliterates the existing agreement and replaces the same. Thus, after 30.08.2010, the Revenue had no recourse to Article 26 as it was operative prior to 30.08.2010.

The principle that the substitution of a provision has the effect of removing the existing provision is also applicable to legislative instruments. Unless there is an appropriate saving clause, all rights and liabilities under a law that is substituted, would ceases to exist.

In Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., the Supreme Court had explained that “Once the old rule has been substituted by the new law, it ceases to exist and does not automatically get revived when the new rule is held to be invalid”. Thus, unless the rights and liabilities under the law as prior to substitution are saved by a savings clause, or by virtue of Section 6 of the General Clauses Act, 1897, or by necessary intent, a clause that is substituted would cease to be effective.

In ZileSingh v. State of Haryana &Ors. , the Supreme Court had explained the practice of amendment by substitution and observed as under: “24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. “Substitution” has to be distinguished from “supersession” or a mere repeal of an existing provision.

Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p. 565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P. [West U.P. Sugar Mills Assn.v. State of U.P., (2002) 2 SCC 645], State of Rajasthan v. Mangilal Pindwal [State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60], Koteswar Vittal Kamath v. K. Rangappa Baliga& Co. [Koteswar Vittal Kamath v. K. Rangappa Baliga& Co., (1969) 1 SCC 255] and A.L.V.R.S.T. Veerappa Chettiar v. I.S. Michael [A.L.V.R.S.T. Veerappa Chettiar v. I.S. Michael, 1962 SCC OnLine SC 318 : 1963 Supp (2) SCR 244 : AIR 1963 SC 933] . In West U.P. Sugar Mills Assn. case [West U.P. Sugar Mills Assn. v. State of U.P., (2002) 2 SCC 645] , a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case [State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60], this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case [Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., (1969) 1 SCC 255] a 5 (2004) 8 SCC three-Judge Bench of this Court emphasised the distinction between “supersession” of a rule and “substitution” of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place.”

In a recent decision in Pernod Ricard (India) Private Limited v. State of Madhya Pradesh &Ors.6 , the Supreme Court once again took note of the distinction between supersession and substitution. The relevant observations of the said decision are set out below: “14. Questioning the legality and validity of the decision [State of M.P. v. Pernod Ricard (India) (P) Ltd., 2017 SCC OnLine MP 1572] of the Division Bench of the High Court, the present Page | 10 appeals are filed. Mr Pratap Venugopal, learned Senior Advocate, appearing on behalf of the appellant argued that the effect of substitution is to repeal the existing provision from the statute book in its entirety and to enforce the newly substituted provision. He would further submit that even for incidents which took place when the old Rule was in force, it is the substituted Rule that would be applicable, and therefore, the demand notice dated 22-11-2011 seeking payment of penalties under the old Rule is illegal.

We may also note the decision of the Supreme Court in Firm A.T.B. Mehtab Majid & Co. v. State of Madras & Another 7 . In its decision, the Supreme Court had observed as under: “……It has been urged for the respondent that if the impugned rule be held to be invalid, old rule 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid…...” Page | 11

Although the said decisions were rendered in the context of legislative amendments; the enunciated principles of construction are instructive. In the case of agreements, substitution of a covenant would novate the agreements and unless the intention of the parties to preserve the rights and obligations under the agreement prior to novation is expressly preserved, the same cannot be inferred. It is trite that novation discharges the prior agreement.

There is no clause in the Amending Protocol that has an effect of saving any rights and obligations under Article 26 (numbered as Article 24 7 1962 SCC OnLine SC 51 prior to 16.02.2000), or one which could be read as expressing the intention of the treaty partners to save any rights and obligations regarding exchange of information as extant prior to 30.08.2010. On the contrary, paragraph 3 of Article 14 of the Amending Protocol contains a non- obstante clause that makes it abundantly clear that Article 26 of the Indo-Swiss DTAA regarding exchange of the information would be applicable only for the information that relates to a fiscal year beginning or after the first day of January of the year following the date of the signing of the Amending Protocol, that is, a fiscal year commencing on or after 01.01.2011, which in the case of this country would be 01.04.2011.

In view of the above, we are unable to accept that any request made by the Revenue after 30.08.2010 for information relating to period prior to 01.04.2011 could have been made in terms of the Indo-Swiss DTAA. 57. We may also note the decision of Tribunal Administratif Fédéral, Switzerland [decision A-4232/2013 of 12th December 2013] rendered in the context of maintainability of a request made by the competent Indian authority on 22.06.2012 under Article 26 of the Indo-Swiss DTAA seeking information pertaining to the financial years 2005-06 to 2012-13. The order does not disclose the identity of the appellant in that case, being person in respect of which information was sought has been concealed in the said order and refers to him as X. The Revenue Authority had requested for information regarding the bank account of ‘X’ in connection with an investigation conducted in India. Pursuant to the said request, on 10.04.2013, the Federal Revenue Administration (FRA) had made a request to the bank to furnish the relevant documents and also informed ‘X’ of the same. ‘X’ had opposed the request and on 23.07.2013, referred the matter to the Federal Administrative Court. The rough and ready translation8 of the relevant extract of the said decision is set out below: “6.2.4.2 It follows that Art. 26 para. 1 CDI IN-CH9 , as amended by the Protocol of 30 August 2010, applies – pursuant to Art. 14 para. 3 of the Protocol – at most the reports relating to the "fiscal year" ("fiscal year") beginning on first January of the civil year following the signing of the Memorandum of Review. … CDI IN-CH is defined, the "fiscal year" ("fiscal year") corresponds to the previous year ("previous year"), excluding the "financial year immediately preceding the assessment year". By virtue of Indian law, the tenure of which is confirmed by Art. 14 para. 2 of the Protocol of 30 August 2010, the "previous year" beginning on 1st April of each civil year. This therefore means that the new art. 26 CDI CH-IN is applicable at the earliest to reports relating to the "previous year" having commenced on 1st April 2011 (corresponding to the "fiscal year" 2011/2012), which will be taxed during the "assessment year" 2012/2013. This provision shall remain without retroactive effect. More specifically, the retroactive effect of the new Art. 26 of INCH CDI is limited to the fiscal year in which followed the date of signature of the Protocol of 30 August 2010, while the amendments entered into force after ratification by both countries on 7 October 2011. Contracting States thus provided for a certain date of entry into force, pending revocation of the report to that intended purpose for the other provisions of the Protocol dated 30 August 2010, which apply – for India – to income realized during tax years commencing on 1st April of the civil year following the entry into force of the Review Protocol or after that date (cf. Art. 14 par. 2 let. a of the Protocol of 30 August 2020), with respect to revenues realized from 1st April 2012, with respect 8 Freely translated through https://www.onlinedoctranslator.com/en/translatefrench- to-english_french to revenues realised from 1st April 2012, accounting for the fact that the instruments of ratification were exchanged on October 7, 2011. That being the case, this retroactivity remains very limited. 6.2.5 The result of the foregoing is that international administrative assistance may at most be entered in a line of account for the fiscal year ("fiscal year") beginning on 1st April 2011 (2011/2012) and the following ("fiscal year" 2012/2013), subject to the examination of other relevant conditions (cf. hereinafter considered. 6.3). It may not in Page | 13 retroactively be granted for tax years ("fiscal year[s]") 02/02, 2002/03, 2003/04, 2004/05, 2005/06, 2006/07, 208/02, 07/2007 2010/11, as required by the requesting authority. These tax years do not fall within the temporal scope of the new Art. 26 CDI IN-CH. The application for administrative assistance must in this regard be dismissed.”

The Tribunal Administratif Fédéral ruled that only the request for financial year 2011-12 would be admissible after examining in some detail provisions of Article 26 of the Indo- Swiss DTAA substituted by virtue of Article 8 of the Amending Protocol as well as the provisions of Article 14 of the Amending Protocol.

Thus, we find no infirmity with the view of the learned ITAT that the request made by the competent authorities under Article 26 of the IndoSwiss DTAA for information, which was prior to 01.04.2011, was not maintainable.

Having stated the above, the next question required to be addressed is whether by virtue of Clause (ix) of the Explanation to Section 153B of the Act, the period for completion of the assessment would stand extended notwithstanding that the request for information made by the Revenue Authority for a period prior to 01.04.2011, was not maintainable.

It is material to note that Clause (ii) of Explanation was amended by virtue of the Amendment Act [Act 17 of 2013] to also cater to a situation where the direction issued by the AO for conduct of a special audit was challenged before a court. The amended clause also provided that where the direction Page | 14 was challenged before a court, the period commencing from the date of the direction and ending on the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner, would also be excluded. Clause (ii) of Explanation to Section 153B of the Act as it was existed prior to the Amendment Act [Act 17 of 2013] and as amended, thereafter, is set out below: “Prior to Amendment of Finance Act, 2013 [Act 17 of 2013] Explanation – In computing the period of limitation for the purposes of this section – *** *** *** (ii) the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under subsection (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that subsection; or” After the amendment of Finance Act, 2013 [Act 17 of 2013] “Explanation.— In computing the period of limitation under this section— (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2-A) of Section 142 and— (a) ending with the last date on which the assessee is required to furnish a report of such audit under that subsection; or (b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or”

It is apparent from the above that the legislature recognised that, in cases where the directions to conduct a special audit had been set aside, the time for completing the assessment under Section 153B of the Act may have elapsed. But for the legislative amendment, which also excludes such a period, the assessments would be time barred.

The decisions rendered by the courts in the context of Explanation (ii) to Section 153B of the Act do shed light on the controversy as raised in the present appeal.

In VLS Finance Limited and Anr. v. Commissioner of Income Tax and Anr.10, the Supreme Court considered a case where the Assessing Officer had issued a direction under Section 142(2A) of the Act for conduct of a special audit on 29.06.2000, which was received by the assessee on Page | 15 10 (2016) 12 SCC 32 . The assessee had challenged the same by filing a writ petition and had secured an interim order dated 24.08.2000 staying the directions for conduct of a special audit. Thereafter, the assessee succeeded in its petition and the directions to conduct a special audit, which were issued on 29.06.2000 were set aside by a judgment dated 15.12.2006. In the aforesaid context, one of the questions that arose for consideration of the Supreme Court was whether the period between 24.08.2000 (the date on which the interim order was granted) and 15.12.2006 (the date on which the petition was allowed) was required to be excluded for calculation of the period of limitation for framing the assessment order. The said question was considered in the context of Explanation (1) to Section 158BE of the Act, which is para material to Clause (ii) of the Explanation to Section 153B of the Act. The said explanation provides for an exclusion of the period during which the assessment proceedings are stayed by any order or injunction of any court. In the aforesaid context, the Supreme Court observed as under: “21. We, therefore, agree with the High Court that the special audit was an integral step towards assessment proceedings. The argument of the appellants that the writ petition of the appellant was ultimately allowed and the Court had quashed the order directing special audit would mean that no special audit was needed and, therefore, it was not open to the respondent to wait for special audit, may not be a valid argument to the issue that is being dealt with. The assessing officer had, after going through the matter, formed an opinion that there was a need for special audit and the report of special audit was necessary for carrying out the assessment. Once such an opinion was formed, naturally, the assessing officer would not proceed with the assessment till the time the special audit report is received, inasmuch as in his opinion, report of the special audit was necessary. Take a situation where the order of special audit is not challenged. The assessing officer would naturally wait for this report before proceeding further. Order of special audit followed by conducting special audit and report thereof, thus, become part of assessment proceedings. If the order directing special audit is challenged and an interim order is granted staying the making of a special report, the assessing officer would not proceed with the assessment in the absence of the audit as he thought, in his wisdom, that special audit report is needed. That would be the normal and natural approach Page | 16 of the assessing officer at that time. It is stated at the cost of repetition that in the estimation of the assessing officer special audit was essential for passing proper assessment order. If the court, while undertaking judicial review of such an order of the assessing officer directing special audit ultimately holds that such an order is wrong (for whatever reason) that event happens at a later date and would not mean that the benefit of exclusion of the period during which there was a stay order is not to be given to the Revenue. Explanation 1 which permits exclusion of such a time is not dependent upon the final outcome of the proceedings in which interim stay was granted.”

It is material to note that Clause (ii) of Explanation 1 to Section 158BE of Act was also similar to Clause (ii) of the Explanation to Section 153B of the Act. The Supreme Court directed that the period during which a stay order was granted, that is, from 24.08.2000 till 15.12.2006 when the judgment setting aside the direction issued under Section 142(2A) of the Act was delivered, was to be excluded for computing the period available for passing the assessment order. However, it is material to note, that the period from 29.06.2000 till 24.08.2000; that is, the date of issuance of the order till the date of passing the stay order was not excluded. Although there is no discussion on this issue, it is implicit that the exclusion on account of direction to conduct a special audit, would not be applicable if the said direction is found to be invalid.

In Sahara India (Firm), Lucknow v. CIT & Anr.11 , the Supreme Court considered the question whether an assessee was required to be afforded a hearing before issuance of a direction for conduct of a special audit under Section 142(2A) of the Act. The Supreme Court held in the affirmative. However, pending consideration of the challenge to orders issued without following the rule of audi alteram partem, the time period for passing the assessment order had lapsed. In the aforesaid back drop, the Supreme Court also issued directions for saving the period of limitation. The relevant extract of the said decision is set out below: “36. The next crucial question is that keeping in view the fact that the time to frame fresh assessment for the relevant assessment year by ignoring the extended period of limitation in terms of Explanation 1(iii) to sub-section (3) of Section 153 of the Act is Page | 17 already over, what appropriate order should be passed. As noted above, the learned Additional Solicitor General had pleaded that if we were not inclined to agree with him, the interpretation of the provision by us may be given prospective effect, otherwise the interest of the Revenue will be greatly prejudiced.

There is no denying the fact that the law on the subject was in a flux in the sense that till the judgment in Rajesh Kumar [(2007) 2 SCC 181: (2006) 287 ITR 91] was rendered, there was divergence of opinion amongst various High Courts. Additionally, even after the said judgment, another two-Judge Bench of this Court had expressed reservation about its correctness. Having regard to all these peculiar circumstances and the fact that on 14-12-2006 [Sahara India (Firm) v. CIT, (2008) 14 SCC 168], this Court had declined to stay the assessment proceedings, we are of the opinion that this Court should be loathed to quash the impugned orders. Accordingly, 11 (2008) 14 SCC 151 we hold that the law on the subject, clarified by us, will apply prospectively and it will not be open to the appellants to urge before the appellate authority that the extended period of limitation under Explanation 1(iii) to Section 153(3) of the Act was not available to the assessing officer because of an invalid order under Section 142(2-A) of the Act. However, it will be open to the appellants to question before the appellate authority, if so advised, the correctness of the material gathered on the basis of the audit report submitted under subsection (2-A) of Section 142 of the Act.”

It is apparent from the above, that but for the specific directions issued by the Supreme Court to treat this decision as settling the law prospectively – the effect of which was to save the orders issued under Section 142(2A) of the Act that were issued prior to the court handing down its ruling – the assessments made would have to be set aside as fresh assessments would be barred by limitation. It is in the aforesaid view that the learned ASG had made a request for prospective ruling, which was acceded to by the Supreme Court. It is implicit that if the directions issued under Section 142(2A) of the Act were held to be invalid, the benefit of exclusion of the period under Clause (ii) of the Explanation to Section 153B of the Act would not be available.

In Principal Commissioner of Income-tax v. Vilson Particle Board Industries Limited12, the Bombay High Court following the decision in Sahara India (Firm), Lucknow v. CIT &Anr. upheld the decision of the learned ITAT setting aside the assessment order as barred by limitation, a consequence of the directions under Section 142(2A) of the Act being vitiated. The relevant extract of the ITAT’s order as noted by the Bombay High Court is reproduced below: “8. …..Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (supra), we hold that where no show cause notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law.”

In K.M. Sharma v. Income Tax Officer, Ward 13(7), New Delhi13, the Supreme Court had observed that “a fiscal statute, more particularly on a provision such as a present one regulating the period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to a litigant for an indefinite period of future unforeseen events”. There is no cavil that the period of limitation as prescribed under Section 153B of the Act is required to be construed strictly. On a plain reading of the language of Explanation (ix) to Section 153B of the Act, the period commencing from the date on which a reference (or first of the reference) for exchange of information is made by an authority competent “under the Agreement referred to in Section 90 or Section 90A” of the Act and ending with the date on which the information is last received, by the Principal Commissioner or Commissioner over a period of one year, whichever is less is required to be excluded.

Thus, on a plain reading of Clause (ix) of the Explanation to Section 12 (2020) 423 ITR 227 13 (2002) 4 SCC 339 153B of the Act, the exclusion of time taken for obtaining the information (or one year) for completion of the assessment under Section 153A of the Act is applicable only if a reference for exchange of information has to be Page | 19 made as per the Agreement under Section 90/90A of the Act. It is necessary that reference be made in terms of the agreement. In this case, the benefit of exclusion of time by virtue of Explanation (ix) of Section 153B of the Act would, thus, be available only if the reference was made in terms of Indo-Swiss DTAA. However, as noted above, the request as made was not in terms of the Indo- Swiss DTAA. It was contrary to the limitations as expressly specified under Article 14 of the Amending Protocol.

In view of the above, the questions to law as framed are answered against the Revenue and in the negative; that is, against the Revenue and in favour of the Assesses.

The appeals are, accordingly, dismissed. The pending applications, if any, stand disposed of.”

The instant appeal is pertaining to AY 2011-12, wherein the assessment orders have been passed u/s 153A r.w. Section 143(3) of the Act on 24.12.2019. The DTAA between India-Hongkong come into force w.e.f. 30.11.2018. As per paragraph 5(c) of the Article 26, request for disclose any information for periods prior to 30.11.2018 should be forcibly relevant to the fiscal year or taxable event following that date Thus, no request can be made under Article 26 of the DTAA for the period/ fiscal year prior to 30.11.2018. Therefore, in our considered opinion, the period of limitation could not be extended under Explanation (ix) to Section 153B of the Act to frame the assessment based on such reference. By relying on the ratio laid down by the Hon'ble High Court of Delhi(supra), we hold that all the assessment framed, which is subject matter of the captioned Appeal is barred by limitation, accordingly same is set aside. The ground of appeal No.1 of the assessee is allowed.

Since, we have decided the Appeal of the assessee on the issue of limitation for framing the assessment order, the other Grounds of Appeal require no adjudication.

In the result, Appeal of the Assessee is allowed. to 1384/Del/2024 [Assessment Years 2012-13 to 2017-18]

Since in all the other appeals of the assessee in 2024 to 1384/Del/2024 for Assessment years 2012-13 to 2017-18 respectively, the assessee has taken one of the ground of appeal, challenging the validity of assessment order passed u/s 143(3) r.w.s.153A of the Act on the issue of limitation which issue has been decided in favour of the assessee in for AY 2011-12, hereinabove. Since the facts are identical and the reference to the competent authority of Hongkong seeking information relating to the assessee are same, thus following the said observations, Ground of appeal No.1 taken with respect to the limitation in all the captioned appeals of the assessee are allowed. Since we have allowed legal ground of appeal of the assessee with regard to the limitation thus, other grounds of appeal in all the appeals are not adjudicated.

In the combined result, all appeals of the assessee in to 1384/Del/2024 [Assessment Years 2011-12 to 2017-18] are allowed.