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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI GAGAN GOYAL, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI GAGAN GOYAL, AM आयकर अपील सं/ I.T.A. No. 968/Mum/2020 (निर्धारण वर्ा / Assessment Year: 2004-05) & आयकर अपील सं/ I.T.A. No. 974/Mum/2020 (निर्धारण वर्ा / Assessment Year: 1999-2000) DCIT, Central Circle-6(4) बिधम/ Smt. Deval D. Thakkar (Now Room No. 1925, 19th Floor, known as Smt. Deval E Vs. Air India Building, Nariman Anthony) Point, Mumbai-400021. 12/22B, Acropolis, Malabar Hills, Mumbai-400006. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACPT8999F (अपीलाथी /Appellant) (प्रत्यथी / Respondent) .. Revenue by: Smt. Mahita Nair (Sr. AR) Assessee by: Shri Dilip Thakkar सुनवाई की तारीख / Date of Hearing: 09/11/2022 घोषणा की तारीख /Date of Pronouncement: 23/11/2022 आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the revenue against the action of the Ld. CIT(A)-54, Mumbai dated 26.11.2019 for A.Y.1999-2000 & for AY. 2004-05. 2. Both the parties agree that the issue involved in both the appeals are identical, therefore, we take the appeal of the assessee for AY. 1999-2000 as the lead case and the decision of which will be followed for AY. 2004-05. 3. The grounds of appeal of the revenue for AY. 1999-2000 is as under: -
ITA Nos. 968 & 974/Mum/2020 A.Ys.1999-2000 & 2004-05 Deval D. Thakkar “(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing assessee’s appeal by ignoring the intention of the legislature behind amendment of sub-section (1) of Section 149, thereby inserting clause (c) under section 149(1) of the Income tax Act, 1961 by the Finance Act, 2012 and Explanation below Section 149, which clarifies that the provisions of sub-sections (1) & (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.” (ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the relevant facts of the case in respect of addition made on account of undisclosed foreign assets/investments.” 4. From a perusal of the aforesaid grounds of appeal, it is discerned that the revenue has challenged the action of the Ld. CIT(A) in allowing the assessee’s appeal on the legal issue raised before him without going into the merit of the case (addition made by AO on account of undisclosed Foreign Asset).
Brief facts pertaining to the legal issue against reopening of the assessment for AY. 1999-2000 is that the assessment of the assessee was reopened u/s 147 of the Income Tax Act, 1961 (hereinafter “the Act”) by issuing notice u/s 148 of the Act by notice dated 27.03.2015. Pursuant to the notice of AO the assessee requested for “reasons for reopening”, which was given to the assessee vide letter dated A.Ys.1999-2000 & 2004-05 Deval D. Thakkar 30.03.2015. Later, the AO issued the statutory notices u/s 143(2) & 142(1) of the Act and the AO taking note that pursuant to a search action which was carried out in the case of assessee’s father Shri Dilip J. Thakkar on 10.08.2011, certain incriminating documents were unearthed from his residential premises. As per the AO, from perusal of the seized material revealed that the certain payments amounting Sterling (Stg) Pound 3,30,400/- were made to the family members of Shri Dilip J. Thakkar out of which an amount of Stg Pound of 90,000/- was shown in the name of the assessee i.e, Smt. Deval Thakkar (Ms. Deval E. Anthony). Based on the aforesaid incriminating material, the AO, was of the opinion that assessee (daughter of Shri Dilip J. Thakkar) was the account-holder in HSBC Bank, Geneva (as the beneficial owner/beneficiary of the M/s Chaganlal Suchak Family Trust). So, according to the AO, since the assessee (Smt. Deval E. Anthony) is having a foreign asset in the form of HSBC Bank Geneva which she has not declared in her return and because she was maintaining asset in the form of deposits to the tune of $. 31,29,878/- in it on February, 2007. And that assessee’s father and mother had investments in Resurgent India Bond (RIB) launched by SBI in 1998, which matured in 2003. And that assessee had claimed receipt from RIB (which got matured in 2003), but could not give details of source of investment, the AO formed his reason to believe that assessee had foreign asset income at least since 1998 and since the assessee has not disclosed the same, according to AO it has A.Ys.1999-2000 & 2004-05 Deval D. Thakkar escaped assessment. Thereafter, the AO reopened the assessment mainly for the following reasons as under: -
“Smt Deval E Anthony who is having account in HSBC as Beneficial owner/ beneficiary of Chhaganlal Suchak Family. It was claimed by the assessee that the corpus of the fund of Chhaganlal Suchak Family Trust is from the maturity amount of RIB. There is evidence to show that the assessee is the account holder of bank account maintained in the name of Chhaganlal Suchak Family Trust in Geneva. Assessee has claimed that the RIB was invested by his grandfather Shri Chhaganlal Suchak. However, the same is made in the name of Shri Suryakant Suchak. Further the assessee Smt Deval E Anthony is the Beneficial owner/ Beneficiary of the Chhaganlal Suchak Family. However, she has not furnished the details of opening of account and income there from. Further, the assessee has Claimed receipt from Resurgent India Bonds (RIB) deposited in 1998 which got matured in 2003. However, no details regarding source of Investment was furnished. It was claimed by the assessee that the corpus of the fund of Chhaganlal Suchak Family Trust is from the maturity amount of RIB. There Is evidence to show that the assessee is the account holder of bank account maintained in the name of Chhaganlal Suchak Family Trust in Geneva. There Is also evidence to show that Suryakant Suchak is not the account holder. No documentary proof of source of fund for investment in RIB has been furnished by the assessee.” A.Ys.1999-2000 & 2004-05 Deval D. Thakkar 6. Based on the aforesaid reason the AO reopened the assessment and for doing so he took the aid of Section 149(1)(c) of the Act which reads as under:-
“Time Limit for notice 149 [(1) No notice under section 148 shall be issued for the relevant assessment year, (a) if four year have elapsed from the end of the relevant assessment year, unless the case falls under clause(b) or clause (c) (b) If 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 (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.” 7. And thereafter framed the re-assessment on 30.03.2016 and made an addition of Rs.69,01,200/-. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the addition by allowing the legal ground raised by the assessee wherein the assessee has challenged the legal issue of reopening of the assessment (for AY. 1999-2000 and for AY. 2004-05) by holding as under: - A.Ys.1999-2000 & 2004-05 Deval D. Thakkar “6.4 The submissions of the Ld. counsel have been carefully considered. It is the assessee’s contention that the provisions of section 149(1)(c) are not applicable to this case as she does not have any financial interest in any foreign entity. As the reopening has been done beyond the limitation period of 6 years, the same is illegal and bad in law. He had also made submission on merits that Swiss Federal Tax Administration issued a notification dated 23.03.2015 clearly stating that the eight bank accounts with HSBC Private Bank, Geneva were of Chaganlal Suchak Famil Trust and not assessee’s accounts. It is the assessee’s argument that inspite of having this information in his possession, the AO did not take cognizance of the same and made the \o” addition. Vide his submission dated 17.12.2018, the assessee had 4x placed reliance on the judgement of the Hon’ble Delhi High Court in the case of Brahmdatt vs. ACIT & Ors. wherein the Hon’ble High Court held that the reassessment could not reopened beyond the period of 6 years in terms of the provisions of section 149 of the Act as applicable at the relevant time. It had also held that section 149(1)(c) has to be applied prospectively. According to the High Court, 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. The Hon‘ble High Court has relied upon the judgements of the Hon’ble Apex Court in the case of K.M.Sharma vs. ITO 254 ITR 772 (SC) and S.S. Gadgil vs. Lal & Co 53 ITR 231. The relevant portion of the judgement of the Hon'ble Delhi High Court is reproduced below:
“3. Search and seizure operation under Section 132 was carried out in the case of the Petitioner. During the course of search, his statement was recorded on 27.09.2011 under Section 132(4) of the Act. In the statement, the Petitioner was, inter-alia, asked to clarify if he maintained foreign bank account(s). In response to the said query, he stated that though he did not maintain any foreign bank account in his individual capacity, he, however did settle an offshore trust when he was non- resident. It is submitted that in the said statement recorded during the course of search as well as during the course of proceedings under section 153A read with Section 143(3) of the Act, the Petitioner repeatedly clarified that he did not maintain any account with foreign bank in his personal capacity, but had contributed an amount of approximately US$ 2-3 million at the time of settling of the Second A.Ys.1999-2000 & 2004-05 Deval D. Thakkar Techna Trust, when he was a non-resident, out of his income earned from sources outside India.
The petitioner complains that despite such explanation, the revenue primarily relying upon his statement, issued the impugned notice dated24.03.2015 under section 148 seeking to initiate reassessment proceedings for AY 1998-99, the year under consideration, on the suspicion that the income of the Petitioner had escaped assessment, It is, at the outset, submitted that reopening of concluded assessment for AY 1998-99 by notice dated 24.03.2015 is barred by limitation prescribed under Section149 of the Act. In this regard, Mr. Ajay Vohra, learned senior counsel urges that Section 147 of the Act empowers the AO to initiate reassessment proceedings, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Such power is, however, subject to the provision of sections 148 to 153 of the Act. Section 149 prescribes the limitation within which reassessment proceedings can be initiated under the Act. The petitioner submits that the said provision was substituted by Direct Tax Laws (Amendment) Act, 1987, w.e.f, 1-4-1989; it read thereafter as follows:
"149. (1) No notice under section 148 shall be issued for the relevant assessment year(a) in a case where an assessment under sub-section (3) of section 143 or section 147 has been made for such assessment year, (i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii)or sub clause (iii) ;
(ii) if four years, but not more than seven 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 rupees fifty thousand or more for that year;
(iii) if seven years, but not more than ten 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 more than rupees one lakh or more for that year;
(b) in any other case, (i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii)or sub-clause (iii); A.Ys.1999-2000 & 2004-05 Deval D. Thakkar (ii) if four years, but not more than seven 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 rupees twenty-five thousand or more for that year;
iii) if seven years, but not more than ten 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 rupees fifty thousand or more for that year..."
It is stated that the outer period of limitation for reopening under section 147 of the Act ws prescribed to be ten years after the end of the relevant assessment year.
The petitioner next refers to the amendment to Section 149 by the Finance Act, 2001, with effect from 01.06.2001 further reducing the time for limitation to six years. Provisions of the said section, as amended are reproduced hereunder:
"149. Time limit for notice. (1) No notice under section 148 shall be issued for the relevant assessment year, -
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if 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.
Explanation.- In determining income chargeable to tax which has escaped assessment for the purposes of this sub section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section..."
The learned senior counsel submits that reassessment proceedings under section 147 of the Act could have been initiated within six years from the end of the relevant assessment year viz. for the AY 1998-99, the year under consideration, limitation for reopening assessment under Section 147 of the Act expired on 31.03.2005. It is submitted that consequently, when the petitioner received the reassessment notice dated 24.03.2015 and subsequent notices/letters, the petitioner A.Ys.1999-2000 & 2004-05 Deval D. Thakkar by letters/ objections dated 06.04.2015, 03.06.2015 and 24.08.2015 submitted before the revenue that the present reassessment proceedings are, inter alia, barred by limitation prescribed in Section 149 of the Act. The respondent revenue, however rejected this contention through the AO s order dated 25.01.2016 and did not agree with the petitioner s argument with respect to the bar of limitation in regard to the period within which reassessment proceedings could be initiated and instead expressed the view that the proceedings were initiated within the extended period of 16 years from the end of the relevant assessment year by relying on Section 149 (1) (c), introduced by the Finance Act, 2012, with effect from 01.07.2012. 7. It is argued by Mr. Vohra that once proceedings for assessment year1998-99 attained finality on expiration of the period of limitation for reopening assessment for the assessment year expired on 31.03.2005, such concluded proceedings could not be reopened by merely taking resort to the subsequent amendment in law. In other words, the subsequent amendment cannot seek to enhance or extend limitation for reopening assessment for those assessment years in respect of which limitation had already expired lapsed before the date the amendment became effective.
Mr. Vohra relies on the decision of the Supreme Court, in K.M.Sharma versus Income Tax Officer254ITR 772(SC) as well as S.S. Gadgil v Lal& Co. [1964] 53 ITR 231 and lastly the decision in C.B. Richards Ellis Moritius Ltd. v Additional Director Income Tax 208 Taxmann 322 to say that once the period of limitation ends, by virtue of the provisions of the Act, it is not open to the revenue, to revisit such issues that are final. It was submitted that the law of limitation confers certainty and finality to legal proceedings and seeks to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Therefore, matters that attain finality under existing law due to bar of limitation cannot be reopened for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. It was highlighted that in this case, the provisions of the 2012 amendment are expressly prospective and cannot be used to re-open those matters that attain finality. It was also contended that the petitioner s status as a person not residing in India has not been disputed and rather, is accepted by the revenue.
The revenue resists the petition and refers to its arguments in the counter affidavit. Its counsel, Mr. Ashok Manchanda, submits that in this case, the AO A.Ys.1999-2000 & 2004-05 Deval D. Thakkar issued notice under Section 148 after recording the reasons to believe, in writing, as the amount of 12,54,60,000/- used for settling a trust had escaped assessment for AY 1998-99 and in line with the provisions of Income Tax Act 1961, the AO had the valid reasons to believe in support of the decision to reopen the assessment under Section 148. It is stated that the assessee petitioner made a general and vague statement that during the period from AY 1984-85 to AY 2003-04 he was either Non-resident or Not Ordinarily Resident in India. No specific statement, averment or evidence was given as regards the status of the assessee for the AY 1998-99 having filed a return of income for the AY 1998-99 which is the subject matter of this petition. The Petitioner s claim is not only wrong, but false as well. In spite of specifically being asked during the statement recorded on oath under Section 132(4) on 27.09.2011, the petitioner never produced any evidence of either he having been Non-resident or of having earned the relevant income outside India.
It is highlighted that though the assessee stated that he did not have any foreign bank account in his personal capacity yet, he was having financial interest in Second Techna Trust. He has undeniably contributed approximately US$ 2-3 million and no evidence of sources was furnished by him; he stated that the income was earned from sources outside India.
But no evidence was furnished by the assessee. The assessee could have produced the returns of income filed outside India where such amount had been shown or the assessee could have produced the Bank statements from where the said money had been withdrawn or certain cheque having been issued by him. On the basis of facts, the revenue contends that the petitioner cannot be treated as one not residing in India within the meaning of the Act; as he did not disclose the asset during the relevant time, the reassessment notice is valid.
It is submitted that the intent and purpose behind the 2012 amendment of the Act was to empower the revenue to reopen assessments beyond a particular period: in this case, by 16 years, if it is revealed that the assessee held asset abroad. Given this relevant condition, the assessee could not complain that as regards matters that had not been disclosed, reassessment proceedings were validly instituted.
The relevant provisions of section 149 of the Act are reproduced below:
"149.Time limit for notice. A.Ys.1999-2000 & 2004-05 Deval D. Thakkar (1) No notice under section 148 shall be issued for the relevant assessment year, -
(a) if four years have elapsed from the end of the relevant assessment year, unless the case fails under clause (b);
(b) if 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.
(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment..."
In KM Sharma s case (supra) the assessee s land was acquired under the Land Acquisition Act, 1894 and an award was passed in 1967 granting compensation in favour of the assessee, Thereafter, the Additional District Judge by judgment dated 20.05.1980 held the assessee to be entitled to1/32th share of the compensation and the assessee was granted total compensation of 1,18,810 in the year 1981. Subsequently, by another judgment dated 31.07.1991, the assessee was awarded sum of 1,10,20,624, which was received by it between 15.10.1992 and 25.05.1993. The said amount comprised of principal compensation as well as interest up to18.05.1992. As land acquired was agricultural land, principal amount was not chargeable to tax; however, in the Act for fifteen assessment years, viz., assessment years1968-69 to 1971-72 and assessment years 1981-82 to 1992-93 which were challenged on the ground of limitation. This court declined to exercise jurisdiction; on appeal, the Supreme Court held that the provision regulating period of limitation ought to receive strict construction. The Supreme Court held that the law of limitation was intended to give certainty and finality to legal proceedings and therefore, proceedings, which had attained finality under the existing law due to bar of limitation, could not be held to be open for revival unless the amended provision was clearly given retrospective operation so as to allow upsetting of proceedings, which had already been completed and attained finality. The observations of the Supreme Court are reproduced hereunder: A.Ys.1999-2000 & 2004-05 Deval D. Thakkar "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 before1.4.1989 when section 150(1) was amended Reliance is placed on the decision in S.S. versus 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, which might accrue on the basis of any decision of any Court in any proceeding in any other law, that the provision has been amended to lift bar of limitation for reassessment.
Fiscal statute, more particularly a provision such as the present one regulating 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 litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to subsection (1) of section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub-section (1) of section 150 which intends to lift embargo of period of limitation under section 149 to enable authorities to reopen assessments not only on the basis of orders passed in proceedings under the Act but also on order of a Court in any proceedings under any law, has to be applied prospectively on or after 1.4.1989 when the said amendment was introduced to sub- section (1). The provision in sub-section (1), therefore, can have only prospective A.Ys.1999-2000 & 2004-05 Deval D. Thakkar operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under section 149. 14. To hold that the amendment to sub-section (1) would enable the authorities to reopen assessments, which had already attained finality due to bar of limitation prescribed under section149 as applicable prior to 1.4. 1989, would amount to give sub section (1) a retrospective operation which is neither expressly nor impliedly intended by the amended sub-section.
On behalf of the assessee before the High Court and in this Court reliance has been placed on the provisions contained in sub-section (2) of section 150. It is submitted that the provision contained in sub-section (2) of section150 is in the nature of clarification or Explanation to sub section (1).Sub-section (2) makes it clear that the embarge of period of limitation lifted under sub section (1) for proposed 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.
The High Court rejected the above contention of the assessee on the ground that on the amendment introduced with effect from1.4.1989 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.
We do not find the above reasoning of the High Court is sound. The plain language of sub-section (2) of Section150 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 reassessments based on Orders ‘in proceedings under the Act'and not to Orders of Court ‘in proceedings under any other law'. Such an interpretation would make the whole provision under Section 150 discriminatory in its application to assessments sought to be reopened on the basis of Orders under the IT Act and other assessments proposed to be reopened on the basis of Orders under any other A.Ys.1999-2000 & 2004-05 Deval D. Thakkar law. Interpretation, which creates such unjust and discriminatory situation, has to be avoided. We do not find that sub-section (2) of section 150 has that result. Sub- section (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to sub- section (1), as is the reasoning adopted by the High Court.
Sub-section (2) aims at putting embargo on reopening assessments, which have attained finality on expiry of prescribed period of limitation. Sub-section (2) in putting such embargo refers to whole of sub-section (1) meaning thereby to insulate all assessments, which have become final and may have been found liable to reassessments or re-computation either on the basis of Orders in proceedings under the Act or Orders of Courts passed under any other law. The High Court, therefore, was in error in not reading whole of amended sub-section (1) into sub-section(2) and coming to the conclusion that reassessment proposed on the basis of order of Court in proceedings under Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on expiry of period of limitation under Section 149 of the Act. On a combined reading of sub-section (1) as amended with effect from 1.4.1989 and sub-section (2) of Section 150 as it stands, in our view, a fair and Just interpretation would be that the Authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under Section149. 19. This Court took similar view in the case of S.S. Gadgil(supra) in somewhat comparable situation arising from the retrospective operation give 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 nonresidents. The case of the assessee, inter alia, was that the proposed action was barred by limitation as right to commence A.Ys.1999-2000 & 2004-05 Deval D. Thakkar proceedings of assessment against the assessee as an agent of non-resident for the assessment year 1954-55 ended 0n31.3.1956, under the Act before it was amended in 1956. This Court in the case of S.S. Gadgil (supra) accepted the contention of the assessee and held as under:
The legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, I.e., up to April 1, 1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred.’ 20. On a proper construction of the provisions of Section150 (1) and the effect of its operation from 1.4.1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1.4.1989 for assessments which have already become final due to bar of limitation prior to 1.4.1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the Authorities to affect finality of tax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub-section (1) of Section 150, as amended with effect from 1.4.1989, does not enable the Authorities to reopen assessments, which have become final due to bar of limitation prior to 1.4.1989 and this position is applicable equally to reassessments proposed on the basis of Orders passed under the Act or under any other law.”
The ratio of K.M Sharma and S.S. Gadgil, in the opinion of this court covers the facts of this case. Reassessment for 1998-99 could not be reopened beyond 31.03.2005 in terms of provisions of Section 149 of the Act as applicable at the relevant time. The petitioner s return for assessment year 1998-99 became barred by limitation on 31.03.2005. The question of revival of the period of limitation for reopening assessment for AY 1998-99 by taking recourse to the subsequent amendment made in Section 149 of the Act in the year 2012, i.e., more than 8 years A.Ys.1999-2000 & 2004-05 Deval D. Thakkar after expiration of limitation 0n31.03.2005, has been dealt with by the Supreme Court in K.M. Sharma(supra).
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 lakhs rupees or more for that year.”
It has been said that the government in all its actions is bound by rules fixed and announced before hand 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 affairs on the basis of this knowledge” (Ref. FA Hayek, “Road to Serfdom”, 1944). In this case, the interpretation proposed by the revenue has the potential of arming its authorities to re-open settled matters, in respect of issues where the citizen could genuinely be sanguine and had no obligation of the kind which the Revenue seeks to impose by the present amendment. All the more significant, is the fact that absent a clear indication, every statute is presumed to be prospective. The revenue had sought to contend that the amendment (to Section 149) is merely procedural and no one has a vested right to procedure; and that procedural amendments can be given effect any time, even in ongoing proceedings.
This court is of the opinion that there is no merit in the revenue $ contention. In Sri Prithvi Cotton Mills versus Broach Borough Municipality, AIR 1970 SC 192, examined the validity of the retrospective amendment of a statute in light of Article 19(1)(g) of the Constitution of India, i.e. a fundamental right to practice any profession, or to carry on any occupation, trade or business. The court said:
"In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental rights under article19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statute struck-down by courts for certain defects; the A.Ys.1999-2000 & 2004-05 Deval D. Thakkar period of such retroactivity, and the decree and extent of any unforeseen or unforeseeable financial burden imposed for the past period etc."
In Govinddas v Income Tax Officer AIR 1977 SC 552 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 weil 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 Scindla 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] 367 ITR 466. 19. In view of the above discussion, it is held that the petition has to succeed; the impugned reassessment notice and all consequent proceedings are hereby quashed and set aside. The writ petition is allowed; however without order on costs.”
The Hon’ble Supreme Court vide order dated 05.07.2019 dismissed the Special Leave Petition filed by the department on the judgment of the Delhi High Court in the case of Brahmdatt (supra), thus making the Delhi High Court judgement final. A.Ys.1999-2000 & 2004-05 Deval D. Thakkar 6.5 In this case, the relevant assessment year is 1999-2000. Notice u/s 148 was issued on 27.03.2015. The AY. Being 1999-2000, the time limit for issue of notice u/s 148 will expire on 31.03.2006. However, it is seen that the notice u/s 148 was issued on 27.03.2015. Section 149(1) is reproduced hereunder for ready reference:
(1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);
(b) if 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;
(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. 6.6 Section 149(1)(c) which extends the period to 16 years where income in relation to any asset located outside India, chargeable to tax has escaped assessment came into effect from 01.07.2012. By the time section 149(1) (c) was introduced i.e. 01.07.2012, the time limit for issue of notice u/s 148 as per the law prevailing on that day has expired. Following the ratio of the judgement of the Hon’ble Delhi High Court in the case of Brahmdatt (supra), the assessment cannot be reopened in 2015 and the period of 16 years does not apply to this case. In the light of the judgments of the Hon’ble Delhi High Court and the Hon’ble Supreme Court (supra), reopening proceedings which are beyond the relevant period are quashed.”
Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is before us, raising the grounds of appeal (supra).
We have heard both the parties and perused the records. We note that the issue is no longer res-integra. It was submitted by the Ld. AR (Shri Dilip J. Thakkar) that this Tribunal after taking note of the decision of the Hon’ble Delhi High Court in the case of Brahm Datt Vs. ACIT (supra) has consistently taken the same view of the Ld. A.Ys.1999-2000 & 2004-05 Deval D. Thakkar CIT(A) inter-alia in the case of Shri Biswanath Goradia for AY. 2001- 02 & for AY. 2005-06, ITA. No. 1672 to 1674/Kol/2018 & ITA. No. 1861 & 1862/Kol/2018; and in the case of Jayashree Jayakar Mohankar ITA. (SS) Nos. 37 & 38/Kol/2018 for AY. 2005-06 & 2006-07 wherein the Tribunal upheld the similar action of the Ld. CIT(A) holding that the proceedings initiated by AO u/s 147/148 of the Act had become time barred prior to 01.07.2012 and which could not have been revived by Section 149(1)(c) of the Act. This action of the Tribunal was challenged by Department before the Hon’ble Calcutta High Court wherein the Hon’ble High Court vide order dated 25.07.2022 (in the case of Jayashree Jayakar Mohankar) (refer page no. 96 to 99 of PB) took into consideration the substantial question of law which are reproduced as under and upheld the Tribunal view as under: -
“i) Whether on the facts and in the circumstances of the case, ITAT was erred in law in holding that the proceedings initiated u/s 148 of the Act for the year under consideration was barred by limitation, without properly considering provision of section 149[1][c] of the Income Tax Act, 1961 ? ii) Whether on the facts and in the circumstances of the case, ITAT was erred in law in confirming the decision of Ld. CIT[A], wherein it was observed that as per Finance Act, 2012, section 149[1][c] of the Act was made effective prospectively from 01.07.2012 and there was nothing expressly provided by amending Act which indicated Legislative intent to make provision of section 149[1][c] applicable, to those proceedings which had become barred by limitation on 01.07.2012? A.Ys.1999-2000 & 2004-05 Deval D. Thakkar We have heard Mr. Tilak Mitra, learned standing Counsel for the appellant/revenue and Mr. Pratyush Jhunjhunwala, learned Advocate appearing for the respondent.
The short question falls for consideration is whether the proceeding initiated by the assessing officer under section 148 of the Act for the year under consideration, namely, AY 2005-06 is barred by limitation in terms of provision of section 149[1][c] of the Act. We have perused the order passed by the tribunal and we find that the tribunal rightly took note of the legal position and allowed the assessee's appeal. Aggrieved by the same, the revenue preferred the appeal before the learned tribunal. The tribunal before took note of the facts of the case took note of the various decisions, more particularly, the decision in the case of BRAHM DATT VS. ASSISTANT COMMISSIONER OF INCOME TAX; REPORTED IN [2018] 100 TAXMANN.COM 324 [DELHI]. In the said decision it was held that the amendment of Section 149 of the Act by Finance Act, 2012, which extended limitation for reopening assessment to sixteen years could not be resorted for reopening proceedings concluded before amendment came into effect. Admittedly the amendment came into effect on 1st July, 2012 and the notice under Section 148 was issued on 19th August, 2013. The decision in Brahm Datt (supra) as well as other decisions were noted in the case of SMT. N. ILLAMATHY VS. INCOME TAX OFFICER, WARD-11(2);[2020] 120 taxmann.com 313 (Madras) . At this juncture it would be beneficial to extract the relevant paragraph of the said decision.
"12. The next issue is as to whether the Assessing Officer, The CIT(A) and the Tribunal were right in holding that the period of limitation exceeded on the date of issuance of the notice under section 148 of the Act dated 22.12.2005 for assessment year 1997-98."
The Tribunal after taking note of the decision in Brahm Datt (supra) took into consideration of the facts of the assessee's case and found that notice for reopening the assessment issued on 19th August, 2013 in respect of the assessment year under consideration, Assessment year 2005-06 was time barred. The view taken by the learned Tribunal does not call for any interference for the above reason. Accordingly, the appeal filed by the revenue is dismissed. A.Ys.1999-2000 & 2004-05 Deval D. Thakkar The substantial questions of law are answered against the revenue.
Application being GA/2/2022 stands closed.”
Thus, we note that the Ld. CIT(A) has rightly decided the legal issue raised by the assessee in accordance to the ratio laid by the Hon’ble Delhi High Court in Brahma Datt Vs. ACIT (supra) [which decision was challenged by the department before the Hon’ble Supreme Court without any success because SLP was dismissed vide order dated 05.07.2019). We note that the Hon’ble Calcutta High Court in the case of Jayashree Jayakar Mohankar (supra) has also concurred with the legal position as laid in the case of Brahm Datta (supra). Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and therefore we decline to interfere with the impugned action of Ld. CIT(A) and dismiss the appeal of the revenue. And on the same reasoning mutatis mutandis the appeal of the revenue in respect of AY. 2004-05 also does not survive and stands dismissed.
In the result, both the appeals filed by the revenue are 11. dismissed. Order pronounced in the open court on 23/11/2022. (GAGAN GOYAL) (ABY T. VARKEY) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 23/11/2022. Vijay Pal Singh (Sr. PS) A.Ys.1999-2000 & 2004-05 Deval D. Thakkar
आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file.
आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //// उि/सहधिक िंजीकधर /(Dy./Asstt.