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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. (Shri) ArjunLalSaini, AM]
PER SHRI A.T. VARKEY, JM
All these appeals and respective cross objections are preferred by the revenue and assessee ( as captioned in the cause list above ) against the separate orders of Ld. CIT(Appeals) - 21, Kolkata [ in short, hereinafter ‘ld. CIT(A)’] all dated 30-05-2018 for the for the Aassessment Years 2001-02 to 2005-06.
1 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
The lead case in Revenue’s appeals is for the A.Y 2001-02; result of which will follow in other appeals. The grounds of appeal preferred by the Revenue are as under:
That on the facts and in the circumstances of the case, Ld CIT(A) has erred in holding that the notice issued u/s 148 of the IT Act 1961 on 16.02.2016 for AYs 200102 was barred by limitation without appreciating the fact that assessee had bank deposits in a foreign country and in that case, sixteen years from the end of the relevant assessment year is the time limit for reopening assessment as per Section 149(1)(c) of the Act.
That the Ld CIT(A) has erred in law by saying that as per the Finance Act, 2012 as enacted by the Parliament, Section 149(1)(c) was made effective prospectively from 01.07.2012 and thereby also has erred in law by observing that there was nothing expressly provided by the amending Act which indicate Legislative mind to make the provision applicable to those proceedings which had become barred by limitation on 01.07.2012.
That the Ld CIT(A) has erred in law in holding that the provision u/s 149(1)(c) are retro active in operation in as much as they are applicable for AY' 200607 onwards and in such sense, the assessment order passed u/s 147 on 10/11/2017 for AYs 200102 was void ab initio.
That, the order of the Ld. CIT CA) is otherwise bad in law and needs to be set aside.
That, the Revenue reserves their rights to substantiate, modify, delete, supplement and / or alter the grounds at the time of hearing.”
Brief facts of the case as noted from the orders of the authorities below are that, for the AY 2001-02, a return of income was filed u/s 139 on 19-10-2001 declaring total income of Rs. 5,49,880/- which was processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). A search u/s 132 was thereafter conducted against Mangal Steel Group, to which the assessee belongs, on 28-07-2011. Although in the said search no material was found in relation to an account maintained with HSBC Bank, Geneva Switzerland, assessee’s statement with reference to such bank account was recorded u/s 132(4) because the Department was in possession of certain information about such an account. In the proceedings which followed the search, the assessee denied ownership of such bank account but in the assessments framed u/s 153A/143(3) for the AYs 2006-07 & 2007-08, the then AO on the basis of information available with him made additions to the total income towards undisclosed investment being funds invested in HSBC Bank A/c which was not disclosed in the assessee’s tax returns for the said years. Being aggrieved by these assessments, appeals were filed before the Ld. CIT(A). At the time of filing the appeal before the ld. CIT(A), the assessee admitted of opening an account in his name with HSBC Bank, Geneva in the year 1999. The assessee however claimed that the monies deposited / transacted through this bank account belonged to M/s MSM Enterprises Pvt Ltd, of which Mr. Onn Sithawalla was the
2 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
principal promoter. In support of such claim, an affidavit sworn in before the Notary Public in Singapore by Mr. Sithawalla and signed copies of the HSBC Bank statements were filed. Since such documents were in the nature of additional evidence, these were forwarded to the AO for furnishing his remand report. In order to ascertain the genuineness of the bank statements, copies of the same were forwarded to the Swiss tax authorities by FT&TR Division of the CBDT. On receipt of the confirmation received from Swiss tax authorities, the AO furnished his remand report. From the entries contained in these bank statements, the AO found that the amounts assessed as income of the AYs 200607 and AY 200708 substantially represented amounts transacted in the said account in the prior years and therefore the AO agreed that only the net accretions in the said account during the relevant years were assessable as assessee’s income. Based on AO’s report, ld. CIT(A) allowed substantial relief to the assessee in these two years. On verification of these bank statements, the AO had however noted that various sums totalling about USD 9,00,000 were deposited in the HSBC Account during FYs 2000-01, 2001-02 & 2004-05. Besides from the investments made out of these deposits, the Bank had earned income which was credited in the said bank account in all the financial years commencing from FY 2000-01 and onwards. Since the said Bank account appearing in the assessee’s name was never disclosed in the returns furnished by the assessee for any of these years, the AO initiated reassessment proceedings u/s 148 of the Act for the AYs 2001-02 to 2005-06 as well as 2008-09 to 2011-12. Before the notice u/s 148 dated 16- 02-2016 was issued, the reasons were recorded, which read as under:-
“Shri Bishwanath Garodia had submitted his return of income in response to notice u/s 153A of the Incometax Act for the assessment years 200607 and 200708 declaring income of RS.518435 & RS.549810 respectively. The search was conducted on 28.07.2011.
Sri Garodia was confronted with the evidence regarding having undisclosed bank accounts in HSBC Bank, Geneva, Switzerland at the time of search during the course of recording of statement u/s 132 of the Incometax Act. In the statement he had accepted to the existence of bank account in his name at HSBC Bank, Geneva, Switzerland.
At the time of assessment proceedings Sri Garodia however denied the existence of the bank accounts completely which was taken under oath u/s 131 of the Incometax Act.
Assessment u/s 153AI143(3) was completed on 31.12.2014 for both the assessment years 2006 07 and 200708 computing total income of Rs,46648560 and Rs 97702290 including the undisclosed balances in the bank accounts at HSBC Bank, Geneva, Switzerland.
During penalty proceedings he submitted copy of petition filed before Id. CIT (Appeals) enclosing copy of paper book filed before Ld. CIT (Appeals) where he accepted that he had bank accounts in HSBC Bank, Geneva, Switzerland.
3 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
Upon receipt of direction from Ld. CIT (Appeals), the bank accounts were sent to the Swiss Tax authorities through FTTR division of CBOT for verification of the authenticity of the same.
The Switzerland tax authorities confirmed the authenticity of the bank account, which was again received through the FTTR division of CBDT being the nodal division for exchange of information ram other countries.
The undisclosed bank account has receipts of USD 149987.5 and accretion of USD 5126.4 during the year.
This bank account was not disclosed in the accounts of Sri Bishwanath Garodia during the assessment year and the accretions were not offered to tax in the assessment year 200102. Thus, I have reason to believe that income of USD 1,55,113.9 not disclosed in return of income and accounts has escaped assessment during the year.
The above income is required to be reassessed as per the provisions of section 147 of the Income tax Act."
The assessee objected to the reopening of the assessments from the AYs 2001-02 to 2005-06 on the plea that the proceedings u/s 148 were initiated beyond the limitation period prescribed u/s 149 of the Act and therefore proceedings u/s 147 were ab initio void. The AO however rejected the objections put forth and proceeded to complete the assessments u/s 147/143(3) for the AYs 2001-02 to 2005-06. Taking note of the entries in the bank statements, the AO concluded that the deposits and the accretions in assessee’s undisclosed bank account during FY 2001-02 totalled US$ 1,55,113.90 and this being undisclosed, the AO added an amount of Rs. 72,34,512/- as concealed income of assessee. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and raised before him a legal plea that re-opening by the AO was bad in law by raising various grounds, which are reproduced as under:
“ 1. For that on the facts and in the circumstances of the case, the AO was unjustified in law and on facts in initiating reassessment proceedings for the A. Y. 200102 without satisfying the conditions precedent.
For that on the facts and in the circumstances of the case, the assessment proceedings u/s 147 be held to be bad in law since proceedings were initiated much after the expiry of limitation period prescribed in Sec. 149(1) of the Act.
For that on the facts and in lhe circumstances of the case, the AO ought to have appreciated that the limitation period extended by enactment of Clause(c) of Sec. 149(1) of the Act did not have any application to the appellant's case since such amended provision came in force much after the period of limitation had expired and in that view of the matter the dead proceedings could not be revived by an amendment which came into force after 1st April, 2012.
For that on the facts and in the circumstances of the case, the assessment order be held to be ab initio void as it has been passed after the period of limitation which expired on
4 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
31.12.2016 because the AO was not "entitled to have recourse to provisions of Explanation 1 (x) of Sec. 153 of the Income Tax Act.”
The ld. CIT(A) in his impugned order observed that the ‘material issue to be decided in Ground Nos. 1 to 4 is whether the initiation of reassessment proceedings u/s. 148 on 16.02.2016 could be said to be within the period of limitation as prescribed in Section 149 of the Act or whether on the facts obtained in the present case it can be said that the reassessment proceedings had become time barred on or before 31.03.2012 and therefore initiation of proceedings u/s. 147 on 16.02.2016 was hit by the law of limitation”. Thereafter, he reproduced Section 149(1) of the Income-tax Act, 1961 as under:-
" (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.”
Thereafter, the ld. CIT(A) taking note of the provisions of the Finance Bill, 2012 observed as under:-
“5. On perusal of the said Section and provisions of the Finance Bill, 2012 read with Notes on Clauses thereon; I find that Clause (c) was enacted by the Legislature through Finance Act, 2012. By enacting clause (c) in Section 149(1), the Legislature enlarged the period of limitation upto 16 years for assessing any income escaping assessment and which an assessee derived in relation to any asset located outside India. I note that even though the Finance Bill, 2012 was presented in the Parliament on 29th February 2012 and the Bill was enacted into Finance Act, 2012 in May 2012 yet clause (c) of Section 149(1) was made effective prospectively from 01.07.2012. The Notes on Clauses stated that the amended provisions came in force with effect from 01.07.2012. I therefore note that the amending Act being Finance Act, 2012 by which clause (c) was enacted and inserted in Section 149(1), particularly prescribed that the amending law came into effect on 01.07.2012 and there was nothing in the amending Act which indicated the Legislative intent to make the said provision operative retrospectively. In this regard the Ld. AR of the appellant brought to my attention the provisions of Finance Bill, 2012 by which amendments were proposed to be made in the Incometax Act, 1961 to amend several Sections with retrospective effect. For example, the Sections 2(14) & 2(47) defining the expressions 'capital asset' & 'transfer' were amended and the amended provisions were made effective retrospectively from 01.04.1962. Similarly amendments were carried out in Section 9(1)(vi) & 9(1)(vii) enlarging the definition of income deemed to accrue in India by way of 'royalty' and 'fees for technical services' and the amendments were made effective retrospectively from 01.04.1976. Unlike, the foregoing amendments which were specifically made effective retrospectively, the amendment in Section 149(1) was. made effective prospectively from 01.07.2012. In the 5 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
above factual background therefore it is necessary to ascertain whether the Ld. AO could be held to be justified in reopening the assessment for AY 2005 06 which became time barred on 31.03.2012 and on that date admittedly clause (c) of Section 149(1) was not in force.
Provisions of the Incometax Act, 1961, as were in force on 31.03.2012; assessment of any assessee could be reopened by the Ld. AO under Section 147 of the Act by issuing notice u/s 148 within the time prescribed in Section 149 of the Act. As per Section 149, no assessment could be reopened after the expiry of period of six years from the end of the relevant assessment year. As such the assessments for & upto AY 200506 could have been legally reopened at any time till 31.03.2012 and not thereafter. From the facts on record it is evident that no notice u/s 148 was issued by the Ld. AO for any of the five assessment years i.e AYs 200102 to 200506, till 31.03.2012 even though the search in the appellant's case was conducted on 28.07.2011 on the basis of information available with the Department that the appellant maintained undisclosed account with HSBC Bank, Geneva. I further note that as per the provisions of Section 149(1) as they were in force till its amendment by Finance Act, 2012, the reopening of assessment for and upto AY 200506 were not permissible after 31.03.2012. It is only if it is held that provisions of Section 149(1)(c) were retrospective in operation then alone it can be held the reopening as made by the Ld. AO is within the period of limitation.
As noted in the foregoing; from the plain language used in Section 149 or in the Finance Act, 2012, there is nothing which in any manner shows that the Legislature intended, to make the provisions of Section 149(1)(c) applicable retrospectively. On the contrary I note that even though the Finance Act, 2012 was passed by the Legislature and approved by the President in May 2012, Section 149(1)(c) was made applicable prospectively from 01.07.2012. These facts considered cumulatively therefore leads to conclusion that the Legislature did not intend to make the amended provision applicable retrospectively.”
Thereafter, the ld. CIT(A) referred to the decisions of the Hon’ble Supreme Court in J.P Jani ITO Vs. Induprasad D. Bhatt reported in 72 ITR 595(SC), in the case of S.S. Gadgil Vs. Lal & Co. reported in 50 ITR 231, and in the case of Union of India Vs. Uttam Steels Ltd reported in 319 ELT 598 as well as the decision of the Hon’ble Jurisdictional Calcutta High Court in the case of CIT Vs. Manik Chand Nahata reported in 78 ITR 204 (Cal.) and held as under:-
“11. Applying the ratio laid down in the foregoing judgments to the facts of the appellant’s case, then I find that search under Section 132 was conducted against the appellant on 28.07.2011 but the notices u/s 148 initiating the reassessment proceedings for AYs 200102 to 200506 were issued on 16.02.2016. As per Section 149(1) as was in force till 31.03.2012, the assessment for AY 200506 could have been validly reopened by the Ld. AO at any time till expiry of six years from end of the relevant assessment year. Admittedly no notice u/s 148 was issued till then. It is true that Finance Bill, 2012 introduced in Parliament in February 2012 proposed to insert clause (c) in Section 149(1) by which period of limitation for issuance of notice u/s 148 was extended upto sixteen years. However as per the Finance Act, 2012 as enacted by the Parliament, Section 149(1)(c) was made effective prospectively from 01.07.2012. The Notes on Clauses specifically stated that the amended provisions were to come in force with effect from 01.07.2012. I therefore find that there was nothing expressly provided by or in the amending Act which indicated Legislative mind to make the provision applicable to those proceedings which had become barred by limitation as on 01.07.2012 i.e. the date when the amended provisions came into force. I agree with the observations of the 6 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
judicial forums that period of limitation is always part of procedural law and therefore such provisions are generally retroactive in operation. In fact the provisions of Section 149(1)(c) are retroactive in operation in as much as they are not applicable only to proceedings for AY 201213 and onwards but they are applicable to all such proceedings which the Ld. AO could have legally taken for reopening of assessment as on 01.07.2012. For example, as on 1st July 2012, the Ld. AO could have reopened the assessments commencing on or after 1st April 2006 i.e. AY 200607 and onwards. As per the law in force as on 1.4.2006 i.e. for AY 200607, the assessment could have been reopened only upto a period of six years from the end of the relevant assessment year. However since the Ld. AO could have reopened the assessment for AY 200607 as on 1st July 2012, the extended period of sixteen years became available for AYs 200607 and onwards and in such sense, the amendment was retroactive in operation. As per the principle laid down in the judgments cited above, I however find that the assessments for and upto AY 200506 had become time barred as on 31.03.2012. Section 149(1)(c) came into force only effective from 01.07.2012 and as such there was no overlapping period. In the circumstances therefore the proceedings u/s 147 which became time barred prior to 1st July 2012, could not be revived by the amendment in Section 149(1)(c). I am therefore of the considered opinion that since in the present case, the assessment was reopened by the Ld. AO only on 16.02.2016, the same was barred by limitation. Accordingly I hold that the proceedings were without jurisdiction and consequently therefore the assessment order passed u/s 147 was ab initio void. The order u/s 147/143(3) dated 10.11.2017 is therefore cancelled. Ground Nos. 1 to 4are therefore allowed.”
The ld. CIT(A) concluded that since the legal issue had been answered in favour of assessee, there was no point in adjudicating other grounds which became only academic. Aggrieved by this action of the ld. CIT(A), the Revenue is now before us in these appeals assailing the action of ld. CIT(A) deciding the aforesaid legal issue in favour of assessee, whereas the assessee is in cross objection(s) challenging the action of the ld. CIT(A) in not deciding the other grounds of appeal.
The learned DR challenging the impugned action of the ld. CIT(A) first drew our attention to para 11 of the impugned order of the ld. CIT(A). She pointed out that the assumption of the ld. CIT(A) that clause (c) in section 149(1) of the Act, as enacted by the Finance Act, 2012 and made effective from 1-7-2012, is to be construed as prospective in operation, is misplaced and erroneous. According to the ld. DR the very assumption of the ld. CIT(A) that the said amendment was prospective in nature was patently erroneous for the reason that he did not take into consideration the Explanation below Section 149, which reads as under:-
“Explanation for the removal of doubts, it is hereby clarified that provisions of sub section (1) and (3) has amended by the Finance Act, 2012 shall also be applicable for any assessment year beginning on/before 1st day of April, 2012.”
7 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
Referring to the said explanation the ld. DR submitted that the ld. CIT(A) was wrong to hold that clause (c) of section 149(1) of the Act is prospective in nature when the Explanation had employed the words ‘for removal of doubt(s)’which means if there is any doubt, it has to be understood that the cut off day is not before 01-07-2012 i.e 30.6.2012 as held by the ld. CIT(A) in his order. According to ld. DR, the Explanation makes it clear that it has to be construed to be applicable from any assessment beginning on 01-04-2012 or earlier. Once such a view is taken then in that case sixteen year period contemplated by Section 149(1)(c) covers the assessment years 2001-02 to 2005-06, which are before us. Thus according to the ld. DR since the ld. CIT(A) in his order did not take into consideration the “Explanation” appended below section 149, according to her the orders of the ld. CIT(A) were per-in curium. The written submission of the ld. DR as filed before us is reproduced for clarity of the issue as under:
“(a) the assessee was assessed under section 148, the reopening being done as per the amended provision of section 149(1)(c) of the Act. The complete section of 149 is being reproduced as under along with explanation and draw our attention to the provisions of law, which is reproduced hereunder:
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) 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.
Explanation.In determining income chargeable to tax which has escaped assessment for the purposes of this subsection, the provisions of Explanation 20f section 147 shall apply as they apply for the purposes of that section.
(2) The provisions of subsection (1) as to the issue of notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a nonresident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such nonresident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year.
Explanation.For the removal of doubts, it is hereby clarified that the provisions of sub sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 8 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
(b). Therefore, the ld. DR submitted that “the Commissioner of Income Tax(Appeals)'s order in disposing the matter of applicability of time limit has not considered Explanation 2 to be read with section 149(1 )(c). The decision of CIT(A) is based on interpretation of judicial pronouncement that proceedings available to the AO. for action in the Financial Year 2016 were barred and could not be revived by the amendment in section 149(1)(c). The said amendment of Sec. 149(1)(c) bringing into ambit sixteen long years has been promulgated for only this reason that on the date of reopening the entire period of sixteen years is available to the AO. for reopening proceedings, on or before 01/04/2012. Any other interpretation will negate the substance of the provision itself and neither explanation nor interpretation can take away the essence of the provision inserted by the legislature. The reopening was done by the AO. on 16/02/2016. As on this date the provision of section 149(1 )(c) were fully available to the AO. for reopening upto 16 years as provided.
( c ). In Para11/Page44 in CIT(A)'s order, the CIT(A) expressed his concurrence this view, however, relied on judicial interpretations and principles to give his final decision. The operative part is reproduced as under:
“It is true that Finance Bill, 2012 introduced in Parliament in February 2012 proposed to insert clause (c) in Section 149(1) by which period of limitation for issuance of notice u/s. 148 was extended upto sixteen years. However, as per the Finance Act, 2012 as enacted by the Parliament, Section 149(1)(c) was made effective prospectively from 01/07/2012. The Notes on Clauses specifically stated that the amended provisions were to come in force with effect from 01/07/2012. I, therefore, find that there was nothing expressly provided by or in the amendment Act which indicated Legislative mind to make the provision applicable to those proceedings which had become barred by limitation as on 01/0712012 i.e. the date when the amended provisions came into force. I agree with the observations of the judicial forums that period of limitation is always part of procedural law and therefore such provisions are generally retroactive in operation. In fact the provisions of Section 149(1)(c) are retro active in operation in as much as they are not applicable only to proceedings for A Y. 2012 13 and onwards but they are applicable to all such proceedings which the Ld. AO. could have legally taken for reopening of assessment as on 01/07/2012. For example, as on 1st July 2012, the Ld. A O. could have reopened the assessments commencing on or after 1st April 2006 i.e. AY. 200607 and onwards. As per the law in force as on 01/04/2006 i.e. for AY. 200607, the assessment could have been reopened only upto a period of six years from the end of the relevant assessment year. However, since the Ld. A O. could have reopened the assessment for AY. 200607 as on 1st July, 2012, the extended period of sixteen years became available for AYs 200607 and onwards and in such sense, the amendment was retroactive in operation. As per the principle laid down in the judgments cited above, I however find that the assessments for and upto AY 200506 had become time barred as on 31/0312012.
( d) It is the argument of the Revenue that, the provision of Sec. 149(1 )(c), being retro active in operation, and being fully applicable, on the date of Reopening, the A.O. is entitled to reopen 16 years backwards from the year of issuing notice. Therefore, the reopening in this case upto Assessment Year 200102 should be held valid and as per the provision of Law.
She therefore urged that the impugned order of ld. CIT(A) ought to be reversed.
Per contra, Shri Damle, ld. AR fully supported the orders of the Ld. CIT(A). The ld. AR took us through the provisions of Section 149 and drew our attention to the fact that clause (c) was inserted in section 149(1) by the Finance Act, 2012. He particularly
9 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
emphasised on the fact that although the Finance Bill, 2012 was presented in the Parliament on 29-02-2012, yet the amendment by which clause (c) was inserted in Section 149(1) was made effective prospectively from 01-07-2012. Thus, according to the ld. AR, the Parliament in its wisdom chose the said provision i.e. clause (c) of section 149(1) to become operational only with effect from 01-07-2012 and not before. According to the ld. AR the Explanation appended below Section 149 could not be pressed into service by the Revenue for interpreting the substantive provision of the principal Section which in the wisdom of the Parliament was made operational prospectively from 01-07-2012. The ld. AR claimed that the principles of interpretation of statutes very clearly provide that a proviso or explanation cannot override the principal legal provision to which such Explanation is appended nor it can provide contrary to the provisions of the principal section of the Act. The ld. AR submitted that when the Legislature in its wisdom made clause (c) of Section 149(1) effective only from 01-07-2012 then by relying on the Explanation to Section 149, it could not be claimed by the Revenue that retrospective operation should be given so as to revive time barred proceedings. Relying on various judicial decisions referred to by the Ld. CIT(A), the ld. AR claimed that it is a settled legal proposition that any amendment in the fiscal statute is applicable prospectively and not retrospectively. In particular, he submitted that nowhere in the amending Act of 2012 the legislature had disclosed its mind or intention to make the law applicable retrospectively so as to disturb the proceedings which had become dead by the time the Finance Bill, 2012 was made into Finance Act, 2012. The ld. AR pointed out that by the time the clause (c) of Section 149(1) became operational on 01-07-2012, the reassessment proceedings for and upto AY 2005-06 had become time barred and therefore when the Legislature did not specifically provide for the said clause to come into effect retrospectively, the same could not be given effect for authorizing the AO to re-open the assessments for AYs 2001-02 to 2005-06 in February 2016. In support of his contention, the ld. AR relied on the judgment of the Hon’ble Delhi High Court in the case of Brahm Dutt Vs ACIT (260 Taxman 380) involving similar facts. He further pointed out that the SLP filed by the Revenue against the said judgment was dismissed by the Hon’ble Supreme Court in its judgment dated 05.07.2019 in SLP No. 20207/2019. The ld. AR also relied on the judgment of the Hon’ble Supreme Court in the case of CIT Vs Vatika Township Ltd (367 ITR 466) in which the Constitution Bench of the Hon’ble Supreme Court laid down parameters to be applied while interpreting retrospective operation of a fiscal statute. The ld. AR also relied on the decision of the Hon’ble Bombay High Court in the case of ACIT Vs Union Bank of India (263 Taxman 385) in which the Hon’ble High Court interpreted an analogous amendment to Section 115JB carried out by the 10 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
same Finance Act, 2012 making the Explanation (3) applicable to assessment years commencing on or before 01-04-2012. The Ld. AR therefore strongly urged us to uphold the order of ld. CIT(A).
We have heard the rival submissions and perused the orders of the authorities below. We have also critically examined the applicable legal provisions as also the judicial decisions relied upon by both the parties. The facts of the case are in narrow compass which are not disputed by either of the parties. The preliminary question to be decided first is whether the initiation of reassessment proceedings by the AO for the AYs 200-02 to 2005-06 on 16-02- 2016 was legally sustainable. If answer to this question is against the Revenue and in favour of the assessee, then the grounds raised in cross objections become academic. In order to understand the issue we may, at the cost of repetition, refer to the provisions of Section 149 which read as follows:
" (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.
Explanation for the removal of doubts, it is hereby clarified that provisions of subsection (1) and (3) has amended by the Finance Act, 2012 shall also be applicable for any assessment year beginning on/before 1st day of April, 2012.”
We note that prior to enactment of clause (c) in Section 149(1), the proceedings for reassessment could be initiated at any time before the end of six years from the end of the relevant assessment year and not beyond. Accordingly the proceedings under Section 147 for the AY 2001-02 could not have been initiated anytime on or after 01-04-2008. In so far as AY 2005-06, no proceedings under Section 147 could have been initiated on or after 01-04-2012. We thus find that when clause (c) of Section 149(1) became operational on 01-07-2012, the reassessment proceedings, as per the law then existing had already become time barred or closed. As such as per the provisions of the Act as on force on 31-03-2012, the assessee had obtained a vested right, as provided by Section 149(1) of the Act. From the language employed by the Legislature while enacting clause (c) in Section 149(1), we find that 11 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
legislative mind to make the said provision applicable retrospectively so as to revive proceedings which had already become time barred, is nowhere discernible. Nowhere either in the amendment Act or in Notes on Clauses, it is apparent that the Parliament while enacting clause (c) in Section 149(1) intended to bestow on the tax authorities powers to revive the proceedings which had already become time-barred/closed at the time when the amended provisions of Section 149(1)(c) became operational on 01-07-2012. In this regard, we note that the ld. DR per se never questioned the judicial principle that an amendment in fiscal statute is generally prospective in nature. However relying heavily on the Explanation appended to the Section 149, the Revenue has tried to make out a case that the amended provision of Section 149(1)(c) brought into effect prospectively, had retrospective effect, in terms of which any assessment for and upto sixteen years before 01-07-2012 could be reopened.
In order to verify the correctness of this contention, it is therefore relevant to understand the function which an Explanation performs in a fiscal statute. It is judicially held that an Explanation cannot be read in isolation. Intention of an explanation is that in case if any provision of the principal Act is not clear then it shall be made clear because of the Explanation. However for the purpose of taking an action or for the purpose of interpreting the law, the foundation is the main section and the Explanation is only a subordinate part. The object of the Explanation is to understand the relevant provision of the Act in its true light but the Explanation does not ordinarily enlarge the scope of the original section which it explains. The Explanation should therefore be read so as to harmonize with and clear up an ambiguity, if any, in the main section and it should not be so construed as to widen the ambit of the Section to which it is appended. It is an error to explain the Explanation with the aid of the Section to which it is appended and any such case, will reverse their roles. It is to be borne in mind that an Explanation to a section is not a substantive provision by itself and it merely explains the meaning of the words or to clarify the ambiguities, if any. It is always intended that Explanation added to a statutory provision is not a substantive provision of the statute and therefore it cannot take away a statutory right with which any person under the law has been clothed by the principal provision or over-ride the substantive provision or set at nought the working of an Act by becoming an hindrance in the interpretation of the same. Applying these judicial principles to the present case, we note that the Parliament in its wisdom while enacting clause (c) in Section 149(1) made the same operational prospectively from 01-07- 2012. Nowhere in the language used by the Parliament, it disclosed its mind that the said
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provision was intended to revive or reopen the proceedings which had attained finality prior to the date on which the amended provision came into operation. In the circumstances in absence of any clear mandate by the Parliament, the Revenue cannot press into service the provisions of the Explanation to claim that even the proceedings which had attained finality or where the proceedings u/s 147 had become time barred, the same stood revived because of the Explanation.
We find that in the impugned order the ld. CIT(A) relied on the decision of the Hon’ble Supreme Court in the case of J.P. Jani ITO Vs Induprasad D. Bhatt (supra). In the decided case the assessee had claimed that his assessment was reopened by the Ld. AO by taking benefit of the extended period of limitation which was provided for in Section 148 under the 1961 Act whereas the period of limitation under the Income Tax Act 1922 Act [referred to in the judgment (infra) as old Act] had already expired. It was assessee’s contention that even though the period of limitation for reopening of assessment was expanded in Section 148 of the Income Tax Act 1961 Act, the said provision did not revive the proceeding for reassessment which had already become time barred before the amended provisions of Section 148 of the Income-tax Act, 1961[referred to in the judgment (infra) as new Act] came into force. While upholding the High Court’s decision quashing the notice issued u/s 148, the Supreme Court’s held as under:
“It was admitted in this case that the right of the ITO to reopen the assessment for the year 194748 was barred under the old Act before the new Act came into force. It was opined that it was not permissible to construe sections 297(2)(d)(ii ) of the new Act as reviving the right of the ITO to reopen the assessment which was already barred under the old Act. The reason was that such a construction of section 297(2)(a )(ii) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the wellknown rule of interpretation that, unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time. The language of the new section must be read as applicable only to those cases where the right of the ITO to reopen the assessment was not barred under the repealed section. The new statute does not disclose in express terms or by necessary implication that there was a revival of the right of the ITO to reopen an assessment which was already barred under the old Act.
It must be held that, on a proper construction of section 297(2)(d )(ii) of the new Act, the ITO could not issue a notice under section 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. It followed, therefore, that the notices dated 13 111963 and 911964, issued by the ITO, were illegal and ultra vires and were rightly quashed by the High Court by the grant of a writ.” (emphasis supplied by us)
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This principle was reiterated by the Honble Apex Court in its judgment in the case of Union of India Vs Uttam Steels Ltd (319 ELT 598). In this case it was the assessee’s plea that the amended provisions of Section 11B of the Central Excise Act, 1944 which granted additional time for preferring refund claim should be made available to the assessee even though within the original limitation period the assessee had failed to furnish such claim and the time limit for making such claim had expired prior to the amending Act becoming operational. The assessee’s plea for extension of limitation period was resisted by the Revenue but was allowed by the Hon’ble High Court. On appeal by the Revenue, the Hon’ble Supreme Court held as follows:
“10. We have heard the learned counsel for the parties and Shri Bagaria, the learned amicus curiae at some length. There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself have been a dead claim in the sense that it was timebarred before an amending Act with a larger period of limitation comes into force. A number of judgments of this Court have recognised the aforesaid proposition:
10.1 Thus, in S.S Gadgil v. Lal and Co. AIR 1965 SC 171, this Court stated: (AIR p. 177, para 13)
“13. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a nonresident party under the Income Tax Act before it was amended, ended on 3131956. It is true that under the amending act by section 18 of the finance act, 1956, authority was conferred upon the Income Tax Officer to assess a person as an agent of a foreign party under Section 43 within two years from the end of the year of assessment. But authority of the Income Tax Officer under the Act before it was amended by the finance act of 1956 having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to section 18 of the finance act, 1956, only a limited retrospective operation i.e up to 141956, 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.”
10.2 To similar effect is the judgment in ITO v. Induprasad Devshanker Bhatt AIR 1969 SC 778. The Court held: (AIR p. 783, para 6)
“6. In our opinion, the principle of this decision applies in the present case and it must be held that on a proper construction of section 297(2)(d)(ii) of the new act, the Income Tax Officer cannot issue a notice under Section 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. It follows therefore that the notices dated 1311 1963 and 911964 issued by the Income Tax Officer, Ahmedabad were illegal and ultra vires and were rightly quashed by the Gujarat High Court4 by the grant of a writ.” 14 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
10.3 In New India Insurance Co. Ltd v. Smt Shanti Misra, Adult 1975 2 SCC 840, this Court said: (SCC p. 846, para 7)
“7. … ‘(2) … The new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation.’”
10.4 Similarly in T. Kaliamurthi v. Five Gori Thaikkal Wakf 2008 9 SCC 306, this Court said: (SCC p. 322, para 40)
“40. In this background, let us now see whether this section has any retrospective effect. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such conclusion. The exception to this rule is enactments dealing with procedure. This would mean that the law of limitation, being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of the enactment as also to proceedings commenced thereafter, notwithstanding that the cause of action may have arisen before the new provisions came into force. However, it must be noted that there is an important exception to this rule also. Where the right of suit is barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right.”[Emphasis given by us]
10.5 For the latest exposition of the same rule see Thirumalai Chemicals Ltd. v. Union of India2011 6 SCC 739, SCC at para 29.
The effect of the amendment of Section 11B on 1252000 is that all claims for rebate pending on this date would be governed by a period of one year from the date of shipment and not six months. This, however, is subject to the rider that the claim for rebate should not be made beyond the original period of six months. On the facts of the present case, since the claims for rebate were made beyond the original period of six months, the respondents cannot avail of the extended period of one year on the subsequent amendment to Section 11 B.”(emphasis supplied)
As regards the Revenue’s contention that the proviso or Explanation to the principal provision of the statute should be given retrospective operation, we find that similar contention was considered and negated by the Constitution Bench of the Hon’ble Supreme Court in the case of CIT Vs Vatika Township Pvt Ltd (supra). In this case the Hon’ble Apex Court was called upon to interpret whether the proviso to Section 113 enacted by the Finance Act, 2002 levying surcharge on the tax payable under block assessment, was clarificatory and therefore retrospective in operation or whether it was applicable prospectively. The Division Bench of the Hon’ble Supreme Court in its earlier judgments had held the said proviso to be retrospective in operation because in its opinion the said proviso was clarificatory in nature. However, later on the issue was referred to the Larger Bench because the earlier view was doubted. While deciding the issue of retrospective operation of the fiscal statute, the
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Constitution Bench of the Hon’ble Supreme Court made the following important observations having bearing on the present case.
“31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [1870] LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision in L'Office Cherifien des Phosphates v. YamashitaShinnihon Steamship Co. Ltd. [1994] 1 AC 486. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later.
We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India v. Indian Tobacco Association [2005] 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra [2006] 6 SCC 286. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here.
In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors 16 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
The Constitution Bench of the Hon’ble Supreme Court while adjudicating the matter also took note of the fact that the same Finance Act, 2002 carried out some other amendments to the Income-tax Act, 1961 which were given retrospective operation by the Parliament. However the proviso to Section 113, was made effective prospectively from 01-06-2002. The relevant discussion in the said judgment is as follows:
“d) There are some other circumstances which reflect the legislative intent. The problem which was highlighted in the Conference of Chief Commissioners on the rate of surcharge applicable is noted above. In view of the aforesaid difficulties pointed out by the Chief Commissioners in their Conference, it becomes clear that as per the provisions then enforced, levy of surcharge in the block assessment on the undisclosed income was a difficult proposition. It is for this reason retrospective amendment to Section 113 was suggested. Notwithstanding the same, the legislature chose not to do so, as is clear from the discussion hereinafter.
"Notes on Clauses" appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that "this amendment will take effect from 1st June, 2002". These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Income Tax Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F is amended "so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract." This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts:
(i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature.
Thus, it was a conscious decision of the legislature, even when the legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002.
In the present case we note that the Finance Act, 2012, by which clause (c) was enacted in Section 149(1), also made several other amendments in the Income-tax Act, 1961 and these were made applicable with retrospective effect. For instance, Sections 2(14) & 2(47) which define the words ‘capital asset’ & ‘transfer’ were amended with retrospective effect from 01-04-1962. Similarly amendments in Section 9(1)(vi) & 9(1)(vii) enlarging the
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definition of income deemed to accrue in India by way of ‘royalty’ and ‘fees for technical services’ were made effective retrospectively from 01-04-1976. These amendments were also closely linked with foreign sources of income or transactions between the non-residents. However the Legislature in its wisdom made the foregoing amendments with retrospective effect, whereas the amendment in Section 149(1) by inserting clause (c) was made effective prospectively from 01-07-2012. We therefore find merit in the ld. AR’s submission that legislative intent to make the clause (c) of Section 149(1) applicable retrospectively so as to revive close proceedings was not apparent.
Before us, the ld. AR bolstered his argument by making reference to the judgment of the Hon’ble Bombay High Court in the case of CIT Vs Union Bank of India (supra). He submitted that the Finance Act, 2012 inserted Explanation (3) to Section 115JB which reads as follows:
"Explanation 3For the removal of doubts, it is hereby clarified that for the purposes of this section, the assessee, being a company to which the proviso to subsection (2) of section 211 of the Companies Act, 1956(1 of 1956) is applicable, has, for an assessment year commencing on or before the 1st day of April, 2012, an option to prepare its profit and loss account for the relevant previous year either in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act, 1956 or in accordance with the provisions of the Act governing such company."
By enacting this Explanation, liability to pay tax on book profit under Section 115JB was sought to be fixed on the companies carrying on the business of banking, insurance or electricity. Relying on Explanation (3), the Revenue sought to justify the assessment of book profit in the hands of a nationalized Bank for the AY 2005-06. It was argued by the Revenue that the Explanation (3) made the provisions of Section 115JB applicable to assessees carrying on banking business for the AYs beginning on or before 01-04-2012. While dealing with the Revenue’s argument with regard to retrospective application of Section 115JB because of Explanation (3) inserted by the Finance Act, 2012; the Hon’ble High Court observed as follows:
“This explanation starts with the expression "For the removal of doubts". It declares that for the purpose of the said section in case of an assesseecompany to which second proviso to section 129 (1) of the Companies Act, 2013 is applicable, would have an option for the assessment year commencing on or before 1st April, 2012 to prepare its statement of profit and loss either in accordance with the provisions of schedule III to the Companies Act, 2013 or in accordance with the provisions of the Act governing such company. To our mind, this is some what curious provision. In the original form, subsection (2) of section 115JB of the Act did not offer any such option to a banking company, insurance company or electricity company to prepare its profit and loss account at its choice either in terms of its governing 18 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
Act or as per terms of Section 115JB of the Act. Secondly, by virtue of this explanation if an anomaly which we have noticed is sought to be removed, we do not think that the legislature has achieved such purpose. In plain terms, this is not a case of retrospective legislative amendment. It is stated to be clarificatory amendment for removal of doubts. When the plain language of subsection (2) of Section 115JB did not permit any ambiguity, we do not think the legislature by introducing a clarificatory or declaratory amendment cure a defect without resorting to retrospective amendment, which in the present case has admittedly not been done.
We note that the language of Explanation (3) to Section 115JB is somewhat similar to the language of the Explanation below Section 149. In both places it is provided that the Explanation is inserted “for removal of doubts” and the Explanation is applicable to assessment years beginning on or before 01-04-2012. Yet the Hon’ble Bombay High Court held that since the principal provision of the Act was not amended retrospectively, by applying the Explanation (3), the principal provisions of Section 115JB cannot be made applicable to banking companies retrospectively. In our considered opinion, the same principle applies to the present appeals as well.
We further find that the issue involved in the present appeal is squarely dealt with by the Hon’ble Delhi High Court in the case of Brahm Datt Vs UOI (supra). In this case a search was conducted against the assessee in July 2011. In the statement recorded during the course of search the assessee had admitted of settling a substantial amount on a trust established outside India in the year 1998. The assessee admitted that he was one of the beneficiary of the Trust which had a bank account with HSBC, Geneva, Switzerland. Based on such information, the Revenue reopened his income-tax assessment for AY 1998-99 taking recourse to the provisions of Section 149(1)(c) of the Act. The assessee challenged the legality of the notice u/s 148 and consequent proceedings by filing writ petition. Before the Hon’ble Delhi High Court, the Revenue pleaded that the provisions of Section 149(1)(c) were intended to be retrospective in operation and therefore the proceedings under Section 148 were validly initiated and consequently therefore the writ petition was liable to be dismissed. The Hon’ble Delhi High Court took note of the Revenue’s averments in the following words:
“11. 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.”
We thus note that before the Hon’ble Delhi High Court, the Revenue had particularly argued that the provisions of Section 149(1)(c) were enacted to empower the Revenue to
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reopen the assessments for a period of sixteen years prior to 01-07-2012 and such amendment being retrospective in nature, the assessment for AY 1998-99 was correctly reopened. Negating the Revenue’s contention, the Hon’ble Delhi High Court held as under:
“17. This court is of the opinion that there is no merit in the revenue's contention. In Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136 (SC), 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 article 19(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 struckdown by courts for certain defects; the period of such retroactivity, and the decree and extent of any unforeseen or unforeseeable financial burden imposed for the past period etc."
In Govinddas v. ITO [1976] 103 ITR 123 the Supreme Court held that Section 171 (6) of the Income Tax Act was prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Act came into force and observed that:
"11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie 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 CIT v. Scindia Steam Navigation Co. Ltd [1961] 42 ITR 589, 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 CIT v. Vatika Township (P.) Ltd [2014] 49 taxmann.com 249/227 Taxman 121/367 ITR 466 (SC).
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.”
We further note that the Revenue’s SLP against the decision of the Hon’ble Delhi High Court was dismissed by the Hon’ble Supreme Court on 05-07-2019. We also find that following the judgment of the Hon’ble Delhi High Court (supra), the coordinate Benches of this Tribunal in the following cases similarly quashed the reassessment proceedings u/s 148
20 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.
which were initiated for assessment years prior to AY 2006-07 taking aid of Section 149(1)(c) of the Act.
Raju Verma Vs DCIT in ITA Nos.1796 & 1797/Del/2017 dated 09.04.2019 Ravichandra V Mehta Vs DCIT in ITA Nos.409, 450, 410 and 451/Rjt/2017 dated 25- 02-2019
Respectfully following the decisions cited above and for the reasons discussed in the foregoing, we therefore do not see any reason to interfere with the orders of the ld. CIT(A) for the AYs 2001-02 to 2005-06.
Since we have upheld the orders of the ld. CIT(A) quashing the reassessment orders, the cross objections taken by the assessee have become only academic in nature and therefore we do not deem it necessary to adjudicate the same separately.
In the result, all the appeals of the revenue are dismissed and cross objections of assessee are also dismissed being academic in nature.
Order Pronounced in the Open Court on 08th November, 2019
Sd/- Sd/- Dr. Arjun Lal Saini A.T. Varkey Accountant Member Judicial Member Dated 08 -11-2019
PP(Sr.P.S.) Copy of the order forwarded to: Appellant/Revenue : The DCIT, Central Circle-3(3), Kolkata, Aaykar Bhawan 1. Poorva, E M Bye Pass, 110 Shanti Pally, 4th Fl., Kolkata-107. 2 Respondent/Assessee;Sri Biswanath Garodia 9 Dover Park, Kolkata-19.
CIT, 4. CIT(A), Kolkata. 5. DR, Kolkata Benches, Kolkata **PP/SPS True Copy By By Order Assistant Registrar
ITAT Kolkata
21 ITA Nos. 1408 to 1412/Kol/2019 A.Y 2012-13 1672 to 1674/Kol/2018 & 1861 & 1862/Kol/2018 A.Ys 2001-02, ’02-03, ’05-06, 03-04 & 04-05 C.O Nos. 87,88,89,100 & 101/Kol/2018 Deptt. V/s. Biswanath Garodia.