Reassessment Proceedings Not Time Barred When Time Limit Increased Retrospectively Under Income Tax Act: ITAT

During search and seizure operations by revenue authorities, the discovery of seized papers showed foreign remittances to the Assessee and his family members. The Assessee had recorded a statement before the revenue authorities admitting that the beneficiaries of the corpus, invested in bonds for non-residents, included the Assessee's wife and children. The Assessing Officer (AO) reopened the assessment for assessment years 1990-2000 on 27^th March 2015, under sections 143(3) and 147 of the Income Tax Act, 1961, on the ground of escapement of income from asset located outside India from assessment.

The Commissioner of Income Tax (Appeals) (CIT (A)) allowed the Assessee's appeal against reassessment. The CIT (A) held that even though the period for reopening the assessment in case of income from foreign assets, vide amendment of section 149, stood increased to sixteen years from six years with effect from 1st July 2012, it could only take prospective effect. Therefore, assessments that already reached finality in 2012 would remain unaffected by the amendment, the CIT (A) ruled. The AO filed an appeal before the ITAT against the findings of CIT (A).

While the AO contended that the time limit for reopening the assessments involving income escaping assessment in relation to any foreign asset is sixteen years from the end of the assessment year sought to be reopened, the Assessee contented that this extended time limit of sixteen years, from six years prevailing as on 1st July 2012 when section 149(1)(c) came into force, will operate only with respect to cases capable of being reopened on that day.

The court noted the relevant provisions, as they stood in 27th March 2015. The amended section 149(1) of the Act, introduced with effect from 1st July 2012, provided that notice for reassessment can be issued in case taxable income in relation to any foreign asset has escaped assessment, provided not more than sixteen years have elapsed from the end of the relevant assessment year. Further, Explanation to Section 149 provided that the provisions of section 149(1), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before 1st April, 2012.

The court noted that the amendment in section 149(1), introduced with effect from 1st July 2012, is expressly stated to be retrospective in nature. The court held that there is no bar on the validity of the retrospectivity of the taxing statute as long as it is clearly specified to be so.

"What essentially follows that there is no bar on the retrospectivity of a statute, though, in the absence of any express intention to that effect, it is presumed to be only prospective. The validity of a statute being retrospective in effect cannot, as such, be questioned in principle. In any event, it is not open to a forum like this Appellate Tribunal- much less a Commissioner (Appeals), to contest validity of a retrospective amendment in law."

Holding the amendment to be retrospective, the court ruled that so far as escapement of income from a foreign asset is concerned, any completed assessment can be reopened as long as sixteen years have not elapsed from the end of the relevant assessment year.

The court allowed the appeal, holding that the order of CIT (A) quashing the reassessment proceedings as time-barred is contrary to the specific words and intent of the statute.

Case Title: DCIT Mumbai Versus Dilip J Thakkar

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