Facts of the Case

The assessee, Late Shri Ladli Pershad Jaiswal, filed his return of income for Assessment Year 2002-03 declaring income of ₹4,55,580. Subsequently, the Assessing Officer received information from the Foreign Tax and Tax Research (FT&TR) Department alleging that the assessee maintained a joint foreign bank account with his son, Shri Anand Pershad Jaiswal, and that total credit entries during the relevant previous year amounted to ₹14,33,03,690.

Based on this information, the Assessing Officer issued a notice dated 30.03.2019 under Section 148 of the Income-tax Act seeking to reopen the assessment. The assessee objected to the reopening on the ground that the notice was barred by limitation and also contested the merits. The objections were rejected, and an assessment order was passed making additions of ₹11,89,190 on substantive basis and ₹5,94,595 on protective basis.

The assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-23, who quashed the reassessment by order dated 29.01.2021 holding the notice under Section 148 to be barred by limitation, relying on the Delhi High Court judgment in Brahm Datt v. ACIT. The Revenue’s appeal before the ITAT was dismissed. Aggrieved, the Revenue filed the present appeal under Section 260A before the Delhi High Court.

Issues Involved

Whether the Assessing Officer could validly assume jurisdiction under Sections 147 and 148 for AY 2002-03 based on foreign bank account information when the notice was issued beyond the prescribed limitation, whether the amendment to Section 149 introduced by the Finance Act, 2012 extending the limitation period to 16 years applied retrospectively, and whether the ITAT was justified in following the decision in Brahm Datt.

Petitioner’s Arguments

The Revenue contended that the ITAT erred in quashing the reassessment and that the amendment to Section 149 extending limitation to 16 years for cases involving foreign assets was retrospective in nature in view of the Explanation to Section 149(3). It was argued that the Assessing Officer was empowered to reopen the assessment notwithstanding the lapse of the earlier limitation period.

Respondent’s Arguments

The assessee supported the orders of the CIT(A) and the ITAT, contending that the notice dated 30.03.2019 was clearly barred by limitation as on the date of its issuance. It was argued that the amendment introduced by the Finance Act, 2012 was prospective and could not revive a time-barred assessment. Reliance was placed on the binding precedent of the Delhi High Court in Brahm Datt v. ACIT, which squarely covered the issue in favour of the assessee.

Court Order / Findings

The Delhi High Court noted that the impugned ITAT order followed the decision of this Court in Brahm Datt v. ACIT, which dealt with a contextually similar factual matrix. The Court observed that the present appeal raised the same controversy as a batch of matters, including U.K. Paints (Overseas) Ltd. v. ACIT, where the issue relating to retrospective applicability of clause (c) of Section 149(1) by virtue of the Explanation to Section 149 had already been referred to a larger bench.

The Court admitted the appeal on the substantial questions of law framed but directed that the present appeal be tagged and heard along with W.P.(C) No.2068/2015 (U.K. Paints (Overseas) Ltd.) and connected matters. Thus, while the challenge of the Revenue was kept open, the impugned order quashing the reassessment continued to operate.

Important Clarification

The High Court clarified that the question of retrospective applicability of the amendment to Section 149 extending limitation to 16 years is pending authoritative determination by a larger bench. Until such decision, the field continues to be governed by existing binding precedents such as Brahm Datt, under which reassessment notices issued beyond the original limitation period are unsustainable.

Final Outcome

The Revenue’s appeal was admitted on substantial questions of law and directed to be listed along with U.K. Paints (Overseas) Ltd. and connected matters. The order of the ITAT quashing the reassessment for Assessment Year 2002-03 on the ground of limitation remained undisturbed, subject to the final outcome of the reference pending before the larger bench.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769677768_THEPR.COMMISSIONEROFINCOMETAXCENTRAL1VsLATESHRILADLIPERSHADJAISWALTHROUGHLEGALHEIRSHRIKARAMJITJAISWALANDSHRIJAGJITJAISWAL.pdf

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