Facts of the Case

The petitioners, including U.K. Paints (Overseas) Limited, K.S. Dhingra and BJN Holdings (I) Ltd., challenged multiple notices issued under Section 148 of the Income-tax Act seeking to reopen concluded assessments for various assessment years ranging from AY 1997-98 to AY 2005-06. The notices were issued between 2014 and 2021, long after the expiry of the original limitation period prescribed under Section 149 as it stood prior to the Finance Act, 2012.

The reassessment proceedings were initiated on the basis of alleged information regarding assets located outside India. The petitioners contended that the assessments had attained finality as the limitation for reopening had expired much prior to the insertion of clause (c) to Section 149(1) by the Finance Act, 2012, which extended the limitation period to sixteen years in cases involving foreign assets.

Issues Involved

Whether reassessment notices under Section 148 could be validly issued for assessment years where the limitation period for reopening had already expired prior to 01.07.2012, whether clause (c) of Section 149(1) introduced by the Finance Act, 2012 applied retrospectively so as to revive time-barred assessments, and whether such revival would offend settled principles governing limitation in fiscal statutes.

Petitioner’s Arguments

The petitioners argued that the right of the Revenue to reopen assessments had extinguished upon expiry of the limitation period under the unamended Section 149 and that such concluded assessments could not be reopened by a subsequent amendment unless the statute expressly or by necessary implication provided for retrospective operation. Reliance was placed on binding precedents including S.S. Gadgil, K.M. Sharma and Brahm Datt, which held that limitation provisions must be strictly construed and cannot revive barred proceedings.

Respondent’s Arguments

The Revenue contended that clause (c) of Section 149(1), read with the Explanation inserted by the Finance Act, 2012, applied retrospectively to all assessment years beginning on or before 01.04.2012. It was argued that the amendment was procedural in nature and that reassessment proceedings could be initiated up to sixteen years from the end of the relevant assessment year in cases involving foreign assets, notwithstanding expiry of the earlier limitation period.

Court Order / Findings

The Delhi High Court confined its examination to the issue of limitation. After an extensive analysis of the statutory provisions, legislative history and judicial precedents, the Court held that clause (c) of Section 149(1) introduced by the Finance Act, 2012 could not be construed to revive assessments which had already become time-barred prior to its insertion.

The Court reaffirmed the principle that limitation provisions in fiscal statutes are to be strictly construed and that vested rights accruing upon expiry of limitation cannot be taken away unless the legislature clearly mandates retrospective operation. Relying heavily on the decision in Brahm Datt v. ACIT, as well as Supreme Court judgments in K.M. Sharma and S.S. Gadgil, the Court rejected the Revenue’s contention that the Explanation to Section 149 had retrospective effect sufficient to reopen concluded assessments.

Accordingly, the Court held that all impugned notices issued beyond the original limitation period were without jurisdiction and liable to be quashed.

Important Clarification

The High Court clarified that even in cases involving alleged foreign assets, the extended limitation period under Section 149(1)(c) introduced by the Finance Act, 2012 cannot be applied retrospectively to revive reassessment proceedings that had already become barred by limitation prior to 01.07.2012.

Final Outcome

All the writ petitions were allowed. The notices issued under Section 148 for the respective assessment years were quashed as being barred by limitation, and all consequential reassessment proceedings were set aside.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769677825_UKPAINTSOVERSEASLIMITEDVsASSISTANTCOMMISSIONEROFINCOMETAXANR..pdf

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