The Department wants to reopen a 1998-99 assessment in 2015 using the sixteen-year limit for foreign assets brought in from July 2012. Limitation for that year ran out in 2005. Can they?
No. The Delhi High Court quashed the section 148 notice and all consequent proceedings. Limitation for assessment year 1998-99 expired on 31 March 2005 under section 149 as it then stood, six years from the end of the assessment year. The sixteen-year period in section 149(1)(c), inserted by the Finance Act 2012 with effect from 1 July 2012, could not revive an assessment that had already become final more than eight years earlier. Applying K.M. Sharma and S.S. Gadgil, an amendment extending limitation is not to be read as reviving proceedings already barred, absent express words or necessary implication.
Decided by the High Court (High Court of Delhi at New Delhi, Division Bench — S. Ravindra Bhat J and Prateek Jalan J) on 2018-12-06, reported as AIRONLINE 2018 DEL 2620; W.P.(C) 1109/2016 (Delhi High Court). It bears on section 149, section 148, section 147, section 132(4) of the Income Tax Act 1961, in Reassessment & Reopening and Residence & Treaty Benefit matters.
Every extension of reassessment limitation raises the same question, and this judgment gives the answer for the sixteen-year foreign-asset window in section 149(1)(c): it operates prospectively and cannot reach back to years already closed when it came into force on 1 July 2012. The reasoning is general and survives the later recasting of section 149 — an authority is empowered to reopen only assessments that have not already closed and attained finality by the bar of limitation, and even a procedural amendment is not given greater retrospectivity than its words carry, especially where the effect is to unsettle finality. The Court also refused the Revenue's stock argument that limitation is mere procedure in which nobody has a vested right. It is a first port of call whenever the Department relies on a new or extended limitation provision to reopen an old year.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, aged about 84, worked and lived in Jordan and Iraq and was a non-resident or not ordinarily resident from assessment year 1984-85 to 2003-04, filing Indian returns in that status; from 2003 he filed as a resident. A search under section 132 was carried out and his statement recorded under section 132(4) on 27 September 2011. Asked about foreign bank accounts, he said he held none personally but had settled an offshore trust, the Second Techna Trust, while a non-resident, contributing about US$ 2-3 million out of income earned outside India. On 24 March 2015 the assessing officer issued a notice under section 148 for assessment year 1998-99, the recorded reasons being that Rs 12,54,60,000 used to settle the trust had escaped assessment. The petitioner objected that the notice was barred by section 149. By order of 25 January 2016 the assessing officer rejected the objection, relying on the sixteen-year period in section 149(1)(c) introduced by the Finance Act 2012 with effect from 1 July 2012 for income relating to any asset located outside India. In that order he also recorded that the assessee was a non-resident in assessment year 1998-99. The Revenue argued that the assessee had produced no evidence of his status or of the source of the contribution, and that the 2012 amendment was procedural.
The writ petition was allowed without order as to costs; the impugned reassessment notice and all consequent proceedings were quashed and set aside. Reassessment for 1998-99 could not be reopened beyond 31 March 2005 under section 149 as applicable at the relevant time, and the assessment became barred on that date. The sixteen-year period introduced by the 2012 amendment, more than eight years after limitation had expired, could not revive it. With the assessing officer having conceded that the assessee was a non-resident in that year, there could be no question about the applicability of the then existing section 149(1)(b), which allowed six years where the escaped income was one lakh rupees or more. The Revenue's contention that the amendment was merely procedural and could be applied to ongoing proceedings was rejected.
The Court took the governing principle from K.M. Sharma, where the Supreme Court read sub-section (2) of section 150 as insulating all assessments that had attained finality on the expiry of the limitation then prescribed, and held that section 150(1) as amended from 1 April 1989 did not enable authorities to reopen assessments already barred before that date. The authority is empowered only to reopen assessments which have not already closed and attained finality by the operation of the bar of limitation in section 149. S.S. Gadgil was to the same effect on the retrospective extension of limitation under the 1922 Act: a limited retrospective operation is not to be enlarged, and the amendment does not authorise the officer to commence proceedings which had already become barred before it came into force. Those two decisions were held to cover the facts. The Court then answered the Revenue's characterisation of limitation as procedure. Prithvi Cotton Mills shows that retrospective taxation is tested against Article 19(1)(g) by reference to the period of retroactivity and the unforeseen burden imposed. Govinddas states the settled rule that, unless the statute expressly so provides or necessarily requires, retrospective operation is not given so as to take away an existing right or create a new liability. Scindia Steam Navigation, reiterated in Vatika Township, holds that liability is computed by the law in force at the beginning of the assessment year. To the same effect the Court invoked the rule-of-law objection that the interpretation urged would arm the authorities to reopen settled matters where the citizen was entitled to be sanguine and was under no obligation of the kind the amendment now sought to impose.
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 Section 149.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court quashed the section 148 notice and all consequent proceedings. Limitation for assessment year 1998-99 expired on 31 March 2005 under section 149 as it then stood, six years from the end of the assessment year. The sixteen-year period in section 149(1)(c), inserted by the Finance Act 2012 with effect from 1 July 2012, could not revive an assessment that had already become final more than eight years earlier. Applying K.M. Sharma and S.S. Gadgil, an amendment extending limitation is not to be read as reviving proceedings already barred, absent express words or necessary implication. This was decided by the High Court (High Court of Delhi at New Delhi, Division Bench — S. Ravindra Bhat J and Prateek Jalan J) and bears on section 149, section 148, section 147, section 132(4) of the Income Tax Act 1961. It is reported as AIRONLINE 2018 DEL 2620; W.P.(C) 1109/2016 (Delhi High Court). Every extension of reassessment limitation raises the same question, and this judgment gives the answer for the sixteen-year foreign-asset window in section 149(1)(c): it operates prospectively and cannot reach back to years already closed when it came into force on 1 July 2012. The reasoning is general and survives the later recasting of section 149 — an authority is empowered to reopen only assessments that have not already closed and attained finality by the bar of limitation, and even a procedural amendment is not given greater retrospectivity than its words carry, especially where the effect is to unsettle finality. The Court also refused the Revenue's stock argument that limitation is mere procedure in which nobody has a vested right. It is a first port of call whenever the Department relies on a new or extended limitation provision to reopen an old year. If it applies to you, the first step is this: Work out the last date for a section 148 notice under the limitation provision as it stood for that assessment year, and check whether it had already expired before the amendment relied on came into force.
The petitioner, aged about 84, worked and lived in Jordan and Iraq and was a non-resident or not ordinarily resident from assessment year 1984-85 to 2003-04, filing Indian returns in that status; from 2003 he filed as a resident. A search under section 132 was carried out and his statement recorded under section 132(4) on 27 September 2011. Asked about foreign bank accounts, he said he held none personally but had settled an offshore trust, the Second Techna Trust, while a non-resident, contributing about US$ 2-3 million out of income earned outside India. On 24 March 2015 the assessing officer issued a notice under section 148 for assessment year 1998-99, the recorded reasons being that Rs 12,54,60,000 used to settle the trust had escaped assessment. The petitioner objected that the notice was barred by section 149. By order of 25 January 2016 the assessing officer rejected the objection, relying on the sixteen-year period in section 149(1)(c) introduced by the Finance Act 2012 with effect from 1 July 2012 for income relating to any asset located outside India. In that order he also recorded that the assessee was a non-resident in assessment year 1998-99. The Revenue argued that the assessee had produced no evidence of his status or of the source of the contribution, and that the 2012 amendment was procedural. The matter was decided on 2018-12-06 by the High Court (High Court of Delhi at New Delhi, Division Bench — S. Ravindra Bhat J and Prateek Jalan J). On those facts the High Court held as follows. The writ petition was allowed without order as to costs; the impugned reassessment notice and all consequent proceedings were quashed and set aside. Reassessment for 1998-99 could not be reopened beyond 31 March 2005 under section 149 as applicable at the relevant time, and the assessment became barred on that date. The sixteen-year period introduced by the 2012 amendment, more than eight years after limitation had expired, could not revive it. With the assessing officer having conceded that the assessee was a non-resident in that year, there could be no question about the applicability of the then existing section 149(1)(b), which allowed six years where the escaped income was one lakh rupees or more. The Revenue's contention that the amendment was merely procedural and could be applied to ongoing proceedings was rejected.
The Court took the governing principle from K.M. Sharma, where the Supreme Court read sub-section (2) of section 150 as insulating all assessments that had attained finality on the expiry of the limitation then prescribed, and held that section 150(1) as amended from 1 April 1989 did not enable authorities to reopen assessments already barred before that date. The authority is empowered only to reopen assessments which have not already closed and attained finality by the operation of the bar of limitation in section 149. S.S. Gadgil was to the same effect on the retrospective extension of limitation under the 1922 Act: a limited retrospective operation is not to be enlarged, and the amendment does not authorise the officer to commence proceedings which had already become barred before it came into force. Those two decisions were held to cover the facts. The Court then answered the Revenue's characterisation of limitation as procedure. Prithvi Cotton Mills shows that retrospective taxation is tested against Article 19(1)(g) by reference to the period of retroactivity and the unforeseen burden imposed. Govinddas states the settled rule that, unless the statute expressly so provides or necessarily requires, retrospective operation is not given so as to take away an existing right or create a new liability. Scindia Steam Navigation, reiterated in Vatika Township, holds that liability is computed by the law in force at the beginning of the assessment year. To the same effect the Court invoked the rule-of-law objection that the interpretation urged would arm the authorities to reopen settled matters where the citizen was entitled to be sanguine and was under no obligation of the kind the amendment now sought to impose. In the words reproduced by the source cited on this page: "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 Section 149."
It was decided by the High Court on 2018-12-06 and is reported as AIRONLINE 2018 DEL 2620; W.P.(C) 1109/2016 (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 149, section 148, section 147, section 132(4), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was allowed without order as to costs; the impugned reassessment notice and all consequent proceedings were quashed and set aside. Reassessment for 1998-99 could not be reopened beyond 31 March 2005 under section 149 as applicable at the relevant time, and the assessment became barred on that date. The sixteen-year period introduced by the 2012 amendment, more than eight years after limitation had expired, could not revive it. With the assessing officer having conceded that the assessee was a non-resident in that year, there could be no question about the applicability of the then existing section 149(1)(b), which allowed six years where the escaped income was one lakh rupees or more. The Revenue's contention that the amendment was merely procedural and could be applied to ongoing proceedings was rejected. It arises in Reassessment & Reopening and Residence & Treaty Benefit matters, on section 149, section 148, section 147, section 132(4) of the Income Tax Act 1961, and was decided by High Court of Delhi at New Delhi, Division Bench — S. Ravindra Bhat J and Prateek Jalan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If it had, take the point that the amendment cannot revive a closed year, and cite K.M. Sharma and S.S. Gadgil rather than arguing the merits of the escapement. Meet the argument that limitation is merely procedural with the presumption against retrospectivity in Govinddas, Scindia Steam Navigation and Vatika Township. Get the residential status for the specific year on record early; here the assessing officer's own concession that the assessee was non-resident in that year removed a live dispute.
Still good law. A Division Bench judgment of December 2018; the source page records it cited in three later matters. Whether the Revenue took it further, and how the reasoning has been applied to section 149 as recast by the Finance Act 2021, were not checked. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The key quotation is the Delhi High Court adopting, in its own reasoning, a passage it reproduces from the Supreme Court in K.M. Sharma; the sentence originates in that judgment. The Court decided the case on limitation alone and expressed no view on whether the contribution to the Second Techna Trust was taxable in India or on the adequacy of the material relied on in the recorded reasons. The batch line lists section 149(1)(c); the judgment quotes and applies it but the record gives section 149 for brevity. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was allowed without order as to costs; the impugned reassessment notice and all consequent proceedings were quashed and set aside. Reassessment for 1998-99 could not be reopened beyond 31 March 2005 under section 149 as applicable at the relevant time, and the assessment became barred on that date. The sixteen-year period introduced by the 2012 amendment, more than eight years after limitation had expired, could not revive it. With the assessing officer having conceded that the assessee was a non-resident in that year, there could be no question about the applicability of the then existing section 149(1)(b), which allowed six years where the escaped income was one lakh rupees or more. The Revenue's contention that the amendment was merely procedural and could be applied to ongoing proceedings was rejected.
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