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Law in force is only applicable for re-opening of Assessment in Income Tax matters - Madras HC

Smt.N.Illamathy ... Vs The Income Tax Officer, Ward II(2), Erode. Tax Case Appeal No.795 of 2019 Decided on: 14.09.2020

For Appellant: Mr.D.G.Hariprasath for M/s.G.R.Associates For Respondent: Mr.T.R.Senthilkumar, SSC assisted by Ms.K.G.Usharani, JSC

The Bench comprising of The Hon’ble Mr.Justice T.S.SIVAGNANAM and The Hon’ble Mrs.Justice V.BHAVANI SUBBAROYAN held in this case that the orders passed by the Assessing Officer dated 04.12.2006, the CIT(A) dated 05.10.2007 and the Tribunal dated 06.1.2009 are set aside and the substantial questions of law raised are answered in the favour of the assessee.

The assessee (Smt.N.Illamathy) had filed a return of income for the assessment year 1997-98 on 31.3.1999 admitting an income of Rs.86,270/-. The assessee had filed an appeal in the respect of the assessment year 2002-03 before the Commissioner of Income Tax (Appeals)-I, Coimbatore [CIT(A)]. In that appeal, the CIT(A) had noted that a sum of Rs.10 lakhs was received by the assessee in the year 1996 and out of the said sum the assessee had amounted for a sum of Rs.4,41,551/- in the year 31.3.1997 towards commission received and the remaining amount of Rs.5,58,449/- was shown as payable to the firm. By order dated 20.10.2005, the CIT(A) directed the assessing officer to assess turnover of rs.5,58,449/- for the assessment year 1997-98. Pursuant to such a direction issued by the CIT(A), the Assessing Officer issued a notice dated 22.12.2005 under section 148 of the IT Act proposing to reopen the assessment. The assessee objected the same on the ground that it was barred by limitation. The Assessing Officer vide order dated 04.12.2006, rejected the contention and determined the income as Rs.6,44,720/- by including the said sum of Rs.5,58,449/- as directed by CIT(A). As against the order, the assessee had filed an appeal before the CIT(A), who dismissed the appeal vide order dated 05.10.2007. Challenging the order passed by the CIT(A), the assessee filed further appeal before the Tribunal, which was also dismissed. The assessee, challenging the impugned order had filed an appeal before the High Court. The Issue before the court :

Whether the assessee could challenge the validity of the notice under section 148 of the Act?

Each case of a notice must be judged according to the law existing on the date the notice was issued or served, as the law may require. So long as the notice where the notice is in question, and the assessment, where the assessment is in question, are within the time limited by the law, as it exists when the respective actions are taken, the actions cannot be questioned provided the law is retrospective. (para 13) The issue or question in the present case relates to initiation of re-assessment proceedings and whether the time/limitation for initiation of the re-assessment proceedings specified by the Finance Act, 2001 is applicable.

After amendment, in terms of the Section 149(1)(b) of the Act, no notice under section 148 shall be issued for the relevant assessment year if four years, but not more than six years have lapsed 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.

The notice under section 148 of the Act was issued by the Assessing Officer on 22.12.2005 and the law applicable as on date prescribed the limitation of four years, but not more than six years. Thus, the notice issued on or after 31.3.2004 would suffer from lack of jurisdiction as it is clearly hit by the limitation prescribed under the Statute. (para 18)

The procedural law when amended or substituted is generally retroactive and applies from the day of its enforcement and to this extent it can be retrospective. The question raised is whether the amendment/substitution of the period with effect from 1.6.2001 in Section 149 of the Act, is procedural or substantive.

The High Court of Judicature at Madras, for the reasons mentioned above have allowed the tax case appeal and ordered the orders passed by the Assessing Officer dated 04.12.2006, the CIT(A) dated 05.10.2007 and the Tribunal dated 06.1.2009 to be set aside. The substantial questions of law raised are answered in the favor of the assessee. Aanchal Tawry

Smt. Illamathy v. ITO - DB-Mad HC - 14
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