Time Limit for Re-Assessment of Escaped Income on Assets Outside India is 16 Years: ITAT restores Order against Senior Chartered Accountant [Read Order]

While considering an appeal filed by the assessee, Mr. Dilip J Thakkar, one of the most senior Chartered Accountants in India, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that for reassessment can be issued in respect of “income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment” within 16 years as per the provisions of section 149 of the Income Tax Act, 1961.

The bench comprising ITAT Vice President Mr. Pramod Kumar and Ms. Suchitra Kamble (Judicial Member) was considering an appeal where the Assessing Officer was of the view that the time limit for reopening the assessments involving income escaping assessment in relation of any asset outside India is sixteen years from the end of the assessment year which is being sought to be reopened, as is said to be the unambiguous position of law under section 149(1)(c) of the Income Tax Act, 1961.

On appeal, the Commissioner (Appeals) allowed the plea of the assessee and held that that such an extended time limit of sixteen years, as against the limit of six years prevailing as on 1st July 2012 when section 149(1)(c) came into force, will come into play only in respect of the cases which could have been reopened on 1st July 2012 anyway.

Terming that the statutory provisions are quite clear and unambiguous, the bench held that Section 149(1)(c) provides that no notice for reassessment can be issued if “more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment”.

“Therefore, as long as sixteen years from the end of the relevant assessment year have not expired, the reassessment notice is in a case involving income from assets located outside India. As for the retrospective application of this provision, Explanation to Section 149 unambiguously provides that “the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012”. The amendment in Section 149(1), introduced with effect from 1st July 2012, is thus expressly stated to be retrospective in nature,” the bench said.

Restoring the order of the Assessing Officer, the bench held that “In all fairness to the respondent, however, the learned Commissioner (Appeals) has not considered many other facets of the matter. These facets significantly influence the outcome of this appeal on merits. We may add that the learned respondent had filed detailed submissions before us, including copies of the trust deed, but then, as there is no adjudication on merits by the learned Commissioner (Appeals), we did not consider it appropriate to deal with the same. In view of the fact that the respondent is a very senior citizen in his eighties, that the assessee’s arguments on merits have not been dealt with at all on merits, that the assessee has a prima facie arguable case on merits, and to ensure the matter reaches finality within a reasonable time frame, we deem it fit and proper to direct, as a result of vacating the relief on the ground of reassessment having been quashed, the Commissioner (Appeals) to dispose of the matter on merits at the earliest and in no event later than 180 days from the date of service of this order. We order so.”

To Read the full text of the Order CLICK HERE

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