Can Income Tax Dept. Extend Assessment Limitation Based on Amended Indo-Swiss DTAA? Supreme Court to Examine [Read Order]

The Supreme Court is set to examine whether the Income Tax Department can rely on a reference made to Swiss authorities under the Indo-Swiss Double Taxation Avoidance Agreement (DTAA) to extend the limitation period for completing assessments under Section 153B of the Income Tax Act, 1961, in cases involving assessment years prior to the amended DTAA from 2011.

The dispute traces back to search and assessment proceedings initiated against the assessee, Praveen Sawhney. The Revenue had information regarding a bank account maintained with HSBC Bank, Geneva.

During the course of proceedings, on 11.06.2013, the authority made a request to the Swiss tax authorities seeking administrative assistance under the “Exchange of Information” clause of the Indo-Swiss Double Taxation Avoidance Agreement .

However, the information sought pertained to a period prior to 01.04.2011. The Swiss authorities declined the request, stating that the DTAA did not obligate exchange of information for such earlier periods. The assessment was nonetheless completed on 04.03.2015 by making certain additions.

The assessee challenged the assessment before the Income Tax Appellate Tribunal (ITAT) which allowed the appeal on the ground that the assessment was barred by limitation under Section 153B, and held that the reference made to Swiss authorities were invalid and no extension could be effectuated to the limitation period.

The Revenue appealed the matter before the Delhi High Court, where a bench of Justice K.V. Viswanathan and Justice S.V.N. Bhatti concluded that the amended provisions of the Indo-Swiss DTAA permitting exchange of information would apply only to fiscal years commencing on or after 01.04.2011, and could not be relied upon for earlier years.

Still aggrieved, the Revenue had instituted the present SLP before the Supreme Court,

ASG Raghavendra P. Shankar, appearing for the Revenue, submitted that the findings of the High Court were unsustainable. He submitted that the Explanation to Section 153B of the Income Tax Act, 1961, provided that an extended period of limitation was available in cases where a reference for information had been made to a foreign authority under a DTAA, making such benefit available even for the period in question.

The ASG further submitted that the High Court had erred in holding that the extension would not apply to the period prior to 01.04.2011. The ASG contended that the erstwhile DTAA from 1995 would govern the period from 01.04.1995 to 31.03.2011. Alternatively, even if the amended DTAA of 2011 was to be applied, the request made on 11.06.2013 would still be valid for the relevant period.

It was thus argued that the assessment order dated 04.03.2015 had been passed well within the extended period of limitation and the impugned judgment warranted interference.

The bench of Justice K.V. Viswanathan and Justice S.V.N. Bhatti, after hearing the submissions, issued notice on the Special Leave Petition, including the application for condonation of delay and interim relief, and listed the matter for further consideration.

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