DCIT v. Dilip J. Thakkar

Case snapshot

Sections / provisions: 149

Questions before the Court / Tribunal

• S. 149 : Reassessment-Foreign asset-HSBC Geneva account of Trust -Time limit for notice-16 years-Assets held outside India- Introduced vide Finance Act, 2012-Retrospective in nature. [S. 147, 148, 151] A search and seizure operation were carried out in the assessee’s premises on August 10, 2011. Documents were found pertaining to a foreign bank account, based on the same, AY .1999-2000 was reopened and addition was made. On appeal the CIT(A) held that the assessment was time barred and not decided the issue on merit . On appeal by the revenue the assessee contended that the law was amended prospectively to provide a time period of 16 years for Foreign Assets vide Finance Act, 2012. Allowing the appeal of the revenue the Tribunal held that the amendment was retrospective in nature and will apply to assessments which had concluded before April 01, 2012. Matter was remanded to the CIIT(A)…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

1. This appeal raises an interesting question , of macro-level importance, about the time limit, under section 149 of the Income Tax Ac t, 1961, within which notice 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 ”, for our consideration. While the st and of the Assessing Officer is 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 (hereinafter referred to as ‘the Act), the assessee‟s contention, which has found favour with the learned Commissioner (Appeals) by her reading down the law , is t hat such an extended time limit of sixteen years, as against the limit of six years prevailing as on 1 st 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 1 st July 2012 anyway. Effectively, thus, the reopening of assessments, in respect of income relating to assets located outside India, with in sixteen years from the end of the relevant assessment year has been held to be effective, in a full-fledged manner, only with effect from 1st April 2022.

2. It is in this backdrop the appellant Assessing Officer has challenged the correctness of the order dated 26 th November 2019 passed by the learned Commissioner (Appeals) in the

matter of assessment under section 143(3) read with sec tion 147 for the assessment year 1999 - 2000.

3. To adjudicate on this appeal, only a very few material facts need to be noted. Mr Thakkar, the assessee before us, is one of the senior-most chartered accountants in Mumbai and he has been in public practice , as such, for well more than sixty years. On 10 th August 2011, his residential premises was subjected to a search and seizure operation. Suffice to note, for our purposes, that some of the papers found during this search and seizure operation indicated, amongst other things and according to the Assessing Officer - and we are not really concerned with the correctness of the findings of the Assessing Officer at this stage as we are only examining the reassessment validity aspect , that the assessee, along with one Suryakant Chagganlal Suchak, had invested UK £ 15,00,000 in India Resurgent Bonds issued by the State Bank of India, for non-resident Indians, that the assessee had received UK £ 14,400 from a nonresident, that the assessee had a bank account in HS BC Republic Bank (Suisse) SA [subsequently renamed as HSBC Private Bank (Suisse) SA] , Geneva, as a trustee of the Chagganlal Suchak Family Trust , and this account had deposits to the tune of US $ 31,29,878.

According to the Assessing Officer, it was also discovered that the seized papers show payments aggregating to UK £ 3,30,400 to the assessee and his family members - namely D J Thakkar, Indira D Thakkar Mitali R Lakhanpal and Deval E Anthony. In the assessee’s statement, recorded under section 132, it w as accepted that the assessee’s father in law. Shri Chagganlal M Suchak had set aside a corpus for the benefit of his children and grandchildren, which was invested in Resurgent India Bonds , and the beneficiaries of this corpus included the assessee’s wife and children. The assessee claimed that the legacy so received by him and his family members was duly disclosed in the tax returns but this fact could not be verified due to the non -availability of the related tax returns.

Appellant / petitioner / assessee submissions

The judgment does not separately label this side’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

This amendment, therefore, could not come to the rescue of the Assessing Officer. In other words, according to the learned Commissioner (Appeals) even though the period for reopening the assessments in case of income from assets located outside India stood increased to 16 years with effect from 1 st July 2012, it could only take prospec tive effect and the assessments having already reached finality will remain unaffected by this amendment. In other words, so far as the assessment years which have become final as on 1 st July 2012 in the pre -amendment law, i.e. up to the assessment years 2 005-06, could not have been revisited by the Assessing Officer even under the post amend ment provision enabling the Assessing Officer to reopen cases up to sixteen years from the end of the relevant assessment year in respect of income escaping assessment with respect to any asset located outside India.

4. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

6. In our humble understanding, the statutory provisions are quite clear and unambiguous. Section 149(1)(c) provides that no notice for reassessment can be issu ed 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), introduc ed with effect from 1 st July 2012, is thus expressly stated to be retrospective in nature , and there is, in our humble

To suggest that this amendment was intended to be prospective in effect would mean that the legislature, which undisputedly has the powers to make amendments with retrospective effect, intended to introduce section 149(1)(c) to take full effect from 1 st April 2022- an incongruity by any standard. The interpretation adopted by the learned Commissioner (Appeals) is thus clearly contrary to the specific words of the statute and unambiguous intent of the legislature. We, therefore, vacate the relief, quashing the reassessment proceedings as time-barred, granted by the learned Commissioner (Appeals) and restore the stand of the Assessing Officer on this point. Our humble understanding is that so far as escaped income from an asset outside India is concerned, any completed assessment can be reopened as long as sixteen years have not elapsed from the end of the relevant assessment year .

Unlike the decisions of Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon'ble non -jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety - factors which are inherently subjective in nature. Quite clearly, therefore, the applicability of the non-jurisdictional High Court is never absolute, without exceptions and as a matter of course. That is the principle implicit in the Hon'ble Supreme Court's judgment in the case of Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 173 Taxman 322/305 ITR 227 wherein Their Lordships have upheld th e plea that "non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a mistake apparent from the record".

The decisions of Hon'ble non - jurisdictional High Courts are thus placed at a level certainly below the Hon'b le High Court, and it's a conscious call that is required to be taken concerning the question whether, on the facts of a particular situation, the non -jurisdictional High Court is required to be followed. Therefore, the decisions of non-jurisdictional High Courts do not constitute a binding judicial precedent in all cases. To a forum like us, following a jurisdictional High Court decision is a compulsion of law and sacrosanct that way, but following a non -jurisdictional High Court is a call of judicial prop riety which is never absolute, as it is inherently required to be blended with many other important considerations within the framework of law, or something which cannot be, in deserving cases, deviated from.

Operative decision and relief

10. 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 t he relief on the ground of reassessment having been quashed, the Commissioner (Appe als) 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.

11. In the result, the appeal is allowed in the terms indicated above. Pronounced in the open court today on the 16th day of February 2022.

Ratio and legal principle

The narrow proposition associated with DCIT v. Dilip J. Thakkar concerns s. 149 : reassessment-foreign asset-hsbc geneva account of trust -time limit for notice-16 years-assets held outside india- introduced vide finance act, 2012-retrospective in nature. [s. 147, 148, 151] a search and seizure operation were carried out in the assessee’s premises on august 10, 2011. documents were found pertaining to a foreign bank account, based on the same, ay .1999-2000 was reopened and addition was made. on appeal the cit(a) held that the assessment was time barred and not decided the issue on merit . on appeal by the revenue the assessee contended that the law was amended prospectively to provide a time period of 16 years for foreign assets vide finance act, 2012. allowing the appeal of the revenue the tribunal held that the amendment was retrospective in nature and will apply to assessments which had concluded before april 01, 2012. matter was remanded to the ciit(a)… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in ITA No. 966/Mum/2020.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: S. 149 : Reassessment-Foreign asset-HSBC Geneva account of Trust -Time limit for notice-16 years-Assets held outside India- Introduced vide Finance Act, 2012-Retrospective in nature. [S. 147, 148, 151] A search and seizure operation were carried out in the assessee’s premises on August 10, 2011. Documents were found pertaining to a foreign bank account, based on the same, AY .1999-2000 was reopened and addition was made. On appeal the CIT(A) held that the assessment was time barred and not decided the issue on merit . On appeal by the revenue the assessee contended that the law was amended prospectively to provide a time period of 16 years for Foreign Assets vide Finance Act, 2012. Allowing the appeal of the revenue the Tribunal held that the amendment was retrospective in nature and will apply to assessments which had concluded before April 01, 2012. Matter was remanded to the CIIT(A)… Its practical value lies in the way the ITAT Mumbai connected the governing provisions—149—to the procedural posture and evidence before it.

The authority level is ITAT / Tribunal. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 149 and the decision date 2022-02-16; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is DCIT v. Dilip J. Thakkar, the proceeding is ITA No. 966/Mum/2020, and the decision is dated 2022-02-16. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as Pramod Kumar (Vice President), and Suchitra Kamble (Judicial Member). A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 149. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is RECTIFICATION_HIGH_COURT_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 149 — apply the exact version considered in the judgment.

Case network

• ITO CIR 6(1)-4 VS ASAHI INFRA & PROJECTS LIMITED — ITAT Mumbai · Quashed / set aside
• Amrita Jhaveri (Ms.) v. Dy. CIT — ITAT Mumbai · Quashed / set aside
• Sajjanraj Mehta v. ITO — ITAT Mumbai · Quashed / set aside
• Ashish Gems v. ACIT — ITAT Mumbai · Quashed / set aside

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