PCIT Vs Praveen Sawhney (Supreme Court of India)
The case concerns whether the Income Tax Department could extend the limitation period for completing assessment under Section 153B of the Income Tax Act, 1961 based on a request for information made to Swiss authorities under the Indo-Swiss Double Taxation Avoidance Agreement (DTAA).
Search and seizure operations were conducted in July 2011, followed by assessment proceedings for multiple assessment years. The Assessing Officer passed the assessment order on 04.03.2015. The Revenue contended that the limitation period stood extended by one year under Clause (ix) of the Explanation to Section 153B due to a reference made on 11.06.2013 to Swiss authorities for exchange of information. However, the assessees argued that the reference was invalid because it sought information for a period prior to 01.04.2011, which was outside the scope of the amended Indo-Swiss DTAA.
The Income Tax Appellate Tribunal accepted the assessees’ contention and held that the assessment orders were time-barred, as the benefit of extended limitation was not available. The Delhi High Court examined whether the reference was valid and whether such reference could extend the limitation period.
The High Court analysed the evolution of the Indo-Swiss DTAA. It noted that although earlier agreements contained provisions for exchange of information, the Amending Protocol of 30.08.2010 substituted Article 26 entirely. The amended provision clearly stated that exchange of information would apply only to fiscal years beginning on or after 01.04.2011. The Court held that substitution of Article 26 resulted in novation of the earlier provision, meaning the earlier exchange of information clause ceased to exist. There was no saving clause preserving earlier rights.
