PCIT Vs Smt. Sneh Lata Sawhney (Delhi High Court)
Conclusion: Clause (ix) of the Explanation to Section 153B could not be invoked to exclude the period of reference under the Indo-Swiss DTAA, if the reference itself was invalid. Thus, no request could be made by Department for information relating to period prior to 01.04.2011 in terms of the Indo-Swiss DTAA.
Read SC Interim Order in this case: SC to Examine Limitation Extension Denied Due to Invalid DTAA Reference for Pre-2011 Period
Held: Department had information regarding assessee maintaining a Swiss bank account and was confronted with the same during the course of the proceedings under Section 153A. The competent authority made a request for administrative assistance to the Switzerland Tax Authorities under the provisions of ‘Exchange of Information’ Article of Indo-Switzerland Double Taxation Avoidance Agreement [Indo-Swiss DTAA]. The information sought related to the period prior to 01.04.2011. The Swiss authorities sent a communication denying the request for information on the ground that the Indo-Swiss DTAA did not entail any obligation to provide information for a period prior to 01.04.2011. Thereafter, the reassessment proceedings culminated in an assessment order making additions in the income from other sources and unexplained expenditure. Assessees however succeeded in their respective appeals before ITAT on the ground that assessment orders from which the appeals emanate were passed beyond the period as stipulated under Section 153B. Department claimed that the assessment order was not barred by limitation as in terms of Clause (ix) of the Explanation to Section 153B, the period commencing from the date on which a reference was made for request for information by an authority competent under the agreement referred to in Section 90 or Section 90A – in this case the Indo-Swiss DTAA – and ending with the date on which the information was last received or a period of one year, whichever was less, was required to be excluded. Department claimed that the request for information in terms of the Indo-Swiss DTAA was made to the concerned authority of the Swiss Confederation and no response was received within the period of one year from the date of the making such request. Therefore, the period of one year was required to be excluded. Assessee contended that the reference made was not valid and thus, the benefit of Clause (ix) of the Explanation to Section 153B was not available to Revenue. It was held that on a plain reading of Clause (ix) of the Explanation to Section 153B, the exclusion of time taken for obtaining the information (or one year) for completion of the assessment under Section 153A was applicable only if a reference for exchange of information had to be made as per the Agreement under Section 90/90A. It was necessary that reference be made in terms of the agreement. In this case, the benefit of exclusion of time by virtue of Explanation (ix) of Section 153B would, thus, be available only if the reference was made in terms of Indo-Swiss DTAA. However, the request as made was not in terms of the Indo-Swiss DTAA. It was contrary to the limitations as expressly specified under Article 14 of the Amending Protocol. In view of the above, the Court held that no request could be made by Department for information relating to period prior to 01.04.2011 in terms of the Indo-Swiss DTAA.
