TaxTMI 
TaxTMI 
2016 (5) TMI 1154
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.... lamps, compact fluorescent lamps and other general lighting lamps. The Petitioners sold their shares in PLL in terms of a warrant subscription and share purchase agreement and the gains therefrom were assessed to tax under the Act as Capital Gains. According to the Revenue, part of the consideration received by the Petitioner - Rs. 38 per share - is non-compete fee and is assessable as business income. This is the principal reason recorded by the Assessing Officer (AO) for believing that the income of the Petitioners for AY 2007-08 had escaped assessment. 3. The Petitioners contend that the entire transaction was examined in detail by the AO during the assessment proceedings which culminated in assessment orders under Section 143(3) of the Act. They submit that in the given facts, the impugned notices are occasioned by a mere change of opinion and AO does not have any fresh tangible material which would provide him a reason to believe that their respective incomes for AY 2007- 08 have escaped assessment. 4. Since the material facts and the controversy involved in these two petitions are similar, the same were heard together. For the sake of brevity, the facts relating to W.P. (C....
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....n response to the aforesaid notice, the Assessee provided the necessary documents including Statement of Affairs, Balance Sheet and Profit and Loss Account for financial year 2005-06 and 2006-07 along with Computation of Income and Audit Report for financial year 2006-07. 5. The AO examined the documents furnished by the Assessee and during the course of assessment proceedings, also called upon the Assessee to furnish further information and documents. In response to the queries raised by the AO during the assessment proceedings, the Assessee furnished further information and documents under the cover of letters dated 20th July, 2009, 12th August, 2009 and 31st August, 2009. The documents furnished by the Assessee included WSSPA dated 3rd July, 2006, revised WSSPA dated 28th December, 2006 , SEBI's letter dated 27th December, 2006 as well as a detailed statement indicating the dates of acquisition of shares. The Assessee also provided statement of shareholding by Stock Holding Corporation of India Ltd., indicating the shares held by the Assessee in PLL. 6. After examining the statements and documents furnished by the Assessee, the AO found that Securities Transaction Tax (STT....
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....ed that the revised WSSPA was devoid of any commercial substance and the sole motive for entering into the revised WSSPA was to avoid tax. 8.3 In the aforesaid context, the AO recorded that the non-compete fee calculated at Rs. 38 per share payable in terms of WSSPA dated 3rd July, 2006 was taxable as business income under Section 28(va) of the Act. 8.4 The AO further tabulated that 13,60,000 shares of PLL were acquired by the Assessee "during 31st March, 2006" and 1,200 shares were acquired by the Assessee "up to 19th May, 2006". He held that since the WSSPA was entered into on 3rd July, 2006, these shares were held for a period less than 12 months and, therefore, qualified as short-term capital assets; but, the Assessee had misled the Department into believing that all shares were held by her for more than 12 months by submitting letters claiming that the subject shares were held for more than 12 months. Reasoning and Conclusions 9. It is apparent from the above that the AO has not referred to any material, other than what had been examined by the AO in the initial round of assessment proceedings, for forming his belief that the Assessee's income for AY 2007-08 has escape....
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....e shares of PLL were acquired by the Acquirers from public at a price of Rs. 190 per share and thus, there was no reason to hold that the sale price of shares in the case of the Assessee was lower. It was further pointed out by the Assessee that there was no grievance that the AO had not examined the relevant agreements and the scope of Section 263 of the Act could not be invoked where two views were possible. 10.3 After hearing the rival contentions, the Tribunal observed that the CIT had passed an order under Section 263 of the Act on the ground that the AO had applied incorrect provisions of law while assessing the income and there was no allegation that proper enquiry had not been held. The Tribunal further rejected the contention advanced on behalf of the Revenue that the revised WSSPA was void as per Sections 10, 25 and 27 of the Indian Contract Act, 1872. It held that the parties were competent to enter into a contract, and fix the price for the subject shares. The Tribunal further noted that it was not the Revenue's case that the shares were sold at a price lower than that available in the market and held that the Revenue did not have the power to hold that the shares ....
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....iew of the matter, it is not disputed that the statement of shareholding indicating the dates on which the subject shares were acquired was provided to the AO in response to the queries raised by him. Thus, it cannot be accepted that the AO did not consider the same while making the assessment order. Thus, it is apparent that the present case is one where the issuance of the impugned notice is occasioned by a change of opinion, which given the scope of Section 147-148 of the Act, is impermissible. 14. In this context, it is relevant to refer to the decision of a Full Bench of this Court in CIT v. Usha International Ltd.: (2012) 348 ITR 485 (Delhi) had held as under:- "Re-assessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The re-assessment will be invalid because the Assessing Officer had formed an opinion ....
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.... Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of " mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if the concept of " change of opinion" is removed, as contended on behalf of the Department, then, in the....
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.... Hossain, the learned counsel appearing for the Revenue contended that the Petitioners had failed to fully and truly disclose the relevant material. In our view, the said contention is not relevant as the impugned notice was issued within a period of four years from the end of the relevant assessment year and, therefore, the proviso to Section 147(1) of the Act is not attracted. 19. Next, Mr Hossain contended that in terms of clause 20 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, public offer price for acquiring shares from public would necessarily also include the consideration for a restrictive covenant agreed with the sellers, which triggers the obligation to make an open offer. He argued that the aforesaid Regulations were framed pursuant to suggestions made by Justice Bhagwati Committee for protection of minority shareholders. He contended that the price of Rs. 190 per share was fixed by SEBI taking into account the noncompete fee. Be that as it may, in our view the aforesaid contentions are not relevant as the issue at hand is not whether the assessment made by AO was erroneous or not. The only question to be considered is whether the AO h....