TaxTMI 
TaxTMI 
2020 (10) TMI 40
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....private limited company having its registered office at Lower Parel, Mumbai. It is engaged in the business of trading in fabric yarn, investment and finance. It is an assesee under the Act assessed to tax under the jurisdiction of respondent No.1. 3.1. For the assessment year 2012-13, petitioner filed e-return of income on 30.09.2012 declaring loss of Rs. 3,69,126.00. Subsequently, petitioner revised its original income on 30.03.2014 whereby the loss figure was declared at Rs. 1,91,940.00. 3.2. Assessment case of the petitioner for the said assessment year was selected for scrutiny. Notice under section 143(2) of the Act was issued on 08.08.2013 followed by notices issued under section 142(1) of the Act on 27.06.2014 and 22.09.2014. 3.3. It may be mentioned that in the previous year relevant to the assessment year 2012-2013, petitioner had transferred 4,20,090 equity shares of ZEE Entertainment Enterprises Limited (for short 'ZEE' hereinafter) to an associated entity called M/s. Essel Business Processes Limited (for short 'Essel' hereinafter) as gift i.e., without consideration. Be it stated that cost of the said shares in the hands of the petitioner was Rs. 1,41,18,604.00. 3.4....
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....f the Principal Commissioner of Income Tax - 6, Mumbai i.e., respondent No.2. 6. Vide the forwarding letter dated 17.04.2019 petitioner informed respondent No.1 that it had filed the return on 15.04.2019 but at the same time requested respondent No.1 to furnish a copy of the reasons recorded for re-opening the assessment along with the sanction of the appropriate authority. 7. By letter dated 24.04.2019, respondent No.1 furnished to the petitioner a copy of the reasons recorded for re-opening assessment along with approval of respondent No.2. Without much elaboration at this stage, it is seen from the reasons recorded that a view was taken by respondent No.1 that transfer of shares of listed entities at nil consideration amongst unlisted group entities was made with the sole purpose of evading payment of capital gains tax and such transfer clearly fell within the scope of a colourable device. Therefore, it was held that petitioner had not disclosed fully and truly all material facts with respect to transfer of the shares of ZEE by claiming the same to be a part of the process of consolidation of media houses. After working out the capital gains which had allegedly escaped assessm....
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....ght to be re-opened by taking the view that such transfer of shares was a colourable device for evading payment of tax on capital gains. 12.1. It is the contention of the petitioner that firstly, there was full disclosure of primary facts by the petitioner before the assessing officer. Secondly, a subsequent view taken by the assessing officer on the basis of which the impugned notice has been issued amounts to a clear change of opinion vis-a-vis transfer of shares. This cannot be a ground for reopening a concluded assessment. Information on the basis of which the impugned action was initiated was not furnished to the petitioner. 13. This Court by order dated 16.10.2019 had issued notice and granted ad-interim stay to the impugned notice dated 22.03.2019 by taking the view that it is a clear case of change of opinion; thus, impugned notice is without jurisdiction. It was held thus:- "2. This Petition under Article 226 of the Constitution of India, challenges a Notice dated 22nd March, 2019 passed by Respondent No.1 - Dy. Commissioner of Income Tax, issued under Section 148 of the Income Tax Act, 1961 (the Act). The impugned notice seeks to re-open an Assessment for the Assessme....
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....eration was made with the sole purpose of evading payment of capital gains tax and was a colourable device. Value of the transferred shares was assessed by respondent No.1 whereafter he contended that Rs. 3,35,61,611.00 was the escaped capital gains. Thus, contention of respondent No.1 is that there was escapement of income to the above extent on account of failure of the petitioner to disclose fully and truly all material facts with respect to transfer of shares of ZEE to Essel. Respondent No.2 had granted approval to re-opening of assessment after due application of mind. Therefore, the writ petition should be dismissed. 15. Mr. Pardiwala, learned senior counsel for the petitioner submits that there was no new material before the assessing officer post the assessment order to have reason to believe that income of the petitioner for the assessment year under consideration had escaped assessment on account of the failure of the petitioner to disclose fully and truly all material facts necessary for assessment. He submits that it is evident petitioner had disclosed all the relevant materials pertaining to transfer of the shares of ZEE to Essel as a gift i.e., without consideration.....
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....bunal, Mumbai Bench 'F', Mumbai ('Tribunal' for short) in Jayneer Infrapower and Multiventures Private Limited Vs. Deputy Commissioner of Income Tax, (2019) 103 Taxmann.com 118. Tribunal, after due deliberation, held that the transaction cannot be said to be a colourable device. By no stretch of imagination, the gain can be taxed under the head 'income from other sources'. As regards transfer of shares as gift, Tribunal held that there is nothing in the Act which prohibits a company from giving or receiving gifts. There is no requirement of a gift deed. Tribunal finally came to the conclusion that the transfer of shares by way of gift is exempt from the provisions of capital gains by virtue of the provisions of section 47(iii) of the Act. In that view of the matter, Mr. Pardiwala submits that the very foundation on the basis of which the impugned notice was issued and the objections raised by the petitioner were rejected by the impugned order no longer survives. He, therefore, submits that the impugned notice is without jurisdiction and the same is liable to be set aside and quashed. 16. Per contra, Mr. Mohanty, learned standing counsel Revenue submits that....
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....eable to tax has escaped assessment for any assessment year, he may assess or re-assess such income. However, as per the first proviso, where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no action shall be taken under section 147 after expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for its assessment for that assessment year. 19. As already noticed above, the present case is one where the impugned notice has been issued clearly beyond four years from the end of the assessment year in question. It is also not a case where the assessee failed to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. Therefore, what would be relevant to note is that in so far the present case is concerned, the assessing officer must have r....
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....relevant provisions dealing with capital gains and taxability of capital gains. 23. Chapter IV of the Act deals with computation of total income. Capital gains is one of the heads of income under section 14. Section 45 deals with capital gains. Sub-section (1) says that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head 'capital gains' and shall be deemed to be the income of the previous year in which the transfer took place. 24. Section 47 deals with transactions not regarded as transfer. Clause (iii) is relevant. Section 47(iii) says that nothing contained in section 45 shall apply to any transfer of a capital asset under a gift or will or an irrevocable trust. However, as per the proviso, this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures, etc. allotted by a company, directly or indirectly to its employees under any employees' stock option plan or scheme of the company offered to such employees in accordance with the guidelines issued by the central government in this behalf. 25. From a conjoint reading....
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....ment proceedings. 28.1. In response thereto, petitioner submitted details of investments including opening balance and transfer of investments during the year. This included equity shares of ZEE at serial No.7, which were transferred to Essel. 28.2. In the letter dated 31.12.2014, petitioner explained to respondent No.1 about the transfer of shares of ZEE to Essel. It was stated that as a part of internal restructuring for consolidation of media assets of the group, the holdings in ZEE were transferred at nil consideration by the petitioner to Essel. In the process petitioner had incurred loss of Rs. 1,41,18,604.00. The related board resolution was enclosed along with the said letter. It is seen that board of directors of the petitioner in its meeting held on 16.08.2011 had approved consolidation of media assets and in that connection, transfer of holdings in ZEE to Essel. 28.3. Responding to a query, petitioner in its further communication dated 12.02.2015 impressed upon respondent No.1 as to why market value should not be considered for transfer of shares of ZEE to Essel which was at nil consideration. It was stated that the said transfer of shares at nil consideration was don....