TaxTMI 
TaxTMI 
2021 (5) TMI 47
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....ade under Section 69C of the Income-tax Act. It appears that additions were made by the Assessing Officer on the basis that petitioner had booked artificial long term capital gains of Rs. 5,73,23,123/- and claimed exemption under Section 10(38) of the Income-tax Act thereon by selling shares of M/s. Lifeline Drugs and Pharma Limited ("Lifeline Drugs") for a total consideration of Rs. 5,87,95,055/-. The case of the Assessing Officer was that the price of this share was artificially rigged by certain operators, the details of which were divulged in the course of a search under Section 132 of the Income Tax Act carried out by the Kolkata Investigation wing of the Income Tax department during which certain statements were recorded under Section 132(4) and in the course of a survey action under Section 133A of the Income Tax Act on the premises of M/s. Gateway Financial Service Limited and Korp Securities Limited where also statements of Directors were recorded. By an Order dated 18th February 2019 under Section 154 of the Income-tax Act, the addition under Section 68 of the Income-tax Act was revised to Rs. 5,87,95,055/- .Aggrieved by both the aforesaid orders, petitioner filed appeals....
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...., order or direction under Article 226 of the Constitution of India, quashing the impugned order passed by Respondent No.1. (b) that this Honourable Court may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate Writ, order or direction under Article 226 of the Constitution of India, directing Respondent No.1 to pass an order in Form No.3 determining tax payable by the Petitioner to be the amount declared by it in Form No.1, i.e. one hundred percent of the disputed tax. (c) that this Honourable Court may be pleased to issue a direction under Article 226 of the Constitution of India that question number 70 in the impugned Circular No.21/2020 and the answer thereto are contrary to the provisions of the Act and are therefore to be ignored." 7. Mr. Pardiwala, learned Senior Counsel for Petitioner, submits that in case of Petitioner for Assessment Year 2015-16, assessment has not been made on the basis of any search but the addition was made only on the basis of certain information obtained in the course of a search conducted on the premises of other entities. He submits that Petitioner has not directly been subjected ....
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.... submits that the first category of cases, i.e. 'search cases', would be those where an assessment is made either under section 153A read with section 143(3)/144 of the Income-tax Act in a case where a search is conducted on the declarant itself, or those where an assessment is made under section 153C read with section 143(3)/144 of the Income-tax Act in a case where in the course of a search conducted on another assessee, any assets, documents or books of accounts belonging to the declarant are found and such assets, documents or books of accounts are handed over to the AO of the declarant to assess the income in light of the same. The case of the Petitioner does not fall under either of the above. 11. He submits that in row numbers 2 and 3 of the impugned order, Respondent No.1 himself holds that the case of Petitioner is not a search case but contradicts himself in determining the amount payable as if the case of Petitioner was a search case and is resorting to approbating and reprobating at the same time, which cannot be permitted in law. 12. Mr.Pardiwala also submits that to interpret the assessment order, such that the case of the assessee would be search case even thou....
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....made under Section 143(3)/144/147/153A/153C/158BC of the Income-tax Act in the case of a person referred to in Section 153A or Section 153C or Section 158BC or Section 158BD on the basis of search initiated under Section 132, or requisition made under Section 132A of the Income-tax Act modifying FAQ No.70 of Circular 21/2020 to that extent. He submits that petitioner is not a person referred to in Section 153A or in Section 153C. He also submits that since the case of the assessee is post the 31st May, 2003, the provisions of Section 158BC or Section 158BD as contained in Chapter XIV-B do not apply to the case of Petitioner in view of Section 158BI which clearly states that the said Chapter shall not apply where a search is initiated after the 31st day of May of 2003. He submits that firstly no search has been initiated in the case of Petitioner, secondly, the dates of the reports, statements with respect to the purported investigation referred to in the Assessment Order are post May, 2003. He submits that therefore the said provisions do not apply to the Petitioner. 16. Learned senior counsel Mr.Pardiwala has also drawn our attention to the assessment order dated 22nd December ....
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.... he was involved in any share price manipulation. Referring to the statement of Shri Pawan Kayan recorded under section 132(4) recorded on 30.03.2015 as referred to in paragraph 7 (A) of the assessment order, learned senior counsel submits that neither in the questions put by the investigation wing nor in the answers, name of petitioner figures. Referring to paragraph 7 (B), he submits that there is a clear mention of survey action under section 133A and not search and that too in the premises of M/s.Korp Securities Limited, Kolkata in which, statement of Anupkumar Maheshwari, Director of Lexus Shares and Stock Brokers Private Limited, Eastern India Pvt. Ltd. and Anuj Realtors Private Limited is referred to. Even here petitioner's name is not there. The same goes with paragraph 7(C) which refers to survey action and not search conducted in the premises of M/s.Gateway Financial Services Limited in which the statement of Praveen Kr Agarwal Director has been recorded. Even here there is no mention of petitioner. The same is with paragraph 7(D) where the survey action and not search was conducted under section 133 in the premises of Korp Securities Limited and in which the statement of....
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.... assessment, where the tax arrear has been determined on the basis of search under section 132/132A of the Income Tax Act and therefore provisions of section 3(b) and section 9(a)(i) of the DTVSV Act apply to every assessment for which the basis is a `search' conducted under the Act. When search is conducted in case of an assessee, assessment pertaining to six assessment years preceding the assessment year of search and relevant assessment years are assessed under section 153A of the Act. If the search was conducted in case of any other person but money, bullion, jewellery, assets, books, documents belonging or pertaining to assessee are seized or information contained therein relate to the assessee, the assessment pertaining to six assessment years preceding the assessment year of search (i.e the year in which such seized asset/ books/ documents etc. are handed over to the AO of assessee) and relevant assessment years is framed under section 153C read with section 153A of the Act. In any other case, the assessment is framed either under section 143(3) or section 147 of the Act depending on the time elapsed from the end of the relevant assessment year. Thus, the phrase `on the basi....
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....on search. He submits that the assessment order describes modus operandi followed by the racket of accommodation of entry providers which was unearthed during the search proceedings. He stresses on the words "on the basis of search" to emphasis this point. 23. He also takes us through paragraph 11 of the assessment order in support of his contentions which reads thus: "11. Thus, considering the findings of the search/survey, inquiries conducted in the case of brokers, operators, entry providers and exit providers and on the basis of the SEBI and NSE findings, the nature of transaction entered into by the assessee for receiving LTCG in respect of shares of Lifeline Drug and the exemption claimed u/s.10(38) of the I.T. Act,1961 are not allowed. Since, these transactions are not treated as genuine and not resulting in a genuine capital gains, hence, he sale proceeds received by the assessee of Rs. 5.87,95,055/- on shares of Lifeline Drug is treated as unexplained taxable income earned during the year and accordingly, added under section 68 of the I.T.Act,1961 to the total income of the assessee during the relevant year under consideration. Further, an amount of Rs. 11,75,9....
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....is not executed, for a case to be treated as search case. 26. He, therefore, submits that there is no merit in the contentions of petitioner and the petition ought to be dismissed with costs and petitioner be directed to make payment of Rs. 2,57,67,714/- being 125% of the disputed tax to the revenue. 27. We have heard learned counsel for the parties and with their able assistance, we have perused the papers and proceedings in the matter. 28. It would firstly be appropriate to dwell on certain relevant provisions of the DTVSV act and the rules, its statement of object and reasons, as well as the circulars issued thereunder as are referred to above as also certain provisions of the income tax act. 29. The statement of objects and reasons of the DTVSV act are set out as under: "Over the years, the pendency of appeals filed by taxpayers as well as Government has increased due to the fact that the number of appeals that are filed is much higher than the number of appeals that are disposed. As a result, a huge amount of disputed tax arrears is locked-up in these appeals. As on the 30th November, 2019, the amount of disputed direct tax arrears is Rs. 9.32 lakh crores.....
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....ed penalty, disputed interest or disputed fee, as the case may be. 4 The proposed Bill shall come into force on the date it receives the assent of the President and declaration may be made thereafter up to the date to be notified by the Government." 30. The DTVSV Act is an Act to provide a resolution for pending tax disputes which have been locked up in litigation. Taxpayers can put an end to tax litigation by opting for the scheme and also obtain immunity from penalty and prosecution by paying percentages of tax as specified therein. This would bring peace of mind, certainty, saving of time and resources for the taxpayers and also generate timely revenue for the Government. 31. In the context of this discussion, section 3 of the DTVSV Act assumes significance. For the sake of convenience, section 3 Of the DTVSV Act is quoted as under : "3:- Amount payable by declarant:- Subject to the provisions of this Act, where a declarant files under the provisions of this Act on or before the last date, a declaration to the designated authority in accordance with the provisions of section 4 in respect of tax arrear, then, notwithstanding anything contained in the Incom....
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....ribed: Provided further that in a case where an appeal is filed before the Commissioner (Appeals) or objections is filed before the Dispute Resolution Panel by the appellant on any issue on which he has already got a decision in his favour from the Income-tax Appellate Tribunal (where the decision on such issue is not reversed by the High Court or the Supreme Court) or the High Court (where the decision on such issue is not reversed by the Supreme Court), the amount payable shall be one-half of the amount in the table above calculated on such issue, in such manner as may be prescribed: Provided also that in a case where an appeal is filed by the appellant on any issue before the Income-tax Appellate Tribunal on which he has already got a decisions in his favour from the High Court (where the decision on such issue is not reversed by the Supreme Court), the amount payable shall be one-half of the amount in the table above calculated on such issue, in such manner as may be prescribed." According to the said section, where a declarant files a declaration to the designated authority in accordance with section 4 in respect of tax arrear, then, the amount payable by ....
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....swers in frequently asked questions (FAQs) were issued vide circular no.9/2020 dated 22nd April, 2020 (covering FAQ 1-55) and circular no.21/2020 dated 4th December, 2020 (covering FAQ no.56-89). 3. FAQ no.70 of circular 21/2020 clarified eligibility the search case under Vivad se Vishwas. It was clarified that if the assessment order has been framed in the case of a taxpayer under section 143(3)/144 of the income-tax Act based on the search executed in some other taxpayer's case, it is to be considered as a 'search case' under Vivad Se Vishwas. 4. Several representations have been received seeking further clarity with regard to the classification of a case as a 'search case' for the purposes of Vivad Se Vishwas. The matter has been examined. In order to remove any uncertainty in this regard, and in exercise of powers under section 10 and 11 of Vivad se Vishwas, it is hereby clarified that a 'search case' means an assessment or reassessment made under sections 143(3) / 144 / 147 / 153A / 153C/ 158BC of the Income-tax Act in the case of a person referred to in section 153A or section 153C or section 158BC or section 158BD of the Income-tax Act on the basis of search initiat....
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....a return required to be furnished under Section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made [and of the relevant assessment year or years]: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years [and for the relevant assessment year or years]: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [and for the relevant assessment year or years] [referred to in this sub-section] pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate: [Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue not....
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....this section, Section 153-B and Section153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 153-C. Assessment of income of any other person.-[(1)] [Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in Section 153-A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the ....
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....sment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in Section 153-A." 36. As far as sections 158BC and 158BD are concerned, we note from Section 158BI that Chapter XIV-B which contains sections 153BC and 153BD shall not apply where a search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132A after the 31st day of May of 2003. The dates of the reports, searches/ surveys, statements of persons with respect to the investigation referred to in the Assessment Order are all post May, 2003. It is not the case of the Revenue that action pursuant to sections 153A or 153C had been initiated in the case of petitioner. These facts are not disputed. Therefore, in our considered view, this criteria no. (ii) necessary for a case to be search case is not satisfied. 37. Let us examine criteria no. (iii) i.e whether the as....
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....d to aforesaid, it is difficult to agree with the submissions made on behalf of the counsel for the Revenue that the assessment order is on the basis of search. 38. It is, therefore, not necessary for us to go in to the challenge tothe vires of circular no. 21/2020 as we find that in view of circular no. 4/2021 modifying/replacing answer to FAQ no. 70 in circular no. 21, the case of Petitioner would not be a search case. Also it would not be necessary for us to go into or deal with the other arguments put forward on behalf of Petitioner. 39. The above referred circulars have been issued under section 10 and 11 of the DTVSV act. For the sake of convenience, the said sections are quoted as under: "10.(1) The Central Board of Direct Taxes may, from time to time, issue such directions or orders to the income-tax authorities, as it may deem fit: Provided that no direction or order shall be issued so as to require any designated authority to dispose of a particular case in a particular manner. (2) Without prejudice to the generality of the foregoing power, the said Board may, if it considers necessary or expedient so to do, for the purpose of this Act, in....