TaxTMI 
TaxTMI 
2022 (9) TMI 1098
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....rishnan, learned Senior Standing Counsel for the respondents have been heard. 2. These Writ Petitions, along with several others challenging proceedings for re-assessment, were originally dismissed by a Division Bench of this Court on 04.07.2014 as against which some of the assessees including these petitioners approached the Hon'ble Supreme Court that set aside the orders passed by this Court remanding the matters to the file of the learned single Judge for consideration, vide orders dated 21.11.2016 and 08.12.2016. 3. The submissions advanced on behalf of the petitioners are taken conjointly, seeing as, barring some differences, relevant facts remain largely the same in both cases. The challenge is to proceedings for re-assessment in terms of the Income tax Act 1961 (in short 'Act') for the periods 2008-09 and 2009- 10 in the case of Mr.Kalanidhi Maran (in short and referred to hereinafter as 'Petitioner A') and 2009-10 in the case of Mrs.Kaveri Kalanidhi (in short and referred to hereinafter as 'Petitioner B'). 4. Returns of income (ROI) were filed by the petitioners within time. Both petitioners state that they are promoter directors of a company by the name and style of Sun....
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....d at a premium to one, South Asia Entertainment Holdings Limited, and at par to the petitioners herein. I will refer to this aspect of the matter more in detail, in the paragraphs to follow. 8. An assessment order came to be passed in terms of Section 143(3) of the Act in the case of petitioner A on 30.11.2011. The order has been passed after scrutiny, and at paragraph 2 thereof, the heads under which income has been admitted in the ROI, being 'salary', 'house property', 'short term capital gains' and 'other sources', have been noted by the officer. 9. As regards petitioner B, the ROI was not taken up for scrutiny and only an intimation was issued in terms of Section 143(1) of the Act. However, petitioner B would urge that, seeing as she was assessed in the same circle as that of petitioner A, and insofar as the issues earmarked for reassessment are one and the same, the distinction drawn between a scrutiny assessment under Section 143(3) and an intimation under 143(1), is artificial and contrary to law. 10. While this was so, and within four years from the end of the relevant assessment year, the respondent, being of the view that there has been escapement of income to tax, iss....
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.... 10 0 32807300 Allotment without premium* M/s. South Asia Entertainment Holdings Ltd was allotted shares on 10.12.2007, 02.04.2008, 31.07.2008 and on 30.09.2008 at a premium of Rs.69.57 for the allotment of shares of 3,96,77,420, 14704415, 10970211 and 3645256 shares respectively. Since the percentage of shares allotted to M/S.SAEHL is below 26%, it did not have any controlling stake in the Company. The value of the shares allotted to it is at Rs.79.57 per share including premium of Rs.69.57. However, the promoter Director was allotted shares at par. Section 2(24) (iv) of the Income-tax Act, 1961 defines that income includes the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such a person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid. Any perquisite or profits in lieu of salary is taxable under the provisions of Chapter IV-A of the Act. Further, clause (iv) of Section 28 provides that t....
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....n case of failure, the 147 proceedings for the AY 2009- 10 will be finalised based on material available on record as per law." 12. The reasons, recorded in the case of petitioner B, read as follows: "As requested in your letter dated 26.04.2013, the reasons for reopening your assessment for the AY 2008-09 are furnished as under: "Mrs. Kaveri Kalanidhi, PAN: AGIPK2942F is a promoter Director in M/s. Sun Direct TV Pvt. Ltd., Chennai and assessed in Media Circle I, Chennai. She has filed her return of income for the assessment year 2009-10 on 29.09.2009 returning income of Rs.32,72,74,380/-. The case was taken up on scrutiny and an order u/s 143(3) was passed on 30.11.2011 assessing the income at Rs.33,39,11,300/-. In the computation of income enclosed by her along with the return of income, she had disclosed the following income, namely: Income from Salary from M/s. Sun TV Network Ltd : 32,41,09,600 Income from House property : 2,29,795 Income from Other sources (interest & Share from Trust) : 3,00,000 Short Term Capital Gains : 1,05,358 Gross Total Income : 32,72,74,380 Subsequent to this, it has come to knowledge of this Assessing Officer through ....
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....profession". Based on the above, am satisfied that by allotting shares at par to its Director, Smt.Kavery Kalanithi on 02.04.2008, 31.07.2008 and on 30.09.2008 while allotting shares at a premium of Rs.69.57 per share to SAEHL, the company has given a value of benefit but for such benefit, the some would have been payable by Smt.Kavery Kalanithi. The income escaped assessment on the allotment of shores of 90891637 at the premium of Rs.69.57 per shore works out to Rs.6,32,33,31,186/- during the assessment year 2009-10. Further, the interest of the assessee in M/s. South East Entertainment Holdings Ltd and its Parent company, M/s. Astro All Asia Networks Plc, which are incorporated outside India, is also to be looked into. Thus, the case of the assessee comes within the purview of clause (b) of Explanation 2 to Section 147 as no scrutiny has taken place earlier in this case for AY 2009-10. In view of the above reasons recorded, I am satisfied that there is reason to believe that income chargeable to tax has escaped assessment for A.Y. 2009-10 in the case of Smt.Kavery Kalanithi to the extent of Rs.6,32,33,31,186/-. Therefore, I am satisfied that this is a fit case for issue o....
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..... In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years." 15. In line therewith, the petitioners filed objections on 15.11.2012 to the assumption of jurisdiction by the authority. Both petitioners stoutly stood by their returns, as filed originally. They maintained that full disclosure had been made therein and there was thus no avenue under the Act for re-assessment of the income. They also advanced detailed submissions on the merits or otherwise of the proposed additions. 16. In the case of petitioner A, the assumption of jurisdiction is challenged on the specific ground that the original assessments were completed under scrutiny after looking into all necessary and relevant materials and hence the present proceedings are contrary to law, being, but a review of the original assessment. Petitioner B also adopts the same defence, that the proceedings constitute a review of the original assessment, though this stand is to be tested in light of the fact that there has been no scr....
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....cified security or sweat equity shares allotted or transferred directly or indirectly by the employer or former employer, free of cost or at a concessional rate. 23. The impugned enhancement could only have been made, according to petitioner A, invoking the provisions of Section 17(2)(vi) that takes effect from 01.04.2010, applicable from the next financial year onwards. Prior to its substitution, clause (vi) dealt with the value of Fringe Benefit tax or amenities, not relevant to this matter. Thus, even assuming that the notional value of a 'benefit' or' perquisite' would be taxable, such liability cannot be fastened for a period prior to the insertion of the relevant provision, and in the absence of a charging mechanism. 24. In this context, the petitioner refers to the judgment in the case of Commissioner of Income Tax, Bangalore V. Infosys Technologies Limited ((2008) 2 SCC 272), drawing particular attention to the following paragraphs, extracted below: 4. For the assessment year 1999-2000, the AO held that the total amount paid by the employees consequent to the exercise of option was Rs. 6.64 crores whereas the market value of those shares was Rs. 171 crores. He held that....
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....r the, first time w.e.f. 1.4.2000 the word "cost" stood explained to mean the amount actually paid for acquiring specified securities and where no money had been paid, the cost was required to be taken as nil. .... 17. Be that as it may, proceeding on the basis that there was "benefit", the question is whether every benefit received by the person is taxable as income? In our view, it is not so. Unless the benefit is made taxable, it cannot be regarded as income. During the relevant assessment years, there was no provision in law which made such benefit taxable as income. Further, as stated, the benefit was prospective. Unless a benefit is in the nature of income or specifically included by the Legislature as part of income, the same is not taxable. In this case, the shares could not be obtained by the employees till the lock-in period was over. On facts, we hold that in the absence of legislative mandate a potential benefit could not be considered as "income" of the employee(s) chargeable under the head "salaries". The stock was non-transferable and the stock exchange was also accordingly notified. This is where the weightage ought to have been given by the AO to an important....
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....ployee relationship between the assessee and the company warranting application of Section 28(iv) of the Act. So too in the present case. Hence, the ratio of the aforesaid decisions, support his case, on all fours. 27. As far as petitioner B is concerned, the argument focuses upon the provisions of Section 56(2)(vii) of the Act, proceeding on the premise that this forms the basis of the impugned proceedings. The provisions themselves have been inserted with effect from 01.10.2009 to apply in relation to transactions undertaken on or after such date only. In the present case, the acquisition of shares has been on various dates prior to 01.04.2009 and hence there is no justification whatsoever to have invoke the statutory provision in her case. 28. The Explanatory notes to the provision at the time of insertion are circulated, drawing attention to paragraph 24 dealing with 'Taxation of certain transactions without consideration or for an inadequate consideration as income from other sources'. Specific reference is made to paragraphs 24.6 and 24.7, that read as under: 24.6. Consequential amendment has been made in section 2 by inserting sub-clause (xv) in clause (24) thus expandin....
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....mited 8.Shriram Housing Finance Limited The above, in summary, are the submissions of the petitioners. 32. I now advert to the submissions advanced on behalf of the respondents in defence of the impugned proceedings. Firstly, and on jurisdiction, they point out that the reasons for re-assessment in case of both petitioners disclose that information had been received on 26.07.2012 from the office of the Chief Commissioner of Income Tax, Chennai, enclosing a letter of the Director General of Income Tax, Investigation, New Delhi. 33. The aforesaid communication draws attention to the transactions of share allotment at issue, and the differential pricing adopted qua promoters and other investors. It is upon consideration of the aforesaid information that the respondent has recorded his belief that income has escaped assessment. Thus, there is new and tangible material at the heart of the impugned proceedings that validates the assumption of jurisdiction. The argument that the proceedings are based upon a mere change of opinion is factually erroneous as would be apparent from a reading of the reasons. 34. The case of both petitioners, particularly Petitioner B, hardly merits consi....
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....7 (Delhi) (iv) Yogendrakumar Gupta V. ITO (2014) 46 taxmann.com 56 (Guj.) (v) Yogendrakumar Gupta V. ITO(2014) 51 taxmann.com 383 (SC) (vi) Mohan Ravi V. ITO (2019) 112 taxmann.com 373 (Md) (vii) Raymond Woolen Mills V. ITO (199) 236 ITR 34 (SC) 39. They submit that the scope of judicial review, in such matters, must be restricted to an examination of whether the officer concerned has the requisite authority to proceed with the matter. In the case of both petitioners, the re-assessments have been initiated within a period of 4 years and based on new information that has come to the attention of the officer. Thus there is no merit whatsoever in the challenge, that is liable to be rejected and the reassessments directed to be proceeded with. 40. I have heard all learned senior counsel at length, perused the affidavits and case-law in detail and set out my order below with reasons assigned for my decision. 41. The Income Tax Act provides for a scheme of re-assessment and sets out strict timelines within which such re-assessment has to be initiated and concluded. Section 148 provides for the issuance of a notice upon the Assessing Officer having recorded his 'reason to belie....
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....d seeking the reasons for re-assessment. (v) The reasons disclose that the jurisdictional Assessing Officer had received information from the Director of Income Tax, New Delhi based upon which, he arrived at a prima facie belief that the income disclosed by the petitioner might call for enhancement, and income had, as it were and prima facie, escaped assessment to tax. 46. In my considered view, the case of petitioner B, falling within the admitted facts and circumstances as set out above, would have to be relegated to the Assessing Officer for continuation of the proceedings as it fails the tests statutorily enshrined as well as judicially developed by the Courts. 47. This is for the reason that (i) there has been no scrutiny of the return at the first instance and no 'opinion' has been formed by the officer. Thus, the question of review or change of opinion does not arise (ii) the officer thus has six years from the end of the relevant assessment year to initiate proceedings which he has, within time (iii) new/tangible material/information has come to the notice of the assessing officer post-assessment based upon which he has formed a prima facie belief that income ha....
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....TR 662, or initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the first outcome of proceeding is not relevant. In other words, at the initiation stage, what is required is"reason to believe", but not the established fact of escapement of income. At the stage of issue of notice,the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing nicer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment....
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.... dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the legislature i.e. to minimise the departmental work to scrutinise each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain, J.) in Apogee International Ltd. v. Union of India. 16. It may be noted above that under the first proviso to the newly substituted Section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under Section 143(1) where (a) either no sum is payable by the ail assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any h assessing officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them? The reply is an emphatic "no". The intimation under Section 143(1)(a) was deemed to be a notice of demand under Section 156, for the apparent purpose of making machinery provisions to recovery of tax applicable. By such application only recovery indicated to be payable in the intim....
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....d., at a premium. In my view, these materials are of no avail to the petitioner as the details were not produced in the course of the assessment of the petitioner and thus were unavailable to the officer while finalising these assessments. 56. In order to avail the benefit of the argument that the reassessment constitutes a review, the assessee must be in a position to establish that the documents/details relied upon in the 'reasons recorded' were part of its own records and not those of another assessee, even one connected to it. It might have made a difference had the petitioner referred to the details of differential pricing or the company's records in this regard in the course of the assessment, but this has not transpired as the pricing difference does not emanate from the cash flow statements or other details furnished by the petitioner. 57. The position is clear to the effect that the materials referred to in the reasons constitute new and tangible material, unavailable at the first instance to the officer. It is such information, as supplied by the DGIT Investigation, that the officer has considered to arrive at his prima facie belief that income may have escaped assessme....
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....re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove........... 61. The above discussion leaves me in no doubt that the assumption of jurisdiction in this case, is based upon additional material over and above what formed part of the records, that have lead to the belief that income has escaped assessment and not a review of existing materials that found part of the assessment records of the petitioners. This issue is answered in favour of the revenue. 62. One thing remains. The petitioners are right in stating that proceedings ....