TaxTMI 
TaxTMI 
2023 (1) TMI 323
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....o application to the listed shares of Wipro Ltd., that were gifted to Pioneer Independent Trust in the previous year relevant to Assessment Year 2014-15; (iv) Quashing the Circular bearing No.6/2012 [F.NO.133/44/2012-SO (TPL) issued by Respondent No.4 03.08.2012 (Annexure-'C') ; and (v) Pass such other or further orders as this Hon'ble Court may deem fit in the facts and circumstances of the case, and in the interest of justice and equity." 2. Heard Sri. S.Ganesh, learned Senior counsel appearing for the petitioner and Sri.K.V.Aravind, learned counsel for the respondents - revenue. 3. Briefly stated the contentions urged by the petitioner are as under:- The Petitioner is a Private Limited Company and the trustee of a private discretionary Trust called 'Pioneer Independent Trust' (for short 'the Trust'), of which the only two beneficiaries are private limited guarantee companies without share capital, which are exclusively engaged in charitable and philanthropic activities. On 03.06.2013, the Trust received a gift of 6.1 crore shares of Wipro Ltd., from a charitable entity belonging to the Azim Premji Group, to be held as a part of the corpus of Trust. Thi....
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....eply was submitted on 24.06.2021, pursuant to which, one more notice dated 25.06.2021 was issued by the 1st respondent, to which also, the petitioner submitted replies dated 28.06.2021 and 29.06.2021. Thereafter, respondents issued a Notice dated 30.06.2021 under Section 148 of the I.T.Act (after amendment). The petitioner challenged the said notice and sought for other reliefs also by preferring W.P.No.12668/2021, which was allowed by the Division Bench of this Court vide final order dated 18.04.2022. 3.5 Petitioner contends that several matters across various High Courts came up for consideration before the Apex Court in the context of the aforesaid amendment which came into force from 01.04.2021 in the case of Union of India & Others vs. Ashish Agarwal - (2022) SCC Online SC 543. Pursuant to the said order, the 1st respondent issued a show cause notice dated 31.05.2022 to the Trust by invoking Section 148A(b) calling upon the petitioner to show cause as to why a Notice under Section 148 should not be issued in respect of Assessment Year 2014-15 for the income in relation to Wipro shares which had allegedly escaped assessment. 3.6 Petitioner filed a reply on 04.06.2022 and ....
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....r to coming into force of the Finance Act, 2021 was governed by the following provisions:- "Income escaping assessment- 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the 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 o....
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.... of information or document received from the prescribed income-tax authority, under sub- section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. Issue ....
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....f October, 2005 in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. Time limit for notice- 149.(1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this subsection, the provisions of Explanation 2 of section 147 shall apply as they apply for the purpos....
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.....2020 20.03.2020 to 29.06.2020 30.06.2020 24.06.2020 20.03.2020 to 31.12.2020 31.03.2021 31.03.2021 31.03.2021 30.04.2021 27.04.2021 30.04.2021 30.06.2021 The Explanations to the Notifications dated 31st March, 2021 and 27th April, 2021 issued under section 3 of the Relaxation Act, 2020 also stipulated that the provisions, as they existed prior to the amendment by the Finance Act, 2021, shall apply to the reassessment proceedings initiated thereunder. 3.2. The Parliament introduced reformative changes to Sections 147 to 151 of the Income Tax Act, 1961 governing reassessment proceedings by way of the Finance Act, 2021, which was passed on 28th March, 2021. The substituted sections 147 to 149 and section 151 applicable w.e.f. 01.04.2021, passed in the Finance Act, 2021, are as under:- Income escaping assessment- "147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deductio....
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....ons of this Act. Explanation 2.-For the purposes of this section, where,- (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or under section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate ....
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....per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitat....
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.... Courts have set aside all the reassessment notices issued under section 148 of the Income Tax Act, 1961 wherever assailed. The common judgment and order passed by the High Court of Allahabad is the subject matter of the present appeals. However, the High Court of Delhi in its common judgment and order dated 15.12.2021 while quashing the respective reassessment notices has also observed that if the law permits the revenue to take further steps in the matter they shall be at liberty to do so. 5. We have heard Shri N. Venkataraman, learned ASG appearing on behalf of the Revenue and Shri C.A. Sundaram and Shri S. Ganesh, learned Senior Advocates and other learned counsel appearing on behalf of the respective assessee. 6. It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended sections 147 to 149 and section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challeng....
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.... an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under section 148 of the IT Act and (v) the AO is required to pass a specific order within the time stipulated. 6.5. Therefore, all safeguards are provided before notice under section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per section 148A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the informati....
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....ng the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law. Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under:- (i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of section 148A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notic....
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....nts and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA. 10. In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under:- (i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the show-cause notices within two weeks thereafter; (ii) The requirement of conducting any enquiry, if required, with the prior approval of specif....
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....so not in dispute that the order passed by the Hon'ble Division Bench in W.P.No.12668/2021 was on 18.04.2022 prior to the judgment of the Apex Court in Ashish Agarwal's case (supra), which was rendered on 04.05.2022. In fact, in the said judgment, the Apex Court took note of the fact that even subsequent to 01.04.2021, the respondents - revenue had been issuing notices to the assessees' by invoking the pre-amended Section 148 and accordingly, directed the said notices to be treated and construed to be show cause notices in terms of Section 148A(b) of the post-amended provisions. Accordingly, the respondents issued the aforesaid show cause notice dated 31.05.2022 with reference to Section 148A(b), which led to the respondents passing the impugned order. It is therefore clear that the legality, validity and correctness of the impugned order has to be examined in the light of the judgment of the Apex Court in Ashish Agarwal's case as well as the provisions of Sections 147 to 151 of the I.T.Act, before and after amendment vide Finance Act, 2021 w.e.f. 01.04.2021. 8. In this context, it is relevant to extract Section 149 of the I.T.Act (after amendment), which reads as under:- ....
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....will indicate that the period of limitation is extendable from 3 years up to 10 years from the end of the relevant assessment year, if the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs more for that year. 11. In the instant case, a perusal of the notices, show cause notice and the impugned order clearly establish that Section 149(1)(b) does not apply, because the allegation of escapement of income is not based on books of account or other documents or evidence in the possession of the A.O; on the contrary, the allegation of escapement of income is based only on the disclosure expressly made by the petitioner - assessee itself of the gift of Wipro shares received by it and the very same information was readily available with the A.O. when the original assessment order dated 28.06.2016 was passed by him. It is significant to note that at the time of passing the said order dated 28.06.2016, the A.O. came to the definite conclusion that Section 56(2)(vii)(c) did not apply insofar as t....
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....)(b) after amendment will not enure to the benefit of the revenue which is barred / prohibited from issuing such notices which are barred by limitation. 15. As stated above, in the facts of the instant case, it is Section 149(1)(a) that is applicable and not Section 149(1)(b) insofar as the petitioner is concerned and on this ground alone, the impugned order and proceedings deserve to be quashed; alternatively and assuming that Section 149(1)(b) is invocable by the respondents, even then the right of the revenue to issue a notice and initiate proceedings is circumscribed by the provisions of Sections 147 to 151 of the I.T.Act prior to amendment. 16. As stated earlier, the mandatory requirements / conditions / ingredients contained in Section 147 have to be complied with by the respondents - revenue to issue a notice by placing reliance upon the pre-amended provisions. In this regard, in relation to assessment year 2013-14 pertaining to the financial year 2012-13, identical notices were issued by the respondents - revenue, which were challenged before this Court by the petitioner in W.P.No.8059/2021, wherein after referring to various judgments of the Apex Court and this Court....
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....ully and truly disclosed material facts so as to enable the respondents - revenue to reopen a concluded assessment. 17. In the instant case, it is the specific contention of the petitioner that all relevant and material facts had been stated and disclosed by the petitioner in its income tax returns as well as the reply to the queries put forth by the respondents and the same having been accepted without any demur by the respondents who had concluded the assessment proceedings and passed an assessment order on 31.03.2016, the impugned Demand notice dated 31.03.2021 which was issued beyond the period of limitation of four years was illegal, arbitrary and without jurisdiction or authority of law. It is also contended that a perusal of income tax returns as well as the reply submitted by the petitioner on 22.06.2015 to the notice dated 09.06.2015 issued by the respondents will indicate that the face value / book value of the shares as well as the total market value of all the quoted investments including the shares had been mentioned / stated in the returns in addition to other material particulars and details and consequently, there has not been any failure of full and true d....
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....ther words, in the light of all the details furnished by the petitioner in the returns including the total number of shares, the methodology adopted to compute / quantify the number of shares, the total number of shares for the previous assessment year, the face value / book value of the shares being shown as Rs.2/- each and the total market value of the quoted investments including the gifted shares coupled with the fact that the market value of the shares of Wipro Ltd., which is the public limited company whose share value is available readily in the public domain, it cannot be said that the petitioner had failed to fully and truly disclose all material facts necessary for its assessment. 21. As stated supra, in the light of all the aforesaid material and relevant facts being fully disclosed by the petitioner in its returns, which were more than sufficient to complete the assessment, mere non-disclosure of the market value of the shares separately by the petitioner in its returns cannot lead to an inference that the petitioner has not fully and truly disclosed all material facts necessary for assessment; to put it differently, so long as all other material and relevant f....
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....public domain and exceeding Rs.50,000/-, the respondents did not deem it necessary or warranted to call upon the petitioner to provide a separate market value of the shares. Accordingly, the respondents proceeded to complete / conclude the assessment proceedings and passed an assessment order on 31.03.2016 accepting the returns submitted by the petitioner. Under these circumstances, I am of the considered view that the impugned notice at Annexure-A and the reasons for reopening the same vide Annexure-A which proceed on the sole premise that the petitioner had not disclosed the boom value and the market value of the shares which tantamount to not fully and truly disclosing material facts are clearly illegal, arbitrary, factually incorrect and perverse and contrary to the material on record warranting interference by this Court in the present petition. 24. As held by the Apex Court and other High Courts including this Court, in the aforesaid decisions, in order to invoke the proviso to Section 147 of the I.T.Act, it is incumbent upon the respondents to establish that the relevant material facts essential for the purpose of assessment had not been disclosed by the petitioner;....
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....ved as a gift were disclosed, but neither the book value nor the market value of the shares was disclosed in the Balance Sheet. This is factually incorrect because the returns submitted by the petitioner indicate that the face value of the WIPRO shares (Rs.2/- per share) and also their market value as on 31.03.2013 which is included in the total market value of the quoted investments are clearly disclosed. In any event, the share of WIPRO is widely quoted and frequently traded and its market value from minute to minute is readily available and it cannot be said that the petitioner has failed to disclose the information which is in the public domain and is continuously available to everybody. Further, the reasons recorded do not even attempt to claim that the non-application of Section 56(2) (vii)(c) of the I.T.Act and the consequent alleged escapement of income was because the Assessing officer was allegedly unaware of the market price of WIPRO shares. For application of Section 56(2)(vii)(c) of the I.T.Act, even if a price as nominal as one paise is assigned to be the market value of each Wipro share received as a gift with the number of shares received as a gift being Rs.29.55 cr....