TaxTMI 
TaxTMI 
2023 (1) TMI 323
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....re 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. This gift was contemporaneously disclosed to the stock exchanges and this inf....
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....021 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 requested the A.O. to furnish information and material so as to enable the petitioner ....
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....aping 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 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all mat....
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....mount 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 of notice where income has escaped assessment- 148.(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such pe....
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....essment 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 purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a nonresident under section 163 and the assessment, reassessment or recomputati....
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....mendment 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 deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Explanation.-For the purposes of assessment or reassessment or recomputation 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 proceedi....
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....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 to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable artic....
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.... 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 limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.-For the purposes of clause (b) of this subsection, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to ....
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....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 challenged inter alia, on the grounds such as (1) no valid "reason to believe" (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. v. Income Tax Officer; (2003) 1 SCC 72, has not been followed. 6.1 Further pre-Finance Act, 2021, the reopening was permissible for a ....
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....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 information which suggests that the income chargeable to tax has escaped assessment. 6.6. Substituted section 149 is the provision governing the time limit for issuance of notice under section 148 of the IT Act. The substituted section 149 of the IT Act has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime pre-Finance Act, 2021. 7. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the....
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....ments 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 notices within two weeks thereafter; (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one-time measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which may be available to the assessee under section 149 and/or which may....
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....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 specified authority under section 148A(a) is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required; (iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted); (i....
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....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:- 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 de....
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.... 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 the petitioner was concerned despite having all details, information and material in this regard that was required at that time and based on the very same material, it was impermissible for the A.O. to simply / merely change his mind and initiate reassessment proceedings by issuing a notice dated 30.06.2021; it is therefore clear that in the facts of the instant case, Section 149(1)(b) was not applicable and it was only Section 149(1)(a) of the I.T.Act that was applicable and consequently, the impugned proceedings pursuant to the Notice dated 30.06.2021 issued beyond he period of limitation, which expired on 31.03.2018 are hopelessly barred by limitation and the impugned proceedings and order deserve to be quashed. 12. A perusal of the proviso to Section 149(1)(b) also creates a bar for issuance of a Notice by invoking Section 14....
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....ce 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, the impugned notice and reasons for reopening were quashed. The relevant portions of the said order passed in W.P.No.8059/2021 are extracted hereunder: "10. The first question that arises for consideration is, whether on 31.03.2021, the respondents were entitled to reopen the assessment proceedings of the petitioner for the assessment year 2012-13 after the expiry of four years as contemplated in Section 147 of the I.T.Act; in this context, reliance is placed upon the proviso to Section 147 of the I.T.Act by the respondents in order to contend that the respondents had a valid reason to believe that the undisclosed income had escaped assessment on account of the petitioner - assessee not disclosing fully and truly all material facts during the course of the original assessment. 11. The power / jurisdiction of the respondents - revenu....
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....ondents 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 disclosure of material facts for the purpose of assessment. 18. Per contra, it is contended by the respondents that the petitioner had not disclosed and full and true facts in as much as the book value and the market value of the shares gifted in favour of the petitioner was not disclosed either in the returns or in the reply submitted by the petitioner and as such, the respondents were entitled to invoke the proviso to Section 147 of the I.T.Act and reopen the assessment. 19. As rightly contended by the petitioner, a perusal of the income tax returns submitted by the petitioner for the financial year 2012-13 will indicate that the same contains the following details:- (i) In the Annexures to the returns showing the schedules forming part of the Balance sheet, schedule - 3 contains the details of the investments, among which, long term investments are shown as A....
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.... 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 facts had been furnished and disclosed and it can be clearly discerned from the returns and the documents that the market value of the shares was in excess of Rs.50,000/-, simply because the market value of 49,07,14,120 shares had not been separately stated / mentioned, it cannot be said that the respondents were entitled to take shelter under the proviso to Section 147 of the I.T. Act and seek to reopen the concluded proceedings of 2016 beyond the period of limitation on 31.03.2021. 22. The material on record also discloses that at the time of assessment proceedings, it was not the case of the respondents that the market value of the shares was a material fact that was not disclosed by the petitioner; on the other hand, in its notice dated 09.06.2015 issued under Section 142(1) of the I.T.Act, the only details sought for by the respondents was with regard to the complete list of donors with address, PAN and the am....
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.... 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; it cannot be gainsaid that all facts / particulars which have not been stated / mentioned in the returns are not material facts and it is only those facts which would have an impact / bearing upon the assessment that can be construed or treated as essential. In the instant case, all relevant material facts viz., details of shares for the assessment years 2011-12 and 2012- 13 have been stated including the breakup, face value of the shares at Rs.2/- per share, the details of the shares for the previous year, market value of all the quoted investments including the shares etc., have been furnished by the petitioner and accepted at the time of assessment without any demur; under these circumstances, the respondents are not entitled to invoke the proviso to Section 147 of the I.T.Act in order to contend that the income from the shares has escaped assessment on account of failure on the part of the petitioner to fully and truly disclose a....
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....hares. 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 crores, the aggregate value will far exceed the limit of Rs.50,000/- specified in Section 56(2)(vii)(c) of the I.T.Act. Thus, in the facts of the case, it is axiomatic that the Assessing officer considered Section 56(2)(vii)(c) of the I.T.Act not to be attracted at all rather than being unaware of the market price of WIPRO shares as alleged. The market price of these shares is irrelevant because in the reasons recorded, nowhere it is specifically alleged and established that the alleged escapement of income was by reason of the so-called non- disclosure of the share price. In any event, such an allegation even if made, would be false because the Balance Sheet states the market value and consequently, on this ground also, the impugned notice and reasons assigned by the respondents deserve to be quashed. It is therefore clear that the jurisdictional condition precedent laid down by the proviso to Section 147 i.e failure to disclose a material fact, w....