TaxTMI 
TaxTMI 
2023 (10) TMI 275
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.....08.2016. 3. An order of assessment came to be passed under scrutiny on 29.12.2017 which is stated to be pending in appeal before the first appellant authority. On 07.04.2021, a notice under Section 148 was issued, the officer having reason to believe that income had escaped assessment for that year. 4. The petitioner complied with the notice by filing return of income on 28.04.2021 and preliminary objections on 19.05.2021 and 23.07.2021. Interalia, it was submitted that the procedure under Section 148A, substituted by Finance Act, 2021 with effect from 01.04.2021, had not been properly followed by the assessing officer and thus the issue of notice on 07.04.2021 invoking the old provision for reassessment was bad in law. 5. A writ petition had been filed in W.P.No.6251 of 2022 challenging the notice and interim protection obtained. In the meanwhile, on 04.05.2022, the Hon'ble Supreme Court passed judgment in the case of Union of India vs Ashish Agarwal (2022 SCC online 543), to the effect that notices under Section 148 issued after 31.03.2021 shall be deemed to have been issued under Section 148A of the Act. 6. A slew of directions had been issued to enable the Revenue to p....
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....r the present re-assessment. That apart, unrealized loss of foreign currency devaluation assumes the nature of a revenue deduction and provision of Rs. 51.11 crore, which was sought to be added back to taxable income had already been disallowed by the petitioner. The proposal to tax the sum would only result in double taxation of the same amount. 12. Coming to the second writ petition relating to AY 2017 - 2018, the petitioner had filed returns of income, original and revised on 30.11.2017 and 29.03.2019 respectively. On 30.12.2019, an order of assessment had been passed under scrutiny which is stated to be pending in first appeal. Notice under the old provisions of Section 148 had been issued on 30.06.2021. 13. Upon due response by the petitioner, notice had been issued on 23.05.2022 and the sequence of events thereafter was similar to what had transpired for AY 2014 - 2015 pursuant to the judgment in the case of Ashish Agarwal and CBDT Instruction dated 11.05.2022. 14. On merits, the proposal relates to the computation of loss due to conversion of PCD's to equity shares which have been the subject-matter of original assessment. That apart, the allocation of expenditure eli....
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.... for the satisfaction of such tests. 21. Without prejudice, they point out that the test of full and true disclosure is premised upon the proviso to old Section 147 which is no longer in the statute book. Moreover, the bar under the proviso would apply only if notice had been issued beyond four years whereas in the present case, notice has been issued within three years. Thus even on this score, invoking the provisions of Section 148, the argument of the petitioner is to be rejected. 22. An additional ground has been filed in W.P.No.22737 of 2022 urging that the liberty granted in Ashish Agarwal's case would be available only in those cases where the re-assessment notice had been challenged either before the High Courts or the Supreme Court. In the present case, that notice was never challenged and hence, the liberty that has been assumed by the respondent is misplaced. 23. This submission is misplaced, since in that judgment, the Hon'ble Supreme Court has granted liberty, carte blanch to the revenue, to both continue with proceedings where notices had already been issued, or afresh, where the law so provided. The Court clarified that all defences as are available in law....
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....that arise in these writ petitions for consideration are crystallized as follows:- (i) Whether the assumption of jurisdiction for re-assessment for AY 2014-15 and 17-18 is right in law. (ii) Whether the officer had 'information' in terms of Explanation 1 to section 149, to proceed with the impugned re-assessments for AY 2014-15 and 2017-18. (iii) Whether the officer had in his possession books of accounts or other documents or evidence that are represented in the form of an asset to come to a conclusion that income that had escaped assessment. 26. Having heard the detailed submissions of Mr.Niraj Sheth for Mr.S.P.Chidambaram for the petitioner and Mr.A.P.Srinivas for the respondents, my decision is as under. 27. Section 148 has been substituted with effect from 01.04.2021 and the new provision, with the Explanation (as it stood then), is extracted below:- Issue of notice where income has escaped assessment. 148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of sect....
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....me in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. 29. Substituted provisions of section 149 w.e.f. 01.04.2021 (as they stood then), read as follows: 149. Time limit for notice No notice under Section 148 shall be issued for the relevant assessment year. (a) If three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) If three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless 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 fifty lakh rupees or more for that year. Provided that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this sec....
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....ble Speaker, presently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years. As a result, taxpayers have to remain under uncertainty for a long time. 154. I therefore propose to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years. In serious tax evasion cases too, only where there is evidence of concealment of income of Rs. 50 lakh or more in a year, can the assessment be re-opened up to 10 years. Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department. 34. The new scheme and provisions have thus to be interpreted in line with the legislative intent and mandate that they usher in certainty and ease of procedure. This aligns with the observations, in conclusion, of the Hon'ble Supreme Court in Parashuram Pottery Works vs. Income tax officer (106 ITR 1), as follows: It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well ....
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....Officer outlines the issues for re-assessment thus: The company has entered into interest rate swaps in the nature of fixed/floating for national principal of Rs. 4396.00 crore outstanding as on 31.03.2014 for varying maturities linked to various benchmarks for asset liability management and hedging. The company has foreign currency borrowings equivalent to Rs. 7240.47 crore against which the company has also entered into coupon only current swaps for notional principal of Rs. 391.16 crore and forward contracts of Rs. 14.16 crore to hedge the foreign currency risks forwards interest on the foreign currency borrowings. On verification of the cash flow from operating activities, it was noticed there was unrealized loss on foreign currency revaluation to the extent of Rs. 221.44 crore. As per Section 43A of the IT Act, in respect of unrealised foreign exchange loss, only deferred tax is required to be created on the unrealised portion and no claim is to be allowed for the same. Hence, the claim of unrealised loss relating to capital asset by the assessee company to the tune of Rs. 221.44 crore is to be disallowed and brought to tax." (B)Amortisation of sale consideration: Th....
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.... with under original assessment relates to disallowance under Section 14a r/w Rule 8 of Income Tax Rules in the course of which the investments of the petitioner have been subject to minute scrutiny. 40. Interest from investments, including external commercial borrowings, income from venture capital funds and deduction under Section 36(1)(viii) in relation to transfer to special reserve, have not escaped the Officer's scrutiny. An addition has been made under capital gain and disallowance of deduction of interest cost on zero coupon bonds. Thus, there is no doubt that the Officer has examined all aspects of the return and framed an assessment after thorough scrutiny. 41. While so, the impugned proceedings are initiated based on the financial records already available with the Officer and indicating that a different view invoking Section 43A in respect of unrealised loss should have been taken. As regards the sale consideration from assets transferred to ARC, the officer records that income has been offered under the head other sources but expresses the view that the sale consideration ought to have been offered in full and not amortised over the years. 42. In regard to AY-2017-1....
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....rsion Date. 5 Schedule-l to the agreement-Para 7.1.4 Conversion Price shall mean Rs. 6.23 per share. From the above, it is evident that the assessee is aware on the subscription date itself that the subscription amount to CCDs, along with accrued interest, shall compulsorily converted into equity shares on the agreed conversion price. The value of the shares viz, Rs. 206,12,90,787 now cited by the assessee pertains to a diminution in the value of investments and the sum of Rs. 111,94,95,405/- on this account pertains to investments in the nature of capital assets. The difference between the subscription amount and the value of shares, at best, would from part of cost of acquisition of Investments and can be reckoned only at the time of transfer of such investments for purpose of capital gains. In view of the above, the loss of Rs. 111,94,95,405/- claimed as deduction needs to be disallowed. (8) Disallowance u/s 43B: The assessee has claimed a sum of Rs. 61,92,43,093/- as deduction u/s 36(1)(viii) and the workings for the same was furnished in Annexure-IV to the computation statement, as under. Table omitted Section 36(1)(viii) provides that in respect of any special res....
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....Loan sold, is in nature of bad debt, which comes under section 36(1). Hence, cannot be considered u/s 37. Reliance is also placed on the Apex court in the case of Southern Technologies Ltd Vs JCIT (CA NO.1337 of 2003 and 154 of 2010 order dated 11.01.2010), where it has been held that- ....If an item falls under sections 30 to 36, but is excluded by an Explanation to section 36(1)(vii), then section 37 cannot come in. Section 37 applies only to items which do not fall in sections 30 to 36. In view of the above, Assessee's Claim of loss (Rs. 1233.73 Crore) on sale of NPA Loans to ARC needs to be disallowed. (D)The assessee has submitted Revised Computation of income and had computed a minus book profits of Rs. 70,30,13,987 u/s 115JB. While re-computing the book profits, the minus figure of Rs. 71,17,21,866/- has been adopted instead of Rs. 70,30,13,987. The difference of Rs. 87,07,879 is required to be brought to tax u/s 115JB." 45. A perusal of the reasons will confirm that in all the issues, the officer merely refers to the financials, Form 3CD, profit and loss account, computation statement and the details furnished during original scrutiny. Thus, in this case as well,....
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....ad in law and quashed. 52. Additionally, the validity of the impugned proceedings have also to be tested on the anvil of the statutory condition in section 149 that the officer has in his possession, 'books of accounts or other documents or evidence which reveal that income chargeable to tax, represented in the form of an asset' has escaped assessment. This additional requirement flows from the reason that the notices have been issued beyond three years from the end of the relevant assessment years. In the present case, the petitioner argues that there is no such asset. 53. Per contra, the submission of the revenue is that the suppressed income/wrong claim of disallowances, will constitute an asset. The submission does not appeal for the reason that what the revenue has in this case are only the books of account and material furnished by the petitioner at the time of original assessment and there is no mention anywhere in the impugned proceedings about an 'asset' representing the income that is alleged to have escaped. 54. Section 149, as it stood then, does not contemplate that the books of account/documents/evidences must themselves represent an asset. In fact, that provision ....
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....t in P.Appavu Pillai vs CIT (58 ITR 622), this Court in Rajagopala Vandayar's case had taken the view that a profit and loss account does not form part of the books of accounts. The Bench, in Taj Borewells, notes this aforesaid position and that subsequently, 'books or books of accounts' have been defined under the Act w.e.f. 01.06.2021. 59. That definition is inclusive and wide, bringing into the ambit of that phrase, 'ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device'. The Bench also took note of the definition under P.Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edition 2005, that defined 'Books of account' as 'Books in which merchants, businessmen, and traders generally keep their accounts. 'Books of Accounts' means such books of account as are usual in the business, and do not extend to "letters, cheques, and vouchers from which books of account can be made up" (Per CAVE, J., Re Winslow, 55 LJQB 238). 60. The Bench concluded holding that: '12. So, the books of account is defined as any book which forms an integra....