TMI Blog2023 (1) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... resented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs more for that year. 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 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 issui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Wipro shares during the assessment year 2014-15 itself and the same was assessed to capital gains tax by the Assessing Officer which clearly indicated that he was fully aware of the market price of the Wipro shares much prior to issuance of the notice dated 30.06.2021 and consequently, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. So also, in the original regular assessment proceedings for the subject assessment year 2014-15, the Assessing Officer had sought for and examined the petitioner share demat account which was provided by the petitioner to the Assessing Officer furnishing all particulars regarding the Wipro shares; this circumstance is also a pointer to the fact that the Assessing Officer had complete and full knowledge of the subject shares and their value at the time of original assessment proceedings and on this score also, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares (Rs.2/- per share) was also disclosed by the petitioner. 3.1 During the financial year 2013-14 ending on 31.03.2014, the petitioner sold a portion of the said Wipro shares and disclosed the resulting capital gain in its audited accounts. The petitioner filed its Return of Income for the Assessment Year 2014-15 disclosing the capital gain from the said sale of Wipro shares. 3.2 The petitioner was subjected to a full scrutiny assessment under Section 143(3) of the I.T.Act. As the Assessing Officer (for short the A.O ) also had to assess the capital gain arising from the sale of Wipro shares, the A.O. was made fully aware of the sale price of Wipro shares. In any event, the market price of Wipro shares was completely in the public realm as it is a very well known and widely traded shares. Further, during the course of the scrutiny assessment, the A.O specifically asked for and was given a copy of the petitioner s demat account, which gave the A.O full information about the gift of Wipro shares received by the petitioner are also the sale thereof and the market value of the said shares. There was no other information which the A.O could possibly ask for in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply along with all relevant documents and requested the respondents to drop the proceedings. It is the grievance of the petitioner that despite the aforesaid facts and circumstances, respondents proceeded to pass the impugned order, aggrieved by which, the petitioner is before this Court by way of the present petition. 4. The respondents revenue have filed their statement of objections inter alia disputing the various contentions urged by the petitioner. It is contended that apart from the fact that the petition is premature, the impugned order is correct, legal and proper and in accordance with the judgment of the Apex Court in Ashish Agarwal s case (supra) and the other judgments relied upon by the respondents. It is contended that the respondents have correctly invoked Section 56(2)(vii)(c) of the I.T.Act and the proceedings initiated by the respondents are well within limitation, both under the pre-amended provisions as well as after amendment and the income of the petitioner having escaped assessment, the respondents were fully justified in initiating the subject proceedings and passing the impugned order, which does not warrant interference by this Court in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub- section (2) of section 143 after the expiry of twelve months specified in the proviso to subsection (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), 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. Sanction for issue of notice- 151.(1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub- section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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 proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with. . 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 section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diately 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 article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3.-For the purposes of this section, specified authority means the specified authority referred to in section 151. Conducting inquiry, providing opportunity before issue of notice under section 148 - 148A. The Assessing Officer shall, before issuing any notice under section 148,- (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the provisions of section 151. Sanction for issue of notice- 151. Specified authority for the purposes of section 148 and section 148A shall be- (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. 3.3. In sub-section (1) of section 151A of the Income Tax Act, in the opening portion, after the words and figures issuance of notice under section 148 , the words, figures and letter or conducting of enquiries or issuance of show-cause notice or passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 maximum period up to six years and in some cases beyond even six years leading to uncertainty for a considerable time. Therefore, Parliament thought it fit to amend the Income Tax Act to simplify the tax administration, ease compliances and reduce litigation. Therefore, with a view to achieve the said object, by the Finance Act, 2021, sections 147 to 149 and section 151 have been substituted. 6.2. Under the substituted provisions of the IT Act vide Finance Act, 2021, no notice under section 148 of the IT Act can be issued without following the procedure prescribed under section 148A of the IT Act. Along with the notice under section 148 of the IT Act, the assessing officer (AO) is required to serve the order passed under section 148A of the IT Act. section 148A of the IT Act is a new provision which is in the nature of a condition prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance 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 rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so. 8. However, at the same time, the judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 of the IT Act. The Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and; (v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not. 9. There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessees. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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); (iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available. 11. The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess 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 recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation.-For the remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 148(1)(b) for the relevant assessment year beginning on or before 01.04.2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of Section 149(1)(b) as they stood prior to 01.04.2021; in other words, the proviso mandates that if a notice could not have been issued under Section 148 as being barred by limitation under Section 149(1)(b) as it stood prior to amendment, then such notices cannot be issued by relying upon Section 149(1)(b) after amendment which provides a longer / larger period of limitation. 13. In this context, it is relevant to state that while Section 149(1)(a) prior to amendment prescribed period of 4 years, Section 149(1)(b) prior to amendment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 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 revenue to reopen assessments under Section 147 of the I.T.Act 1961, beyond the prescribed period of limitation on the ground that there were income had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment came up for consideration before the Apex Court XXXXXXXXXXXXXX 16. As held in the aforesaid decisions, the respondents Revenue are entitled to invoke the proviso to Section 147 of the I.T.Act and reopen the proceedings even after the prescribed period of four years only if the petitioner assessee had failed to fully and truly disclose all material facts for the purpose of assessment; failure on the part of the assessee to fully and truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, B, C and D while short term investments are shown as A and B. (ii) At page No.1 of the schedules, among long term investments, quoted shares are shown at Sl.No.A, in which, shares of Wipro Ltd., having a face value of Rs.2/- each are shown as 49, 07,14,120 in number. (iii) At Page No.2 of the aforesaid schedules annexed to the returns, the details of the Wipro shares received by the petitioner as gift have been explained including how the aforesaid number of 49,07,14,120 had been arrived at by the petitioner. (iv) At Page No.1 referred to supra, the total number of shares for the previous year i.e., 19,51,87,120 has also been stated. So also, at page No.2, the market value of all the quoted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 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 amount donated. In the said notice, though there is a separate column which enables the respondents to seek details with regard to computation of income, audit report along with financial statements / schedules, additional information in this regard with regard to non- furnishing of the market value of the shares was not sought for by the respondents in the aforesaid notice dated 09.06.2015 (Annexure-G). This circumstance is also a pointer to the fact that the details furnished by the petitioner in its returns were sufficient and that the petitioner had fully and truly disclosed all material facts. 23. In response to the aforesaid notice dated 09.06.2015, petitioner submitted a reply dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 all material facts. Viewed from this angle also, the impugned notice and the reasons assigned by the respondents deserve to be quashed. 25. As can be seen from the aforesaid decisions, it is the settled legal position that an assessee is under a duty or obligation to disclose only the basic and primary facts relating to his assessment and thereafter, it is for the Assessing officer to make further enquires and draw inferences and if he does not do so for any reason , then the Revenue cannot contend that there was any failure or omission on the part of the assessee. In the instant case, after being in possession of all the relevant facts relating to the gifts of shares received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged 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, which failure allegedly is the proximate cause of the escapement of income has not been fulfilled at all in the present case and the impugned notice deserves to be quashed. 27. Insofar as the decisions relied upon by the learned counsel for the respondents are concerned, the same are clearly distinguishable on facts and are not adverted to for the purpose of the present case; suffice it to state that the impugned notice and order which proceed on the premise that the face value / book value of the shares has not been stated is clearly factually incorrect; so also, in the peculiar facts of the instant case and the details / particulars of the shares and their value already availa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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