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2023 (12) TMI 283 - MADRAS HIGH COURTReopening of assessment - Exemption u/s 47 - conversion of the company into a Limited Liability Partnership Firm - whether Notice under Section 148A(b) can be issued for the purpose of re-assessment under Section 147? - HED THAT:- There is no dispute that the notice that were issued were under the old regime. However, the Hon'ble Supreme Court in Union of India and others versus Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] as a result of which all notices issued under the old regime after 01.04.2021 were to be treated as a notice issued under section 148A of the Income Tax Act, 1961. Thus, the Notice Issued under Section 148 of the Income Tax Act, 1961 to the petitioner on 30.06.2021 was to be decided in accordance with the newly inserted section 148A of the Income Tax Act, 1961. Thus, the Assessment was to be completed in accordance with the aforesaid provision. Prior to issuance of Notice Issued under Section 148 of the Income Tax Act, 1961 to the petitioner on 30.06.2021, the Department had audited the accounts of the petitioner for the assessment year 2016- 17 after the Assessment was completed under Section 143(3) of the Income Tax Act, 1961. The audit memo addressed to the Asst Commissioner of Income Tax dated 19.6.2019 indicates that the petitioner a Limited Liability Partnership Firm was earlier Private Limited Company. The 2 partners of the petitioner Firm were itsdirectors. The company was converted into petitioner firm only on 07.08.2015. As on 31.03.2015, one of the partner namely Ms Nina B. Kothari held 25,07,688 preference shares of Rs. 10/- each in the said company prior to its conversion into a Limited Liability Partnership Firm. After, 31.03.2015, but before the conversion of the company into a Limited Liability Partnership Firm on 07.08.2015, the aforesaid preference shares were transferred to the other partner namely BHK Foundation (Discretionary Trust). Ms Nina B. Kothari thus merely held one equity share in the said company, prior to conversion on 07.08.2015. The Trust, thus had 1,99,999 equity shares of Rs 10 each and 25,07,688 preference shares of Rs. 10 each in the company. This aspect was not brought to the notice of the Income Tax Department prior to scrutiny assessment that came to be completed/passed on 27.11.2018. Prime facie, it appears that income had escaped assessment. The exemption that was claimed under section 47 (xiv) of the Income Tax Act, 1961 is available subject to the rider specified therein. The sales turnover or gross receipts from the business in the 3 preceding year prior to the previous year in which the conversion took place should not have been more than Rs. 60,00,000/-. The petitioner firm has not disclosed all the above information to the assessing officer prior to the assessment order that was passed on 27.11.2018 under Section 143 (3) of the Income Tax Act, 1961. Therefore, the respondents were prima facie justified in re-opening the assessment under Section 148 of the Income Tax Act, 1961 for the Assessment year 2016-17. The limitation stood which was to expire stood protected in view of the orders passed by the Hon'ble Supreme Court and in view of the Ordinance and the Act in the wake of out break of Covid-19 Pandemic. However, in the light of the decision of the Hon’ble Supreme Court in Union of India versus Ashish Agarwal, notices issued after 01.04.2021, were to be treated as notice issued under section 148A of the Income Tax Act, 1961. Therefore, the challenge to the proceedings initiated in the light of the decision of the Hon’ble Supreme Court cannot be countenanced. Whether the petitioner is indeed entitled to succeed eventually in the re-assessment proceedings or not is to be decided by the 1st respondent. Intervention of this Court against the proceedings initiated cannot be countenanced as prime facie there are indications that income had escaped assessment. The petitioner has also participated in the proceedings and has filed this writ petition only on 16.3.20 23. Therefore, the challenge to the impugned proceedings and show cause notices cannot be countenanced at this stage. Consequently, this writ petition is liable to be dismissed.
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