GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (3) TMI 31 - DELHI HIGH COURT

2016 (3) TMI 31 - DELHI HIGH COURT - [2016] 382 ITR 443 - Validity of reopening of assessment - whether notices under Section 148 could be issued to the Assessee after the said company stood dissolved in terms of a scheme of amalgamation of the Assessee with the Petitioner approved under Section 391 and 394 of the Companies Act, 1956? - Held that:- It is well settled that the in a case of amalgamation, the amalgamating company would stand dissolved from the date on which the amalgamation/transfe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee’s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe – not reason to suspect - is the precondition for exerc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eafter the Petitioner ), inter alia, impugning the notices issued by the Assessing Officer (hereafter AO ) under Section 148 of the Income Tax Act, 1961 (hereafter the Act ) for re-opening the assessments to re-assess M/s Rustagi Engineering Udyog Private Limited (hereafter the Assessee ) in respect of income for the Assessment Years ( AYs ) 1989-90 to 1993-94. 2. W.P. (C) 1289/1999, W.P.(C) 1290/1999, W.P. (C) 1293/1999 and W.P. (C) 1291/1999 have been filed impugning separate notices dated 26t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

th the Petitioner approved under Section 391 and 394 of the Companies Act, 1956. The Petitioner has further challenged the re-opening of assessments on the ground that the AO had no reason to believe that any part of the income of the Assessee has escaped assessment. It is also contended that the issuance of the impugned notices have not been approved by the competent authority. 4. Briefly, the relevant facts are that the Assessee was engaged in the business of manufacturing of sheet metal compo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

used by the said entities. The lease rental received from such entities in terms of the agreement entered into with them, were duly declared as business income by the Assessee during the relevant period. 5. The returns filed by the Assessee for AY 1990-91 and 1991-92 were subjected to scrutiny and thereafter assessment orders under Section 143 (3) were passed. The separate assessment orders for AY 1990-91 and AY 1991-92 passed on 30th November, 1992 duly indicate that the AO had examined the tr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t April 1995. 7. Thereafter, the Assessee received a notice under Section 142(1) of the Act calling upon the Assessee to file its return of income for the AY 1996-97. The Assessee responded to the said notice by a letter dated 3rd October, 1997 and informed the AO that it was not required to file a return as the Assessee stood dissolved with effect from 1st April, 1995 in terms of the scheme sanctioned by this Court. Thereafter, the Assessee received four separate notices dated 26th December, 19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee, which at the material time, stood dissolved. The Petitioner, being the amalgamated company, has preferred the present batch of Writ Petitions challenging the impugned notices issued for re-assessing the income of the Assessee. 9. During the course of the present proceedings, the Petitioner was supplied with a copy of a letter dated 8th October, 1997 sent by the Office of the Assistant Commissioner of Income Tax to the Deputy Commissioner of Income Tax Range-II for seeking an approval for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

verify the genuineness of the transactions, on request, survey was conducted by the Inv. wing (Pune and Meerut) at the premises of the lessee (Thane) and supplier (Ghaziabad). The survey revealed that the transaction was actually sham transaction. In fact no MS Moulds were purchased. The assessee company had created various papers to give air of genuineness to a factually sham transaction. Accordingly the wrong depreciation claimed to the extent of ₹ 60,62,500/- was withdrawn and penalty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

00) 100% 68,04,665.8 1991-92 1. Plant & Machinery (Below ₹ 5000) 100% 24,35,144.62 1990-91 1. Plant & Machinery 100% 19,93,819.00 1989-90 1. Plant & Machinery (Below ₹ 5000) 100% 6,99,999.36 1988-89 Plant & Machinery (Below ₹ 5000) 100% 1,38,854 From the above it is very clear that the assessee company has adopted systematically a method to evade tax by creating paper transactions to claim substantial depreciation (100%). Due to this the assessment for the A.Y. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ds ₹ 50,000/- your sanction u/s 151 of the I.T. Act 1961 is required for re-opening the cases. 10. The reasons for re-opening the assessments for AY 1989-90 and 1993-94 are concededly similar to the reasons as reflected in the above quoted letter. 11. These petitions were admitted on 9th February, 2000 and by an order dated 10th March, 2000, further proceedings pursuant to the impugned notices issued under Section 148 of the Act were stayed. 12. Mr S. Krishnan, learned advocate appearing f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted that the AO had sought to re-open the assessment on the basis of the assessment order dated 27th March, 1997 passed under Section 143(3) of the Act in respect of AY 1994-95. In that year, the AO had disallowed the Assessee s claim for depreciation to the extent of ₹ 60,62,500/- which was claimed in respect of MS Moulds that were leased by the Assessee. The AO held that the said transaction was a sham transaction and concluded that in fact, MS Moulds were purchased by the Assessee. Mr K .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Lastly, Mr Krishnan contended that the impugned notices were issued without any approval from the competent authority. He stated that the Respondents had been called upon on several occasions to produce the approval but had failed to do so. 15. Mr Ashok Manchanda, learned Senior Standing Counsel countered the arguments advanced by Mr Krishnan and contended that a survey team had found that the transaction relating to purchase of MS moulds costing ₹ 60,62,500/- in the financial year 1993- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s not required to finally determine whether the income of an Assessee had escaped assessment but was only required to form a prima facie opinion. 16. We have heard the learned counsel for the parties. 17. It is well settled that the in a case of amalgamation, the amalgamating company would stand dissolved from the date on which the amalgamation/transfer takes effect. 18. In Marshall Sons & Co. (India) Ltd. v. Income-tax Officer [1997] 223 ITR 809 (SC), the Supreme Court held that every schem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed by the Income Tax Officer to the amalgamating company for the period after the appointed date of amalgamation. After examining the provisions of the Companies Act, 1956, the Supreme Court held that the notices issued by the Income Tax Officer were not warranted in law. 19. In a recent decision dated 3rd August, 2015 in ITA No. 475/2011 (SPICE Infotainment Ltd. v. Commissioner of Income Tax), this Court set aside the order passed by the Tribunal upholding the action of the assessing officer in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ad ceased to exist. 20. In view of the aforesaid, the contention that the impugned notices issued under Section 148 of the Act were invalid as having been issued to an Assessee that had ceased to exist, must be accepted. The impugned notices are, therefore, liable to be set aside on this ground alone. 21. Having stated the above, we must also add that in our view, the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icer, Calcutta & Ors. vs. Lakhmani Mewal Das: [1976] 103 ITR 437 (SC) the Supreme Court held that there must be a live link or a close nexus between the material available with the AO and his reason to believe that income of an assessee had escaped assessment. The court further observed as under: The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version