TMI Blog2018 (2) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... T OF INDIA] even post the amendment of section 147 with effect from 01.04.1989 would bar the Assessing Officer from carrying out such fresh scrutiny. - Decided in favour of assessee - Special Civil Application No. 22517 of 2017 - - - Dated:- 14-2-2018 - MR. AKIL KURESHI AND MR. B. N. KARIA, JJ. For The Petitioner : Mr B S Soparkar, Advocate For The Respondent : Mr.Nikunt K. Raval, Advocate For Mrs Kalpanak Raval, Advocate ORAL ORDER ( PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioner has challenged a notice of reopening dated 31.03.2017 issued by the respondentAssessing Officer for the assessment year 2010-11. 2. Brief facts are as under. 3. Petitioner is a company registered under the Companies Act. For the assessment year 2010-11, the petitioner had filed return of income on 22.09.2010, which was later on revised on 29.03.2012. Such return was taken in scrutiny by the Assessing Officer who passed order of assessment under section 143(3) of the the Income Tax Act, 1961 ('the Act' for short) on 29.01.2013. To reopen such assessment, he issued the impugned notice. In order to do so, he had recorded following reasons: Informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders of all or any part of the assets of the company. Therefore the ld CIT(A) held that the transfer of shares by M/s Demuric Holdings Pvt. Ltd. to M/s.Nerka Chemicals Pvt. Ltd. is covered within the purview of Section 2(22)(a) of the Act as it involves distribution by M/s Demuric Holdings Pvt. Ltd. of accumulated profits and hence, as per ld. CIT(A) M/s Demuric Holdings Pvt. Ltd. will be liable to pay Dividend Distribution Tax U/s 1150 of the I.T. Act in respect of the value of dividend distributed to M/s.Nerka Chemicals Pvt. Ltd. U/s 2(22)(a) of the I.T. Act (Pl. refer Page 37 of the CIT(A)'s Order). It is pertinent to note that similarly five other persons (4 individuals and 1 firm) had also transferred shares to M/s.Nerka Chemicals Pvt. Ltd. in the F.Y. 200910, relevant to the A.Y. 2010-11, without any consideration and the A.O. had made addition on account of Capital Gain in the hands of the transferors. On perusal of case records in the case of M/s Demuric Holdings Pvt. Ltd., it is seen that the assessment order u/s 143(3) of the I. T. Act was passed on 29/01/2013, assessing the total income at Rs.() 89,94,34,030/, by without making any addition to the returned inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opposed the petition contending that the Assessing Officer had recorded proper reasons. The transferee company was a shareholder of the petitioner company. Question of payment of dividend would therefore be relevant. In any case, such issues cannot be examined by this Court at this stage. 10. For the following reasons, we are not inclined to allow the assessment to proceed on the basis of the impugned notice. The reasons recorded by the Assessing Officer are somewhat elaborate. The gist of his contention is that during the year under consideration, the assessee transferred 6.63 crore (rounded off) shares to one M/s.Nerka Chemicals Pvt. Ltd. This was done without consideration. The market value of the shares on the date of transfer was ₹ 1008.07 crores (rounded off). According to the Assessing Officer, the assessee was therefore liable to pay capital gain tax on such transfer. Additionally, this transfer amounted to payment of dividend as provided under section 2(22a) of the Act. The petitioner was therefore liable to pay dividend distribution tax on such transfer. 11. On the first aspect of the Assessing Officer's assertion that the transfer of shares would give ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the nature of shares, debentures or warrants allotted by a company to its employees under Employees' Stock Option Plan or Scheme. Admittedly, this is not such a case. This proviso is in the nature of exclusion to main provisions of subclause (iii) of section 47 of the Act. Under the circumstances, the case on hand would be governed by the main body of subclause (iii) of section 47 of the Act and consequently, the provision of section 45 of the Act pertaining to capital gain would not apply. 12. An attempt was made by the Assessing Officer to apply further to proviso to section 48 of the Act. Section 48 of the Act pertains to mode of computation. It essentially provides that the income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely, expenditure incurred wholly and exclusively in connection with such transfer, and the cost of acquisition of the asset and the cost of any improvement. Further proviso to section 48 of the Act which the respondents want to press into service reads as under: Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the assessee to M/s.Nerka Chemicals Pvt. Ltd. It was pointed out that M/s.Nerka Chemicals Pvt. Ltd. was a subsidiary of the assessee company. It was also pointed out that the transfer of shares was without any consideration, the valuation of which came to ₹ 142.15 crores. It was canvassed that this transfer would not invite capital gain. Reliance was placed on the provisions contained in sections 45 and 47 of the Act. Transfer agreement dated 19.09.2009, under which, the said shares were transferred was also produced. 14. It can thus be seen that this entire transaction of transfer of shares by the petitioner to M/s.Nerka Chemicals Pvt. Ltd. came up for scrutiny by the Assessing Officer during the original assessment proceedings. Of course, the assessee's contention revolved around the issue whether such transaction would invite capital gain tax in the hands of the assessee or not. Nevertheless, this transaction was scrutinized and eventually when the order of original assessment was passed, no additions were made. If the Assessing Officer was of the opinion that even though capital gain cannot be charged, the transfer being in the nature of payment of divide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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