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2019 (8) TMI 410

..... THAT:- On a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to believe as a whole the ‘live link’ between the material in the form of the investigation report and the formation of belief that income that has escaped assessment is prima facie discernable. Where a similar challenge is made to the reopening of assessments by issuing notice u/s 148 of the Act, where the Court invariably directs as an interim measure that the re-assessment proceedings may go on but no final order should be passed during the pendency of the petition, in the present case the Court ordered a total stay of further proceedings pursuant to the impugned notices dated 31st March 2015. This in effect meant that the re-assessment proceedings before the AO did not progress. With the Court disinclined to interfere at this stage for the reasons explained above, it would be open to the two Petitioners to advance all the arguments made by them in these petitions, except the point that the reopening constitutes a change .....

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..... e distinguishing feature in the two sets of petitions. While the assessments in the case of Mr. Chetan Sabharwal for the two AYs in question in the first instance by the Assessing Officer (AO) were scrutiny assessments under Section 143 (3) of the Act, as far as Mr. Nitin Sabharwal is concerned, there was no scrutiny assessment for the two AYs. Intimations accepting his returns were sent to him under Section 143 (1) of the Act. Background facts 5. The background facts are that on 19th October 2007, the two Petitioners i.e. Mr. Chetan Sabharwal and Mr. Nitin Sabharwal, and two other shareholders - Mr. Kabul Chawla and his wife Mrs. Anjali Chawla - entered into a Share Purchase Agreement (SPA) with GYS Real Estate Private Limited (GYS) for sale of 30 lakhs equity shares of M/s. Pawan Impex Private Limited (Pawan Impex) for a consideration of ₹ 97.50 crores. 7.5 lakhs equity shares of Pawan Impex were held by Mr. Chetan Sabharwal and Mr. Nitin Sabharwal. Pursuant thereto each of them received an advance of ₹ 27.50 crores (1/4th Shares of the total of ₹ 110 crores remitted to all share holders) against the sale of equity shares of Pawan Impex after the pledging of 30% .....

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..... request by GYS and transferred to Religare Securities limited, depository under NSDL, and an associate company of the Religare group. Each of the Petitioners deposited ₹ 28 crores and ₹ 3,91,50,000/- on 25th and 26th September, 2009 in the capital gain savings bank account in accordance with Section 54F (iv) of the Act. 10. Under a separate SPA the equity shares of M/s.SVIIT Software Pvt. Ltd. (SVIIT Software) held by the two Petitioners and two others - Mr. Kabul Chawla and Mrs. Anjali Chawla -were agreed to be sold to GYS for an aggregate consideration of ₹ 60 crores. As far as the two Petitioners were concerned, each of them held 2.5 lakhs equity share of SVIIT Software. They were paid an advance of ₹ 22.50 crores after pledging of 40% of the shares of SVIIT Software. Each of them received ₹ 5,62,50,000/- for the respective 2.5 lakhs equity shares. Thereafter GYS also made a further payment of ₹ 18.00 crores in terms of Article 3.2 (b) (i) of the SPA. Each of the Petitioners accordingly received ₹ 10,12,50,000/- (5,62,50,000 + 4,50,00,000) being 1/4th of ₹ 18.00 crores. 11. As far as the SPA concerning the shares of SVIIT Software .....

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..... re was issued by the Assessing Officer (AO) to Mr. Chetan Sabharwal under Section 142 (1) of the Act where 56 queries were raised, inter alia, requiring him to explain the nature of the transaction with GYS and requiring him to file a Memorandum of Association (MOA) and ROC returns for the last five years of the said GYS. On 5th October, 2010 Mr. Chetan Sabharwal replied to these queries. 16. Following this on 30th December, 2010, the AO issued summons under Section 131 of the Act to Pawan Impex, GYS and SVIIT Software. These parties filed their respective replies on 16th December, 2010. More documents were placed on record by Mr. Chetan Sabharwal on 20th December, 2010. On 22nd December 2010, the AO framed an assessment under Section 143(3) of the Act qua the return filed by Mr. Chetan Sabharwal. The assessment order was in one page and the material portion is in para 3 which reads as under: After examination of the submissions of the Assessee and discussion with the authorized representative of the Assessee. Assessed at loss of ₹ 90,37,369/- under Section143(3) of the Act. Thus, the return as filed was accepted without change. 17. As far as AY 2009-10 is concerned Mr. Cheta .....

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..... 77; 3,87,14,131/- after claiming the set off in the sum of ₹ 31,04,70,241/-. In this case too, intimation under Section 143(1) was issued by the AO. Notices under Section 147/148 of the Act 21. On 31st March, 2015 notice under Section 148 of the Act was issued by the AO to each of the Petitioners separately for the two AY s stating that he had reason to believe that income chargeable to tax for the two AY s had escaped assessment within the meaning of Section 147 of the Act, therefore he proposed to assess/reassess the income. It must be noticed here that this notice was issued after four years after the completion of the respective financial years in which the assessments were complete. This fact is relevant as far as Mr. Chetan Sabharwal is concerned since in his case the assessments for the two AYs were finalized upon scrutiny under Section 143(3) of the Act. However, as already noticed, in the case of Mr. Nitin Sabharwal ,since only intimations were sent under Section 143(1) in respect of the returns filed by him for the two AYs, this aspect is not relevant. 22. Each of the Petitioners applied for inspection of the file which was carried out on 16th April, 2015. Each of t .....

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..... Mr. Chetan Sabharwal and Mr. Nitin Sabharwal have also purchased 1/4th share each in the Property No. 7, Sikandara Road, New Delhi vide sale deed dated 21.04.2010 for ₹ 9,33,69,928/- each. Mr. Nitin Sabharwal and Mr. Chetan Sabharwal along with the other shareholders (Mr. Kabul Chawla and Smt Anjali Chawla) of Pawan Impex Pvt Ltd have entered into share purchase agreement dated 19th day of October, 2007 with GYS Real Estate Pvt. Ltd which determined the sale of 30,00,000 fully paid up equity shares of Pawan Impex Pvt Ltd for a total consideration of ₹ 1,95,00,000/- to GYS Real Estate Pvt. Ltd. Further, vide share purchase agreement dated 19-10-2007 entered between the equity shareholders of SVIIIT Software Pvt. Ltd. and GYS Real Estate Pvt. Ltd. 10,00,000 equity shares were to be sold. After enquiries by the Investigation Unit, NOIDA about the value of shares of M/s Pawan Impex Pvt. Ltd. and SVIIT Software Pvt. Ltd. It has been reported that: "It can be prima facie concluded that the value of shares are overvalued to the extent of ₹ 109,80,000/- (in the case of M/s Pawan Impex Pvt. Ltd.) and of ₹ 40,40,28,0001- (in the case of M/s SVIIT Software Pvt. L .....

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..... ing, Lucknow and, therefore, there was fresh evidence and material, which became the basis for reopening of the assessment. For the AY 2008-2009, income from capital gains from sales of shares was not declared. Income from capital gains arose in the said year and not in the assessment year 2009-2010. We have merely recorded the submissions made and not commented on merits. Learned counsel would be ready for arguments on the issues raised. Learned counsel for the respondent would produce original records on the next date of hearing. Relist on 11.4.2018. 27. At a subsequent hearing on 11th April, 2018, the Court was informed that while the report received from the Investigation Wing, Lucknow was available but the records relating to first assessment under Section 143(3) of the Act were not. The Court then directed that the said record should be available at the time of hearing. 28. On 25th July, 2019, the files of the Department including the report of the Investigation Wing, Lucknow and the assessment records were made available and were perused by the Court. Submissions on behalf of the Petitioners 29. Mr. Ajay Vohra, learned Senior Counsel appearing for the Petitioners submitted t .....

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..... ] 366 ITR 115, Tractebel Industry Engg. v. Asst. Director of Income Tax [2011] 198 Taxman 408 (Del) and CIT v. Atul Kumar Swami [2014] 362 ITR 693(Del). 33. Adverting to the merits of the cases, Mr. Vohra submitted that since the sale of shares is completed only during the Financial Year 2008-09 in terms of the SPAs relevant to AY 2009-10. LTCG could be declared only in the return for AY 2009-10. Accordingly, he submitted that there was no question of any failure by Mr. Chetan Sabharwal to disclose any material facts. He questioned the rationale of the AO forming an opinion that income had escaped assessment, when in fact, even assuming the so called over valuation of the shares purchased, the resultant income was in any event disclosed and tax paid thereon. He pointed out that the factum of sale of shares of Pawan Impex and SVIIT Software was not doubted by the AO even in the impugned orders. 34. Mr. Vohra further placed before the Court documents relating to the reopening of assessment in the case of GYS. GYS had also filed three writ petitions in which, notices were issued by this Court on 2nd March, 2016 and in the interim, it was directed that the orders may be passed in the a .....

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..... sain maintained that at the present stage the Court only had to be satisfied prima-facie that there was sufficient material for reopening of the assessment. Referring to the assessment orders passed by the AO under Section 143 (3) of the Act in the cases of Mr. Chetan Sabharwal, Mr. Hossain pointed out that there is absolutely no discussion in the orders themselves on the aspects now highlighted in the reasons for reopening of the assessments. He placed reliance on the decision in Income Tax Officer Ward No. 16(2) v. Tecspan India Pvt. Ltd. (2016) 6 SCC 685. 38. As far as the scope of the present proceedings are concerned, he placed reliance on the decision in M/s. Phool Chand Bajrangi Lal v. ITO (1993) 4 SCC 77 and submitted that the fresh information in the form of the investigation report clearly demonstrated that the initial disclosure regarding the price of shares was not true and complete and the said report therefore formed a real basis for re-assessment. Reliance was also placed on the decision in Income Tax Officer, Calcutta v. Selected Dalurband Coal Co. Pvt. Ltd. (1997) 10 SCC 68 in support of the contention that the report of the investigation could occasion a reasonabl .....

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..... de has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address, itself to a given aspect sought to be examined in the reassessment proceedings. 42. Consequently, even in the cases of Mr. Chetan Sabharwal in view of the fact that the original assessment orders are totally silent on this aspect of the matter, it cannot be said that the reason to believe constitutes a change of opinion . 43. At this juncture it must be stated that on a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to be .....

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..... where the Court invariably directs as an interim measure that the re-assessment proceedings may go on but no final order should be passed during the pendency of the petition, in the present case the Court ordered a total stay of further proceedings pursuant to the impugned notices dated 31st March 2015. This in effect meant that the re-assessment proceedings before the AO did not progress. 46. With the Court disinclined to interfere at this stage for the reasons explained above, it would be open to the two Petitioners to advance all the arguments made by them in these petitions, except the point that the reopening constitutes a change of opinion, before the AO. This would include the point urged by Mr. Chetan Sabharwal that the reopening is bad in law because the reasons do not expressly state that there was a failure on his part to disclose fully and truly all material facts in relation to his assessment. 47. Consequently, this Court would not like to further dwell on the other points urged before this Court on behalf of the Petitioners or express a view one way or the other on them except to hold that at this stage the Court, prima facie, finds no merit in the contention that the .....

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