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TMI Blog2020 (5) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has arisen from an assessment order dated 31.12.2008 passed by learned Assessing Officer (hereinafter called "the AO") u/s 143(3) read with Section 147 of the 1961 Act.. The appeal in ITA no. 307/Chny/2010 is filed by assessee against an revisionary order dated 22.01.2010 passed by learned Commissioner of Income-tax, Chennai-I, Chennai u/s 263 of the Income-tax Act,1961 for ay: 2001-02 holding that re-assessment framed by learned Assessing Officer u/s 143(3) read with Section 147 of the 1961 Act, vide reassessment order dated 31.12.2008 is erroneous so far as prejudicial to the interest of Revenue for reasons stated therein in the revisionary order. The appeal in ITA no. 1016/chny/2012 is filed by assessee for ay: 2001-02 which has arisen from appellate order dated 27.03.2012 passed by learned CIT(A), which appeal has arisen before learned CIT(A) from consequential assessment order dated 08.11.2010 passed by AO u/s 143(3) read with Section 263 of the 1961 Act. 2. The grounds of appeal raised by assessee as well Revenue in memo of aforesaid appeals filed with Income-Tax Appellate Tribunal, Chennai (hereinafter called "the Tribunal") with respect to all these four appeals for ay: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout assigning proper reasons and justification. 10. The CIT (Appeals) failed to appreciate that the scope of section 48 of the Act was not considered while erroneously sustaining the exclusion of the garnishee payment to Indian Bank in the computation of Long Term Capital Gains and further ought to have appreciated that the evidence placed on record clearly demonstrated the fact of encumbrance as well as the fact of such payments directly made to M/s Indian Bank. 11. The CIT (Appeals) failed to appreciate that the theory of diversion by overriding title even though brought to his notice as well as in the assessment proceedings, non consideration of the said legal theory to the facts of the case would vitiate their action in re-computing Long Term Capital Gains. 12. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law. 13. The CIT (Appeals) failed to appreciate that the recomputation of Long Term Capital Gains in any event was wrong, incorrect, unjustified, erroneous and not sustainable both on facts and in law. 14. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uffic chem Pvt. Ltd vs CIT (332 ITR 602) cannot be applied to the facts of the case since the issue is not whether to treat the non compete fee as capital or revenue receipt. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored." c) Grounds in ITA No.307/Chny/2010 for ay: 2001-02(Assessee's appea) "1. The order of The Commissioner of Income Tax, Chennai-I, Chennai - 600 034 dated 22.1.2010 in C.No.218(36)/CIT-l/263/2009-10 for the above assessment year is contrary to law, facts, and in the circumstances of the case. 2. The CIT erred in passing the order u/s 263 of the Act in directing the Assessing Officer to re-examine the computation of Long Term Capital Gains as well as to reexamine the eligibility of the deduction u/s 54F of the Act without assigning proper reasons and justification. 3. The CIT failed to appreciate that the jurisdiction assumed u/s 263 of the Act on the facts of the case was wrong, incorrect, unjustified, erroneous and not sustainable both on facts and in law. 4. The CIT failed to appreciate that hence the order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the above fact and in the light of the interim order(s) passed by the Hon'ble High Court in W.P.No.49683/2006, the order of revision under consideration was bad in law. 14. The CIT failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law, 15. The Appellant craves leave to file additional grounds/arguments at the time of hearing." d) Grounds in ITA No.1016/Chny/2012 for ay: 2001-02(Assessee's Appeal) "1. The order of The Commissioner of Income Tax (Appeals) III, Chennai - 600 034 dated 27.03.2012 in I.T.A.No.283/10-11/A.III for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in sustaining the order giving effect to the revision order passed by the CIT for re-computing the Long Term Capital Gains arising or accruing as a result of transfer of shares without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the determination of sale consideration at Rs. 15 Crores as against the determination of sale consideration as Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is engaged in the business of Modelling, Cricket Commentary, Journalism and Consulting & BPCL Dealership. The assessee filed his return of income with Revenue for impugned ay: 2001-02 on 28.03.2002, declaring an income of Rs. 20,42,510/-. The said return of income was processed by Revenue u/s.143(1) of the 1961 Act and admittedly no scrutiny assessment u/s 143(3) of the 1961 Act was originally framed by Revenue. The AO observed from enclosures of the return of income filed by assessee with Revenue that assessee has sold shares held in his name, minor children and wife, during the impugned year under consideration. It is stated that the amounts transacted as Restricted covenants arises on the course of sale of shares and hence the same cannot be claimed to be independent of the transaction to be allowed as an exempted income under the provisions of the 1961 Act or capital receipt not chargeable to tax. The AO observed that the assessee has not offered Rs. 4.25 Crs. from the sale proceeds of the shares claimed it to be payment towards overriding garnishee attachment on the shares by Indian Bank. The AO observed that it is not an encumbrance attached to the shares. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees Two Crores and fifty Lakhs only). Agreement 3. The assessee entered into an agreement with M/s. ABN FINANCIAL SERVICES PRIVATE LIMITED, No. 13, Rani Annadurai Street, Raja Annamalaipuram, Chennai-600 028. The purchaser propose to purchase 1/3rd of issued, subscribed and paid up shares in KRIS SRIKKANTH SPORTS ENTERTAINMENT PRIVATE LIMITED, (Formerly known as A.A.International Private Limited) from the various shareholders in their name. The company was promoted by the assessee who had necessary expertise and contacts relating to the said business and the business of the company was wholly promoted and developed by the assessee. As per the agreement, the assessee shall not carry on either by himself or in association with any other person or persons or associate or involve directly or indirectly with any other company, firm or person in a business similar to that carried on by M/s. KRIS SRIKKANTH SPORTS ENTERTAINMENT PRIVATE LIMITED, for a period of 6 years. In consideration of the above agreement, the purchaser has paid a sum of Rs. 2.5 crore (Rupees Two Crores and fifty Lakhs only). Agreement 4. The agreement was entered into Minor. Anirudaa Srikkanth, son of Krishna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000000 01.03.2001 UTI Bank 3500000 16.03.2001 UTI Bank 1500000 22.03.2001 UTI Bank Total up to year ending 31.03.2001 (A) 95000000 11.04.2001 UTI Bank 2500000 16.04.2001 UTI Bank 5000000 17.04.2001 UTI Bank 5000000 20.04.2001 UTI Bank 2500000 27.04.2001 UTI Bank 2500000 30.04.2001 UTI Bank 2500000 11.05.2001 UTI Bank 5000000 TOTAL UP TO YEAR ENDING 31.03.2001 (B) 25000000 TOTAL RECEIPTS FOR THE TRANSFERE OF SHARE (A) + (B) 120000000 The AO observed that the total sale consideration is shown at Rs. 15 Crs. and out of which the assessee has claimed exemption of Rs. 7.5 Crs under the restrictive covenant as the assessee was not allowed to compete with the company to which the shares have been sold. Further, the AO observed that the assessee has reduced a sum of Rs. 4.25 Crs. wherein, the assessee had claimed that he has not received the said sum owing to overriding garnishee attachment on the shares by the Indian Bank. The AO observed that the assessee has in fact received Rs. 12 Crs. on various dates and the said sum of Rs. 4.25 crores were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upheld the re-opening of the assessment as in the opinion of the AO no scrutiny assessment was framed by Revenue against assessee u/s.143(3) of the Act and only intimation was issued u/s.143(1)(a) of the Act. It was observed by AO that from 01.04.1989, the provisions of Sec.147 has undergone change and intimation u/s.143(1) is not an assessment. The AO relied upon decision of Hon'ble Supreme Court in the case of Delhi Development Authority. It was observed by the AO that no assessment was originally framed by AO u/s 143(3) of the 1961 Act and hence no opinion was formed by AO on the return of income originally filed by assessee, while processing return of income u/s.143(1)(a), there cannot be any change of opinion when provisions of Section 147 are invoked. The AO rejected contentions of the assessee that once notice u/s 143(2) is not issued and time limit to issue notice u/s 143(2) has expired, then no notice u/s 148 could have been issued. The AO relied upon the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Limited reported in [2007] 291 ITR 500 (SC). The AO observed that w.e.f. 01.04.1989, the scheme of re-opening of the concluded assessment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it was not clear to the AO as to activities undertaken by the said company. The AO also observed that there was no condition as to penalty to be levied in case terms and conditions of the agreement are violated. Thus, as per AO these agreements are sham agreements which are not enforceable at law and entire consideration received by assessee and his minor child were held to be chargeable to tax as capital gains on sale of shares which as per AO was camaflouged as non-compete fee. Thus, the AO rejected the contentions of the assessee and income of the assessee was assessed as capital gains. The second issue was with respect to receipt of Rs. 4.25 crs. which was claimed by assessee to have been paid to the Indian Bank for clearing bank dues. The AO observed from the details furnished by assessee that the amount has not gone directly to the Indian bank and amount was received by assessee and thereafter it was utilized by assessee for paying to the banker to discharge his liability and hence the same cannot be called as diversion of income by overriding title. The AO observed that even if amount is paid directly to the banker but still said consideration is to be assessed to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was passed. Hence, the fact of the present case is different from the case of Kelvinator of India Ltd (supra) where a regular order of assessment had been passed u/s.143(3) on 17.11.1989 before issue of notice u/s.148 on 20.04.1990. Intimation u/s.143(1) is not an assessment. In similar circumstances, the Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd 291 ITR 500(SC) held that proceedings initiated u/s.147 are valid. As intimation u/s.143(1)(a) is not "assessment", there is no question of treating reassessment in such a case as based on change of opinion. Since no decision had been taken at the first instance, there is no question of reviewing it based on change of opinion. Further, in the case of Sun Engineering Works Pvt. Ltd. 198 ITR 297(SC), the Hon'ble Supreme Court has held that re-assessment proceedings are for the benefit of revenue and are aimed at gathering the escaped income. The Hon'ble Madras High Court in the case of Madras Gymkhana Club v. DCIT, 328 ITR 348 (Mad) has held the reopening to be valid under similar circumstances. In view of the above factual position and authoritative precedents, I am of the considered o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the party of the Second Part that he shall not for a period of six years from the date hereof carry on any business similar to that carried on by M/s.Kris Srikkanth Sports Entertainment P Ltd. either by himself or in association with any other person or persons nor shall he involved, or associate himself as Proprietor, Partner, Director, Consultant or Advisor to any Company, Firm or other person carrying on or involved in a similar business. That in consideration of the above said covenant by the party of the first part, the party of the second part shall pay to the party of the first part a sum of Rs. 2,50,00,000/- (Rupees Two Crorss and fifty lakhs only) The restrictive covenant of the party of the first part as herein contained shall ensure for a period of 6 years from the date hereof and shall cease on the expiry of the said period..." 6.2.1 It is clear from the reading of the above clauses that the compensation for restrictive non-compete covenant is a capital receipt as the income earning apparatus has been taken away from the appellant for a period of 6 years. It is to compensate the loss of income from sports media activities for 6 years that the appellant had receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the submissions of the Id.AR. I have also gone through the decision relied on by the ld.AR. I have also carefully perused the affidavit filed by Indian Bank, order of DRT in OA No.1642/1998 and 1399/1998 dated 23.2.2001 and other details submitted by the appellant. From the facts on record, it is clear that the appellant was a guarantor in respect of the loan granted by Indian Bank to Aditya Leather Exports P. Ltd. (ALE). The borrower was unable to pay the dues to the bank on account of huge losses. The Bank has a right to proceed against the guarantors if the borrower does not pay the loan. In the instant case, the bank on learning that the guarantor (appellant) was proposing to sell his securities without settling the dues of the bank, had filed an application before Debt Recovery Tribunal at Chennai to grant interim injunction restraining the buyer from making payment to the appellant towards the sale of shares and to direct the buyer to pay the amount directly to the bank towards the loan outstanding. Subsequently, the bank entered into an out of court settlement whereby a sum of Rs. 4.25 cores from sale proceeds was to be paid to the bank. The appellant has claimed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said shares, the clearances of the loan by way of sale of shares would only be an application of income that is received by way of sale of share and cannot be in any way said to be an expenditure incurred towards sale or improvement in the cost of the asset. The decision relied upon by the ld.AR in the case of Bradford Trading Co. Pvt. Ltd. (261 ITR 222), in my opinion, Is not applicable to the facts of this case since the decision related to clearance of specific encumbrances on the assets sold. A suit was filed by one of the shareholders when the assessee company transferred a building belonging to it. The Hon'ble Court held payment of `2 lakhs over and above return of share capital was deductible. The facts of the present case are totally different. Indian Bank was neither a shareholder of KSEPL nor it had any interest in KSEPL. Further, the application filed by the bank before DRT clearly shows that what is sought is only clearance of dues of the bank and not any restrain on sale of the shares. In fact, the bank could not have restrained the sale of shares as long as its interest was protected. Therefore, in my considered opinion, the amount paid to Indian Bank towards sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, "ordinarily" the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression "ordinarily" has been used in the said rule itself. This rule was inserted as a result of directions of Hon'ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that "We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly", and also observed that "arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020". It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus "should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure...". The term 'force majeure' has been defined in Black's Law Dictionary, as 'an event or effect that can be neither anticipated nor controlled' When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary" period. 10. In the light of the above dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case." We have also observed that Hon'ble Supreme Court has passed an order whereby in exercise of its powers under Article 141/142 of Constitution of India has extended limitation period in suo motu case, effective from 15th March 2020 by holding as under: "To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings." The State of Tamil Nadu is also hit by Covid19 disease as could be seen from the data of positive cases emerging in State of Tamil Nadu. Thus, even if we exclude period of first national lockdown from 25.03.2020 to 19.04.2020, when offices were not allowed to be physi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) read with Section 147 of the 1961 Act was erroneous so far as prejudicial to the interest of Revenue, which led to issuance of notice dated 13.10.2009 issued by learned CIT u/s 263 of the 1961 Act. The assessee in response to notice dated 13.10.2019 issued by learned CIT u/s 263 of the 1961 Act submitted in its reply vide letter dated 05.11.2009 that the assessee has not realized the sale consideration of Rs. 3 Crs. and hence the net realization has been correctly taken in the workings of the assessment order passed by AO. It was submitted that when return of income was originally filed u/s.139(1) of the 1961 Act, the assessee has assumed the possibility of realizing Rs. 3 Crs. eventually but when revised return of income was filed, it was certain that said sum had become irrevocable and bad. Thus, the assesse submitted that the AO has correctly taken net consideration of Rs. 12 crores instead of Rs. 15 crores. The Ld.CIT rejected contentions of the assessee and observed that the AO had already rejected contention of the assessee that the sale consideration is to be taken as only Rs. 12 crores instead of Rs. 15 crores, while framing assessment order dated 31.12.2008. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order u/s 143(3) read with Section 263 of the 1961 Act. The claim of the assessee that he has not received Rs. 3 Crs. and hence same should be excluded from sale consideration was rejected by AO while passing consequential order u/s 143(3) read with Section 263 of the 1961 Act and hence this differential amount of Rs. 3 Crs. was also brought to tax by the AO. The assessee being aggrieved by an assessment order dated 08.11.2010 passed by AO u/s 143(3) read with Section 263 of the 1961 Act filed first appeal with Ld.CIT(A) who rejected contentions of the assessee and adopted gross sale consideration of Rs. 15 Crs. for computing capital gains and ground of the appeal raised by assessee to that effect were dismissed by Ld.CIT(A), vide appellate order dated 27.03.2012 by holding as under: "5. I have carefully considered the facts of the case and the submissions of the ld.AR. I have also gone through the order passed u/s.143(3) r.w.s.147 dated 31.12,2008 and the order of CIT u/s 263 dated 22.1.2010. The AO, in the order passed u/s.143 r.w.s.147 dated 31.12.2008, has stated that the entire sale consideration of Rs. 15 crores should be considered in the computation of capital gains. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income. The appellant acquired the right to receive Rs. 15 crores on entering into the agreement on 27.11.2000 and, therefore, the income has accrued during the year. Hence, the AO has rightly made the addition. The ground is accordingly dismissed." The assessee being aggrieved by consequential assessment order dated 08.11.2010 passed u/s 143(3) read with Section 263 of the 1961 Act against which appeal stood dismissed by learned CIT(A), has filed an appeal before the Tribunal which is listed in ITA no. 1016/chny/2012 for ay: 2001-02. 9. Coming back, as we could see that all the issues in these four appeals revolves around taxability of gains arising from sale of share of the Company 'Kris Srikkanth Sports Entertainment Private Limited' held by assessee and his minor sons, to three entities belonging to Pentamedia Group of Concerns and the alleged claim of the assessee that it entered into non-compete agreement with these purchasing entities and an amount of Rs. 7.50 crores was received towards non-compete fee by assessee for not competing with these entities for a period of six years and the same could not be brought to tax for impugned ay:2001-02 as amendment in Section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with enclosures which is stated to have been filed by assessee with Revenue, which are placed on record at Pg.No.1-17/paper book. It was submitted that the return of income was processed by AO u/s.143(1) of the Act, vide intimation dated 26.03.2003, wherein an amount of refund of Rs. 94,24,254/- was found to be payable to the assessee. The said intimation issued by AO u/s 143(1) of the 1961 Act is placed at paper book at Page No.18. It was submitted by ld. Counsel for the assessee that the return of income was manually processed u/s 143(1) of the 1961 Act as it was for a period prior to when e-processing of return of income was started by Revenue. It was further submitted by Ld.Counsel for the assessee that reopening of the concluded assessment u/s 147 of the 1961 Act was done by AO within four years from the end of the assessment year as notice u/s.148 of the 1961 Act dated 30.03.2006 was issued by AO to the assessee which notice was issued within four years from the end of assessment. The said notice issued by the AO u/s 148 of the 1961 Act to the assessee is placed in Paper Book at Page No.19. It was further submitted by learned counsel for the assessee that in response to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 20.12.2006 to furnish reasons for reopening of the concluded assessment u/s 147 of the 1961 Act. The said letter dated 20.12.2006 is filed in paper book at page 27. It was submitted by learned counsel for the assessee that the assessee filed Writ Petition before Hon'ble Madras High Court and the Hon'ble Madras High Court was pleased to stay proceedings u/s.147 of the Act invoked by Revenue for a period of two weeks by order in MP No.1/2006 in WP No.49683/2006, vide Interim orders dated 21.12.2006. It was submitted by learned counsel for the assessee that thereafter, vide interim order dated 08.01.2007, the interim order earlier granted by Hon'ble Madras High Court was further extended. Thereafter vide order dated 14.12.2007, the Hon'ble Madras High Court was pleased to observe as under: "2. What is challenged in the writ petition is the notice issued under Section 147 of the Income-tax Act,1961. The petitioner has already filed a letter dated 20.12.2006 stating that the return filed under Section 139 of the Act may itself by treated as one filed under Section 148 of the Act for the present. 3. Therefore, suffice is to permit the petitioner to confirm whether the return f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, there shall be no order as to costs. Consequently, connected miscellaneous petition is also dismissed." The ld.Counsel for the assessee submitted that the AO framed reassessment u/s.143(3) r.w.s.147, vide orders dated 31.12.2008. It was submitted by learned counsel for the assessee that the company whose shares were transferred was engaged in coaching of cricket. It was also explained by the Ld.Counsel for the assessee that the total sale consideration as stated in the agreements was to the tune of Rs. 15 Crs., out of which consideration for restricted covenant was to the tune of Rs. 7.5 Crs. It was also submitted by learned counsel for the assessee that Rs. 4.25 Crs. was paid by assessee to 'Indian Bank' to clear Bank liabilities as there was an overriding garnishee attachment. It was also submitted that assessee only received Rs. 12 Crs. out of Rs. 15 Crs. stated to be total agreed amount payable by three entities of Pentamedia Group of concerns with respect to transfer of shares and towards Restrictive covenants and an balance amount of Rs. 3 Crs. was never received by assessee. It was submitted by learned counsel for the assessee that notice was issued by AO u/s.148 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment and that there should be fresh tangible incriminating material available with the AO before reopening of the concluded assessment by invoking provisions of Section 147 of the 1961 Act. It was submitted by learned counsel for the assessee that Explantion-2 to Sec.147 creates a deeming fiction as to escapement of income wherein, inter-alia, it provides that in case return of income is filed but no assessment is framed, then in that case if the assessee has understated its income or has claimed excessive loss, deduction, relief or allowance, then it is deemed that income of the assessee has escaped assessment. The assessee's counsel submitted that there was no fresh tangible material before the AO to reopen the concluded assessment. The assessee's counsel submitted that time limit for invoking provisions of Section 143(2) of the 1961 Act for framing scrutiny assessment u/s 143(3) against original return of income filed by assessee, has expired and now time limit cannot be extended by adopting indirect route by invoking provisions of Section 147 of the 1961 Act, relying on decision of Hon'ble Delhi High Court in the case of Orient Craft(cited supra). The assessee also relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted on 31.12.2008. It was submitted that no fresh tangible incriminating evidences were available with AO and the re-opening of concluded assessment was done wrongly wherein roving enquiries were made by the AO to justify reopening of concluded assessment by invoking provisions of Section 147 and there was clearly a change of opinion by the AO. It was submitted by learned counsel for the assessee that original return of income was processed u/s.143(1) of the 1961 Act and manual processing of return of income was done by the AO and there was an application of mind by the AO while initially processing return of income u/s 143(1) of the 1961 Act. Our attention was also drawn to the decision of the Hon'ble High Madras Court in CIT v. S&S Power Switchgear Limited (2018)92 taxmann.com 429 (Madras). It was submitted by learned counsel for the assessee that the assessee participated in proceedings to protect its interest and it was submitted the provisions of Section 292BB of the 1961 Act will not come to rescue of the Department. It was submitted by learned counsel for the assessee that reasons recorded for reopening of the concluded assessment were furnished by AO to assessee on 26.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Hon'ble Supreme Court in the case of DCIT v. T.Jayachandran reported in (2018) 406 ITR 1(SC) and submitted that only real income of the assessee can be brought to tax and this amount of Rs. 4.25 Crs. has to be treated as an expenditure u/s.48(1) of the 1961 Act and is not taxable and it was submitted that it was rightly excluded by assessee while computing income of the assessee. It was submitted that the AO did not consider submissions of the assessee while deciding whether Rs. 4.25 Crs. was expenses u/s.48(1) of the 1961 Act. Our attention was drawn by learned counsel for the assessee to the order passed by learned Debt Recovery Tribunal in O.A. No. 1642/1998 & O.A. No. 1399/1998, dated 23.02.2001, which is placed in Paper Book at Page No.125-132. It was also explained by learned counsel for the assessee that an amount of Rs. 4.25 crores never reached assessee and hence the same cannot be brought to tax. The ld.CIT-DR in rebuttal submitted that the assessee's concluded assessment was reopened by invocation of provisions of Section 147/148 of the 1961 Act. It was submitted by learned CIT-DR that return of income was originally filed on 28.03.2002 which was beyond the due da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO did not had any evidence of two claims of exemption made by assessee in the return of income. The notice u/s 143(2) of the 1961 Act was not originally issued and return of income was manually processed by invoking provisions of Section 143(1) of the 1961 Act. It was submitted that department has all the right to invoke provisions of Section 147 of the 1961 Act. The learned CIT-DR relied upon decision of Hon'ble Delhi High Court in the case of CIT v. Orient Craft Limited (2013) 354 ITR 536(Del HC) and also decision of Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 291 ITR 500(SC). It was submitted by learned CIT-DR that the AO was required to record reasons for reopening of the concluded assessment which were duly recorded by AO. It was submitted by learned CIT-DR that AO was having reasons to believe that income of the assessee has escaped income. It was submitted by learned CIT-DR that the AO was having cogent material to come to belief that the income of the assessee has escaped assessment. It was submitted by learned CIT-DR that merely because notice u/s Sec.143(2) of the 1961 Act was not issued and regular scrutiny assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court allowed proceedings u/s 147 of the 1961 Act to go ahead. Our attention was drawn by learned CIT-DR to Page No.32 of the Paper Book, wherein, decision of Hon'ble Madras High Court is placed. Our attention was also drawn to Page No.27 of the Paper Book wherein, assessee has asked for reasons recorded for issuance of notice u/s.148 of the Act, vide communication dated 20.12.2006. It was submitted that fresh return of income was filed by assessee u/s.148 of the Act, on 08.02.2008. Our attention was drawn to Page No.35 of the Paper Book, wherein, revised return of income u/s.148 is placed, filed on 08.02.2008. It was submitted that in original return of income, exemptions were claimed by assessee to the tune of Rs. 11.98 Crs., while in the revised return of income, exemptions were claimed to the tune of Rs. 12.41 Crs. Our attention was drawn to Page No.36 of the Paper Book, wherein, details of exempt income as claimed by the assessee in the notes to the return of income filed on 08.02.2008 are placed. It was submitted that this information was not placed before the AO when original return of income was filed, and the AO had rightly brought to tax income claimed as exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to reopen the concluded assessment and there is no requirement of having fresh material to reopen concluded assessment. It was submitted that if audit objections is based on factual errors, then it can be a valid ground for reopening of the concluded assessment u/s 147 of the 1961 Act. Reliance was placed by learned CIT-DR on the decision of Hon'ble Supreme Court in the case of CIT v. P.V.S. Beedies Pvt. Ltd.(1999) 237 ITR 13(SC). Thus, learned CIT-DR would contend that factual error was brought to the notice of the AO and hence reopening of the concluded assessment by invoking provisions of Section 147 is justified, by relying on the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra),para 18 and it was submitted by learned CIT-DR that even in the cases covered u/s.143(1) wherein no assessment is framed under Sec.143(3) of the 1961 Act, if ingredient of Section 147 are fulfilled, reopening of the concluded assessment u/s 147 of the 1961 Act is justified. It was submitted that under assessment of income/excessive loss deduction/relief can lead to invocation of Sec.147 of the Act. The learned CIT-DR submitted that there has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2019. The ld.CIT-DR also relied upon decision of the Hon'ble Delhi High Court in the case of Consolidated Photo and Finvest v. ACIT reported in (2006) 281 ITR 394(Delhi) The learned CIT-DR summarized his contention as to validity of reopening of the concluded assessment, as under: a.The assessee has not furnished any material before AO, wherein the AO could come to know whether the assessee has received noncompete fees or garnishee payments were made by the assessee. Therefore, he relied upon the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) and Calcutta Discount Company Limited v. ITO reported in (1961) 41 ITR 191(SC) and submitted that key ingredients for invoking provisions of Sec.147 are fulfilled in the instant case and hence reopening of the concluded assessment be upheld. b. It was also submitted by learned CIT-DR that the material with AO was sufficient to reopen the concluded assessment u/s 147 of the 1961 Act. The learned CIT-DR relied upon decision of Hon'ble Delhi High Court in the case of CIT v. Orient Craft Limited reported in (2013) 354 ITR 536(Del. HC) and submitted that there is a requirement of having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments made to 'Indian Bank'. Our attention was drawn to re-assessment order passed by the AO and it was submitted that the assessee infact received the amount and then it was paid to the banker namely 'Indian Bank', hence there is no diversion of income by overriding title. Our attention was also drawn to the appellate order passed by ld. CIT(A). It was submitted by learned CIT-DR that the shares were not pledged with 'Indian Bank' but since 'Indian Bank' came to know about the sales of shares by assessee to Pentamedia Group of Concerns through media reports and hence the said 'Indian Bank' stepped in to protect its interest. It was submitted that there was no overriding title over the shares as the shares were never pledged with the bank and overriding title is where the property is encumbered. It was submitted that the assessee namely Mr. K. Srikanth was only guarantor for certain loans availed by 'Aditya Leather Exports Private Limited' and to recover their money from the said 'Aditya Leather Exports Private Limited', the bank namely 'Indian Bank' issued garnishee notice and the assessee was merely guarantor and the shares were never in the picture when the assessee stood guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shee application was to recover the amount due to the bank and rather it is application of income and not diversion of income by overriding title. The learned CIT-DR relied upon decision of Hon'ble Supreme Court in the case of CIT v. Sitaldas Tirathdas reported in (1961)41 ITR 367(SC) and submitted that there were no diversion of income by overriding title rather it was only application of income. The learned CIT-DR would also draw our attention to provisions of Section 48(1) of the 1961 Act and submitted that deduction from capital gains can only be allowed when the amount is incurred wholly and exclusively in connection with transfer of shares. It was submitted by learned CIT-DR that the decision of Hon'ble Madras High Court in the case of Bradford Trading Company Private Limited(supra) is different and not applicable to the facts of the case in the instant case. It was submitted that approbation and reprobation is not allowed as in the original return of income filed with the department, the assessee has declared sale consideration to the tune of Rs. 15 crores while it was claimed at Rs. 12 crores in the return of income pursuant to orders passed by Hon'ble Madras High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) and in that case reopening was done after four years based on audit objections and Revenue is empowered to see that there is true and full disclosure. The assessee's counsel also submitted that Revenue is empowered to reopen concluded assessment after four years by invoking provisions of Section 147 of the 1961 Act and to see that there is true and full disclosure as held in the case of Girilal and Company (supra). The assessee's counsel also tried to distinguish the case laws relied upon by learned CIT-DR to contend that reopening of the assessment was not done properly within the provisions of Section 147 of the 1961 Act and it was submitted that there was no triggering point for invoking provisions of Section 147/148 of the 1961 Act in the instant case. It was submitted that three separate agreements were entered into by assessee for sale of shares and three agreements for non-compete fees. It was submitted that there was a diversion of income by overriding title relying on real income theory. The learned counsel for the assessee relied upon decision of Hon'ble Supreme Court in the case of CIT v. Sitaldas Tirathdas reported in (1961) 41 ITR 0367(SC) and decision of Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of shares and the AO had rightly included the same as income of the assessee while computing capital gains. The ld.CIT-DR referred to Para No.6.1 of the appellate order passed by Ld.CIT(A) and submitted that learned CIT(A) allowed relief to the assessee. It was submitted that neither ld.CIT(A) nor the assessee has furnished any reply to issues raised by the AO. It was submitted that there is no specific clarification as to what the assessee was doing earlier and what assessee was doing later and this is merely an agreement to avoid tax and assessee is continuing as Director in the new company. It was brought to notice by learned CIT-DR that non compete fee was brought to tax by provisions of Section 28(va) read with Section 2(24)(xii) of the 1961 Act by Finance Act, 2002 w.e.f. 01.04.2003 and submitted that prior to that reasonableness is to be seen for which quantum is to be found out and basis of computing non-compete fee is to be seen. The learned CIT-DR relied upon decision of Hon'ble Madras High Court in the case of CIT v. Chemech Laboratories Limited, dated 23.12.2016.11.2016. The learned CIT-DR would also rely on the decision in following case laws: a) CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares or minors son shares were sold, these shares are to be treated as assessee's share and the assessee sold the shares of minor children. The learned counsel for the assessee submitted that in the year ended 31.03.2001, the assessee and minor children received Rs. 9.50 crores while Rs. 2.5 crores was received in year ended 31.03.2002. Thus, it was submitted by learned counsel for the assessee that only Rs. 12 crores was received while Rs. 3 crores was never received and hence the same cannot be brought to tax as only real income can be brought to tax. Our attention was drawn to page 53 of the Paper book, wherein sundry debtors as at 31.03.2001 were to the tune of Rs. 5.51 crores. On Being asked and directed to produce the bounced cheque of Rs. 300 lacs, the learned counsel for the assessee submitted that the assessee does not have bounced cheque of Rs. 300 lacs and the same cannot be produced.Thus, the learned counsel for the assessee expressed inability to produce the bounced cheque of Rs. 300 lacs. It was also submitted that no proceedings for recovery of said Rs. 300 lacs was initiated by assessee/minor sons against Pentamedia Group Concerns for bouncing of cheque. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on report at the behest of the contracting parties, was prepared to value shares. The assessee has filed written submissions and it was submitted by learned counsel for the assessee that it was a contractual agreement between the parties to value the shares and no valuation report was prepared nor any basis for valuation of shares is available with the assessee, rather it is submitted that it was a negotiated price entered into between two parties to the contract. The assessee's counsel also relied upon decision of Chennaitribunal in the case of Empee Holdings Limited v. DCIT in ITA no. 1503/chny/2014 for ay: 2005-06, dated 07.11.2019 to which both of us were part of the Division Bench who pronounced the said order. It was also submitted that in ay: 2001-02 with which we are concerned, Section 50C and 43CA of the 1961 Act were not in statute and hence actual sale consideration entered into between two contracting parties voluntarily cannot be substituted by invoking deeming fiction of the said sections. The learned CIT-DR submitted that assessee has himself admitted that there was no quantification/valuation report for valuing the shares and hence the entire amount of Rs. 15 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the enclosure as to details of exempt income being furnished, but however it is now claimed by assessee that details of the aforesaid exempt income claimed by him were filed, which is stated to be placed at page 15 of the paper book which on our perusal we found that it is an unsigned enclosure. The Revenue on its part is averring that this document stated to be placed at page 15/paper book is a suspect document which is planted by the assessee and was not part of the return of income originally filed by assessee. We will see at later point of time in this order as to the validity of reliance on this document and whether the disclosure of exempt income even if it was made by assessee was sufficient on the part of the assessee to discharge primary onus cast on it to make true and full disclosure to come out of clutches of Section 147/148 of the 1961 Act. The return of income was admittedly originally processed by Revenue u/s 143(1) of the 1961 Act and intimation dated 26.03.2003 was issued to assessee by AO u/s 143(1) of the 1961 Act computing refund of Rs. 94,24,254/- being made payable to the assessee. This processing of return of income was done manually prior to introduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim which is apparent from any information in the return of income and it cannot be equated with scrutiny assessment framed u/s 143(3) read with Section 143(2) of the 1961 Act. It is an admitted position that in the instant case, no scrutiny assessment was framed by AO originally u/s 143(3) of the 1961 Act. It is also an admitted position that reopening of the concluded assessment in the instant case by AO by invoking provisions of Section 147 of the 1961 Act was done in the instant case by Revenue within four years from the end of assessment year viz. notice of reopening of the concluded assessment was issued on 30.03.2006 while we are presently seized of ay: 2001-02. It is also admitted position that the return of income was not originally securitized by Revenue u/s 143(2) read with Section 143(3) and merely processing of return of income was done with in provisions of Section 143(1) of the 1961 Act, which cannot be equated with scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act. The ratio of decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) shall be clearly applicable and the Revenue can validly reopen the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd complete disclosure of the primary facts and in our view clearly primary onus cast on the assessee is not discharged. Reliance is made to decision of Hon'ble Supreme Court in the case of New Delhi Television Limited v. DCIT reported in (2020) 116 taxmann.com 151(SC). The above disclosure do not give complete disclosure of the loans availed by a company named 'Aditya Leather Exports Private Limited' from 'Indian Bank' which was in default by said company. The above disclosure also did not disclose that the assessee was a Director of the said company namely 'Aditya Leather Exports Private Limited' and also stood guarantor of the loan availed by said company 'Aditya Leather Exports Private Limited'. It also did not disclose that the shares of 'Kris Srikanth Sports Entertainment Private Limited' were not subject matter of charge with 'Indian Bank'. It also did not mention that it is under memo of compromise that the said amount of Rs. 4.25 crores was paid by the assessee to 'Indian Bank' in settlement of the aforesaid defaulted loan by 'Aditya Leather Exports Private Limited' and the payments were never made under direction of any Court Orders but were made under a compromise arran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to court with clean hands and courts cannot be party to such an act of the assessee. Further, the assessee is claiming that he has not received Rs. 3 crores out of total consideration of Rs. 15 crores. The said consideration of Rs. 15 crores is bifurcated into sale of shares of 'Kris Shrikant Sports Entertainment Private Limited' to the tune of Rs. 7.50 crores while rest of Rs. 7.50 crores is claimed towards non compete fee. The assessee did not produced bounced cheque of Rs. 3 crores despite being directed by Court and secondly, the assessee is claiming that Rs. 3 crores which is not received shall be attributed towards sale of shares of 'Kris Srikanth Sports Entertainment Private Limited' and not towards non compete fee, which is claimed as an exempt income. It is again a perverse claim as the assesse has duly transferred entire shareholding of 'Kris Srikanth Sports Entertainment Private Limited' to the buyers Pentamedia Group of Concerns and later no legal suit was filed for non payment of alleged part sale proceeds of shares of 'Kris Srikanth Sports Entertainment Private Limited'. The majority of shares of 'Kris Srikanth Sports Entertainment Private Limited' to the tune o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot entitled for deduction / exemption of said income even within the provisions of the 1961 Act. Thus, we hold that the primary facts were not completely, correctly and truly disclosed by assessee in the return of income originally filed by assessee with Revenue and there is clearly an attempt to evade taxes, even if we accept the contention of the assessee that the disclosure of exempt income was made by assessee in the return of income originally filed with Revenue, as is placed in paper book /page 15 ( although it is a suspect disclosure as Revenue is alleging that this document is planted by assessee before ITAT and this document was never filed by assessee along with original return of income filed by assessee with Revenue). Thus, we hold that the Revenue has rightly invoked provisions of Section 147 of the 1961 Act and we uphold reopening of the concluded assessment within four years from the end of the assessment as was made by Revenue in the instant case and more-so even scrutiny assessment was not framed by Revenue initially u/s 143(3) of the 1961 Act and return was merely processed u/s 143(1) of the 1961 Act. Thus, we reject the contentions of the assessee and uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Concerns. Simultaneously, there were agreements entered into by assessee with said Pentamedia Group concerns for non compete by assessee with the said company namely 'Kris Srikanth Sports Entertainment Private Limited' for a period of six years for total consideration of Rs. 7.50 crores. The said company namely 'Kris Srikanth Sports Entertainment Private Limited' is engaged in providing cricket coaching through electronic media. The said agreements are claimed to be entered into based on negotiated price between two independent parties. It is also a matter of fact that the assessee is a renowned cricketer who was part of Indian/national cricket team at one point of time and also was captain of Indian Cricket Team. It is also fact that the assessee resorted to cricket commentary and other activities associated with sport of cricket after retiring from cricket team. The assessee undoubtedly enjoys reputation and brand value in sporting activities more specifically in Cricket. The name of the assessee is also part of the name of the company namely 'Kris Srikanth Sports Entertainment Private Limited' whose shares are transferred. The assessee has agreed not to compete with the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of these laws and indulgence by Courts as provided under law is to protect the interest and welfare of minor which is paramount. The assessee being natural guardian was duty bound to protect the interest of his minor sons. The shares held by minor sons in 'Kris Srikanth Sports Entertainment Private Limited' were divested for a total consideration of Rs. 7.50 crores. The shares in ' Kris Srikanth Sports Entertainment Private Limited' to the tune of 99% were held by minor sons of the assessee. The shares of the minor stood transferred to Pentamedia Group Concerns and minors were divested of their shareholding in 'Kris Srikanth Sports Entertainment Private Limited'. There are simultaneous agreement for sale of shares as well for non compete which were simultaneously entered by the assessee on his behalf as well on behalf of the minor, of which total value was Rs. 15 crores out of which Rs. 12 crores stood realised.Thus, it is to be held that the entire consideration of Rs. 7.50 crores towards sale of shares of minor in 'Kris Srikanth Sports Entertainment Private Limited' stood realized and to be brought to tax within provisions of the 1961 Act including provisions of Section 60-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rikanth Sports Entertainment Private Limited' were never subject matter of charge with Indian Bank. The shares were held by minor sons of the assessee in 'Kris Srikanth Sports Entertainment Private Limited' and minor sons were not the guarantor of the said loan availed by 'Aditya Leather Exports Private Limited' from Indian Bank which stood defaulted. The minor sons of the assessee also could not be made to pay for the default of the said Aditya Leather Exports Private Limited of which the assessee was Director/Guarantor not the minor sons. The assessee was the Director of the said company namely 'Aditya Leather Exports Private Limited' as well guarantor of the said loan, but the assessee had no right to transfer the proceeds of sale of shares held by his minor sons in 'Kris Srikanth Sports Entertainment Private Limited' to Indian Bank, except with permission of Courts. No such permission was obtained by assessee. The said act of claiming deduction for amount paid to Indian Bank out of sale proceed of shares held by minor sons is clearly an act of perversity/illegality as well an attempt made to evade taxes. The assessee also simultaneously received non compete fee to the tune of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et any deduction from taxable income of amount paid to Indian Bank to discharge liability of 'Aditya Leather Exports Private Limited' of the misconceived cannot be part of scheme of illegitimate tax evasion undertaken by assessee. Further, we also hold that payments made to Indian Bank by assessee to the tune of Rs. 4.25 crores was merely an application of income. Reference is drawn to decision of Third Member of ITAT, Mumbai in case of Perfect Thread Mills Limited v. DCIT reported in (2020) 181 ITD 1( Mum-trib.)(TM). We order accordingly. Thus, we summarize and conclude our decision as under: a) We uphold reopening of concluded assessment by AO invoking provisions of Section 147 of the 1961 Act. b) We hold that sale consideration of Rs. 7.50 crores was duly received for sale of shares of 'Kris Srikanth Sports Entertainment Private Limited' which is to be brought to tax under provisions of 1961 Act including Section 60-64 of the 1961 Act. c) We hold that non compete fee of Rs. 7.50 crores was exempt from tax being capital receipt. d) We hold that payment of Rs. 4.25 crores was made by assessee to 'Indian Bank' to settle loan availed by 'Aditya Leather Exports Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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