TMI Blog2021 (10) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Petitioner assessee had not incurred any long term capital loss during the year against the equity shares of Ponds Exports Limited and there had been no transfer of shares during the year as claimed by the Petitioner assessee - a different view has been taken from the view conclusively taken by the Assessing Officer and as held in Ananta Landmark Pvt.Ltd. [ 2021 (10) TMI 71 - BOMBAY HIGH COURT] it would not be open to reopen the assessment based on the very same material with a view to take another view. Petitioner had truly and fully disclosed all the material facts necessary for the purpose of assessment and that this was a case where the assessment was sought to be reopened on account of change of opinion of Respondent No. 1. Respondent No. 1 by recording that I have reason to believe that income chargeable to tax amounting to ₹ 20.52 cr. had escaped assessment within the meaning of Section 147 of the Act read with proviso thereto has not referred to any material fact not disclosed and merely stated that the Petitioner had failed to disclose fully and truly all the material facts necessary for its assessment for Assessment Year 2012-13. This st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduction by its subsidiary Ponds Exports Limited, wherein the face value of the shares of Ponds Exports Limited was reduced from ₹ 10/- to Re. 1/-. Since there was extinguishment of proportionate right in shares held by the company, the long term capital loss arising on account of capital reduction had been claimed. 7. A draft assessment order dated 22nd March 2016 was passed by Respondent No. 1 without making any addition or disallowance of loss claimed on account of capital reduction. On 27 th February 2017, the Respondent No. 1 passed final order under Section 143(3) read with 144C(13) of the Act giving effect to the direction of the Dispute Resolution Panel ( DRP ). In the final assessment order, there was no addition or disallowance with respect to the loss claimed by the Petitioner. 8. Four years after the end of the relevant Assessment Year 2012-13, the Petitioner received a notice dated 31st March 2019 under Section 148 of the Act informing the Petitioner that Respondent No. 1 had reason to believe that income had escaped assessment for Assessment Year 2012-13 and requested the Petitioner to file return of income in pursuance of the said notice. 9. The Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected the objections filed by the Petitioner against the reopening of the assessment under Section 148 of the Act. Being aggrieved by the order dated 10th September 2019, the Petitioner has filed the present Petition. 13. Mr. Nishant Thakkar, learned Counsel appearing for the Petitioner has submitted that the Petitioner had filed its income tax return on 30th November 2012. The Petitioner held 179,10,132 shares of ₹ 10/- each of Ponds Exports Limited. During the previous year under consideration, the Petitioner had received consideration on account of capital reduction by Ponds Exports Limited, wherein the face value of the share of Ponds Exports Limited was reduced from ₹ 10/- to Re. 1/- each. Since there is extinguishment of proportionate right in shares held by the company, the long term capital loss arising on account of capital reduction had been claimed by the Petitioner. Accordingly, the Petitioner had filed its return of income for Assessment Year 2012-13 claiming the long term capital loss ₹ 20,52,22,019/-. He has submitted that true and full disclosure of all material facts was made in the tax return. He has submitted that all details relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. Deputy Commissioner of Income Tax Writ Petition No. 2814 of 2019 Jt. dt. 14.09.2021. He has submitted that the reasons recorded in the notice under Section 148 of the Act are ex facie contrary to the settled law. 16. In the case of Vania Silk Mills Pvt.Ltd. Vs. CIT 191 ITR 647, the Supreme Court observed that the definition of transfer clearly contemplates extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof. The Supreme Court has observed that extinguishment of any right therein can be extended to mean extinguishment of right independent of or otherwise on account of transfer. Thus, even extinguishment of right in a capital asset would amount to transfer and in the present case, the Petitioner s right having been extinguished proportionately to the reduction of capital, would amount to a transfer. He has accordingly, submitted that it has been erroneously held in the reasons for the reopening of the assessment that there is no transfer of shares during the year as claimed by the assessee in the return of income and that the assessee has not incurred any long term capital loss during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 147 of the Act. He has submitted that the Petitioner had not incurred any long term capital loss during the year against the equity shares of Ponds Exports Limited, as there was no transfer of shares during the year as claimed by the Petitioner in the return of income and such long term capital loss should have been disallowed while completing the assessment under Section 143(3) of the Act. Thus, Respondent No. 1 has expressed reasons to believe that income chargeable to tax amounting to ₹ 20.52 cr. had escaped assessment within the meaning of Section 147 of the Act read with proviso therewith. He has accordingly submitted that there is no merit in the Petition. 20. Having considered the submissions, in our view, the notice and order impugned requires to be set aside by ruling that the Assessing Officer had no jurisdiction to issue the notice under Section 148 of the Act. This is particularly the case where the assessment is sought to be reopened after the expiry of period of four years from the end of the relevant assessment year. The proviso of Section 147 of the Act prior to amendment of Section 147 of the Act which would be applicable in the present case stip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was noticed that the number of equity shares of 1,79,10,132 in Ponds Exports Limited were shown as investment under the head Investment in Subsidiary, and hence, there was no transfer of shares during the year, there is non disclosure of the material fact which was not truly and fully disclosed by the Petitioner/Assessee. The Petitioner assessee had in fact disclosed the material facts in the Balance Sheet and based on which an opinion had been arrived at by the Assessing Officer. 23. In the reason for reopening of the assessment the Respondent No. 1 has stated Even otherwise, it is pertinent to mention that Explanation 1 to Section 147 provides that production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of proviso to the said Section. . 24. The Supreme Court in Calcutta Discount Co. Ltd. V/s. Income Tax Officer (1961) 41 ITR 191 (SC) has held that there can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above., In view of the Explanation, it will not be open to the assessee to say, for example- I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents . His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, amount to omission to disclose fully and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty imposed on the Income-fax Officer. We have therefore come to the Conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. The position, therefore, is that if there were in fact some reasonable grounds for thinking that there had been any nondisclosure as regards any primary fact, which could have a material bearing on the question of under assessments that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under Section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non-disclosure of material facts. .............. Both the conditions, (i) the Income-tax Officer having reason to believe that there has been under assessment and (ii) his having reason to believe that such under assessment has resulted from nondiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed long term capital loss on account of reduction in the shares of the subsidiary. In the Profit and Loss Accounts, loss suffered in the capital reduction was shown separately under the head exceptional items . Also the amount received from the subsidiary on account of the capital reduction was shown separately in the notes to accounts under the head related party disclosure . Thus it is the case of the Petitioner that Ponds Exports Limited was never a fully owned subsidiary of the Petitioner. This submission of the Petitioner in paragraph 6 of the Petitioner has been dealt with paragraph 4.4 of the said Affidavit in Reply on behalf of the Respondents wherein it is stated that the Petitioner has submitted the factual aspect of the subsidiary of the Petitioner, application made to the High Court for capital reduction, order of the High Court, share holding of the Petitioner and loss suffered on account of capital reduction to the Petitioner for Assessment Year 2012-13. Hence, no comments are offered. Thus, the Respondents have not controverted what is stated in paragraph 6 of the Petition. 30. The Petitioner has further stated in ground B of the Petition that Ponds Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd there had been no transfer of shares during the year as claimed by the Petitioner assessee. Thus, a different view has been taken from the view conclusively taken by the Assessing Officer and as held in Ananta Landmark Pvt.Ltd. (supra), it would not be open to reopen the assessment based on the very same material with a view to take another view. 33. We are satisfied that the Petitioner had truly and fully disclosed all the material facts necessary for the purpose of assessment and that this was a case where the assessment was sought to be reopened on account of change of opinion of Respondent No. 1. 34. We are of the view that the Respondent No. 1 by recording that I have reason to believe that income chargeable to tax amounting to ₹ 20.52 cr. had escaped assessment within the meaning of Section 147 of the Act read with proviso thereto has not referred to any material fact not disclosed and merely stated that the Petitioner had failed to disclose fully and truly all the material facts necessary for its assessment for Assessment Year 2012-13. This statement is clearly made with an attempt to take the case out of the restrictions imposed by the proviso to Sect ..... 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