TMI Blog2023 (10) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessing officer. But there is no mention of this in the reasons recorded for issuing reopening notice u/s148 - Therefore, the audit objection cannot be termed as tangible material. A Division Bench of this court in Aroni Commercials Ltd. [ 2014 (2) TMI 659 - BOMBAY HIGH COURT] has held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the AO to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Therefore, there can be no doubt in the facts of this case that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion of the assessing officer from that held earlier during the course of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of petitioner company. Remaining shareholders were the children of the said two daughters. 3. The said Mehroo Irani died on 17th February 2005 and as per her last Will and Testament dated 30th September 2002, most of her assets were to be bequeathed to her two daughters. The said Will that was probated on 10th May 2007 included certain directions with respect to one particular immoveable property belonging to petitioner which was part of the rent free accommodation of Mehroo Irani. 4. There were certain disputes between the two daughters which came to be settled upon entering of a Memorandum recording family arrangement dated 7th January 2008. A per the Memorandum recording family arrangement, the said two daughters achieved a complete separation of all their business assets from each other including the assets they were to inherit from their mother Late Mehroo Irani. 5. Petitioner was one of the signatories of the Memorandum recording the family arrangement. Before the family arrangement was entered into, petitioner gifted a residential flat (the said property) owned by petitioner being Flat No. 141 in El-Cid Building in Mumbai to Mr. Bezan Chenoy, who was the husban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 1 passed assessment order dated 30th September 2010 under section 143 (3) of the Act holding that the gift made by petitioner to Bezan Chenoy is considered as distribution of asset by petitioner on behalf of existing shareholders. Respondent no. 1 held that petitioner has undertaken the distribution of the asset to fulfill the obligation of the existing shareholders and hence, the same is to be treated as deemed dividend as per the provisions of section 2 (22) (a) of the Act. Respondent no. 1 levied additional income tax on account of dividend distribution tax of Rs. 53,70,896/- under section 115-O of the Act. It is necessary to note that the assessment order does contain a reference to the letter dated 16th July 2010 by which, petitioner explained as to why the provision of Section 50C of the Act was not applicable. 11. Aggrieved by the assessment order petitioner preferred an appeal before the Commissioner of Income Tax (Appeals), who by an order 16th August 2011 allowed the appeal of petitioner. The CIT(A) held that the gift of the said property by petitioner to Bezan Chenoy cannot be charged as dividend under Section 2 (22) (a) of the Act as the conditions specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings and hence reopening of the assessment to apply very same Section 50C on the same transaction is not permissible as it will tantamount to change of opinion by respondent no. 1 which is not permissible under section 147 of the Act. These objections were rejected by an order dated 6th February 2014, which is also impugned in this petition. After the said impugned order was passed, this petition came to be lodged and rule was issued on 28th July 2014. Respondent No. 3 was also restrained from taking any steps pursuant to the impugned order and impugned notice. 16. Submissions of Mr. Pardiwalla:. (a) The reopening of the assessment is purely on the basis of change of opinion which is not permissible and that cannot be a tangible material. (b) During the course of assessment proceedings specific queries were raised with regard to the gift of the flat on the applicability of Section 50C of the Act and also as to why it should not be treated as deemed dividend income. (c) On the issue of Section 50C, petitioner by its letter lettered 16th July 2010 filed a copy of the gift deed with all annexures and also explained why section 50C cannot come into play. (d) By a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 148 of the Act. (b) Oversight in passing the assessment order, will not affect assessing officer s jurisdiction to issue notice and for this, as held in judgment of the apex court in A.L.A. Firm Vs. Commissioner of Income Tax (1991) 189 ITR 285 (SC). (c) Kalyanji Mavji Co. Vs. CIT (1976) 102 ITR 287 (SC) which has been referred to and relied upon in A.L.A. Firm (Supra), permits reopening in the following categories of cases: (1) where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where the information is derived from an external source of any kind and such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (3) where the information may be obtained even from the record of the original assessment from the investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law; (4) Where the Income Tax Officer derives information from the record on an investigation or an inquiry into facts not originally undertaken and such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (2015) 55 taxmann has held that during the original assessment proceedings, once a query was made with regard to the same issue which was responded to by the assessee and on satisfaction of the same, the assessing officer has passed an assessment order, reopening would be purely on the basis of change of opinion. Moreover, the court has held that the tangible material urged should emanate from the reasons recorded for issuing reopening notice under Section 148 of the Act. The tangible material as stated in the affidavit in reply and by counsel for revenue are the audit objections received by the assessing officer. But there is no mention of this in the reasons recorded for issuing reopening notice under Section 148 of the Act. Therefore, the audit objection cannot be termed as tangible material. 20. The only basis the notice under Section 148 of the Act was issued is that petitioner had gifted a flat to Bezan Chenoy as per the Memorandum of Family arrangement and, therefore, has resorted to colorable device by way of gift of the said property to avoid tax liability. Therefore, this is a fit case for invoking provisions of Sec. 50C and value as per Stamp Duty-authority at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the applicability of Section 50C was a subject of consideration of the assessing officer while completing the assessment. A Division Bench of this court in Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax-2(1) (2014) 44 taxmann.com 304 (Bombay) has held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. 22. Therefore, there can be no doubt in the facts of this case that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion of the assessing officer from that held earlier during the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r looked by the ITO in the assessment but has only given information on a question of law, i.e., applicability of Section 50C, which is not permissible. Moreover, the Apex Court in A.L.A. firm (Supra) has held that the formation of opinion by ITO on the basis of material already on record provided the formation of such opinion is consequent on information in the shape of some light thrown on aspects of facts or law which ITO had not earlier been conscious of. Therefore, where ITO derives information from the record on an investigation into facts not originally undertaken then reopening was permissible. That is not the case in the matter at hand because the issue of Section 50C of the Act, as noted earlier, was a subject of consideration during the assessment proceedings, the query having been raised and petitioner responded to the query and the assessing officer not taking that issue forward. During the course of assessment proceedings a specific question was raised by the assessing officer as to why the transaction should not be taxed under Section 50C of the Act. This was replied to by petitioner vide its letter dated 16th July 2010 where petitioner has explained why the gift b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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