TMI Blog2023 (12) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment was to be completed in accordance with the aforesaid provision. Prior to issuance of Notice Issued under Section 148 of the Income Tax Act, 1961 to the petitioner on 30.06.2021, the Department had audited the accounts of the petitioner for the assessment year 2016- 17 after the Assessment was completed under Section 143(3) of the Income Tax Act, 1961. The audit memo addressed to the Asst Commissioner of Income Tax dated 19.6.2019 indicates that the petitioner a Limited Liability Partnership Firm was earlier Private Limited Company. The 2 partners of the petitioner Firm were itsdirectors. The company was converted into petitioner firm only on 07.08.2015. As on 31.03.2015, one of the partner namely Ms Nina B. Kothari held 25,07,688 preference shares of Rs. 10/- each in the said company prior to its conversion into a Limited Liability Partnership Firm. After, 31.03.2015, but before the conversion of the company into a Limited Liability Partnership Firm on 07.08.2015, the aforesaid preference shares were transferred to the other partner namely BHK Foundation (Discretionary Trust). Ms Nina B. Kothari thus merely held one equity share in the said company, prior to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged the Impugned Notice dated 19.05.2022 issued under Section 148A(b) of the Income Tax Act, 1961 and an order dated 30.06.2022 under Section 148A(d) of the Income Tax Act, 1961, pursuant to order of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal reported in [2022] SCC online SC 543 rendered on 04.05.2022. 2. The case of the petitioner is that the impugned proceedings are bad in law in asmuch as it is inspired from the change of opinion. 3. A regular Assessment was completed and an Assessment Order came to be passed under Section 143(3) of the Income Tax Act, 1961 on 27.11.2018 for the Assessment year 2016-2017. The aforesaid Assessment Order was preceded a notice under Section 142(1) of the Income Tax Act, 1961 on the same issue which is the subject matter of the Impugned Notice and the Impugned Order under Section 148A(b)(d) of the Income Tax Act, 1961. 4. The petitioner had filed a detailed reply in response to Notice dated 19.11.2018 issued under Section 142(1) of the Income Tax Act, 1961 on 26.11.2018. Thereafter, the aforesaid Assessment Order dated 27.11.2018 came to be passed under Section 143(3) of the Income Tax Act 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceeding Assessment years viz., 2017-2018 and 2018-2019 have also been assessed in the same manner, vide Assessment Order dated 04.01.2021 for 2018-2019 and vide Assessment Order dated 30.11.2019 for the Assessment Year 2017-2018. 8. It is therefore submitted that the invocation of amended provisions of Section 148A for re-opening of the Assessment completed under Section 143(3) on 27.11.2018 for the Assessment year 2016-2017 was without jurisdiction. 9. That apart, it is submitted that in response to the Notice issued on 19.05.2022, the petitioner had also filed a detailed reply which has not been considered. 10. It is therefore submitted that the specific allegations in the notice dated 19.05.2022 was on account of transfer of preference shares held by Ms.Nina B Kothari to M/s. BHK Foundation (Discretionary Trust). It was not camouflaged to avail to exemption under Section 47(xiiib) of the Income Tax Act, 1961. It is further submitted that the petitioner had not circumvented any of the provisions of the Income Tax Act, 1961. 11. It is therefore submitted that the notice alleges violation of Section 47(xiiib) of the Income Tax Act, 1961 with reference to proviso (e) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ools (P.) Ltd Vs. ITO reported in [2020] 272 taxman 154 (Bom HC); (22) Sylvesa Infotech (P.) Ltd Vs. ACIT reported in [2023] 146 taxmann.com 94 (Orissa High Court); (23) UOI and others Vs. Ashish Agarwal rendered in [Civil Appeal No.3005/2022] (SC); (24) Kamlesh Keswani Vs. ACIT reported in [2023] 451 ITR 153; (25) State of Uttar Pradesh and others Vs. Aryaverth Chawal Udyog and others reported in [2015] 17 SCC 324; (26) Ratan Industries (Pvt.) Ltd Vs. ACIT and another reported in [2006] 148 STC 111 and (27) Ball Aerosol Packaging India (P.) Ltd Vs. ACIT reported in [2023] 146 taxmann.com 193 (Guj HC). 13. Specifically, a reference was made to the decision of the Division Bench of this Court in the case of Deputy/Assistant Commissioner of Income-tax Vs. Financial Software and Systems Pvt Ltd reported in [2022] 145 taxmann.com 37 (SC) and Financial Software and Systems (P) Ltd Vs. Deputy/Assistant Commissioner of Income Tax reported in [2022] 145 taxmann.com 36 (Mad) rendered in the context of re-opening of the Assessment. 14. It is submitted that the aforesaid decision of the Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18.03.2014 of the High Court. The appointed date was 01.04.2014. It is therefore submitted that consequent to the merger of these three companies with BHK Trading Pvt Ltd, the assets of these company as on 31.03.2015 was Rs. 4,94,50,71,538/- as against Rs. 7,85,26,272/- as on 31.03.2014 i.e., one day before the Appointment Date under the Scheme of Amalgamation. 19. It is further submitted that revenue of the company as on 31.03.2015 was Rs. l5,26,34,643/- as against Rs. 23,60,000/- as on 31.03.2014. It is therefore submitted that there was a huge investment of Rs. 51,22,23,588/- in the shares of the listed companies and the shares in the unlisted company amounting to Rs. 10,64,97,947/- from the investments in Mutual funds is Rs. 2,15,58,56,047/-, investment in urban infrastructure OPP Fund is Rs. 7,13,01,600/- investments in fixed maturity plan in Rs. 3,15,00,000/-. There is an investment in bonds and debentures to the tune of Rs. 3,03,64,57,137/-. 20. That apart, it is further submitted that the said companies were dealing with shares, mutual funds, other investments and advancing of loans to various companies in huge amounts and the business activities are done in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. By way of rejoinder, the learned counsel for the petitioner submits that the aforesaid petition has become infructuous in the light of the subsequent development and in view of the pendency of the Writ Petition. Same stands recorded. 25. Arguing further, the learned Senior Standing Counsel for the respondents would submit that the provisions of Section 147 of the Income Tax Act as, 1961 as it stood prior to the period in dispute and during the period in dispute are different. It is therefore submitted that if there are circumstances re-opening of the Assessment on account of income escaping Assessment, a Notice under Section 148A(b) can be issued for the purpose of re-assessment under Section 147 of the Income Tax Act, 1961. 26. It is therefore submitted that if there is an income escaping assessment, the Assessing Officer may subject to the provision of 148 of the Act, issue a notice to a person who has failed to furnish a return of income, report or statement of financial transaction. This Section was introduced by the Finance Act, 2021, and is applicable from 01.04.2021. 27. By way of rejoinder, the learned counsel for the petitioner would submit that an audit me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the partner namely Ms Nina B. Kothari held 25,07,688 preference shares of Rs. 10/- each in the said company prior to its conversion into a Limited Liability Partnership Firm. 35. After, 31.03.2015, but before the conversion of the company into a Limited Liability Partnership Firm on 07.08.2015, the aforesaid preference shares were transferred to the other partner namely BHK Foundation (Discretionary Trust). Ms Nina B. Kothari thus merely held one equity share in the said company, prior to conversion on 07.08.2015. 36. The Trust, thus had 1,99,999 equity shares of Rs 10 each and 25,07,688 preference shares of Rs. 10 each in the company. This aspect was not brought to the notice of the Income Tax Department prior to scrutiny assessment that came to be completed/passed on 27.11.2018. 37. Prime facie , it appears that income had escaped assessment. The exemption that was claimed under section 47 (xiv) of the Income Tax Act, 1961 is available subject to the rider specified therein. The sales turnover or gross receipts from the business in the 3 preceding year prior to the previous year in which the conversion took place should not have been more than Rs. 60,00,000/-. 38. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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