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2023 (1) TMI 323 - HC - Income TaxReopening of assessment u/s 147 - Time limit for notice - period of limitation u/s 149 - failure on the part of the assessee to disclose fully and truly all material facts - HELD THAT - Section 149(1)(a) contemplates that if Section 149(1)(b) does not apply, then the period of limitation is 3 years from the end of the relevant assessment year; in the instant case, the subject assessment year came to an end on 31.03.2015 and the applicable period of limitation is 3 years which expired on 31.03.2018 and consequently, the impugned proceedings initiated pursuant to the Notice dated 30.06.2021 issued under Section 148 is clearly barred by limitation. A perusal of Section 149(1)(b) will indicate that the period of limitation is extendable from 3 years up to 10 years from the end of the relevant assessment year, if the AO has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs more for that year. In the instant case, a perusal of the notices, show cause notice and the impugned order clearly establish that Section 149(1)(b) does not apply, because the allegation of escapement of income is not based on books of account or other documents or evidence in the possession of the A.O; on the contrary, the allegation of escapement of income is based only on the disclosure expressly made by the petitioner - assessee itself of the gift of Wipro shares received by it and the very same information was readily available with the A.O. when the original assessment order dated 28.06.2016 was passed by him. It is significant to note that at the time of passing the said order dated 28.06.2016, the A.O. came to the definite conclusion that Section 56(2)(vii)(c) did not apply insofar as the petitioner was concerned despite having all details, information and material in this regard that was required at that time and based on the very same material, it was impermissible for the A.O. to simply / merely change his mind and initiate reassessment proceedings by issuing a notice dated 30.06.2021; it is therefore clear that in the facts of the instant case, Section 149(1)(b) was not applicable and it was only Section 149(1)(a) that was applicable and consequently, the impugned proceedings pursuant to the Notice dated 30.06.2021 issued beyond he period of limitation, which expired on 31.03.2018 are hopelessly barred by limitation and the impugned proceedings and order deserve to be quashed. While Section 149(1)(a) prior to amendment prescribed period of 4 years, Section 149(1)(b) prior to amendment prescribed a further period of 4 years subject to the conditions stipulated in Section 147 prior to amendment. However, after amendment, while Section 149(1)(a) prescribes a period of three years, Section 149 (1)(b) prescribes a further period beyond 3 years up to 10 years. The proviso to Section 149(1)(b) is a safeguard in favour of the assessee which prevents / prohibits the respondents revenue from invoking the larger / longer period of 10 years in cases of time barred notices which had lapsed on account of the expiry of the period of limitation under Section 149 (1)(b) prior to amendment. It is therefore clear that if the further period of 4 years contemplated in Section 149(1)(b) had expired prior to 01.04.2021, the larger / longer period of 7 years contemplated in Section 149(1)(b) after amendment will not enure to the benefit of the revenue which is barred / prohibited from issuing such notices which are barred by limitation. The mandatory requirements / conditions / ingredients contained in Section 147 have to be complied with by the respondents revenue to issue a notice by placing reliance upon the pre-amended provisions. Coming to the facts of the case on hand, which is in relation to the assessment year 2014-15, the material on record discloses that the aforesaid judgment was also rendered in relation to the same petitioner company under identical and similar circumstances, albeit for the previous assessment year 2013-14 and the same is directly and squarely applicable to the facts of the present case also and consequently, no reliance can be placed upon the proviso to Section 149(1)(b) after amendment by the respondents in order to contend that the notice dated 30.06.2021 was within the prescribed period of limitation. For previous assessment year 2013-14, in the present case, there was a sale of Wipro shares during the assessment year 2014-15 itself and the same was assessed to capital gains tax by the Assessing Officer which clearly indicated that he was fully aware of the market price of the Wipro shares much prior to issuance of the notice dated 30.06.2021 and consequently, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. So also, in the original regular assessment proceedings for the subject assessment year 2014-15, the Assessing Officer had sought for and examined the petitioner share demat account which was provided by the petitioner to the Assessing Officer furnishing all particulars regarding the Wipro shares; this circumstance is also a pointer to the fact that the Assessing Officer had complete and full knowledge of the subject shares and their value at the time of original assessment proceedings and on this score also, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and consequently, the impugned order deserves to be quashed on this ground also.
Issues Involved:
1. Quashing of the impugned order dated 28.07.2022 under Section 148A(d) of the Income Tax Act, 1961. 2. Quashing of the impugned notice dated 28.07.2022 under Section 148 of the Income Tax Act, 1961. 3. Applicability of Section 56(2)(vii)(c) of the Income-tax Act, 1961 to the listed shares of Wipro Ltd. gifted to Pioneer Independent Trust. 4. Quashing of Circular bearing No.6/2012 dated 03.08.2012. 5. Other reliefs deemed fit by the Court. Issue-wise Detailed Analysis: 1. Quashing of the impugned order dated 28.07.2022 under Section 148A(d) of the Income Tax Act, 1961: The petitioner contended that the impugned order was passed despite full disclosure of the gift of Wipro shares during the original assessment. The Assessing Officer (A.O.) had all the necessary information during the original scrutiny assessment under Section 143(3). The petitioner argued that there was no omission or failure to disclose material facts. The Court noted that the impugned proceedings were initiated after the amendment of Sections 147 to 151 by the Finance Act, 2021. The Supreme Court in Union of India & Others vs. Ashish Agarwal had laid down guidelines for such cases. The Court found that the impugned proceedings were barred by limitation as per Section 149(1)(a) since the relevant assessment year ended on 31.03.2015, and the notice was issued on 30.06.2021, beyond the permissible period. 2. Quashing of the impugned notice dated 28.07.2022 under Section 148 of the Income Tax Act, 1961: The petitioner argued that the notice was issued beyond the period of limitation and was based on information already available with the A.O. during the original assessment. The Court observed that the A.O. had assessed the capital gains from the sale of Wipro shares during the original assessment, indicating full knowledge of the shares' market value. The Court held that the notice was barred by limitation under Section 149(1)(a) and quashed the impugned notice. 3. Applicability of Section 56(2)(vii)(c) of the Income-tax Act, 1961 to the listed shares of Wipro Ltd. gifted to Pioneer Independent Trust: The petitioner contended that Section 56(2)(vii)(c) did not apply to the gift of Wipro shares. The A.O. had concluded during the original assessment that this section did not apply. The Court found that the A.O.'s decision was based on full disclosure of all relevant facts by the petitioner. The Court held that it was impermissible for the A.O. to change his mind and initiate reassessment proceedings based on the same material. 4. Quashing of Circular bearing No.6/2012 dated 03.08.2012: The petitioner sought to quash the circular, but the Court did not find it necessary to address this issue separately as the primary reliefs sought were granted. 5. Other reliefs deemed fit by the Court: The Court granted the primary reliefs sought by the petitioner, quashing the impugned order and notice. The Court did not find it necessary to address other reliefs separately. Conclusion: The Court quashed the impugned order dated 28.07.2022 and the impugned notice dated 28.07.2022, holding that the proceedings were barred by limitation and that there was no failure on the part of the petitioner to disclose material facts. The Court did not find it necessary to address other reliefs sought by the petitioner.
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