2013 (4) TMI 367 - HC - Income Tax

Notice U/s 148 of the Income Tax Act, 196 - Exemption of towards long term capital gain U/s 10(23g) of the Income Tax Act, 1961 - Approval for claiming the exemption was not received from the Government - The assessee company has furnished wrong evidence as the name of the assessee company appears on the certificate of M/s. RPG Cellular Services Ltd and not RPG Cellular Investment and Holding Pvt Ltd - Held that - In the present case, this has reference to the investee company which is M/s. RPG Cellular Services Limited. Therefore, the respondents were wrong in requiring the petitioner to furnish an approval with regard to the petitioner company, which is the investor company. Insofar as the investee company is concerned, the petitioner had already placed on record an approval under Section 10(23G) dated 18.11.2004 In the aforesaid circumstances, there is absolutely no reason for reopening the assessment under Section 147 of the said Act. The purported reason for re-opening does not exist. Consequently, we set aside and quash the notice dated 30.03.2011 as also the order dated 21.11.2011 - Decided in favor of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act for re-opening assessment for the assessment year 2004-05 based on alleged income escaping assessment under Section 147.

Analysis:
The writ petition challenges a notice issued under Section 148 of the Income Tax Act for re-opening the assessment of the petitioner for the assessment year 2004-05. The notice was based on an allegation that income had escaped assessment within the meaning of Section 147 of the said Act. The reason for initiating the proceedings under Section 148 was recorded on 28.03.2011, highlighting an alleged underassessment of income due to a claimed exemption without proper approval. The petitioner objected to the proposed reassessment proceedings, leading to an order dated 21.11.2011 by the Deputy Commissioner of Income Tax, which was also challenged in the petition.

The petitioner argued that the reason for initiating the re-assessment proceedings was invalid, as the approval required for exemption under Section 10(23G) pertained to the investee company, not the investor company. The investee company had obtained the necessary approval, as evidenced by notifications from the Central Government. The court agreed with the petitioner's contention, emphasizing that the approval and certificate required for exemption under Section 10(23G) should refer to the investee company, as per the relevant provisions of the Income Tax Act and Rules.

The court highlighted the provisions of Section 10(23G) and Rule 2E of the Income Tax Rules, emphasizing that the approval by the Central Government is specifically for the enterprise wholly engaged in the eligible business, in this case, the investee company. The court noted that the petitioner had already provided the necessary approvals related to the investee company, rendering the re-opening of assessment unnecessary and invalid. Consequently, the court set aside and quashed the notice dated 30.03.2011 and the order dated 21.11.2011, allowing the writ petition with no order as to costs.