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TMI Blog2013 (6) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the transactions amount to a revocable transfer and that the income which would arise should be taxed in the hands of the individual contributors. The reopening of an assessment under Section 148 on the basis of a submission which is raised before the appellate authority by the assessee is clearly impermissible because what Section 147 requires is a formation of a reason to believe by the AO. In the present case, there is clearly a want of compliance with the jurisdictional condition. AO has not formed a reason to believe that income has escaped assessment since the reopening is based purely on a contingency that may arise upon a particular outcome before the appellate tribunal. To accept the contention of the Revenue in the present case would be to allow a reopening of an assessment under Section 148 on the ground that the AO is of the opinion that a contingency may arise in future resulting an escapement of income. That would be wholly impermissible and would amount to a rewriting of the statutory provision. Thus setting aside the notice of reopening. In favour of assessee. - Writ Petition (LODG.) No. 2966 of 2012 - - - Dated:- 14-6-2013 - Dr. D. Y. Chandrachu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner filed a return of income claiming the status of an AOP. Exemption was claimed from income chargeable to tax under Section 10(23FB) on the ground that the income was of a Venture Capital Fund. The Assessing Officer in the order of assessment under Section 143(3) dated 29 December 2009 determined the total income of the Petitioner at Rs.110.76 Crores and denied the exemption under Section 10(23FB) on the ground that the Petitioner was in breach of the SEBI guidelines relating to investment conditions and restrictions on a Venture Capital Fund. The CIT (A) dismissed the appeal and proceedings are pending before the Tribunal. 5. For Assessment Year 2008-09, which is the Assessment Year under consideration the Petitioner had an income of Rs.32.83 Crores. In the computation of income the Petitioner claimed that the contributions by its investors in terms of the trust deed and contribution agreements constituted revocable transfers under the provisions of the Act and hence, the income accruing to the fund was not liable to tax in the hands of the Petitioner, but in the hands of the investors / contributors in proportion to their respective contributions. A similar note was append ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the stand taken by the DHFL Venture Capital Fund during its assessment proceedings that provisions of section 61 to 63 are attracted to the transactions between the contributors and DHFL Venture Capital Fund. In view of the above, the income arising from the contributions made by the contributors to DHFL Venture Capital Fund is taxable in the hand of Body of contributors whose members being companies and individuals is Association of Persons of the contributors if provisions of section 61 to 63 are attracted to the transactions between contributors and DHFL Venture Capital Fund as has been claimed by the DHFL Venture Capital Fund during the assessment proceedings for AY 2008-09 as per letter dated 25.12.2010. Therefore, the income of Rs.32,83,77,906/- arising from investment of contributions of the contributors to DHFL, which has been claimed as exempt in the hands of the DHFL Venture Capital Fund, has to be assessed as income in the hands of the AOP of the contributors of DHFL Venture Capital Fund. However, it is found that no return of income has been filed by such AOP of the contributors of DHFL Venture Capital Fund and therefore, an amount of Rs.32,83,77,906/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on a patent misreading of Clause 15 of the deed of trust. All that Clause 15 postulates is that the contribution of an investor cannot be withdrawn without the consent of 75% of the contributories, but by that itself is not sufficient to hold that the contributories have come together to form an AOP; (iii) For Assessment Year 2009-10 and for Assessment Year 2010-11, the Assessing Officer has held that the trust itself is an AOP and the assessment order for Assessment Year 2010-11 is after the reopening of the assessment for Assessment Year 2008-09 which is the year in question. Even if the Petitioner is held to be an AOP, the provisions of Sections 61 to 63 would be attracted and in a situation where there is a revocable transfer of assets, all income arising to any person is chargeable to income tax as the income of the transferor under Section 61. Hence, even on the basis that the contention of the Revenue to the effect that the Petitioner is an AOP is correct, even so by virtue of the provisions of Section 61, the income would be brought to tax only in the hands of the contributories. 10. On the other hand, counsel appearing on behalf of the Revenue submits that : (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner has a direct and substantial interest in the issues which are raised in these proceedings and in the challenge to the legality of the notice which has been issued under Section 148. 12. During the course of the assessment proceedings for Assessment Year 2008-09 under Section 143(3) the Assessing Officer brought the income of the Petitioner to tax on the basis that the status of the Petitioner is that of an AOP. Though the Assessing Officer was of the view that the income arising to the AOP was by a revocable transfer, the Assessing Officer nonetheless came to the conclusion that the contributories have practically no control over the Petitioner as a result of which the provisions of Sections 61 to 63 were held not to be attracted. In appeal, the Commissioner (Appeals) accepted the case of the Petitioner and came to the conclusion that the income arising to the trust was taxable in the hands of the contributors and not in the hands of the Petitioner since there was a revocable transfer within the meaning of Sections 61 to 63. The correctness of that determination is pending before the Tribunal where the Revenue is in appeal and we must clarify at the outset that we expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieve is if the provisions of Sections 61 to 63 are attracted. It is on this hypothesis that the Assessing Officer proceeds to record that the income of Rs.32.83 Crores arising from the investment of contributions of the contributories which has been claimed as exempt in the hands of the Petitioner has to be assessed as income in the hands of the AOP of the contributors of the Petitioner. Reading the reasons as they stand, it is evident that the Revenue has sought to reopen the assessment in exercise of powers conferred by Section 148 on the hypothesis that should the Tribunal accept the contention of the Petitioner and affirm the view of the Commissioner (Appeals), the income would be exempt in the hands of the Petitioner and in such an eventuality should be brought to tax in the hands of an AOP of the contributors of the Petitioner. 15. The jurisdictional requirement for reopening an assessment under Section 148 is the formation of a reason to believe by the Assessing Officer that income has escaped assessment. The formation of the reason to believe and the existence of that reason must be in the present . Recourse can be taken to the provisions of Section 148 where the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly in Sampath Ayengar's Law of Income Tax (11th edition, Vol. VI, page 9724) : Protective assessment The Assessing Officer may often have to assess the same income in more than one place. Sometimes they may be made by different officers as, for example, where an officer assessing A thinks that certain income belongs to him but another officer assessing B is of the opinion that the income is his. Sometimes the same officer may find that an assessee before him is returning a particular income but is of the opinion that it should be assessed in the hands of a firm or a family and not in the hands of the person who returned it. It has been held that the officer may, when in doubt, Not otherwise : CIT v. Shri Ramchandraji Maharaj Ka Bada Mandir (1988) 73 CTR (MP) 79. to safeguard the interests of the Revenue assess it in more than one hand. Lalji Haridas v. ITO (1961) 43 ITR 387 (SC). But this procedure can be permitted only at the stage of the assessment as, at higher levels, it is possible for the appellate or revisional authority to give a clear finding as to the assessee who is liable to be so assessed leaving the one who is aggrieved to get redress by appropriate proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is sought to be placed on the provisions of Explanation 2(a) to Section 147 is misconceived. Explanation 2 provides a deeming definition of cases where income chargeable to tax has escaped assessment and clause (a) includes a case where no return of income has been furnished by the assessee although his income or the income of any other person in respect of which he is assessable exceeds the maximum amount which is not chargeable to tax. As the reasons which have been disclosed to the assessee would indicate, this is not a case where an assessee has not filed a return of income simplicitor. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of Rs.32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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