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TMI Blog2019 (8) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... This in effect meant that the re-assessment proceedings before the AO did not progress. With the Court disinclined to interfere at this stage for the reasons explained above, it would be open to the two Petitioners to advance all the arguments made by them in these petitions, except the point that the reopening constitutes a change of opinion, before the AO. This would include the point urged by Mr. Chetan Sabharwal that the reopening is bad in law because the reasons do not expressly state that there was a failure on his part to disclose fully and truly all material facts in relation to his assessment. Consequently, this Court would not like to further dwell on the other points urged before this Court on behalf of the Petitioners or express a view one way or the other on them except to hold that at this stage the Court, prima facie, finds no merit in the contention that there is no live nexus between the material relied upon and the reasons to believe that income has escaped assessment in both sets of cases. - W.P. (C) 10897/2015 WITH W.P. (C) 10898/2015, WITH W.P. (C) 11215/2015, AND W.P. (C) 11220/2015 - - - Dated:- 6-8-2019 - S. MURALIDHAR AND TALWANT SINGH JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed (GYS) for sale of 30 lakhs equity shares of M/s. Pawan Impex Private Limited (Pawan Impex) for a consideration of ₹ 97.50 crores. 7.5 lakhs equity shares of Pawan Impex were held by Mr. Chetan Sabharwal and Mr. Nitin Sabharwal. Pursuant thereto each of them received an advance of ₹ 27.50 crores (1/4th Shares of the total of ₹ 110 crores remitted to all share holders) against the sale of equity shares of Pawan Impex after the pledging of 30% equity shares and furnishing of an irrevocable bank guarantee of ₹ 52 Crores. 6. In terms of Article 1.1 read with Article IV of the SPA, the date of completion of the sale transaction (defined under the SPA as closing ) was to occur upon fulfilment of certain conditions by these two Petitioners and the other shareholders (the sellers). Upon such closing, each of the Petitioners along with the other shareholders was to deliver, inter alia, transfer deeds and share certificates including the 30% equity shares originally pledged, to GYS and thereafter the sale transaction would be deemed to complete. 7. It may be noted that the aggregate payment which was agreed to be paid by GYS for the entire shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Software. They were paid an advance of ₹ 22.50 crores after pledging of 40% of the shares of SVIIT Software. Each of them received ₹ 5,62,50,000/- for the respective 2.5 lakhs equity shares. Thereafter GYS also made a further payment of ₹ 18.00 crores in terms of Article 3.2 (b) (i) of the SPA. Each of the Petitioners accordingly received ₹ 10,12,50,000/- (5,62,50,000 + 4,50,00,000) being 1/4th of ₹ 18.00 crores. 11. As far as the SPA concerning the shares of SVIIT Software was concerned, the closing happened in January, 2009. GYS made a payment of ₹ 18.99 crores for repayment of the unsecured loan standing in the books of SVIIT Software. Further an amount of ₹ 60.00 lakhs was to be paid to GYS on account of estimated cost of construction of building as per terms of SPA and certain other expenses such as brokerage etc. were also deductable. Thus the net consideration receivable from GYS for the sale of 10 lakhs share of SVIIT Software was ₹ 40,40,84,770/-. The net proportionate sale consideration for the sale of 2.5 lakhs equity shares owned by each of these Petitioners came to ₹ 10,10,21,192/-. Each of the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mr. Chetan Sabharwal on 20th December, 2010. On 22nd December 2010, the AO framed an assessment under Section 143(3) of the Act qua the return filed by Mr. Chetan Sabharwal. The assessment order was in one page and the material portion is in para 3 which reads as under: After examination of the submissions of the Assessee and discussion with the authorized representative of the Assessee. Assessed at loss of ₹ 90,37,369/- under Section143(3) of the Act. Thus, the return as filed was accepted without change. 17. As far as AY 2009-10 is concerned Mr. Chetan Sabharwal filed his return of income declaring a net income of ₹ 1,17,21,750/-. The exemption claimed of ₹ 31,04,70,241/- and the LTCG of ₹ 3,87,14,131/- was shown in the return. This was set off against the short-term capital loss on sale of quoted share and on sale/redemption of mutual funds. It is stated that LTCG of ₹ 40,38,40,170/- was declared by Mr. Chetan Sabharwal in the return for AY 2009-10 on sale of equity shares of Pawan Impex and SVIIT Software. Of the aforementioned capital gains a sum of ₹ 31,91,50,000/- was deposited in the capital gain account scheme and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this notice was issued after four years after the completion of the respective financial years in which the assessments were complete. This fact is relevant as far as Mr. Chetan Sabharwal is concerned since in his case the assessments for the two AYs were finalized upon scrutiny under Section 143(3) of the Act. However, as already noticed, in the case of Mr. Nitin Sabharwal ,since only intimations were sent under Section 143(1) in respect of the returns filed by him for the two AYs, this aspect is not relevant. 22. Each of the Petitioners applied for inspection of the file which was carried out on 16th April, 2015. Each of the Petitioners on 23rd April, 2015 wrote to the AO stating that return already filed by each of them should be treated as return filed as a response to the notice under Section 148 of the Act. Each of them requested for a copy of the reasons recorded. Reasons for reopening assessments 23. On 24th April, 2015, the reasons recorded by the AO were served on each of the Petitioners. The reasons read as under: REASONS FOR RE-OPENING OF ASSESSMENT FOR A.Y. 2009-10. The letter DG/LKO/D/44Nol.204/2011-12 dated 15- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,00,000 fully paid up equity shares of Pawan Impex Pvt Ltd for a total consideration of ₹ 1,95,00,000/- to GYS Real Estate Pvt. Ltd. Further, vide share purchase agreement dated 19-10-2007 entered between the equity shareholders of SVIIIT Software Pvt. Ltd. and GYS Real Estate Pvt. Ltd. 10,00,000 equity shares were to be sold. After enquiries by the Investigation Unit, NOIDA about the value of shares of M/s Pawan Impex Pvt. Ltd. and SVIIT Software Pvt. Ltd. It has been reported that: It can be prima facie concluded that the value of shares are overvalued to the extent of ₹ 109,80,000/- (in the case of M/s Pawan Impex Pvt. Ltd.) and of ₹ 40,40,28,0001- (in the case of M/s SVIIT Software Pvt. Ltd.) going by the cost of land and building which is much lower than the transaction amount of ₹ 195,00,00,000/- in the case of M/s Pawan Impex Pvt. Ltd. plus ₹ 60,00,00,000/- in the case of M/s SVIIT Software Pvt. Ltd. On further perusal of the information and mentioned above the shares have been overvalued and the capital gains were adjusted in future years and the deductions were also claimed u/s 54 AY 2008-09, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions made and not commented on merits. Learned counsel would be ready for arguments on the issues raised. Learned counsel for the respondent would produce original records on the next date of hearing. Relist on 11.4.2018. 27. At a subsequent hearing on 11th April, 2018, the Court was informed that while the report received from the Investigation Wing, Lucknow was available but the records relating to first assessment under Section 143(3) of the Act were not. The Court then directed that the said record should be available at the time of hearing. 28. On 25th July, 2019, the files of the Department including the report of the Investigation Wing, Lucknow and the assessment records were made available and were perused by the Court. Submissions on behalf of the Petitioners 29. Mr. Ajay Vohra, learned Senior Counsel appearing for the Petitioners submitted that the reopening of the assessments in both sets of cases was bad in law. He submitted that the common ground that would apply to both sets of petitions was that in order to justify the reopening of the assessment, there had to be a rational/intelligible nexus be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that since the sale of shares is completed only during the Financial Year 2008-09 in terms of the SPAs relevant to AY 2009-10. LTCG could be declared only in the return for AY 2009-10. Accordingly, he submitted that there was no question of any failure by Mr. Chetan Sabharwal to disclose any material facts. He questioned the rationale of the AO forming an opinion that income had escaped assessment, when in fact, even assuming the so called over valuation of the shares purchased, the resultant income was in any event disclosed and tax paid thereon. He pointed out that the factum of sale of shares of Pawan Impex and SVIIT Software was not doubted by the AO even in the impugned orders. 34. Mr. Vohra further placed before the Court documents relating to the reopening of assessment in the case of GYS. GYS had also filed three writ petitions in which, notices were issued by this Court on 2nd March, 2016 and in the interim, it was directed that the orders may be passed in the assessment proceedings by the AO which would be subject to the outcome of the writ petition. In the re-assessment proceedings, the income originally declared in the initial returns was accepted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment. Referring to the assessment orders passed by the AO under Section 143 (3) of the Act in the cases of Mr. Chetan Sabharwal, Mr. Hossain pointed out that there is absolutely no discussion in the orders themselves on the aspects now highlighted in the reasons for reopening of the assessments. He placed reliance on the decision in Income Tax Officer Ward No. 16(2) v. Tecspan India Pvt. Ltd. (2016) 6 SCC 685. 38. As far as the scope of the present proceedings are concerned, he placed reliance on the decision in M/s. Phool Chand Bajrangi Lal v. ITO (1993) 4 SCC 77 and submitted that the fresh information in the form of the investigation report clearly demonstrated that the initial disclosure regarding the price of shares was not true and complete and the said report therefore formed a real basis for re-assessment. Reliance was also placed on the decision in Income Tax Officer, Calcutta v. Selected Dalurband Coal Co. Pvt. Ltd. (1997) 10 SCC 68 in support of the contention that the report of the investigation could occasion a reasonable belief that the income had escaped assessment. He submitted that at this stage, the Court would not go into the mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address, itself to a given aspect sought to be examined in the reassessment proceedings. 42. Consequently, even in the cases of Mr. Chetan Sabharwal in view of the fact that the original assessment orders are totally silent on this aspect of the matter, it cannot be said that the reason to believe constitutes a change of opinion . 43. At this juncture it must be stated that on a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to believe as a whole the live l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, where the Court invariably directs as an interim measure that the re-assessment proceedings may go on but no final order should be passed during the pendency of the petition, in the present case the Court ordered a total stay of further proceedings pursuant to the impugned notices dated 31st March 2015. This in effect meant that the re-assessment proceedings before the AO did not progress. 46. With the Court disinclined to interfere at this stage for the reasons explained above, it would be open to the two Petitioners to advance all the arguments made by them in these petitions, except the point that the reopening constitutes a change of opinion, before the AO. This would include the point urged by Mr. Chetan Sabharwal that the reopening is bad in law because the reasons do not expressly state that there was a failure on his part to disclose fully and truly all material facts in relation to his assessment. 47. Consequently, this Court would not like to further dwell on the other points urged before this Court on behalf of the Petitioners or express a view one way or the other on them except to hold that at this stage the Court, prima facie, finds no merit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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