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TMI Blog2021 (5) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of Petitioner recorded on 14.12.2017 at the time of assessment under section 131, nowhere suggests any incriminating material or admission of purported manipulation/rigging of scrips of Lifeline Drugs except saying that he had purchased the shares on advice of his brother nor it is elicited that the Petitioner had any knowledge of penny stock company, its financial position or about the activities of the company. In the scenario, the allegation that the assessee in collusion with the parties who had rigged the prices of shares artificially by manipulation and thereby introduced the amount received in the guise of LTCG/STCG is rather conjecturous. Nowhere in the statements recorded, referred to in the assessment order is there any allegation that Petitioner was one of the parties that had booked any artificial gains. There is no allegation that any incriminating material belonging to Petitioner was obtained in the course of the search. The assessment therefore does not appear to be on the basis of search initiated under Section 132, or requisitions made under Section 132A of the Income-tax Act. Having regard to aforesaid, it is difficult to agree with the submissions made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey action under Section 133A of the Income Tax Act on the premises of M/s. Gateway Financial Service Limited and Korp Securities Limited where also statements of Directors were recorded. By an Order dated 18th February 2019 under Section 154 of the Income-tax Act, the addition under Section 68 of the Income-tax Act was revised to ₹ 5,87,95,055/- .Aggrieved by both the aforesaid orders, petitioner filed appeals to the Commissioner of Incometax (Appeals). 3. While the aforesaid appeals were pending, the Direct TaxVivad Se Vishwas Act, 2020 ( DTVSV Act ) received the assent of the President of India on March 17, 2020, giving an option to the tax payers to settle their income tax disputes by making a declaration to the designated authority and paying varying percentages of the disputed tax as specified under Section 3 of the DTVSV Act. On 18th March 2020, the Direct Tax Vivad se Vishwas Rules, 2020 (the DTVSV Rules ) were notified under Section 12 of the DTVSV Act. On 22nd April 2020, respondent No.2 Central Board of Direct Taxes ( CBDT ) issued Circular No.9 of 2020 under Sections 10 and 11 of the DTVSV Act clarifying certain aspects of the DTVSV Act in the form of answers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Act and are therefore to be ignored. 7. Mr. Pardiwala, learned Senior Counsel for Petitioner, submits that in case of Petitioner for Assessment Year 2015-16, assessment has not been made on the basis of any search but the addition was made only on the basis of certain information obtained in the course of a search conducted on the premises of other entities. He submits that Petitioner has not directly been subjected to any search. Drawing attention of this Court to Section 3 of the DTVSV Act, he submits that sub-clause (a) is applicable to the case of petitioner as the tax arrear is the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax and therefore, the amount payable by the Petitioner would be the amount of the disputed tax. He submits that only in a case as contained in sub-clause (b) of Section 3, where the tax arrears include tax, interest or penalty determined in any assessment on the basis of search under Section 132 or Section 132A of the Income-tax Act, only then the amount payable under the DTVSV Act would be 125% of the disputed tax and in no other case. He refers to F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order, Respondent No.1 himself holds that the case of Petitioner is not a search case but contradicts himself in determining the amount payable as if the case of Petitioner was a search case and is resorting to approbating and reprobating at the same time, which cannot be permitted in law. 12. Mr.Pardiwala also submits that to interpret the assessment order, such that the case of the assessee would be search case even though neither any such search has been conducted on the assessee nor there has been any direct reference of the assessee s involvement in the findings of the investigation would lead to an absurd situation where every shareholder or person involved in the transaction of M/s. Lifeline Drugs would have to be treated as search case which is not the intention of the DTVSV Act. The Assessing Officer has noted that there are 84 such companies where allegedly, artificial capital gains have been booked. He submits that since these are listed companies having thousands of investors and if the interpretation of Respondent No.1 is accepted, it would mean that the assessment of all such hundreds of thousands of assessees would be deemed to be a search assessment, a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of May of 2003. He submits that firstly no search has been initiated in the case of Petitioner, secondly, the dates of the reports, statements with respect to the purported investigation referred to in the Assessment Order are post May, 2003. He submits that therefore the said provisions do not apply to the Petitioner. 16. Learned senior counsel Mr.Pardiwala has also drawn our attention to the assessment order dated 22nd December 2017 in support of his contentions. He submits that a plain reading of the assessment order suggests that the case of petitioner was selected for scrutiny under CASS selection and notice under section 143(2) of the Income Tax Act as well as further notice under section 129/142(1) of the Income Tax Act were issued to petitioner. He submits that even the sections and sub sections under which the assessment is made refers only to section 143(3) of the Income Tax Act. No where the assessment order suggests that the said assessment order is pursuant to or read with the provisions of the search and seizure contained in Chapter XIV-B of the Income Tax Act where the special procedure for assessment of search case is prescribed. 17. Referring to paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there. The same goes with paragraph 7(C) which refers to survey action and not search conducted in the premises of M/s.Gateway Financial Services Limited in which the statement of Praveen Kr Agarwal Director has been recorded. Even here there is no mention of petitioner. The same is with paragraph 7(D) where the survey action and not search was conducted under section 133 in the premises of Korp Securities Limited and in which the statement of Anuj Agarwal is recorded. Even here the name of petitioner does not figure. Learned senior counsel refers to paragraphs 7.4 and 7.5 to submit that the department has not conducted its own investigation and statedly only on the basis of circumstantial evidences of survey findings on all the brokers/agents, SEBI and NSE findings and purportedly on applying the test of human probabilities has stated that the price hike in the shares of Lifeline Drugs is a pre planned activity. He submits that the entire assessment order is on the basis of study and analysis of financials of Lifeline Drugs and Pharma Limited, share trading pattern of the petitioners, investments, deductions on the basis of SEBI orders, analysis and circumstantial evidence, surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years preceding the assessment year of search (i.e the year in which such seized asset/ books/ documents etc. are handed over to the AO of assessee) and relevant assessment years is framed under section 153C read with section 153A of the Act. In any other case, the assessment is framed either under section 143(3) or section 147 of the Act depending on the time elapsed from the end of the relevant assessment year. Thus, the phrase `on the basis of search used in the DTVSV Act has a broad connotation and covers all assessment orders. The principle of equity demands that similarly placed cases should be treated in a similar manner. It cannot be argued that a person whose assessment is framed under section 153C of the Income Tax Act on the basis of information contained in seized assets pertaining to him should be treated differently from a person in whose case information emanates from search but he is not covered by the provisions of section 153C of the Act. In petitioner s case, the basis for assessment was information emanating from a search conducted by the Directorate of Income Tax (Investigation), Kolkata. Had the assessment not been based on information emanating from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot allowed. Since, these transactions are not treated as genuine and not resulting in a genuine capital gains, hence, he sale proceeds received by the assessee of ₹ 5.87,95,055/- on shares of Lifeline Drug is treated as unexplained taxable income earned during the year and accordingly, added under section 68 of the I.T.Act,1961 to the total income of the assessee during the relevant year under consideration. Further, an amount of ₹ 11,75,901/- i.e 2% of ₹ 5,87,95,055/- (commission paid to the entry provider/operator) is being added to the total income of the assessee u/s 69C of IT Act,1961 on account of unexplained expenditure. Penalty proceeding u/s.271(1)(c) are separately initiated for furnishing inaccurate particulars of income leading to evasion of tax. 24. With reference to circular No.4 of 2021, revenue has tendered a note submitting as under : A further clarification dated 23.3.2021 was issued by CBDT vide Circular No.4/20-21. Vide paragraph 4 of the circular, the CBDT has clarified that a `search case means an assessment or reassessment made under sections 143(3)/ 144/ 147/ 153A/ 158BC of the Income Tax Act in the case of a person referred to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DTVSV act are set out as under: Over the years, the pendency of appeals filed by taxpayers as well as Government has increased due to the fact that the number of appeals that are filed is much higher than the number of appeals that are disposed. As a result, a huge amount of disputed tax arrears is locked-up in these appeals. As on the 30th November, 2019, the amount of disputed direct tax arrears is ₹ 9.32 lakh crores. Considering that the actual direct tax collection in the financial year 201819 was ₹ 11.37 lakh crores, the disputed tax arrears constitute nearly one year direct tax collection. 2 Tax disputes consume copious amount of time, energy and resources both on the part of the Government as well as taxpayers. Moreover, they also deprive the Government of the timely collection of revenue. Therefore, there is an urgent need to provide for resolution of pending tax disputes. This will not only benefit the Government by generating timely revenue but also the taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities. 3 It is, therefore, proposed to introduce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the sake of convenience, section 3 Of the DTVSV Act is quoted as under : 3:- Amount payable by declarant:- Subject to the provisions of this Act, where a declarant files under the provisions of this Act on or before the last date, a declaration to the designated authority in accordance with the provisions of section 4 in respect of tax arrear, then, notwithstanding anything contained in the Income-tax Act or any other law for the time being in force, the amount payable by the declarant under this Act shall be as under, namely:- Sl. No. Nature of tax arrear Amount payable under this Act on or before 31 st day of March, 2020 Amount payable under this Act on or after the 1 st day of April, 2020 but on or before the last date. (a) Where the tax arrear is the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax. Amount of the disputed tax The aggregate of the amount of disputed tax and ten per cent of disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be one-half of the amount in the table above calculated on such issue, in such manner as may be prescribed: Provided also that in a case where an appeal is filed by the appellant on any issue before the Income-tax Appellate Tribunal on which he has already got a decisions in his favour from the High Court (where the decision on such issue is not reversed by the Supreme Court), the amount payable shall be one-half of the amount in the table above calculated on such issue, in such manner as may be prescribed. According to the said section, where a declarant files a declaration to the designated authority in accordance with section 4 in respect of tax arrear, then, the amount payable by the declarant under the DTVSV Act shall be amount of the disputed tax where the tax arrear is the aggregate amount of disputed tax, interest and penalty on such disputed tax. In other words in such a case the amount payable would be 100% percent of the disputed tax declared. And in case, where tax arrear includes tax interest or penalty determined in any assessment on the basis of search under section 132 or section 132 A of the Income Tax Act, the amount payable would be the aggregate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t based on the search executed in some other taxpayer s case, it is to be considered as a search case under Vivad Se Vishwas. 4. Several representations have been received seeking further clarity with regard to the classification of a case as a search case for the purposes of Vivad Se Vishwas. The matter has been examined. In order to remove any uncertainty in this regard, and in exercise of powers under section 10 and 11 of Vivad se Vishwas, it is hereby clarified that a search case means an assessment or reassessment made under sections 143(3) / 144 / 147 / 153A / 153C/ 158BC of the Income-tax Act in the case of a person referred to in section 153A or section 153C or section 158BC or section 158BD of the Income-tax Act on the basis of search initiated under section 132, or requisition made under section 132A of the Incometax Act. The FAQ no.70 of circular 21/2020 stands modified to this extent. It is to be noted that the aforesaid clarification with respect to FAQ No. 70 has been issued after the petition had been filed. It clarifies that a search case means an assessment or reassessment made under Section 143(3)/144/147/153A/153C/158BC of the Income-tax Act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years [and for the relevant assessment year or years]: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [and for the relevant assessment year or years] [referred to in this sub-section] pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate: [Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made [and for the relevant assessment year or years] : ] [Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51 and Section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in Section 153-A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of Section 153-A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of Section 153-A] : ] [P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply where a search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132A after the 31st day of May of 2003. The dates of the reports, searches/ surveys, statements of persons with respect to the investigation referred to in the Assessment Order are all post May, 2003. It is not the case of the Revenue that action pursuant to sections 153A or 153C had been initiated in the case of petitioner. These facts are not disputed. Therefore, in our considered view, this criteria no. (ii) necessary for a case to be search case is not satisfied. 37. Let us examine criteria no. (iii) i.e whether the assessment is on the basis of search initiated under Section 132, or requisition etc. made under Section 132A of the Income-tax Act. Admittedly, no search has been initiated in the case of Petitioner. Assessment order dated 22nd December 2017 suggests that the case of petitioner was selected for scrutiny under CASS selection and notices under the Income Tax Act were issued to petitioner not pursuant to any search under section 132 or requisition under section 132A. Assessment refers only to section 143(3) of the Income Tax Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner. 39. The above referred circulars have been issued under section 10 and 11 of the DTVSV act. For the sake of convenience, the said sections are quoted as under: 10.(1) The Central Board of Direct Taxes may, from time to time, issue such directions or orders to the income-tax authorities, as it may deem fit: Provided that no direction or order shall be issued so as to require any designated authority to dispose of a particular case in a particular manner. (2) Without prejudice to the generality of the foregoing power, the said Board may, if it considers necessary or expedient so to do, for the purpose of this Act, including collection of revenue, issue from time to time, general or special orders in respect of any class of cases, setting forth directions or instructions as to the guidelines, principles or procedures to be followed by the authorities in any work relating to this Act, including collection of revenue and issue such order, if the Board is of the opinion that it is necessary in the public interest so to do. 11. (I) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, not inconsist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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