9911796707
TMI Blog2022 (9) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... above those available in the original records. In this case, the reasons disclose so. The Assessing Authority refers to material received from the DGIT Investigation bringing to his notice information relating to the allegedly offending share allocation and pricing. This constitutes tangible material on the basis of which jurisdiction has been assumed. As in the case of Commissioner of Income Tax. Delhi V. Kelvinator of India [ 2010 (1) TMI 11 - SUPREME COURT] considered the impact of re-assessment proceedings initiated within four years, and upon noticing that there was no new material that had come to the possession of the Department held that the re-assessment was nothing but a review. The assumption of jurisdiction in this case, is based upon additional material over and above what formed part of the records, that have lead to the belief that income has escaped assessment and not a review of existing materials that found part of the assessment records of the petitioners. This issue is answered in favour of the revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... er A in the company was reflected, under the head 'payments'. The specific entry, as aforesaid, reads thus: Cash Flow Statement - FY 2008-09 Opening Balance - CUB - 01.04.2008 ..... Add: Receipts ......... Less: Payments Investment in Sun Direct 26,38,78,950 ....... 6. The petitioners aver that the factum of investment by the petitioners in Sun Direct, and the pricing methodology adopted was well within the knowledge of the assessing authority, as the assessing officer was common to both the petitioners and Sun Direct. In this connection, the petitioners draw attention to Schedule I of the Annual Report of Sun Direct, (page 67 of compilation dated 20.07.2022) that reads as follows: Sun Direct TV (P) Ltd. Schedules to the financial statements for the year ended 31.03.2008 As on March 31, 2008 As on March 31, 2007 Schedule I Authorized Share Capital 380,000,000 Equity Shares of Rs.10/- each (Previous Year 200,000,000 Equity Shares of Rs.10/- each) 3,800,000,000 2,000,000,000 Issued, Subscribed and Paid up Share Capital 198,387,097 (150,000,000) Equity Shares of Rs.10/- each fully paid (During the year the Company had issued 39,677,420 Equity Shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai. He has filed his return of income for the assessment year 2009-10 on 28.07.2009 returning income of Rs.33,11,96,260/-. The case was taken up on scrutiny and an order u/s 143(3) was passed on 30.11.2011 assessing the income at Rs.33,39,11,300/- In the computation of income enclosed by him along with the return of income, he had disclosed the following income, namely: Income from Salary from M/s.Sun TV Network Ltd : 32,41,09,600 Income from House property : 3,37,398 Income from other sources : 67,49,257 Gross Total Income : 33,11,96,255 or 33,11,96,260 In the assessment made u/s 143(3) dated 30.11.2011, an addition of Rs. 27,15,043/- under Income from Other Sources were made. Subsequent to the assessment made on 30.11.2011, it is found that Shri Kalanidhi Maran, the promoter Director has been allotted shares by M/s. Sun Direct TV Pvt. Ltd. at par during the financial year relevant to the Assessment Years 2008- 09 and 2009-10, whereas on the same dates, a company by the name of M/s. South Asia Entertainment Holdings Ltd (SAEHL) has been issued shares at a premium of Rs.69.57/-. The allotment of shareholding by Shri S. Kalanidhi Maran in M/s. Sun Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mium of Rs.69.57 per share works out to Rs.18358,05,855/- during the assessment year 2009-10, Further, the interest of the assessee in M/s. South East Entertainment Holdings Ltd and its Parent company, M/s. Astro All Asia Networks Plc., which are incorporated outside India, is also to be looked into. Thus, the assessee was given excess relief which comes within the purview of clause (i) of Explanation 2 to section 147. The above information has come to the notice subsequent to the original assessment made on 27.12.2010. In view of the above reasons recorded, I am satisfied that there is reason to believe that income chargeable to tax has escaped assessment for A.Y. 2009- 10 in the case of Shri.Kalanidhi Maran to the extent of Rs.183,58,05,855/- Therefore, I am satisfied that this is a fit case for issue of notice u/s 148 of the Act to bring the above escaped income chargeable to tax by reopening the assessment for Assessment Year 2009-10. Accordingly, I am issuing notice u/s 148 of the Income-tax Act, 1961 for AY 2008-09." From the above reasoning, it is clear that there is escapement of Income chargeable to tax for the AY 2009-10 and the notice u/s 148 issued on 28.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.) Total Value Remarks 18.02.2005 5000000 10 0 50000000 Promoter allotment 27.06.2005 (11,80,00,000) 10 0 (1180000000) Transfer of share to wife, another Director 02.04.2008 455836887 10 0 455836870 Allotment without premium* 31.07.2008 34007656 10 0 340076560 Allotment without premium* 30.09.2008 11300294 10 0 113002940 Allotment without premium* M/s. South Asia Entertainment Holdings Ltd was allotted shares on 02.04.2008, 31.07.2008 and on 30.09.2008 at a premium of Rs.69.57 for the allotment of shares of 14704415, 10970211 and 3645256 shares respectively. Since the percentage of shares allotted to M/S.SAEHL is below 26%, it did not have any controlling stake in the Company. The value of the shares allotted to it is at Rs.79.57 per share including premium of Rs.69.57. However, the promoter Director was allotted shares at par. Section 2(24)(iv) of the Income-tax Act, 1961 defines that 'income' includes "the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Premium, if any, Date of allotment and total value of shares. Your case is posted for hearing 13.08.2013 @ 11.30 a.m. You are requested to appear before the undersigned on the hearing date either in person or through an authorised representative authorised for this purpose and produce the details called for. In case of failure, the 147 proceedings for the AY 2009-10 will be finalised based on material available on record as per law. 13. Before proceeding, I must mention that the officer has undeniably erred in stating in the reasons recorded, that the ROI of petitioner B was scrutinized and an order under Section 143(3) passed, as admittedly, only an intimation was issued and the matter rested there. The error has been corrected both in the impugned order and the counter filed. Be that as it may, it is an admitted fact that only an intimation has been issued in the case of Petitioner B and no scrutiny order was passed. Hence nothing turns on this error in the reasons recorded, though it was clearly to have been avoided. 14. The procedure for re-assessments has been settled by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs Income Tax Officer and Ors ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income tax (in short 'JCIT') praying that he issue appropriate directions to the officer for conduct and completion of the proceedings. The JCIT, by his order dated 21.01.2014, took stock of the fact that there had been 'information' on the basis of which the proceedings for re-assessment had been initiated. He thus directed the officer to decide the matter appropriately, taking careful note of the objections filed, and in a fair manner. In conclusion he directs the officer to dispose the objections by way of a speaking order taking note of all decisions cited by the petitioners. 19. Since detailed submissions have been advanced on the merits, I summarise the same below. Though the reasons are identical in the cases of both petitioners, barring the dates and amounts of investment, the stand on merits is different. 20. Section 2(24)(iv) includes within the ambit of 'income', the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such a person, and any sum paid by any such company in respect of any obligation which, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. Both the authorities took into account the "perquisite value" as on the date of exercise of option. 6. Whether tax had to be deducted under Section 192 of the 1961 Act, by the respondent-assessee, on the amount earned by its employees from exercise of stock option granted to them by the company through the Trust, is the question which arises for determination in these civil appeals. 7. In the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax and Ors. MANU/SC/0317/1985 : [1985]155ITR144(SC) this Court held that there are four components of tax. The first component is the character of the imposition, the second is the person on whom the levy is imposed, the third is the rate at which tax is imposed and the fourth is the value to which the rate is applied for computing tax liability. It was further held that if there is ambiguity in any of the four concepts then levy would fail. In this case, we are concerned with the forth concept. There is one more principle which is required to be noted. A benefit/receipt under the 1961 Act must be made taxable before it can be regarded as "income". 8. During the assessment years 1997-98, 1998-99 and 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 1.4.2000. In fact, the later deletion of Clause (iiia) is an indicator of the Ineffective Charge. 25. They also refer to the judgment in the case of Additional Commissioner of Income Tax V. Bharath V. Patel ((2018 15 SCC 670) wherein the Hon'ble Supreme Court has considered the meaning and import of the terms 'benefit' and 'perquisite'. Paragraphs 21 and 22 are relied upon, extracted below: 21. Alternatively, the Revenue also contended that the case of the Respondent shall come within the ambit of the 28(iv) of the IT Act. At this juncture, we deem it appropriate, for the sake of convenience, to refer Section 28(iv) of the IT Act which is reproduced herein below: 28. Profits and gains of business or profession.-The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession"- (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. 22.On a first look of the said provision, it is apparent that such benefit or perquisite shall have arisen from the business activities or profession whereas in the instant case there is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable property) or fair market value (for asset being a movable property) as the case may be. 24.7 Applicability - These amendments have been made applicable with effect from 1st October, 2009 and will accordingly apply for transactions undertaken on or after such date.' 29. According to the petitioner, it is in the background of this amendment that the impugned proceedings have been initiated, albeit misconceived as the amendment to Section 2(xv) and 56(2)(vii), if at all applicable would only be with effect from 01.10.2009, in respect of transactions undertaken on or after the aforesaid date. Since the transactions in the present case are long prior to the effective date of 01.10.2009, the provision and consequently, its impact, would have no relevance to her case. 30. Petitioners also submit that that there has been no re-assessment in the cases of other similarly placed assesses who had engaged in identical transactions. Hence they allege that they were being singled out for differential treatment. In the objections to assumption of jurisdiction, petitioners have enumerated instances where shares were allotted at par to the promoters and at a premium to overseas investors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of ACIT V. Rajesh Jhaveri Stock Brokers (P) Ltd. (161 Taxmann 316) and Deputy Commissioner of Income Tax V. Zuari Estate Development and Investment Co. Limited (63 Taxmann.com 177) in this regard. 36. As regards the merits, the respondents would argue that Section 2(24)(xv) read with Section 56(2)(vii) would apply only to income under the head 'other sources', whereas in the present case, the provision invoked is 2(24)(iv), that deals with 'salary'. Hence, these arguments have no merit whatsoever. In any event, all energies of the revenue are expended on the challenge to the assumption of jurisdiction and the submissions on merits are addressed only peripherally. 37. The respondents would reiterate that the merits of the matter are at large, seeing as the challenge is now to be tested and decided only in the context of assumption of jurisdiction and no further. To this, Mr.Somayaji would retort that the question of jurisdiction should be seen contextually, taking note of the merits as well. While one facet of jurisdiction would flow from the specific statutory conditions, another facet of jurisdiction hinges upon the merits of the matter as well, as there would be no avenue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned has filed a return under Section 139 and such return has been scrutinized by way of an order of assessment, it is incumbent upon the Assessing Officer to establish and satisfy certain pre-conditions prior to assuming jurisdiction. 43. The impugned proceedings in both cases, have been initiated within a period of four years and there is hence, no need to traverse to the proviso or to the statutory conditions set out thereunder. That apart, the assessment of petitioner B has been completed only by way of an intimation and has not been selected for scrutiny. Thus, in the case of petitioner B, there is very little that stands in the way of the Income Tax Department initiating proceedings for a reassessment. 44. Needless to state, though the reasons recorded must stand prima facie scrutiny that they are not apparently arbitrary or illegal, Courts do not traverse much into this arena as it normally considered to be beyond the pan of preliminary judicial scrutiny, and falling within the realm of subjective satisfaction of the officer. This test will thus be restricted to an overall and prima facie evaluation of the reasons, only to determine if arbitrariness, illegality or irrationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has triggered the reassessment and thus there is no independent 'reason to believe' or belief on the part of the assessing officer to have commenced the impugned proceedings. This argument is misconceived for the reason that while it is the communication of the DGIT that constitutes new and tangible information conveyed to the assessing officer, the reasons recorded disclose the officer's belief that such information indicates escapement of income, prima facie. In my considered view, this would suffice for purposes of initiation of proceedings. 49. In the cases of Rajesh Jhaveri Stock Brokers (supra) and Zuari International (supra), the Hon'ble Supreme Court had had occasion to deal with a similar set of facts as arising in this matter. Proceedings for reassessment had been initiated beyond a period of four years but within six years in the former matter, whereas in the latter case, proceedings had been initiated within four years. 50. The relevant paragraphs in the aforesaid judgments are as follows: In the case of Rajesh Jhaveri: '. . . . 16.Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.' In the case of Zuari: '. . . . 2. After going through the detailed order passed by the High Court, we find that the main issue which is involved in this case is not at all addressed by the High Court. A contention was taken by the appellant-Department to the effect that since the assessee's return was accepted under Section 143(1) of the Income Tax Act, there was no question of "change of opinion" inasmuch as while accepting the return under the aforesaid p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgments of the Hon'ble Supreme Court supra, order dated 27.01.2014 challenged in W.P.No.3277 of 2014 is confirmed and this writ petition is dismissed. 52. In the case of petitioner A, facts in relation to the allegedly offending transaction remain the same, barring differences in dates of share allotment, that are immaterial to decide the question of assumption of jurisdiction. I hence desist from referring to the same. In any event, the reasons for re-assessment in both the cases reveal clearly the specific details of the allegedly offending transactions and may be referred to, for clarity in this context. I leave it at that in the interests of brevity and for the reasons as above. 53. The impugned proceedings in the case of petitioner A were originally completed under scrutiny and this constitutes the sheet anchor of his argument. The re-assessment has been initiated just three days shy of the completion of four years, on 28.03.2013. The case of petitioner A would thus have to be tested in the context of whether the impugned proceedings constitute a review, impermissible in law. 54. The reasons disclose the receipt of information that was hitherto unavailable with the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased upon new material. The critical test is therefore as to whether the Department had in its possession any material over and above those available in the original records. 59. In this case, the reasons disclose so. The Assessing Authority refers to material received from the DGIT Investigation bringing to his notice information relating to the allegedly offending share allocation and pricing. This constitutes tangible material on the basis of which jurisdiction has been assumed. The Hon'ble Supreme Court in the case of Commissioner of Income Tax. Delhi V. Kelvinator of India (320 ITR 561), considered the impact of re-assessment proceedings initiated within four years, and upon noticing that there was no new material that had come to the possession of the Department held that the re-assessment was nothing but a review. 60. At paragraph 6, the Bench states as follows: 6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal error, that goes to the root of the matter to invalidate the jurisdiction assumed. 63. This is not a matter where I would conclude so. The merits of the matter involve interpretation of the statutory provisions cited and careful study of the judicial precedents relied upon. In my view, this is a matter for the assessing authority to decide, after hearing the petitioners, bearing note of the decisions cited. 64. Though I have, in the interests of completion of the narration recorded the submissions of the parties on the merits of the proposed addition, in light of my decision in the context of assumption of jurisdiction, it would be inappropriate to render an observation or finding in regard to the merits in these proceedings and hence, I desist. 65. The impugned orders are upheld and as a consequence, respondents will proceed with the re-assessment on merits. It is made clear that all arguments and defences as available to the petitioners may be advanced, barring that of assumption to jurisdiction. Seeing as the impugned proceedings relate to AY 2008-09 and 2009-10, proceedings shall be completed within a period of sixteen weeks from date of issuance of certified copy of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
