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TMI Blog2023 (5) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Sale of shares of two companies was by the promoters, who was the family members. According to the AO he was satisfied that there was insider trading amongst two family members by which the income which had become chargeable to tax was not shown and had escaped the assessment requiring to exercise powers for reopening of the assessment. There was a strong foundation for invoking reassessment. Challenge to the impugned notice u/s 148 issued by the AO to the petitioner to reopen the assessment in respect of the AY stands merit less. Decided against assessee. - R/SPECIAL CIVIL APPLICATION NO. 254 of 2022 - - - Dated:- 5-5-2023 - HONOURABLE MR. JUSTICE N.V. ANJARIA AND HONOURABLE MR. JUSTICE DEVAN M. DESAI Appearance: For the Petitioner(s) No. 1 : Darshan R Patel (8486) For the Respondent(s) No. 1 : Mr. Varun K. Patel (3802) CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE N.V. ANJARIA) Heard learned advocate Mr. Darshan Patel for the petitioner and learned advocate Mr. Varun Patel for the respondent, at length. 2. By filling the present petition under Article 226 of the Constitution, the petitioner has prayed to set aside notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was transferred to Trusts created in the name of (1) Mrugesh Jaykrishna Family Trust-1, (2) Munjal M. Jaykrishna Family Trust, (3) Mrugesh Jaykrishna Family Trust-2 and (4) Gokul M Jaykrishna Family Trust, through bulk deal (insider trading). The beneficiaries of both the Trust appears to be the promoter group itself. The assessee has calculated LTCG of Rs. 59,54,83,421/- on such transfer and claimed u/s 10(38) of the Act. 3.3 Analysing the information collected as above, it was observed by the Assessing Officer inter alia that the assessee had undertaken transactions as per the above details, however, the same were not shown in the return of income. It was concluded that during the previous year relevant to the Assessment Year, the assessee was having income exceeding the taxable limit, however, the same was not reflected in the return of income filed by the assessee. It was stated that in light of the material on record, it was claimed that the assessee had not disclosed the taxable income in the return of income and therefore the income chargeable to tax to the tune of Rs. 86,53,31,770/- escaped the assessment. 3.4 Raising objections to the reasons recorded, the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to reopen the proceedings of assessment was ex facie bad in law, inasmuch as it was based on the incorrect facts. Secondly, it was submitted that what is stated in paragraph 5 of the reasons inter alia that the assessee claimed exemption under section 10(38) of the Act, but not shown the income in the return of income, was incorrect and had no nexus. It was next submitted that figure of Rs. 86,53,31,770/- appeared for the first time in the reasons and nothing was mentioned about the said figure. It was fourthly submitted that reasons contained glaring discrepancies. It was finally submitted that the assessee had not sold any shares but had only purchased shares of M/s. Aksharchem (India) Ltd.. 4.1 What was harped by learned advocate for the petitioner was that the reassessment was founded on wrong facts and misdirected exercise of powers. According to the petitioner, it lacked foundation required in law. A spree of decisions came to be relied on by learned advocate for the petitioner. First amongst them was in Chhugamal Rajpal vs. S. P. Sharma [(1971)79 ITR 603 (SC)], from which paragraph No.5 was pressed into service. Also relied on was the another decision of Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d over to submit the aspect mentioned in the rejoinder. It is noticeable that in the rejoinder in para 2 of the rejoinder affidavit, the petitioner made reference about reassessment proceedings against one of the family members named Mr. Mrugesh Jaykrishna Family Trust-I in whose name the Family Trust was created like done in the name of the petitioner herein. It was avered thus, The Petitioner respectfully states that [ identical reasons, the Respondent reopened the care of Mrugreah Jaykrisna Family Trust -1, which is also challenged the Petitioner before the Hon'ble Gujarat High Court (SCA 3922/2022). In the cass Nrugresh Jaykrishna Family Assessment Order u/s 147 r.w.s. 144B of act was passed on 23/03/2022, wherein Respondent has agreed to the fact that t is no claim of exemption u/s 10(38) for LTCG on sale of shares. The Respondent further observed 'there being no mate available on record for any adverse find no addition/ disallowance Petitioner states that is made'. the Revenue accepted the of the Petit Trust (Mrugresh Jaykrishna Family Trus for which no Affidavit in Reply is filed, however on identical facts in present case, the Respondent wants to t differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. The assessee [i.e., Smt. Paru M Jaykrishna (PAN: ADIRPJ9354P)] has calculated LTCG of Rs. 59,54,83,421/- on such transfer and claimed u/s 10(38) of the Act. 4.3.2 It was further stated in the affidavit that that Assessing Officer after drawing his own inference that the instant assessee, Munjal M. Jaykrishna Family Trust was allotted promoter quota shares of Asahi Songwon Colors Ltd long back. In the Financial Year 2016-2017, it was stated, that the promoters holdings were transferred to various trusts and that the trust created in the name of Munjal M. Jaykrishna Family Trust was transferred Rs. 86,53,31,770/- through bulk deal during the Financial year 2016-2017 relevant to Assessment Year 2017-2018. It was contended that the Assessing Officer observed that the petitioner assessee Munjal M. Jaykrishna Family Trust filed its return of income for the Assessment Year concerned showing the total income of Rs 72,750/- only as state above and claimed Rs. 58,37,478/- as exempt income, which was in the nature of dividend. 4.4 In the rejoinder affidavit, the petitioner reiterated its case to submit that the petitioner has calculated long term capital gains of Rs. 59,54,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form basis for exercise of powers to reopen the assessment by the Assessing Officer was well delineated by the supreme court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers Private Limited [(2008) 14 SCC 208]. It was observed, Section 148 as presently stands is differently couched in language from what was earlier the position. Prior to the substitution by the Direct Tax Laws (Amendment) Act, 1987, the provision read as follows: 148. Issue of notice where income has escaped assessment .(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub- section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub- section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. (para 17) 5.2.1 The supreme court compared position in juxtaposition of section 147 prior to its substitution in the year 1987, Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. (para 19) 5.2.3 In Rajesh Jhaveri Stock Brokers Private Limited (supra), it was explained thus, what could validly confer the jurisdiction on the Assessing Officer to reopen the assessment, by observing further as under, The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumptions of facts made in the notice were erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. (para 3) 5.4 The principles emerge are inter alia that when the Assessing Officer proceeds to exercise his powers to reopen on the basis of reasons which he may have to believe on the basis of facts available with him that the income chargeable to tax had escaped the assessment for the year under consideration, the word reason would imply the justifying facts available with the Assessing Officer. Reason to believe is a cause which may validly weigh with the Assessing Officer to prima facie notice that the income had escaped assessment. When primary facts and on the basis of the primary but cogent facts possessed by the Assessing Officer, he believes that the income had escaped the assessment for the year under consideration, he would be justified in resorting to powers of reassessment to issue notice to the assessee under section 148 of the Act. 5.4.1 It is well settled that at this initial stage, the final ascertainment about the escapment of income is not necessary. What is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their holdings of shares in both the companies through exchange in the Financial Year 2016-2017. The promoters holdings came to be transferred to the different Trusts created in the name of the the family members, which were (i) the petitioner-Mrugesh Jaykrishna Family Trust-1, (ii) Munjal M. Jaykrishna Family Trust, (iii) Mrugesh Jaykrishna Family Trust-2 and (iv) Gokul M. Jaykrishna Family Trust., through bulk deal. 6.2 The contention on the part of the petitioner that figure of Rs. 86,53,31,770/- was mentioned for the first time, does not lead the case of the petitioner anywhere. The said amount is referable to the bulk deal or insider trading resorted to by the assessee and on such basis certain long term capital gains were claimed. The relatibility of the said figure is a matter of further inquiry which could be done only in reassessment proceedings. In paragraph No.5 of the affidavit-in-reply has dealt with this aspect contending, On the basis of such information, the Assessing Officer after drawing his own inference that the instant assessee, Munjal M. Jaykrishna Family Trust was allotted promoter quota shares of Asahi Songwon Colors Ltd. long back. In FY 2016-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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