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TMI Blog2025 (4) TMI 1495X X X X Extracts X X X X X X X X Extracts X X X X ..... Dalmia Power Limited is the petitioner in W.P.(MD)No.19826 of 2018. 2.The aforesaid companies had filed their returns of income for the assessment year 2011-2012. They had reported business losses and adjusted their book profits. Following the search conducted by the Income Tax Department under Section 132 of the Income Tax Act, 1961, notice under Section 153A of the Act was issued to M/s.Dalmia Cement (Bharat) Limited (hereinafter referred to as DCBL). DCBL filed reply on 03.10.2013 reiterating the figures set out in their original returns. On 14.10.2013, notice under Section 143(2) of the Act was issued. On the same day, notice under Section 142(1) of the Act along with the questionnaire was issued. The assessee offered its reply which was followed by issuance of show cause notice on 24.10.2013. The assessee filed their reply on 24.01.2014. Thereafter, order under Section 153A r/w Section 143(3) of the Act was passed on 31.03.2014. Challenging the same, the assessee filed an appeal. The appeal was partly allowed and based on the same, demand notice under Section 156 of the Act was issued on 31.03.2014. On 31.07.2015, the appeal order was implemented and the search assessment att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 500/- crores in their returns, the assessments cannot be reopened and allowed the writ petitions. Challenging the same, the department has filed these writ appeals. 5.The learned standing counsel appearing for the department reiterated all the contentions raised in the grounds of appeals. The assessment period relates to the year 2011-12. The normal time limit of four years for reopening the assessment concluded on 31.03.2016. In this case, the re-opening was made on 31.03.2018. According to the learned standing counsel, the case on hand would fall within the extended period of six years since there was failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year. He would submit that reopening is primarily based on the information received subsequently by the assessing officer vide communication from DDIT (Investigation Wing), Delhi on 28.03.2018 informing that the equity investment of Rs. 500/- crores made in DCBL had been bought back for a huge sum of Rs. 1218/- crores, and that this buyback arrangement and the manner in which it has been carried out by creating a shell company furnished prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises and suspicion. According to him, the assessing officer wants to make a roving enquiry. Such a course of action is impermissible (vide Chhugamal Rajpal Vs. S P Chahal 1971 (1) SCC 453). The learned Senior Counsel took us through the reasons given by the department and pointed out that most of them are rank hearsay. He added that though the writ petitioner companies are group companies, they are separate legal entities and that the proceedings cannot be initiated on the group companies in respect of the transactions undertaken by the subsidiary company. In this regard, he relied on the decision reported in (2025) 1 SCC 456 (BRS Ventures Investment Limited Vs. SREI Infrastructure Finance Limited). 8.For each of the propositions canvassed by him, the learned Senior Counsel relied on the precedents of the Hon'ble Supreme Court and the High Court. Some of them are as follows : 1. Calcutta Discount Co.Ltd. Vs. ITO (1961) 41 ITR 191 (SC) 2. CIT, Delhi Vs. Kelvinator India Ltd (2010) 320 ITR 561 (SC) 3. Ganga Saran and Sons Ltd., Vs. ITO (1981) AIR 1363 (SC) 4. ACIT 12(3)(2) Vs. Marico Ltd., (2020) 16 SCC 354 (SC)v 5. Sri Krishna Pvt.Ltd., Etc.Vs.ITO (1996) 221 ITR 538 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or re-computation as specified in sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011. The relevant para reads as follows : - "21.The Company along with Dalmia Bharat Sugar and Industries Limited (formerly known as Dalmia Cement (Bharat) Limited) and Dalmia Bharat Enterprise Limited, the holding company, has entered into definitive agreements, namely, Share Subscription Agreement and Shareholders Agreement on May 7 2010 with KKR Mauritius Cement Investments Limited ("KKR"). As per the definitive agreements, KKR will make fresh equity subscription in the company to the extent of Rs. 7,500 million in multiple tranches and KKR shall be entitled to get equity stake up to 21% of the Company post investments. The company has received Rs. 5,000 million and issued 37,919,005 fully paid up shares of Rs. 10 each at Rs. 131.86 per share constituting 14.99% of post issue capital on September 3, 2010." In the income tax returns filed in Form ITR 6, it had been mentioned that KKR Mauritius Cement Investments Limited is holding beneficial ownership of 14.99% of equity shares. Even their PAN was given as AADCK9761E. When following the search conducted under Section 132 of the Act queries were raised, the assessee replied on 26.10.2013 that KKR Mauritius Cement Investments Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l" facts in the case and the ITO would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under Section 147 of the Act, on receipt of the information subsequently. The subsequent information on the basis of which the ITO acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or non-specific 25. ..... It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .75 crores. The entire arrangement did not appear to be a prudential business deal. DBL was bending backwards to financially favour KKR. The information received by the assessing officer pointed out that the return on investment made by KKR was around 18% compound rate. 18.We wanted to assure ourselves that there was no arbitrary exercise of power by the assessing authority. We thought it fit and appropriate to have a look at undisputed facts that are available in public domain. We noticed that after acquiring 8.45% in DBL, KKR exited by off-loading its shares in the open market and made a huge gain. We can take judicial notice of matters of history. This would include economic and business history also. History need not necessarily hark back to ancient times. Even happenings in the very recent past can also qualify as matters of history for the purpose of Section 57 of the Indian Evidence Act corresponding to Section 52 of Bharatiya Sakshya Adhiniyam. The Hon'ble Supreme Court in Onkar Nath v. Delhi Administration (1977) 2 SCC 611 held that the list of facts mentioned in Section 57 of the Evidence Act of which the court can take judicial notice is not exhaustive. Notorious fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reasonable belief entertained by the assessing officer for issuing notice under Section 148 of the Income Tax Act, 1961. 20.The assessing officer, with the benefit of hindsight, proposes to probe the matter in depth. Of course, quite a few of the reasons set out in the orders impugned in the writ petitions partake the character of market gossip. The Hon'ble Supreme Court in ITO vs. Lakshmani Mewal Das (1976) 103 ITR 437 had held that the expression "reason to believe" does not mean a purely subjective satisfaction on the part of the officer but the reason must be held in good faith and cannot be merely a pretence. Applying the said ratio, we would discount such portions of the reasons as appear to be based on impressions. Even dehors such reasons that may not stand legal scrutiny, there are still reasons left that furnish the basis for taking action under Section 147 of the Act. The Hon'ble Supreme Court in the very same decision had held that the sufficiency of the grounds that induce the assessing officer is not a justiciable issue. 21.We are satisfied that the materials relied on by the assessing officer prima facie indicate that KKR Mauritius Cement Investment L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued under Section 148 of the Act was challenged and the Hon'ble Delhi High Court rejected the challenge as premature, the assessee filed Civil Appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court delineated the procedure to be followed when a notice under Section 148 is issued in the following terms : "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." The statutory provision does not stipulate that at the stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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