SISTEMA ASIA FUND PTE LTD vs. ASSISTANT COMMISSIONER OF INCOME TAX

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W.P.(C)-7838/2023HC Delhi2023:DHC:423431 May 20234 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned order dated April 28, 2023, passed under Section 148A(d) of the Income Tax Act, 1961, was erroneous. The court found that the Assessing Officer (AO) had indeed moved away from the allegations initially made in the notice dated March 23, 2023, issued under Section 148A(b). Specifically, the AO's conclusion regarding the applicability of Section 50CA of the Act, based on the absence of a valuation report, was not foreshadowed in the Section 148A(b) notice. Furthermore, the court noted that if the transaction was indeed an investment, the provisions of Section 50CA might not have been applicable in the first place. Consequently, the court set aside the order under Section 148A(d) and the consequential notice under Section 148. The AO was granted liberty to recommence proceedings, provided they conducted an examination based on the allegations originally embedded in the Section 148A(b) notice.

What were the facts?

The petitioner, Sistema Asia Fund Pte Ltd, filed a writ petition challenging an order dated April 28, 2023, passed under Section 148A(d) of the Income Tax Act, 1961, and consequential notices issued under Section 148 and Section 148A(b) of the Act for Assessment Year 2019-20. The challenge was primarily against the Assessing Officer's (AO) deviation from the initial allegations. The notice under Section 148A(b) alleged escaped income due to a share purchase transaction with Lendingkart Technologies Pvt. Ltd. (LTPL) amounting to Rs. 6,78,86,701/-. While the petitioner's explanation for the source of investment was accepted, the AO faulted the petitioner for not providing a share subscription agreement, share certificate, and valuation report. The AO then invoked Section 50CA, which was not part of the original allegation.

What were the issues?

1. Whether the impugned order dated 28.04.2023 passed under Section 148A(d) and the consequential notice dated 28.04.2023 under Section 148 are flawed, given that the Assessing Officer (AO) moved away from the allegations made in the notice dated 23.03.2023 issued under Section 148A(b)? (Question of mixed law and fact, concerning procedural fairness and adherence to statutory provisions). Assessee's contention: The AO erred by introducing a new ground for assessment (Section 50CA) which was not part of the initial notice under Section 148A(b), thereby deviating from the stated allegations. The AO also erroneously concluded that Section 50CA was applicable when the transaction was an investment, not a transfer of shares. Revenue's contention: The revenue, through its counsel, accepted notice and stated that no counter-affidavit was required, indicating they would argue based on the available record. No specific arguments were recorded for the revenue.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 50CA

AI-generated summary — verify with the full judgment below

W.P.(C) 7838/2023 Page 1 of 4

$~110 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision: 31.05.2023

+ W.P.(C) 7838/2023

SISTEMA ASIA FUND PTE LTD

..... Petitioner

Through: Mr Ritesh Bajaj, Adv.

versus

ASSISTANT COMMISSIONER OF INCOME TAX..... Respondent Through: Mr Sunil Agarwal, Sr Standing Counsel with Mr Shivansh Pandya and Mr Utkarsh Tiwari, Advs.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA

[Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J. (ORAL)

CM Appl.30218/2023 1. Allowed, subject to just exceptions. W.P.(C) 7838/2023 & CM Appl.30217/2023 [Application filed on behalf of the petitioner seeking interim relief] 2. Issue notice. 2.1 Mr Sunil Agarwal, learned senior standing counsel, accepts notice on behalf of the respondent/revenue. 3. In view of the directions that we intend to pass, Mr Agarwal says that Digitally Signed By:TARUN RANA Signing Date:22.06.2023 18:16:28 Signature Not Verified

W.P.(C) 7838/2023 Page 2 of 4

no counter-affidavit is required to be filed, and he would argue based on the record presently available with the court. 4. This writ petition concerns Assessment Year (AY) 2019-20. 5. The petitioner has assailed, via the said writ petition, the order dated 28.04.2023 passed under Section 148A(d) of the Income Tax Act, 1961 [in short, “Act”]. 5.1 In addition thereto, a challenge is also laid to the consequential notice of even date, i.e., 28.04.2023 issued under Section 148 of the Act. 5.2 Besides this, the petitioner has also challenged the notice dated 23.03.2023 issued under Section 148A(b) of the Act. 6. Counsel for the petitioner says that the impugned order and consequential notice referred to hereinabove are flawed, as the Assessing Officer (AO) has moved away from the allegation which was made against the petitioner in the notice dated 23.03.2023, issued Section 148A(b) of the Act. 7. A perusal of the said notice shows that it is alleged that income chargeable to tax had escaped assessment, on account of transaction referred to therein. The transaction, which is referred to in the said notice, concerns the purchase of shares by the petitioner, involving a company going by the name, Lendingkart Technologies Pvt. Ltd. [in short, “LTPL”]. 8. The amount which is attributed to this transaction is Rs.6,78,86,701/-. 8.1 A perusal of the order dated 28.04.2023 would show that the petitioner’s explanation with regard to the source of investment was accepted. This is evident upon a plain reading of paragraph 5 of the said order. However, what went against the petitioner is that it had not submitted Digitally Signed By:TARUN RANA Signing Date:22.06.2023 18:16:28 Signature Not Verified

W.P.(C) 7838/2023 Page 3 of 4

the following documents: a copy of the share subscription agreement, a copy of the share certificate issued by LTPL and copy of valuation report on the date of purchase of share. 9. The AO, thus, concluded, in our view erroneously, that in the absence of the valuation report, it could not be determined whether shares were purchased at fair market value, as per the provisions of Section 50CA of the Act, or not. 10. Undoubtedly, this aspect of the matter was never put to the petitioner in the notice issued under Section 148A(b) of the Act. 11. Furthermore, since even according to the respondent/revenue, this was a case where an investment was made and not a transaction involving the transfer of shares, facially, the provisions of Section 50CA of the Act, perhaps, were not applicable. 12. Accordingly, in our view, the best way forward would be to set aside the impugned order dated 28.04.2023 passed under Section 148A(d) of the Act. 12.1 It is ordered accordingly. 13. Resultantly, the consequential notice of even date dated 28.04.2023 will collapse. 14. The AO is, however, given liberty to take next steps in the matter, albeit, as per law. 15. It is made clear that if the AO wishes to recommence the proceeding, he will conduct an examination on the basis of the allegation embedded in the notice issued under Section 148A(b) of the Act. 16. The writ petition is disposed of, in the aforesaid terms. Digitally Signed By:TARUN RANA Signing Date:22.06.2023 18:16:28 Signature Not Verified

W.P.(C) 7838/2023 Page 4 of 4

17.

Parties will act based on the digitally signed copy of the order.

RAJIV SHAKDHER, J

GIRISH KATHPALIA, J

MAY 31, 2023/pmc Digitally Signed By:TARUN RANA Signing Date:22.06.2023 18:16:28 Signature Not Verified

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