ACIT,, CHENNAI vs. SRI. K.SRIKANTH,, CHENNAI

No.2866/2018, vide order dated 15.02.2019. The ld.CIT-DR also relied upon decision of the Hon’ble Delhi High Court in the case of Consolidated Photo and Finvest v. ACIT reported in (2006) 281 ITR 394(Delhi) The learned CIT-DR summarized his contention as to validity of reopening of the concluded assessment, as under: a.The assessee has not furnished any material before AO, wherein the AO could come to know whether the assessee has received non- compete fees or garnishee payments were made by the assessee.

Therefore, he relied upon the decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) and Calcutta Discount Company Limited v. ITO reported in (1961) 41 ITR

191(SC) and submitted that key ingredients for invoking provisions of Sec.147 are fulfilled in the instant case and hence reopening of the concluded assessment be upheld .

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 51 -: b. It was also submitted by learned CIT-DR that the material with AO was sufficient to reopen the concluded assessment u/s 147 of the 1961 Act . The learned CIT-DR relied upon decision of Hon’ble

Delhi High Court in the case of CIT v. Orient Craft Limited reported in (2013) 354 ITR 536(Del. HC) and submitted that there is a requirement of having tangible material to come to conclusion that income of the assessee has escaped assessment and there is no requirement of having fresh material to reopen the concluded assessment u/s 147 of the 1961 Act. He also relied upon decision(s) of Hon’ble Madras High Court in the case of Mrs. A. Sridevi(supra) and also in the case of Jayaram Paper Mills Pvt. Ltd.(supra) and submitted that if the assessee has made claim which is not supported by material , then AO can make re-assessment. The learned CIT-DR would submit that decision(s) of Hon’ble Madras

High Court in the cases of TANMAC India v. DCIT reported in (2017)78 taxmann.com 155(Mad. HC) and also decision in the case of Tenzing Match Works v. DCIT in TCA No. 702/2009 be not taken into consideration.

The learned CIT-DR would submit that original return of income was filed by assessee on 28th March, 2002. The learned CIT-DR submitted that return of income was originally processed u/s.143(1) of the Act on 26th March 2003 and reopening of the concluded assessment was done u/s 147 of the 1961 Act, vide notice dated 30.03.2006 issued u/s 148 of the 1961

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Act. Our attention was drawn to Page Nos.19 & 20 of the Paper Book Volume-1, wherein the aforesaid notice is placed. The learned CIT-DR would also draw our attention to various orders passed by Hon’ble Madras High Court in writ petition file by assessee challenging reopening of the concluded assessment. We have already referred to these orders in the preceding para’s of this order and for sake of brevity they are not repeated. It is claimed by learned CIT-DR that in the return filed in pursuance to notice issued u/s 148 of the 1961 Act, the assessee is claiming higher exemption than what was claimed by it earlier in the original return of income filed with the Revenue. It was submitted that proceedings u/s 147/148 are for the benefit of Revenue and the assessee cannot now challenge reopening of the assessment u/s 148 of the 1961 Act. It was submitted that the assessee is indulging in approbation and reprobation at the same time which is not permissible. It was submitted by learned CIT-DR that the assessee can claim deduction for non recovery of dues of Rs. 3 Crs. in subsequent years but the assessee cannot challenge the proceedings u/s.148 of the Act. The Ld.CIT-DR submitted on the merits of the issue that the assessee has claimed garnishee deduction on account of payments made to ‘Indian Bank’ . Our attention was drawn to re-assessment order passed by the AO and it was submitted that the assessee infact received the amount and then it was paid to the banker namely ‘Indian Bank’ , hence there is no diversion of income by overriding title. Our attention was also drawn to the appellate order

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 53 -: passed by ld. CIT(A). It was submitted by learned CIT-DR that the shares were not pledged with ‘Indian Bank’ but since ‘Indian Bank’ came to know about the sales of shares by assessee to Pentamedia Group of Concerns through media reports and hence the said ‘Indian Bank’ stepped in to protect its interest. It was submitted that there was no overriding title over the shares as the shares were never pledged with the bank and overriding title is where the property is encumbered. It was submitted that the assessee namely Mr. K. Srikanth was only guarantor for certain loans availed by ‘Aditya Leather Exports Private Limited’ and to recover their money from the said ‘Aditya Leather Exports Private Limited’, the bank namely ‘Indian Bank’ issued garnishee notice and the assessee was merely guarantor and the shares were never in the picture when the assessee stood guarantor. It was submitted by learned CIT-DR that it was a liability of the assessee to repay the loans availed by the said ‘Aditya Leather Exports Private Limited’ as the assessee was guarantor , and since the assessee was selling the shares of ‘Kris Sriknanth Sports Entertainment Private Limited’, the assessee entered into deal with ‘Indian Bank’ to settle the bank loan, for which the assessee paid Rs. 4.25 Crores to Bank. . The learned CIT-DR submitted that this settlement will not impinge upon the sale consideration as the shares were not carrying any obligation to be discharged. It was submitted that Garnishee has come at a later date only when ‘Indian Bank’ came to know that the assessee is selling his shares. It was submitted by learned CIT-DR that the title of the share was perfect with Mr. K Srikanth(assessee) and/or minor

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 54 -: sons. Our attention was drawn by learned CIT-DR to Hon’ble DRT Order of 2001 which is placed in Page No.125-132 of the Paper Book and was submitted that compromise petition was filed and shares were not impugned by any of the proceedings . It was submitted that the money was received by the assessee and then discharged to the bank. It was submitted that memo of compromise was entered into with Indian Bank, which was settled out of Court, and there was no order of Court of garnishee and it was settlement out of court entered into by assessee with the ‘Indian bank’. It was submitted by learned CIT-DR that there is no garnishee order of court but rather it was only a threat of garnishee . At this stage learned counsel for the assessee placed on record letter in File No. 2/5/2016-Recovery , issued by Government of India , Ministry of Finance, Department of Financial Services and contended that all properties of guarantor is subject to charge and the DRT can order for attachment and sale of such property u/s 19(12) to (18) of the RDDB & FI Act 1993 and prayers were made to allow deduction ( the said letter is placed in file) . The Ld. CIT- DR drew our attention to Para No.7.3 of the appellate order passed by Ld.CIT(A) and submitted that there were no encumbrance on sale of shares. It was submitted that learned CIT(A) has clearly held that decision of Hon’ble Madras High Court in the case of CIT v. Bradford Trading Co. Private Limited, reported in 261 ITR 222 shall not be applicable as facts in that case were different. It was submitted that garnishee application was to recover the amount due to the bank and rather it is application of income and not diversion of income by ITA No.307/Chny/2010 & & 1016/Chny/2012 & 55 -: overriding title. The learned CIT-DR relied upon decision of Hon’ble Supreme Court in the case of CIT v. Sitaldas Tirathdas reported in (1961)41 ITR 367(SC) and submitted that there were no diversion of income by overriding title rather it was only application of income. The learned CIT-DR would also draw our attention to provisions of Section 48(1) of the 1961 Act and submitted that deduction from capital gains can only be allowed when the amount is incurred wholly and exclusively in connection with transfer of shares. It was submitted by learned CIT-DR that the decision of Hon’ble Madras High Court in the case of Bradford Trading Company Private Limited(supra) is different and not applicable to the facts of the case in the instant case. It was submitted that approbation and reprobation is not allowed as in the original return of income filed with the department , the assessee has declared sale consideration to the tune of Rs. 15 crores while it was claimed at Rs. 12 crores in the return of income pursuant to orders passed by Hon’ble Madras High Court in writ proceedings. It was submitted that sale consideration was not considered at Rs. 15 crores by the AO but was considered at Rs. 12 crores and hence learned CIT had rightly invoked proceedings u/s 263 of the 1961 Act and brought to tax remaining Rs. 3 crores.

The Ld.Counsel for the assessee drew our attention to Page No.1 & 35 of the Paper Book, which is the acknowledgement of the original return of income filed by assessee as well revised return of income filed by assessee u/s 147 of the 1961 Act, in pursuance to orders of Hon’ble Madras High

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 56 -:

Court. It was submitted that in original return of income , exemption claimed was Rs. 11.94 Crs. , while in the revised return of income, the exemption claimed was Rs. 12.41 crores and the difference was on account of dividend income received which was in any case exempt from tax and there was no income tax impact owing to such differential . Our attention was drawn to page 36 of the paper book and it was submitted that dividend income of Rs. 66,65,190/- was received by son of the assessee namely Mr. Adityaa Srikanth. It was submitted that there is no difference in the Income Tax liability owing to such differential in the exempt income owing to dividend income received by minor son of the assessee. The assessee relied upon decision in the case of CIT v. Orient Craft Limited (2013) 354 ITR 536(Del. HC) and also decision in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) and it was submitted that the information was received from Revenue audit which is fresh material . It was submitted that Revenue missed to frame scrutiny assessment u/s 143(2) read with Section 143(3) of the 1961 Act and reasons to believe which formed basis of invoking provisions of Section 147 for reopening of the concluded assessment were based on old material and once no notice u/s 143(2) of the 1961 Act was issued at that time for framing scrutiny assessment, the Revenue has missed the bus and now it cannot rely on stale material to get extended limitation period by invoking provisions of Section 147 of the 1961 Act. It was submitted that the assessee made full and true disclosure in the return of income

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 57 -: filed with department originally. It was submitted that Revenue can no doubt invoke provisions of Section 147 of the 1961 Act , if there are factual errors in disclosures as held by Hon’ble Supreme Court in the case of PVS Beedies(supra) and in that case reopening was done after four years based on audit objections and Revenue is empowered to see that there is true and full disclosure. The assessee’s counsel also submitted that Revenue is empowered to reopen concluded assessment after four years by invoking provisions of Section 147 of the 1961 Act and to see that there is true and full disclosure as held in the case of Girilal and Company (supra) . The assessee’s counsel also tried to distinguish the case laws relied upon by learned CIT-DR to contend that reopening of the assessment was not done properly within the provisions of Section 147 of the 1961 Act and it was submitted that there was no triggering point for invoking provisions of Section 147/148 of the 1961 Act in the instant case.

It was submitted that three separate agreements were entered into by assessee for sale of shares and three agreements for non-compete fees.

It was submitted that there was a diversion of income by overriding title relying on real income theory . The learned counsel for the assessee relied upon decision of Hon’ble Supreme Court in the case of CIT v.

Sitaldas Tirathdas reported in (1961) 41 ITR 0367(SC) and decision of Hon’ble Supreme Court in the case of DCIT v. T. Jayachandran (2018) 406 ITR 1 (SC) . It was submitted by learned counsel for the assessee that only real income can be brought to tax. It was submitted that the sale was made under compelling circumstances and it was court monitored

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 58 -: sale of share and hence payment of Rs. 4.25 crores to ‘Indian Bank’ is an expense in connection with transfer of shares and was rightly claimed by assessee. The prayers were made by learned counsel for the assessee to quash the assessment. It was submitted that contract of minor was entered into through the assessee who is natural guardian of the minor sons being father and income is to be clubbed for tax purposes. On being asked by the Bench, the learned counsel for the assessee submitted that minor money being sale consideration of shares were diverted towards payment of loan due from ‘Aditya Leather Exports Private Limited’ without any orders of the Court for using minor’s money for payment of aforesaid dues to Indian Bank. On being confronted, the learned counsel for assessee admitted that page 15 of the paper book is an unsigned page which is claimed to be attached to return of income , while rest of the enclosures were signed, thus strengthening doubt on the claim of the assessee that said document was at all attached with the return of income originally filed by assessee. The assessee was also present during the course of hearing before the Bench on 17.10.2019. The Ld.CIT-DR relied upon the decision of Hon’ble Supreme Court in the case of R.N. Gosai A v.

Yashpal Dhir, judgment dated 23.10.1992 and decision of Hon’ble Madras High Court in the case of G. Kumar v. Samuthiradevi , vide judgment dated 19.12.2012. The ld.CIT-DR submitted that in the case of share agreement, there are no consequences provided for making default in payment of sale consideration of shares. The learned counsel for the assessee submitted that no basis for valuation of shares and of compete

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 59 -: fees is there and it was a negotiated price between the buyer and seller.

It was submitted by learned counsel for the assessee that it is only because of Mr. K. Srikanth, the assessee who was a renowned cricket player in Indian team that non compete fees was paid by the Pentamedia Group Concerns. The Ld.CIT-DR submitted at this is point of time that it is merely a tax avoidance scheme and non-compete fees is nothing but sale consideration of shares and the AO had rightly included the same as income of the assessee while computing capital gains . The ld.CIT-DR referred to Para No.6.1 of the appellate order passed by Ld.CIT(A) and submitted that learned CIT(A) allowed relief to the assessee. It was submitted that neither ld.CIT(A) nor the assessee has furnished any reply to issues raised by the AO. It was submitted that there is no specific clarification as to what the assessee was doing earlier and what assessee was doing later and this is merely an agreement to avoid tax and assessee is continuing as Director in the new company. It was brought to notice by learned CIT-DR that non compete fee was brought to tax by provisions of Section 28(va) read with Section 2(24)(xii) of the 1961 Act by Finance Act, 2002 w.e.f. 01.04.2003 and submitted that prior to that reasonableness is to be seen for which quantum is to be found out and basis of computing non-compete fee is to be seen. The learned CIT-DR relied upon decision of Hon’ble Madras High Court in the case of CIT v.

Chemech Laboratories Limited, dated 23.12.2016.11.2016. The learned CIT-DR would also rely on the decision in following case laws:

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 60 -: a) CIT v. Mediworld Publications Private Limited b) Mrs. Hami Aspi Balsara v. ACIT c) Ramesh D. Tainwala v. ITO ( TS-594-ITAT-2011(Mum.)

It was submitted by learned CIT-DR that if consideration is paid to the shareholders then capital gains are to be computed and brought to tax and not non-compete fee as contended by assessee. It was submitted by learned CIT-DR that if only business is snatched away, then non-compete fee will come into picture otherwise it is business receipt which is to be brought to tax in the hands of the assessee . The Ld.CIT-DR submitted that the assessee is continued with the company even after transfer of shares as Director and hence there is no question of non compete fee being claimed as an exempt income by the assessee and entire consideration of Rs. 15 crores is to be brought to tax as per provisions of the 1961 Act. The learned CIT DR relied upon decision of Hon’ble AAR in the case of H M Publishers Holdings Limited in AAR No. 1238 of 2012.

The Ld.AR submitted that reasoning of Ld.CIT(A) is sound and needs to be confirmed and no substance in the arguments of Revenue and the decisions relied upon by Revenue are all after the insertion of Sec.28(va) by Finance Act, 2002 w.e.f. 01.04.2003 while presently we are concerned with ay: 2001-02 and the amendment brought in by Finance Act, 2002 by introducing Section 28(va) are prospective in nature. The learned counsel relied upon decision of tribunal in the case of R. K. Swamy v. ACIT

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 61 -: reported in (2004) 88 ITD 185(Chennai-trib.) and decision in the case of G.Raveendran v. CIT reported in (2015)375 ITR 326(Mad. HC) and it was submitted that there was no need to interfere with the orders of the Ld.CIT(A) so far as department appeal is concerned and prayers were made to dismiss the appeal filed by Revenue. It was submitted that there is a separate contract between unrelated parties for non compete fee. It was submitted that the wisdom of businessmen should prevail as it is a contractual transaction between unrelated parties which is at arms length price. It was submitted that shareholders who transferred shares are minor and assessee is a separate ‘person’ under the 1961 Act albeit father of the minor sons. The learned CIT-DR relied on the grounds of appeal and it was submitted that non-compete fees is in context of sale of share and it was submitted that it is immaterial whether assessee sold shares or minors son shares were sold , these shares are to be treated as assessee’s share and the assessee sold the shares of minor children . The learned counsel for the assessee submitted that in the year ended 31.03.2001 , the assessee and minor children received Rs. 9.50 crores while Rs. 2.5 crores was received in year ended 31.03.2002. Thus, it was submitted by learned counsel for the assessee that only Rs. 12 crores was received while Rs.3 crores was never received and hence the same cannot be brought to tax as only real income can be brought to tax. Our attention was drawn to page 53 of the Paper book , wherein sundry debtors as at 31.03.2001 were to the tune of Rs. 5.51 crores. On Being asked and directed to produce the bounced cheque of Rs. 300 lacs , the learned

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 62 -: counsel for the assessee submitted that the assessee does not have bounced cheque of Rs. 300 lacs and the same cannot be produced.Thus, the learned counsel for the assessee expressed inability to produce the bounced cheque of Rs. 300 lacs. It was also submitted that no proceedings for recovery of said Rs. 300 lacs was initiated by assessee/minor sons against Pentamedia Group Concerns for bouncing of cheque. It is also submitted that 99% shares in ‘Kris Srikanth Sports Entertainment Private Limited’ were held by his minor sons. It was also explained that as on 31.03.2002, sundry debtors included said sum of Rs.3 Crores . The assessee has filed Balance Sheet as on 31.03.2002 wherein sundry debtors to the tune of Rs. 300.66 lacs are reflected and assessee is claiming said amount of Rs. 3 Crs. is still receivables as on 31.03.2002. It was submitted that AO has recognized that Rs3 Crs. was not received by the assessee and AO took a view which is a plausible view and Ld.CIT cannot substitute its view with its opinion by invoking provisions of Section.263 of the 1961 Act, which is not permissible. The Ld.AR relied upon the decision of A.R. Real Estate Developers Pvt. Ltd. v.

ITO in , dated 18.09.2019 for ay: 2014-15. The Ld.DR submitted that an amount of Rs.5.5 crs. was receivable by assessee as on 31.03.2001 and an amount of Rs. 3.00 crores was receivable as on 31.03.2002. It was submitted by learned CIT-DR that this amount of Rs. 300 lacs was due to assessee as per its Balance Sheet as good money

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 63 -: and hence the entire amount of Rs. 15 crores including an outstanding amount of Rs. 3 crores is chargeable to tax. It was submitted that it was AO’s mistake that he took total consideration at Rs. 12 Crs. as chargeable to tax instead of Rs15 Crs. which was rectified by learned CIT by invoking provisions of Section 263 of the 1961 Act. It was submitted by learned CIT-DR that the assessee has accounted for his income on accrual basis and it was submitted that invocation of provisions of Section 263 is valid.

The learned CIT-DR submitted that the assessee has not submitted that there is any error on the basis of accounting followed by the assessee viz. cash or mercantile. So far as regards computation of deduction u/s 54F of the 1961 Act , the learned CIT-DR submitted that learned CIT invoked provisions of Section 263 of the 1961 Act and directed AO to verify the claim of the assessee u/s.54F of the Act . The learned CIT-DR submitted that the AO verified and allowed the claim of deduction u/s 54 F to the tune of Rs.43 lakhs , instead of Rs. 35 lakhs, even while framing assessment u/s.143(3) r.w.s.263 of the Act. The case of the assessee was re-fixed for clarification to find out as to the basis / quantification of valuation of shares and as to whether any valuation report at the behest of the contracting parties, was prepared to value shares. The assessee has filed written submissions and it was submitted by learned counsel for the assessee that it was a contractual agreement between the parties to value the shares and no valuation report was prepared nor any basis for valuation of shares is available with the assessee, rather it is submitted

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 64 -: that it was a negotiated price entered into between two parties to the contract. The assessee’s counsel also relied upon decision of Chennai- tribunal in the case of Empee Holdings Limited v. DCIT in for ay: 2005-06, dated 07.11.2019 to which both of us were part of the Division Bench who pronounced the said order. It was also submitted that in ay: 2001-02 with which we are concerned, Section 50C and 43CA of the 1961 Act were not in statute and hence actual sale consideration entered into between two contracting parties voluntarily cannot be substituted by invoking deeming fiction of the said sections .

The learned CIT-DR submitted that assessee has himself admitted that there was no quantification/valuation report for valuing the shares and hence the entire amount of Rs. 15 crores be treated as consideration for sale of shares. It was also submitted that so far as reopening of the concluded assessment u/s 147 is concerned , it will not make any difference between manual processing of return of income and electronic processing of return.

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 65 -: of Indian Cricket Team. It is also admitted fact that later on after retiring from cricket team, the assessee turn to cricket commentary and other activities associated with sport of cricket. Thus, undisputedly the assessee is a known name the field of sports of Cricket. It is also an admitted fact that in India , Sport of Cricket is one of the frontline sporting activity and large number of people are keenly interested in the sport of Cricket. With this background now , we will proceed to adjudicate all these four appeals. The assessee originally filed its return of income u/s 139 on 28th March 2002 for impugned ay: 2001-01. The said return of income was not filed within the prescribed time u/s 139(1) of the 1961 Act but was admittedly filed belatedly , albeit within time prescribed u/s 139(4) of the 1961 Act.

The income declared by assessee under the said return of income was to the tune of Rs. 20,42,507/- . The exempt income claimed in the said return of income originally filed by the assessee u/s 139 of the Act was to the tune of Rs. 11,98,48,643/- as per acknowledgement of return of income placed in paper book at page 1, wherein the column of exempt income , the aforesaid amount of Rs. 11,98,48,643/- is duly filed in at column 24(page 1/pb). The assessee also filed a claim for refund of an amount of Rs. 85,20,565/- which was filed along with return of income in Form No. 30,placed at page 3 of the Paper Book. Along with this return of income filed by assessee, it has claimed to have filed a covering letter which specify the list of enclosures to return of income. The said covering letter did not specify about the enclosure as to details of exempt income being furnished , but however it is now claimed by assessee that details of ITA No.307/Chny/2010 & & 1016/Chny/2012 & 66 -: the aforesaid exempt income claimed by him were filed , which is stated to be placed at page 15 of the paper book which on our perusal we found that it is an unsigned enclosure. The Revenue on its part is averring that this document stated to be placed at page 15/paper book is a suspect document which is planted by the assessee and was not part of the return of income originally filed by assessee. We will see at later point of time in this order as to the validity of reliance on this document and whether the disclosure of exempt income even if it was made by assessee was sufficient on the part of the assessee to discharge primary onus cast on it to make true and full disclosure to come out of clutches of Section 147/148 of the 1961 Act . The return of income was admittedly originally processed by Revenue u/s 143(1) of the 1961 Act and intimation dated 26.03.2003 was issued to assessee by AO u/s 143(1) of the 1961 Act computing refund of Rs. 94,24,254/- being made payable to the assessee.

This processing of return of income was done manually prior to introduction of e-processing of return of income by department. If we refer to Section 143(1) of the 1961 Act as it was existing in the statute at that point of time , it is clear that the scope of Section 143(1) is very restrictive and is limited to correcting any arithmetical errors or to an incorrect claim apparent from any information in the return of income filed by assessee . The provision of Section 143(1) of the 1961 Act as were applicable at that point of time when return of income was processed on 26.03.2003 are reproduced below:

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 67 -:

“Assessment.

(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2) , an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee :

Provided that except as otherwise provided in this sub-section, the acknowledgement of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him :

Provided further that no intimation under this sub-section shall be sent after the expiry of [one year from the end of the financial year in which the return is made :]

[Provided also that where the return made is in respect of the income first assessable in the assessment year commencing on the 1st day of April, 1999, such intimation may be sent at any time up to the 31st day of March, 2002.]”

Thus, the AO cannot go into merits of the claim made by assessee and such corrections are limited to correcting any arithmetical errors and to correcting incorrect claims apparent from any information in the return.

Thus, even if the return of income was processed manually in the instant case, the AO had a restrictive powers to correcting only arithmetical errors in the return of income and to an incorrect claim which is apparent from any information in the return of income and it cannot be equated with scrutiny assessment framed u/s 143(3) read with Section 143(2) of the ITA No.307/Chny/2010 & & 1016/Chny/2012 & 68 -:

1961 Act. It is an admitted position that in the instant case, no scrutiny assessment was framed by AO originally u/s 143(3) of the 1961 Act. It is also an admitted position that reopening of the concluded assessment in the instant case by AO by invoking provisions of Section 147 of the 1961 Act was done in the instant case by Revenue within four years from the end of assessment year viz. notice of reopening of the concluded assessment was issued on 30.03.2006 while we are presently seized of ay: 2001-02. It is also admitted position that the return of income was not originally securitized by Revenue u/s 143(2) read with Section 143(3) and merely processing of return of income was done with in provisions of Section 143(1) of the 1961 Act , which cannot be equated with scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act. The ratio of decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) shall be clearly applicable and the Revenue can validly reopen the concluded assessment by invoking provisions of Section 147 of the 1961 Act . In the instant case return of income was not originally scrutinised u/s 143(2) read with Section 143(3) and reopening of the concluded assessment was done within four years from the end of the assessment, clearly proviso to Section 147 is not applicable and reopening of the concluded assessment can be done within a period of four years from the end of assessment year by invoking provisions of Section 147 of the 1961 Act . Moreover, first of all the disclosure as is contemplated to have been made by the assessee in the instant case has been doubted by Revenue to be suspect and it is claimed

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 69 -: by Revenue that document at page 15 of the paper book is a planted document which is planted after words and this document was never part of the return of income originally filed by assessee with Revenue u/s 139(4) of the 1961 Act on 28.03.2002. It is also claimed by Revenue that this document was also not specified as one of the enclosed document in the list of documents enclosed with return of income . It is also claimed by Revenue that this is the only document which is not signed by assessee , while rest of the other documents as were made part of the return of income as enclosures were signed by assessee. Now let us see the content of this document which is placed at paper book/page 15 which is claimed by Revenue to be a planted document, and while going through the aforesaid document , it is observed that following disclosure was made by assessee, as under:

“K.Srikanth Assessment Year 2001-02 Annexure to Statement of Income a, Income claimed to be exempt and not included in total income – consideration for restrictive covenant Rs. 7.50 Crores. b. Residuary sale proceeds of shares after mandatory diversion of Rs. 4.25 crores by Indian Bank overriding garnishee attachment-Rs. 3.25 Crores. K.Srikanth Assessment Year 2001-02 Income claimed to be Exempt Rs. a. Restrictive Covenant 75,000,000 b. Indian Bank Overriding Garnishee attachment 42,500,000

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 70 -: c. Dividend : Minor Adityaa 2,348,643 --------------- 119,848,643 --------------- “

Perusal of the above disclosure as was allegedly claimed to have been made by assessee which is albeit disputed by Revenue to be planted/suspect document, it clearly appears that these are bald disclosures made by assessee and it cannot be said that the assessee has made true and complete disclosure of the primary facts and in our view clearly primary onus cast on the assessee is not discharged. Reliance is made to decision of Hon’ble Supreme Court in the case of New Delhi Television Limited v. DCIT reported in (2020) 116 taxmann.com 151(SC).

The above disclosure do not give complete disclosure of the loans availed by a company named ‘Aditya Leather Exports Private Limited’ from ‘Indian Bank’ which was in default by said company . The above disclosure also did not disclose that the assessee was a Director of the said company namely ‘Aditya Leather Exports Private Limited’ and also stood guarantor of the loan availed by said company ‘Aditya Leather Exports Private Limited’ . It also did not disclose that the shares of ‘Kris Srikanth Sports Entertainment Private Limited’ were not subject matter of charge with ‘Indian Bank’. It also did not mention that it is under memo of compromise that the said amount of Rs. 4.25 crores was paid by the assessee to ‘Indian Bank’ in settlement of the aforesaid defaulted loan by ‘Aditya Leather Exports Private Limited’ and the payments were never made under direction of any Court Orders but were made under a ITA No.307/Chny/2010 & & 1016/Chny/2012 & 71 -: compromise arrangement entered into by assessee voluntarily with the said ‘Indian Bank’ . The aforesaid disclosure also did not mention about the agreements made simultaneously by assessee and his minor sons ( through assessee) for transfer of entire shareholding of said company ‘Kris Srikanth Sports Entertainment Private Limited’ for an aggregate value of Rs. 7.50 crores ( wherein majority shareholding to the tune of 99% was held by minor sons of the assessee), and that also assessee entered into non compete agreement with the buyers namely Pentamedia Group of Concerns , of the entire shareholding of said company ‘Kris Srikanth Sports Entertainment Private Limited’ agreeing not to compete for a period of six years with the said company ‘Kris Srikanth Sports Entertainment Private Limited’ for a non compete fee of Rs. 7.50 crores.

This disclosure also did not specify that minor sons of the assessee who were holding 99% of shareholding of ‘Kris Srikanth Sports Entertainment Private Limited’ were never guarantor of loan availed by said ‘Aditya Leather Exports Private Limited’ from ‘Indian Bank’ nor they were Directors of Aditya Leather Exports Private Limited and he being natural guardian of minor sons were under duty under law relating to Minors and Guardianship as are applicable in India to protect interest of Minor sons who infact were holder of share capital of ‘Kris Srikanth Sports Entertainment Private Limited’ which was a subject matter of transfer .

The assessee as per laws applicable to minor and guardianship In India could not have diverted sale proceed of shares held by Minor Sons to repay Indian Bank for loan of Rs. 4.25 crores availed by ‘Aditya Leather

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 72 -:

Exports Private Limited’ , to the prejudice of minors interest without permission of Courts as per laws applicable to Minors and Guardianship in India. It was a blatant illegal act and Income-tax Act, 1961 Act cannot be read in vaccum dehors other prevailing laws in India. The assessee if so desire could have always contended that proceeds of non compete fee received by him was utilized for payment of dues to Indian Bank but to claim that the assessee appropriated proceeds of sale of shares of minor sons for the purposes of payment to Indian Bank while utilizing non compete fee received by him , which he is claiming as an exempt income , for other purposes is a perversity which cannot be accepted. The assessee has not come to court with clean hands and courts cannot be party to such an act of the assessee. Further, the assessee is claiming that he has not received Rs. 3 crores out of total consideration of Rs. 15 crores. The said consideration of Rs. 15 crores is bifurcated into sale of shares of ‘Kris Shrikant Sports Entertainment Private Limited’ to the tune of Rs. 7.50 crores while rest of Rs. 7.50 crores is claimed towards non compete fee.

The assessee did not produced bounced cheque of Rs. 3 crores despite being directed by Court and secondly , the assessee is claiming that Rs. 3 crores which is not received shall be attributed towards sale of shares of ‘Kris Srikanth Sports Entertainment Private Limited’ and not towards non compete fee, which is claimed as an exempt income. It is again a perverse claim as the assesse has duly transferred entire shareholding of ‘Kris Srikanth Sports Entertainment Private Limited’ to the buyers Pentamedia Group of Concerns and later no legal suit was filed for non payment of ITA No.307/Chny/2010 & & 1016/Chny/2012 & 73 -: alleged part sale proceeds of shares of ‘Kris Srikanth Sports Entertainment Private Limited’ . The majority of shares of ‘Kris Srikanth Sports Entertainment Private Limited’ to the tune of 99% were held by minor sons of the assessee and the assessee is natural guardian of the minor sons was duty bound to protect the interest of minor as per law prevailing in India as to minors and guardianship. Reference is drawn to provisions of The Hindu Minority and Guardianship Act, 1956 especially to provisions of Section 8. The assessee has claimed that Rs. 12 crores in all was received as against total consideration in both the agreements of Rs. 15 crores, out of which Rs. 7.50 crores being for sale of shares and Rs. 7.50 crores being towards non compete fee. Thus, the proceeds of sale of shares shall be deemed to have been fully received to the tune of Rs. 7.50 crores firstly being belonging to minor and secondly the entire shareholding stood transferred to the buyers. It is again a perversity to claim that sale proceeds of shares of ‘Kris Srikanth Sports Entertainment Private Limited’ held by minor sons under a simultaneous agreements made for sale of shares as well non compete fee, was not received but the entire non compete fee was received which is claimed as an exempt income. It is clearly visible that an attempt is made by assessee to evade taxes. Thus, we reject the claim of the assessee and hold that entire sale proceeds of sale of shares by minor sons of the assessee of the company namely ‘Kris Srikanth Sports Entertainment Private Limited’ to Pentamedia Group of Concerns to the tune of Rs. 7.50 crores was received by assessee which shall be brought to tax under the provisions of the ITA No.307/Chny/2010 & & 1016/Chny/2012 & 74 -:

1961 Act including provisions of Section 60-64 of the 1961 Act. Further, we hold that non receipt of Rs. 3 crores ( out of total non compete fee of Rs. 7.50 crores) as was the claim set up by assessee was towards non compete fee payable by Pentamedia Group of Concerns to assessee for not competing with them for a period of six years . Further, we also hold that proceeds of non compete fee of Rs. 4.50 creores actually received by assessee was utilized by assessee to pay ‘Indian Bank’ an amount of Rs. 4.25 crores towards defaulted loan availed by ‘Aditya Leather Exports Private Limited’ of which assessee was Director as well Guarantor . As we will also see in the later part of this order that claim of exemption/deduction made for payment of Rs. 4.25 crores to Indian Bank by diversion by over-riding title was a wrong claim made by assessee even on merits and he was not entitled for deduction / exemption of said income even within the provisions of the 1961 Act. Thus, we hold that the primary facts were not completely , correctly and truly disclosed by assessee in the return of income originally filed by assessee with Revenue and there is clearly an attempt to evade taxes, even if we accept the contention of the assessee that the disclosure of exempt income was made by assessee in the return of income originally filed with Revenue, as is placed in paper book /page 15 ( although it is a suspect disclosure as Revenue is alleging that this document is planted by assessee before ITAT and this document was never filed by assessee along with original return of income filed by assessee with Revenue). Thus, we hold that the Revenue has rightly invoked provisions of Section 147 of the 1961 Act and ITA No.307/Chny/2010 & & 1016/Chny/2012 & 75 -: we uphold reopening of the concluded assessment within four years from the end of the assessment as was made by Revenue in the instant case and more-so even scrutiny assessment was not framed by Revenue initially u/s 143(3) of the 1961 Act and return was merely processed u/s 143(1) of the 1961 Act. Thus, we reject the contentions of the assessee and uphold the reopening of the concluded assessment by Revenue u/s 147 of the 1961 Act. While upholding reopening of the concluded assessment u/s 147 in the instant case, we note that there was tangible material before the AO to reopen the concluded assessment as the assessee is claiming huge exemption of income by making incomplete, untrue and wrong claim before the AO and scrutiny assessment having not been made earlier by Revenue by invoking provisions of Section 143(3) read with Section 143(2) of the 1961 Act while originally processing return of income , and reopening of the concluded assessment u/s 147 of the 1961 Act is sought to be done within four years from the end of assessment , the Revenue is within its right to reopen the concluded assessment u/s 147 of the 1961 Act. The ratio of decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) shall be clearly applicable as processing of return of income u/s 143(1) cannot be equated to scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act. It is also laid down by Hon’ble Supreme Court in the case of P.V.S. Beedies(supra) that reopening of concluded assessment u/s 147 of the 1961 Act can be made by AO based on factual errors pointed out by audit team of department. Hence, in the ITA No.307/Chny/2010 & & 1016/Chny/2012 & 76 -: instant case, we hold that the Revenue was within its right to reopen the concluded assessment u/s 147 of the 1961 Act and we uphold the reopening of the concluded assessment by Revenue in the instant case.

We order accordingly.

Now , coming to merits of the issues before us. We have observed that the assessee along with his minor sons has entered into sale of entire shareholding of ‘Kris Srikanth Sports Entertainment Private Limited’ with Pentamedia Group of Concerns. It is observed that almost entire shareholding to the tune of 99% was held by minor sons of the assessee and assessee merely held 125 shares of the said company. The clubbing provisions as are contained in Section 60 to 64 of the 1961 Act are attracted and income of the minor sons are to be clubbed with the income of the assessee. The perusal of these agreements will reveal that the assessee has entered into agreement of sale of shares to the tune of Rs. 7.50 crores by virtue of which entire shareholding in the said company ‘Kris Srikanth Sports Entertainment Private Limited’ will stand transferred to Pentamedia Group of Concerns. Simultaneously, there were agreements entered into by assessee with said Pentamedia Group concerns for non compete by assessee with the said company namely ‘Kris Srikanth Sports Entertainment Private Limited’ for a period of six years for total consideration of Rs. 7.50 crores . The said company namely ‘Kris Srikanth Sports Entertainment Private Limited’ is engaged in providing cricket coaching through electronic media. The said agreements are claimed to be ITA No.307/Chny/2010 & & 1016/Chny/2012 & 77 -: entered into based on negotiated price between two independent parties.

It is also a matter of fact that the assessee is a renowned cricketer who was part of Indian/national cricket team at one point of time and also was captain of Indian Cricket Team. It is also fact that the assessee resorted to cricket commentary and other activities associated with sport of cricket after retiring from cricket team . The assessee undoubtedly enjoys reputation and brand value in sporting activities more specifically in Cricket. The name of the assessee is also part of the name of the company namely ‘Kris Srikanth Sports Entertainment Private Limited’ whose shares are transferred . The assessee has agreed not to compete with the said company ‘Kris Srikanth Sports Entertainment Private Limited’ for a period of six years for a total consideration of Rs. 7.50 crores . The said company is engaged in the business of providing cricket coaching through electronic media. The period of six years for not competing with the said company ‘Kris Srikanth Sports Entertainment Private Limited’ by assessee vide non compete agreement is by no means a small period. The Revenue has merely rejected non compete fee charged by the assessee and no cogent reasons are provided . The Revenue has also not brought on record cogent reasons for discarding the valuation of shares of Rs. 7.50 crores for sale of entire shareholding of ‘Kris Srikanth Sports Entertainment Private Limited’. The assessee has discharged its primary onus and now it was for revenue to have rebutted the said primary onus by bringing on record cogent material to dislodge the claim of the assessee. For the relevant year under consideration , there were no ITA No.307/Chny/2010 & & 1016/Chny/2012 & 78 -: specific provision/section in the 1961 Act brought to our notice by Revenue which debarred negotiated price for the valuation of share or which created a deeming fiction for valuing shares. Thus, we accept the valuation of shares and non compete fee charged by assessee, based on negotiated agreement as we donot find them to be unconscionably or patently wrong requiring interference in the business deal entered into by and between willing parties , as there is no material brought on record to take a contrary view. Now, coming to sale consideration of Rs. 7.50 crores for sale of shares of ‘Kris Srikanth Sports Entertainment Private Limited’, we have observed that majority of shares exceeding 99% were held by minor sons . It is the assessee who was natural guardian for his minor sons of the assessee and the assessee executed agreement for sale of shares on behalf of his minor sons.The assessee being natural guardian was duty bound to protect the interest of minor sons. There are Minority and Guardianship laws prevalent in India which protects the interest of minors and the guardians are duty bound to protect interest of minors and if the proceeds belong to minor are to be diverted or minor are to be divested of their assets then permission of Court is required. Attention is drawn to The Hindu Minority and Guardianship Act, 1956 especially to provisions of Section 8 of the said act. The purpose and intent of these laws and indulgence by Courts as provided under law is to protect the interest and welfare of minor which is paramount. The assessee being natural guardian was duty bound to protect the interest of his minor sons.

The shares held by minor sons in ‘Kris Srikanth Sports Entertainment ITA No.307/Chny/2010 & & 1016/Chny/2012 & 79 -: Private Limited’ were divested for a total consideration of Rs. 7.50 crores .

The shares in ‘ Kris Srikanth Sports Entertainment Private Limited’ to the tune of 99% were held by minor sons of the assessee. The shares of the minor stood transferred to Pentamedia Group Concerns and minors were divested of their shareholding in ‘Kris Srikanth Sports Entertainment Private Limited’. There are simultaneous agreement for sale of shares as well for non compete which were simultaneously entered by the assessee on his behalf as well on behalf of the minor, of which total value was Rs. 15 crores out of which Rs. 12 crores stood realised.Thus, it is to be held that the entire consideration of Rs. 7.50 crores towards sale of shares of minor in ‘Kris Srikanth Sports Entertainment Private Limited’ stood realized and to be brought to tax within provisions of the 1961 Act including provisions of Section 60-64 of the 1961 Act. It is admitted fact that no permission of Court for selling/divesting of shares of minor is brought on record. Under these circumstances, we are of the considered view that the assessee was duty bound to protect the interest of the minor sons. Thus, we hold that sale consideration of Rs. 7.50 crores towards sale of shares stood fully realized and it is required to be brought to tax by invoking provisions of the 1961 Act including clubbing provisions as are contained in Section 61 to 64 of the 1961 Act. So far as consideration of Rs. 7.50 crores towards non compete fee is concerned which is for non competing by assessee with ‘Kris Srikanth Sports Entertainment Private Limited’ , we are of the considered view that the said amount is not chargeable to tax as in the impugned ay: 2001-02, the said amount was ITA No.307/Chny/2010 & & 1016/Chny/2012 & 80 -: not chargeable to tax as amendment in Section 28 wherein clause (va) was inserted by Finance Act, 2002 w.e.f. 01.04.2003 and prior to that , it could not be brought to tax as it was held to be capital receipt. The ratio of decision of Hon’ble Supreme Court in the case of Guffic Chem Private Limited(cited supra) is applicable, as we are presently dealing with ay:

2001-02 which is prior to aforesaid amendment made by Finance Act, 2002 which is applicable from 01.04.2003. Thus,an amount of Rs. 7.50 crores which was purportedly towards non compete fee is not chargeable to tax within provisions of the 1961 Act as were applicable for ay: 2001-

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 81 -:

Srikanth Sports Entertainment Private Limited’ and minor sons were not the guarantor of the said loan availed by ‘Aditya Leather Exports Private Limited’ from Indian Bank which stood defaulted. The minor sons of the assessee also could not be made to pay for the default of the said Aditya Leather Exports Private Limited of which the assessee was Director/Guarantor not the minor sons. The assessee was the Director of the said company namely ‘Aditya Leather Exports Private Limited’ as well guarantor of the said loan , but the assessee had no right to transfer the proceeds of sale of shares held by his minor sons in ‘Kris Srikanth Sports Entertainment Private Limited’ to Indian Bank , except with permission of Courts. No such permission was obtained by assessee. The said act of claiming deduction for amount paid to Indian Bank out of sale proceed of shares held by minor sons is clearly an act of perversity/illegality as well an attempt made to evade taxes. The assessee also simultaneously received non compete fee to the tune of Rs. 4.50 crores out of total agreed non compete fee of Rs. 7.50 crores and the said proceed shall be deemed to have been applied for payment to Indian Bank. The said amount of Rs. 4.50 crores is already held by us to be exempt from tax and it will not matter even if the said sum was paid to discharge to loan of Indian Bank . Further, there was no charge held by Indian Bank on shares of ‘Kris Srikanth Sports Entertainment Private Limited’. In any case as discussed above, the shares were held by Minor sons of the assessee. The minor sons of the assessee were neither Director of Aditya Leather Exports Private Limited nor guarantors for the said loan granted by Indian

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 82 -:

Bank to Aditya Leather Exports Private Limited. The assessee being natural guardian of minor son has no right to use sale proceeds belonging to minor sons to discharge Indian Bank Loan without permission of the Court and then turn back and say that the said amount paid to Indian bank is to be allowed deduction on the ground of diversion of overriding tittle, which will lead to traversity of justice and illegality. The assessee has not come to Court with clean hand and we cannot be party to such illegal and perverse act of the assessee. Thus, we hold that the said amount of Rs. 4.25 crores was paid by assessee out of non compete fee received by assessee and further it is mere application of income and there is no diversion by overriding title as the shares were never part of the charge in favour of Indian Bank. The said amount of Rs. 4.25 crores was paid by assessee to Indian Bank to settle defaulted loan obligation of Aditya Leather Exports Private Limited. Further, the assessee has entered into simultaneous agreement for sale of shares as well for non compete fee and Indian Bank was also in a position to exercise restraint over non compete fee which belonged to assessee and even Indian Bank could not have exercised any extended lien over shareholding of minor sons in ‘Kris Srikanth Sports Entertainment Private Limited’ without permission of Court keeping in view laws prevailing in India relevant to minor and guardianship . No such permission was ever taken from Courts by Indian Bank or by assessee under the laws applicable to minor and guardianship and hence extended lien if at all it is available was over non compete fee which in any case is held to be an exempt income. Thus, the assessee will

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 83 -: not get any deduction from taxable income of amount paid to Indian Bank to discharge liability of ‘Aditya Leather Exports Private Limited’ of the misconceived cannot be part of scheme of illegitimate tax evasion undertaken by assessee. Further , we also hold that payments made to Indian Bank by assessee to the tune of Rs. 4.25 crores was merely an application of income. Reference is drawn to decision of Third Member of ITAT , Mumbai in case of Perfect Thread Mills Limited v. DCIT reported in (2020) 181 ITD 1( Mum-trib.)(TM). We order accordingly.

Thus, we summarize and conclude our decision as under: a) We uphold reopening of concluded assessment by AO invoking provisions of Section 147 of the 1961 Act. b) We hold that sale consideration of Rs. 7.50 crores was duly received for sale of shares of ‘Kris Srikanth Sports Entertainment

Private Limited’ which is to be brought to tax under provisions of 1961 Act including Section 60-64 of the 1961 Act. c) We hold that non compete fee of Rs. 7.50 crores was exempt from tax being capital receipt. d) We hold that payment of Rs. 4.25 crores was made by assessee to ‘Indian Bank’ to settle loan availed by ‘Aditya Leather Exports

Private Limited’ which was in default , out of non compete fee earned by assessee which we have already held to be exempt

ITA No.307/Chny/2010 & & 1016/Chny/2012 & 84 -: from tax and now it is academic whether there was any diversion of income by overriding title or not. In any case for completeness, we hold that the assessee was not entitled for deduction by way of diversion by overriding title as there was no charge held by ‘Indian Bank’ and there was merely a compromise entered into by assessee with Indian Bank voluntarily to pay defaulted loans availed by said ‘Aditya Leather Exports Private

Limited’ . Thus, the payment to Indian Bank was merely an application of income and that too of an exempt income. e) The question of taxability of Rs. 3 crores which was not received by assessee is again an academic question as we have already held that this non receipt of Rs. 3 crores was on account of non compete fee which is held to be exempt income.

Order pronounced on the 19th May , 2020 in Chennai.