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The High Court, considering the submissions made on behalf of the Petitioner and in light of the recent judgments cited (Country Liquor Retail Shop vs. Ministry of Finance and others, and Smt.Rachna Singhi vs. Income Tax Officer, Ward 30(1), Kolkata and another), disposed of the Writ Petition. The Court granted liberty to the Petitioner to tender his explanation along with accompanying documents. The Petitioner was given time until 19.07.2023 to submit his explanation. The Court noted that thereafter, the Department would proceed strictly in accordance with the law. The specific findings on the merits of the escaped assessment or the grounds of challenge were not decided as the petition was disposed of on a procedural basis.
The High Court held that the Respondent No.1 had incorrectly recorded that the petitioner had not responded to the notice. Based on the petition and annexed documents, including the department's email confirming receipt of the reply, the court found the recording to be erroneous. Consequently, the court quashed and set aside the impugned order dated April 6, 2023, passed under Section 148A(d) of the Act, and the notice under Section 148 of the Act. The court directed Respondent No.1 to consider the reply filed by the petitioner and pass a fresh order in accordance with law. All rights and contentions of the petitioner, including the issue of limitation, were kept open. The court further mandated that before passing any order, the petitioner must be given a personal hearing with at least seven working days' advance notice. The Assessing Officer is also required to provide a list of any judgments or orders they intend to rely upon in advance of the hearing. Any subsequent order must be reasoned and detailed, addressing all submissions made by the petitioner.
The High Court, without delving into the merits of the case, quashed and set aside the order dated March 30, 2022, passed under section 148A(d) of the Income Tax Act, 1961, and the Assessment Order dated March 29, 2023. Consequently, the consequential demand notice and penalty notice, both dated March 29, 2023, were also set aside. The matter was remanded for de novo consideration. The time spent from the date of filing the petition (June 8, 2023) until the date of the order was excluded for limitation purposes. Before passing any fresh order, the petitioner is to be granted a personal hearing, with at least five working days' advance notice. The Assessing Officer is also required to provide a list of any judgments or orders they intend to rely upon in advance, enabling the petitioner to address them. Any subsequent order must be reasoned and detailed, addressing all submissions made by the petitioner. The petition was disposed of.
The High Court did not uphold the objection regarding territorial jurisdiction. However, the Court found merit in the revenue's second objection concerning the availability of an alternate remedy. The Court noted that the petitioner had admittedly filed objections before the Dispute Resolution Panel (DRP) concerning the draft order dated 26.12.2022, and these objections were pending consideration. Therefore, it was deemed inappropriate for the High Court to entertain the writ petition by bypassing the alternate remedy, which had not only been availed but was also pending. The Court directed the DRP (Respondent No. 2) to dispose of the petitioner's objections expeditiously, within three months from the date of the order, after complying with the principles of natural justice and fair play. Pending the disposal of these objections by the DRP, the Income Tax Officer (Respondent No. 1) was restrained from finalizing the impugned draft order. The Court explicitly stated that it had not examined the merits of the matter, and all contentions of the parties were left open for the DRP's decision.
The High Court held that the notice to reopen the assessment dated March 28, 2008, for AY 2003-2004 was based merely on a change of opinion by the Assessing Officer (AO) from that held during the original assessment proceedings, which concluded with the assessment order dated March 6, 2006. The Court found that the breakdown of expenses claimed as interest and finance charges was already provided and considered, and the subsequent reassessment notice did not present any new material or reason to believe that income had escaped assessment. The Court relied on the principle that a change of opinion does not constitute valid justification for reopening an assessment, citing the reasoning in *Aroni Commercials (Supra)*, which states that if a query is raised and the assessee replies, it is considered to have been subject to the AO's consideration, even if not explicitly detailed in the assessment order. Therefore, the notice under Section 148 was quashed and set aside. The Court did not wish to go into other points raised by the petitioner. The petition was allowed, and the rule granted was made absolute.
The High Court held that the impugned notice dated March 27, 2019, and the order dated October 5, 2019, were invalid. The Court found no material to indicate any failure on the part of the assessee to disclose material facts. Upon examining the original assessment order passed under Section 143(3), the Court noted that the AO had considered all documents and accepted the business loss of ₹12,14,41,599/- and allowed unabsorbed depreciation of ₹2,15,94,618/- to be carried forward. Therefore, the Court found no justification for reopening the assessment after the expiry of four years. The ratio decidendi is that for reopening assessments beyond four years, a specific failure to disclose material facts must be demonstrated, and a mere re-appreciation of existing facts or a different view on deductibility of interest expenses, without evidence of non-disclosure, is insufficient. The Court quashed and set aside the impugned notice and order and prohibited further action.
The High Court held that the impugned notice dated March 30, 2021, and the order dated February 14, 2022, are quashed and set aside. The Court found no tangible material to indicate that income had escaped assessment. The reasons for reopening were based on a 'change of opinion,' which is impermissible, as held in CIT v Kelvinator of India Ltd. The Court noted that the original assessment order for AY 2011-12 had considered all submissions and documents and accepted the loss to be carried forward. The reliance on Kalyanji Mavji & Co by the Revenue was deemed inapplicable as the present case involved a change of opinion rather than inadvertence or oversight. The Court also observed that the respondent's reply crystallized their view that the reopening was based on the Revenue Audit identifying an incorrect claim of losses, which the Court found to be an attempt to review the original assessment.
The High Court held that the notice issued under Section 148 of the Income Tax Act, 1961, dated March 31, 2021, is unsustainable in law and is accordingly set aside. The Court noted that it was not denied that the notice was issued in the name of a non-existent entity, Times Infotainment Media Ltd., which had ceased to exist pursuant to the Scheme of Amalgamation approved by the Court. The Court also observed that the factum of amalgamation was within the knowledge of the respondents. Following the ratio of the Supreme Court in Principal Commissioner of Income Tax, New Delhi Vs. Maruti Suzuki India Ltd. and its own decision in CLSA India Private Limited, the Court concluded that the issuance of the notice in the name of a non-existent entity renders it void. The Writ Petition is allowed, and the notice is quashed.
The High Court allowed the Petition, setting aside the impugned notice under Section 148 dated July 1, 2014, and the order dated November 24, 2015, rejecting the objections. The Court held that for reopening an assessment beyond four years, the Assessing Officer must satisfy the jurisdictional condition of failure on the part of the assessee to disclose fully and truly the material facts. The Court found that the basis for reopening was the alleged failure of the Petitioner to furnish bank account statements of M/s Avash Logistii Park Pvt. Ltd. However, these statements pertained to a different legal entity and were scrutinized during the assessment of that entity, which was handled by the same Assessing Officer. The bank account of M/s Avash Logistii Park Pvt. Ltd. contained the transactions with Mr. Vasudev Thakkar and Mr. Nishant Thakkar, and these were reflected in the reasons recorded. The Court concluded that it could not be said that there was any failure on the part of the Petitioner to disclose material facts fully and truly during the regular assessment. Furthermore, the Assessing Officer had no tangible material to form a belief that income had escaped assessment, particularly regarding the alleged generation of cash from payments made to Mr. Thakkar and his son. The Court noted that the Revenue did not contend that the amounts received by Mr. Thakkar and his son were not used for the purchase of land for the project, and questioned why only four specific entries were picked up by the Assessing Officer.
The High Court held that the receipt of share premium, in the facts and circumstances of the case, did not constitute 'income' chargeable to tax for the assessment years 2010-11 and 2011-12. The Court reasoned that the amendments to Section 2(24)(xvi) and Section 56(2)(viib) of the Income Tax Act, 1961, which deem certain share premiums as income, were prospective and applicable only from April 1, 2013, onwards. Similarly, the amendment to Section 68 by incorporating the first proviso was also effective from April 1, 2019, for AY 2013-14 and onwards. Therefore, these amendments were not applicable to the assessment years in question. The Court relied on the decision in Vodafone India Services (P.) Ltd. Vs. Union of India, which held that share capital receipts, including premium, are capital in nature and do not give rise to income. The Court further noted that the assessing officer's belief that the share premium was excessive and the transaction was not established lacked tangible material. The Court found no doubt regarding the existence of the entities to whom shares were allotted or the receipt of premium. Consequently, the notices for reopening and the orders rejecting objections were quashed. The ratio decidendi is that share premium received before the applicability of specific amendments treating it as income is a capital receipt and cannot form the basis for reopening assessment under Section 147 if no income has, in fact, escaped assessment.
The High Court held that the notice and all consequential proceedings issued in the name of a deceased assessee are null and void. The Court referred to several High Court judgments and the Apex Court's decision in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki India Ltd., which held that a notice issued and an order passed in the name of an old entity is bad in law and such an error is not curable under Section 292B as it constitutes a substantive illegality, not a mere procedural violation. The Court noted the Revenue's admission that the Assessing Officer was aware of the assessee's death but notices were system-generated due to ITBA system changes. The Court emphasized that issuing notices on a deceased person is not merely a procedural lapse but a condition precedent for validity. Therefore, the impugned notice dated 19th March 2022 under Section 148A(b), the order dated 31st March 2022 under Section 148A(d), and the notice dated 31st March 2022 under Section 148 were quashed and set aside.
The High Court held that the Respondent No. 1 (Income Tax Officer) had a duty to examine and verify the Petitioner's contentions regarding the cancellation of the old PAN and the returns filed under the new PAN before issuing the impugned order and notice. The Court found that the Revenue's failure to do so led to the filing of the writ petition, which could have been avoided. The Court noted that the Revenue's counsel could not provide any procedure for PAN cancellation. Consequently, the Court quashed and set aside the impugned order under section 148A(d) and the notice under section 148 for AY 2019-20. The Respondent No. 1 was directed to cancel the old PAN in accordance with law and reassess the Petitioner for AY 2019-20, if required, after considering submissions and documents under the new PAN. The ratio is that tax authorities must properly verify assessee's submissions, especially concerning PAN issues, before initiating reassessment proceedings, and the absence of a clear PAN cancellation procedure by the department is a failure.
The High Court held against the Revenue on both counts. Firstly, regarding the stay on demands for AY 2015-16 and 2016-17, the Court ruled that a stay granted under Section 220(6) of the ITA continues until the disposal of the appeal, not merely for a fixed period. The Court relied on its own decision in Hindustan Unilever Ltd. v DCIT. Secondly, the Court found the non-giving of prior intimation in writing before setting off the refund against the demand to be fatal. Citing its judgments in Jet Privilege (P) Ltd. v Dy CIT and BPCL v ADIT, the Court emphasized that the requirement of prior intimation under Section 245 of the ITA is mandatory, and failure to comply renders the entire adjustment illegal. Consequently, the Court quashed and set aside the adjustments of ₹1,66,84,74,041 and ₹44,58,24,745. The Court directed the Respondents to pay the total adjusted amount of ₹211,42,98,781, or any additional amount determined, to the Petitioner within two weeks, along with interest under Section 244A.
The High Court held that the reopening of the assessment for AY 2015-16 was not justified. The Court found that the reliance placed by the revenue on the decision in M/s Consolidated Photo & Finvest Ltd. was misleading, as the Delhi High Court had dissented from the principle that reopening can be based on a change of opinion. The Court emphasized that the AO's original assessment order under Section 143(3) had already considered the issues concerning interest income and its deductibility under Section 80IA and its treatment under Section 115JB. Since the Petitioner had filed an appeal against this order, which was pending adjudication, the reopening based on the same material constituted a 'change of opinion'. The Court further noted that the AO's reasons for reopening appeared to be based on facts and figures available from the audited accounts, indicating no tangible material to conclude that income had escaped assessment. The ratio in Ananta Landmark P. Ltd v Dy. CIT, which states that reopening based on a change of opinion without new tangible material is not justified, was found clearly applicable. Consequently, the AO was deemed to have acted in excess of jurisdiction. The impugned notice and order were quashed and set aside.
The High Court held that the impugned notice dated March 13, 2015, and the order dated December 30, 2015, issued by the ITO for AY 2009-10, were liable to be quashed and set aside. The Court found that the reasons for reopening, based on information about accommodation entries of share premium, lacked a rational connection or live link with the material on record. The assessee had provided its balance sheets, which clearly showed no transaction of Rs. 34,50,000/- on account of share premium. The Court observed that the revenue failed to aver the particulars of the information that led to the belief of escapement of income and that there was no new tangible material. The Court concluded that this was a clear case of 'change of opinion' by the AO, which is impermissible for reopening an assessment, especially after four years, when primary facts were fully and truly disclosed. The ratio is that an AO cannot reopen an assessment based on the same material if one view was conclusively taken, and reopening cannot be based on a mere change of opinion without new tangible evidence.
The High Court held that the Assessing Officer (AO) had no valid reason to believe that income had escaped assessment. The information received from the DDIT (Investigation) Unit-2(4), Mumbai, that the payment was a penalty, was a mere assertion without any cogent material to support it. The settlement agreement explicitly stated it was not an admission of wrongdoing or liability, and the US Court order approving it did not refer to the amount as a penalty. The AO's belief that the payment was a penalty was found to be perverse and aimed at reviewing an earlier concluded assessment where the allowability of the claim was specifically examined. A mere assertion without material does not constitute tangible material for reopening. Consequently, the impugned notice under Section 148 and the order disposing of objections were set aside.
The High Court held that the impugned notices and the order rejecting objections were invalid and quashed them. The Court found that there was no live link or nexus between the alleged SEBI orders and the information received by the respondent. The respondent failed to aver particulars of the information that led to the belief of escaped assessment and presented no new tangible material. The Court concluded that this situation clearly constituted a 'change of opinion' by the Assessing Officer. The Court emphasized that once the assessee provides all details and explanations, the Assessing Officer must examine the material and provide reasons to disbelieve the assessee to shift the onus back. Relying on *Ananta Landmark P. Ltd v Dy. CIT*, the Court stated that reopening based on a 'change of opinion' when primary facts were fully disclosed is not justified. The ratio decidendi is that reopening of assessment after four years, based on information from the investigation wing without independent verification or tangible material, and without demonstrating a failure to disclose material facts during the original assessment, amounts to a 'change of opinion' and is therefore not permissible. The Court directed that the impugned notices and order be quashed and set aside.
The High Court held that the Assessing Officer (AO) acted in excess of his jurisdiction in reopening the assessment under Section 147 read with Section 148 of the Act. The Court found no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The reasons for reopening relied on facts and figures available in the audited accounts, specifically Note No. 20, which had been considered during the original assessment under Section 143(3). The Court noted that the AO's reasoning for disallowing the CSR expenditure relied on Explanation 2 to Section 37(1), which was inserted prospectively from April 1, 2015 (AY 2015-16) and was therefore not applicable to AY 2013-14. Citing judgments like SGS India (P) Ltd. vs ACIT, the Court held that reopening based on provisions inserted subsequently cannot be sustained. Furthermore, the Court found that the disallowance of CSR expenditure, incurred as required by Section 135 of the Companies Act, 2013, would not constitute an offense. The Court concluded that there was no tangible material to suggest that income had escaped assessment, and the reopening was based on a change of opinion, which is not permissible after four years without failure to disclose material facts. Consequently, the impugned notice and order were quashed and set aside.
The High Court disposed of the Writ Petition with liberty granted to the Petitioner to tender his explanation along with accompanying documents. The Court considered the Petitioner's request in light of recent judgments from the Bombay High Court and the Calcutta High Court. The Petitioner was granted time until 11.07.2023 to submit his explanation. Following this, the Department was directed to proceed strictly in accordance with the law. The Court did not decide on the merits of the escaped income or the Petitioner's liability. The core principle applied is that in cases involving reassessment proceedings initiated under Section 148, assessees should be given an opportunity to present their case and explanations, especially when supported by relevant judicial precedents.
The High Court allowed the Writ Petition, quashing and setting aside the impugned Assessment Order dated December 17, 2022. The Court found that the petitioner had sought an adjournment until December 16, 2022, which was not denied by the Department. Crucially, the Department closed the portal on December 9, 2022, without accepting or rejecting the petitioner's adjournment request and without communicating any decision. This failure to provide an opportunity to file a reply, as contemplated under Section 144B(1)(xiii) of the Income Tax Act, 1961, rendered the assessment order unsustainable. The Court directed the Department to open the portal for the petitioner to submit its explanation by July 10, 2023. It also stipulated that if the portal was opened by June 30, 2023, the petitioner would be intimated via email. Furthermore, if the petitioner sought a personal hearing in its reply, considering Section 144B(6)(vii) and (viii), such a hearing would be granted with proper intimation, and the Department's Standard Operating Procedure dated August 3, 2022, would be followed.
The High Court held that no substantial question of law arises from the ITAT's order and found no infirmity in it. The Court reasoned that Article 13(4) of the India-Singapore DTAA states that gains derived from the alienation of any property (other than those mentioned in paragraphs 1, 2, and 3) shall be taxable only in the Contracting State of which the alienator is a resident. In this case, the debt instruments fall under Article 13(4), meaning the gains should be taxed only in Singapore. The Court further analyzed Article 24(1), which limits exemption if the income is taxed in the other Contracting State by reference to the amount remitted or received, not the full amount. However, the Court noted that the AO's rejection of the exemption was based on the premise that repatriation was not proven. The assessee had provided a certificate dated 16th April 2012 from Singapore Tax Authorities, which stated that the capital gain income would be brought to tax in Singapore without reference to the amount remitted or received. This certificate, supported by Circular No. 789 and the judgment in Lakshmi Textile Exporters Ltd., constitutes sufficient evidence of the legal position in Singapore. Therefore, Article 24(1) would not apply if Singapore taxes the full amount irrespective of remittance. The ITAT's decision to allow the exemption was upheld.
The High Court held that the ITAT correctly concluded that the payment of USD 11,80,500/- made by CPI to the assessee was not royalty under the provisions of the Act. For Explanation 2(v) to Section 9(1)(vi) of the Act to apply, there must be a transfer of a right in respect of a copyright as mentioned in Section 14(a) or 14(b) of the Copyright Act. The assessee only gave access to the SAP system, not a right to use the software itself, nor did it transfer any copyright. Similarly, Explanation 4 to Section 9(1)(vi) was not applicable as there was no transfer of the right to use computer software. Furthermore, the ITAT correctly held that the payment was business profit under Article 7 of the India-Malaysia DTAA. Since the assessee did not have a Permanent Establishment in India, these business profits were not taxable in India. The Court found no substantial question of law arising from the ITAT's order and dismissed the appeal.
The High Court held that the impugned order dated 22/02/2022 was required to be quashed and set aside on the ground that no personal hearing was granted to the petitioner. The Court also found merit in the petitioner's contention of non-application of mind, noting that the respondents did not deny the allegations of factual inaccuracies in the impugned order. Consequently, the Court quashed and set aside the impugned order. Without making any observations on the merits of the matter, the case was remanded to the Jurisdictional Assessing Officer (JAO). The JAO is directed to dispose of the petitioner's objections within four weeks of receiving supplementary objections, which the petitioner is to file within two weeks. The JAO must pass a reasoned order addressing all objections, grant a personal hearing at least five working days after providing notice, and provide a list of judgments intended to be relied upon along with the hearing notice. The petitioner is to file written submissions within three days of the personal hearing.
The High Court held that the impugned order dated February 22, 2022, is required to be quashed and set aside on the ground of non-application of mind alone. The court noted that the petitioner's allegations regarding incorrect findings in paragraphs 5 and 6 of the impugned order were not denied by the respondents. The respondents' affidavit-in-reply stated that they offered no comments as the contentions pertained to the National E-Assessment Centre. The court found this sufficient to set aside the order. Without making any observations on the merits, the matter was remanded to the Jurisdictional Assessing Officer (JAO). The JAO is directed to dispose of the petitioner's objections within four weeks of receiving supplementary objections, which the petitioner will file within two weeks. The JAO must pass a reasoned order addressing all objections, grant a personal hearing at least five working days in advance, and provide a list of relied-upon judgments along with the hearing notice. The petitioner is to file written submissions within three days of the personal hearing.
The High Court held that the impugned order dated February 22, 2022, is required to be quashed and set aside on the ground of non-application of mind alone. The court noted that the petitioner's allegations regarding incorrect findings in paragraphs 5 and 6 of the impugned order were not denied by the respondents. The respondents' affidavit-in-reply stated that they offered no comments as the contentions pertained to the National E-Assessment Centre. The court found this sufficient to set aside the order. Without making any observations on the merits, the matter was remanded to the Jurisdictional Assessing Officer (JAO). The JAO is directed to dispose of the petitioner's objections within four weeks of receiving supplementary objections, which the petitioner will file within two weeks. The JAO must pass a reasoned order addressing all objections, grant a personal hearing at least five working days in advance, and provide a list of relied-upon judgments along with the hearing notice. The petitioner is to file written submissions within three days of the personal hearing.
The High Court held that the impugned order dated 22/02/2022 was required to be quashed and set aside on the ground that no personal hearing was granted to the petitioner. The Court also found merit in the petitioner's contention of non-application of mind, noting that the respondents did not deny the allegations of factual inaccuracies in the impugned order. Consequently, the Court quashed and set aside the impugned order. Without making any observations on the merits of the matter, the case was remanded to the Jurisdictional Assessing Officer (JAO). The JAO is directed to dispose of the petitioner's objections within four weeks of receiving supplementary objections, which the petitioner is to file within two weeks. The JAO must pass a reasoned order addressing all objections, grant a personal hearing at least five working days after providing notice, and provide a list of judgments intended to be relied upon along with the hearing notice. The petitioner is to file written submissions within three days of the personal hearing.
The High Court quashed and set aside both the order dated March 9, 2020, passed by the PCIT under Section 264, and the order dated May 7, 2018, passed under Section 179(1) of the Income Tax Act, 1961. The Court found that there was no evidence to indicate that any notice was issued to the deceased Director before the Section 179(1) order was passed. The revenue's claim of issuing letters via speed post was unsubstantiated by any annexed evidence. The Court held that the order under Section 179(1) did not satisfy the required ingredients, particularly the necessity of demonstrating that tax dues could not be recovered from the company. Furthermore, the deceased was not given an opportunity to prove that non-recovery was not attributable to gross neglect, misfeasance, or breach of duty. The Court also noted that the company was under CIRP, which should have been considered. The ratio is that proceedings under Section 179(1) must be preceded by proper notice to the director and a clear demonstration of the inability to recover dues from the company, with an opportunity for the director to rebut the presumption of gross neglect.
The Court granted the petitioner's request to withdraw the writ petitions. The petitions were dismissed as withdrawn. The Court also granted the petitioner the liberty to pursue their alternate remedy, keeping all their rights and contentions open to be raised before the Appellate Authority. The specific issues that would have been decided had the petitions proceeded on merits were not addressed as the matter was disposed of on the petitioner's request for withdrawal.
The Court granted the petitioner's request to withdraw the writ petitions. The petitions were dismissed as withdrawn. The Court also granted the petitioner the liberty to pursue their alternate remedy, keeping all their rights and contentions open to be raised before the Appellate Authority. The specific issues that would have been decided had the petitions proceeded on merits were not addressed as the matter was disposed of on the petitioner's request for withdrawal.
The High Court held that the Rule granted in favor of the Petitioner should be made absolute. Regarding the first issue, the Court found that Section 244(1A) of the Act, which deals with interest on refunds, uses the expression "amount" in its earlier part, which is neutral and encompasses not only tax but also interest. The Court reasoned that the intention of Parliament was to compensate the assessee for the excess payment during the intervening period. Therefore, the expression "tax" in the later part of Section 244(1A) should be construed to include interest also, making the Petitioner entitled to interest on the interest refunded. The Court respectfully agreed with the views of the Madras High Court in Needle Industries Pvt. Ltd. and subsequent judgments from Gujarat and Delhi High Courts. The Court also clarified that Section 240 of the Act makes no distinction between refund of tax, penalty, or other amounts. The Petitioner was claiming interest on an amount paid as interest under Section 220(2), which formed part of the refund due. The Court directed the Assessing Officer to grant interest on the refund of the amount paid as interest under Section 220(2) and to calculate the refund accordingly within eight weeks.
The High Court held that no substantial question of law arises from the ITAT's order, as the matter is fact-based. The ITAT had correctly concluded that Infomedia was an independent agent acting in the ordinary course of its business, and not a dependent agent PE. This conclusion was based on Infomedia's independence, its host of other activities for different clients, and its compensation for services rendered. Therefore, following Explanation 2 read with the proviso to Section 9(1)(i) of the Act and CBDT Circular 7 of 2003, the assessee's income could not be deemed to accrue or arise in India as business income. Consequently, it was not necessary to delve into the DTAA provisions for business income. Regarding FTS, the ITAT had found that the services provided by the assessee were limited to displaying/storing data and offering an e-commerce platform for advertising, which did not fall under the definition of "rendering of any technical, managerial or consultancy services" as per Section 9(1)(vii) read with Explanation 2. The ITAT also relied on the Supreme Court judgment in Commissioner of Income-tax-4, Mumbai vs. Kotak Securities Ltd., emphasizing that constant human endeavor is essential for technical services, and automated processes without significant human intervention do not qualify. The High Court agreed that the ITAT correctly rejected the revenue's grounds regarding FTS. The appeal was dismissed.
The Special Court held that while the priority in payment for taxes under Section 11(2)(a) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, is for principal taxes for the 'priority period', the distribution of assets must consider all liabilities. The Court noted that the outstanding principal tax demand for the priority period far exceeded the available assets. However, distinguishing the present case from a prior one where release was denied, the Court found that the facts warranted a partial release. The Court ordered the release of Rs.1.50 Crores to the Income Tax Department, subject to the Department furnishing an undertaking to bring back the amount along with interest as directed by the Court. This decision was based on the quantum of assets and the huge outstanding principal tax demand. The application was partly allowed, and the Custodian Report No.11 of 2023 was made absolute to the extent of prayer clauses (a) and (b).
The High Court held that the petitioner had sufficiently discharged the burden cast upon him under the latter part of Section 179(1) of the Income Tax Act, 1961. The Court found that the petitioner had provided material demonstrating his lack of financial control, decision-making power, and limited role in KAPL, with the entire decision-making process being with the directors appointed by KFI. The impugned orders were criticized for being cryptic and failing to consider the petitioner's case and supporting material in the context of non-recovery of tax dues. The Court noted that no material was highlighted by the Income Tax Officer contrary to the petitioner's evidence. Furthermore, the Court held that the action initiated after a delay of approximately 8 years was vitiated on the grounds of procedural fairness and violation of principles of natural justice. The Court also referred to a similar judgment by a co-ordinate bench in the petitioner's wife's case, which had quashed identical orders. Consequently, the impugned orders were quashed and set aside, and the rule was made absolute.
The High Court quashed and set aside the notice dated March 26, 2019, issued under Section 148 and the order dated November 20, 2019, disposing of the Petitioner's objections. The Court agreed with the Petitioner's submissions. The reasons for reopening were based on the Petitioner's own records, which were accessed during the original assessment. There was no indication of any failure on the Petitioner's part to disclose material facts. The Assessing Officer's allegations that material facts could not be discovered were bald. Furthermore, the Petitioner had responded to a query regarding the capital gain during the original assessment, and the fact that the assessment order did not explicitly refer to it did not mean the query was not considered. The Court relied on the decision in Aroni Commercials Ltd. V. Deputy Commissioner of Income-Tax, holding that an assessment order need not discuss every query. The reopening was deemed to be a case of change of opinion, which does not constitute valid reasons to believe that income chargeable to tax has escaped assessment. The rule was made absolute.
The High Court decided to address only the first substantial question of law as the second question was rendered res integra by previous High Court judgments. Regarding the first question, the Court held that the expenditure incurred by the appellant for MMC and the dues considered not recoverable were indeed for the purpose of business and directly relatable to the appellant's business. The Court reasoned that the appellant's participation in MMC's rehabilitation scheme, providing funds and guarantees, was driven by commercial expediency to preserve its own goodwill and the reputation of the Mahindra Group. The nexus between the appellant and MMC was established, and the appellant's actions were aimed at keeping MMC as a going concern, which indirectly benefited the appellant's business. Citing precedents like Usher's Wiltshire Brewery and Malayalam Plantations Ltd., the Court emphasized that expenditures incurred for commercial expediency, to facilitate carrying on business, protect assets, or preserve goodwill, are deductible. Therefore, the expenditure and write-offs were held to be deductible under Section 28 of the Act. The ITAT was not right in disallowing these claims. The appeal was allowed.
The High Court held that the notice issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961, for reopening the assessment for AY 1992-1993 was invalid. The Court agreed with the assessee's contention that the Kar Vivad Samadhan Scheme (KVSS) provided for a conclusive settlement. Once a declaration was made under KVSS, tax arrears were determined, paid, and a certificate was issued, the immunity under Section 91 came into effect. The Court found no jurisdiction for the Assessing Officer to reopen the assessment by a notice under Section 148, except where material particulars furnished in the declaration were found to be false, which was not the case here. Furthermore, the Court noted that the reopening was based on a change of opinion, as the issue of Portfolio Management Scheme (PMS) was already raised and dealt with during the original assessment. The notice was also issued after the expiry of four years, and the revenue failed to demonstrate any failure on the part of the assessee to disclose material facts. Therefore, the petition was allowed.
The High Court held that the Assessing Officer (AO) can make a reference to the Transfer Pricing Officer (TPO) under Section 92CA of the Income Tax Act, 1961, only after selecting the case for scrutiny assessment. This is supported by CBDT Instructions No. 3/2003, which indicate that a case should be selected for scrutiny before referring it to the TPO. The determination of the arm's length price is envisaged to occur during the course of assessment proceedings under Section 143(3). In this case, no assessment proceedings were pending when the reference was made to the TPO, rendering the reference invalid. Consequently, the subsequent order passed by the TPO was a nullity in law and void ab initio. The AO could not rely on this invalid order to form a belief that income had escaped assessment. Therefore, the Tribunal was correct in its findings. No substantial questions of law arise.
The High Court held that the reopening of assessment was not justified. The Court found that the Assessing Officer (AO) relied on the same information available from the assessment records, indicating a 'change of opinion' rather than the discovery of new tangible material suggesting escaped income. The Court emphasized the principle laid down in Ananta Landmark P. Ltd v Dy. CIT, stating that if primary facts are fully and truly disclosed, the AO cannot reopen an assessment based on a change of opinion using the same material. Crucially, the Court noted that the ITAT order dated January 11, 2022, had already addressed and decided the contentions raised by the revenue in favour of the petitioner. The AO ought to have considered this ITAT order and could not feign ignorance. The Court observed that the revenue did not offer to withdraw the notice and impugned order at the outset. Consequently, the impugned notice dated March 19, 2021, and the order dated March 16, 2022, were quashed and set aside.
The High Court held that the impugned notice dated March 26, 2021, issued under Section 148 of the Income Tax Act, 1961, for AY 2014-15, was invalid and quashed it. The Court found no indication of the Petitioner's failure to disclose any material fact. It noted that the AO had considered the very same transactions during the original assessment under Section 143(3) and added ₹1,07,18,922 to the total income, on which the Petitioner had already paid tax. The Court found no substance in the AO's belief that income had escaped assessment, as there was no mention of any tangible material supporting this conclusion. The reassessment proceedings were triggered by a change of opinion regarding the calculation of tax payable. The Court reiterated the well-settled principle that reassessment requires fresh "tangible material," and reconsideration of material available during the original assessment amounts to a change of opinion, rendering the reassessment proceedings invalid. The Court made the Rule absolute, quashing the notice and prohibiting further action.
The High Court held that the order passed by the Tribunal warrants no interference and that no substantial questions of law arise. The Tribunal had upheld the view of the CIT(A) to treat purchases from ten parties as bogus and also sustained the addition to the extent of 12.5% of the amount of disputed purchases. The High Court reasoned that if the entire purchases were held as non-genuine, it would be impossible to justify how the works allotted to the assessee for execution by semi-government agencies could have been completed. The High Court relied on its own previous decision in Income Tax Appeal No. 398 of 2018, decided on 18th July, 2022, where the revenue's appeal was dismissed on similar grounds. The principle is that when works are completed, it implies genuine expenditure, and a partial addition representing profit is justifiable rather than the entire purchase amount.
The Tribunal upheld the CIT(A)'s decision to treat the purchases from ten parties as bogus. However, it also upheld the CIT(A)'s view that only the profit element embedded in these purchases, estimated at 12.5% of the disputed amount, should be added to the total income. The Tribunal relied on the Gujarat High Court's decision in CIT V/s. Bholanath Poly Fab Pvt. Ltd. The Bombay High Court, in this judgment, agreed with the Tribunal, noting that if the entire purchases were disallowed, it would be impossible to justify the completion of works allotted to the assessee by semi-government agencies. The High Court found no substantial question of law arising and dismissed the appeals. The principle is that when purchases from bogus parties are made by a contractor who completes the work, the profit element embedded in such purchases can be taxed, rather than disallowing the entire purchase cost.
The High Court allowed the petition, directing the respondents to issue a fresh Form-3 under the DTVSV Act after giving the petitioner credit for the amount paid under the IDS. The Court reasoned that the amount deposited under the IDS could not be forfeited or retained illegally by the revenue. It was held that this was a case where the money lying with the revenue had to be adjusted as a mathematical exercise to accord the benefit under the DTVSV Act. The Court found that not adjusting the prior payment would defeat the purpose and spirit of the DTVSV Act, which aims at resolving disputes. The Court also noted that after adjusting the prior deposited amount, the petitioner would be entitled to a refund, if any, which should be considered for payment. The respondents were directed to complete this process within four weeks.
The High Court held that the jurisdictional conditions for invoking Section 147-148 were not satisfied, as there was no failure to disclose material facts fully and truly. The Court noted that the assessee had submitted all particulars and supporting documents. The reasons to believe that loans were bogus or accommodation entries, based on a third party's statement during a search, were dispelled by the assessee's disclosures. The Court emphasized that once the assessee provided bank statements and details, the AO should have carefully examined them and provided reasons to believe otherwise when rejecting objections, especially after an assessment order under Section 143(3). The Court cited Lakhmani Mewal Das for the principle that 'reason to believe' must be in good faith and have a rational connection to the formation of belief. The recorded reasons did not state the primary facts not disclosed, and the case of Rushabh Enterprises, where reopening was quashed for lack of tangible material, was not considered. The Court found that the AO relied on facts and figures already on record and that the assessee had demonstrated that the AO's reasonable belief was unfounded. Consequently, the reassessment sought to be initiated was stalled, and the AO acted in excess of jurisdiction. The impugned notice and order were quashed and set aside.
The High Court held that the impugned order transferring the Petitioner's assessment jurisdiction was unsustainable in law and liable to be set aside. The Court found that the order dated November 21, 2022, did not adequately reflect the reasons for the transfer, nor did it deal with the specific objections raised by the Petitioner. The Court noted that the assessing officer appeared to have acted mechanically on a request from Jaipur, rendering the agreement envisaged under Section 127(1)(a) superfluous and the opportunity to be heard illusory. The Court emphasized that the obligation to record reasons and provide an opportunity to be heard is crucial to prevent arbitrariness. The Court set aside the impugned order but granted liberty to the Principal Commissioner, Mumbai, to pass a fresh order if the Jaipur jurisdiction provides cogent material and reasons justifying the transfer within four weeks. The Petitioner would be given an opportunity to be heard, and any subsequent order should be passed within eight weeks. The Court did not decide on the merits of the proposed transfer itself, but on the procedural infirmities of the impugned order.
The Special Court disposed of the application and the Custodian's report. The Court accepted the Custodian's report and made it absolute in terms of prayer clauses (a) and (b). This implies that the Court allowed the release of funds as proposed by the Custodian, which was Rs. 2.85 Crore to the Income Tax Department. The reasoning appears to be based on the Custodian's assessment of available assets versus total liabilities and the need to retain a portion for expenses. The Court did not explicitly decide on the full demand of Rs. 10,34,40,612/- but rather on the amount the Custodian deemed appropriate for release. The application filed by the Income Tax Department was also disposed of. No issue was expressly left undecided.
The High Court held that the appeals were dismissed. The Court found no reason to interfere with the view taken by the ITAT. The Court noted that the exemption order dated 31.07.2001 was passed after the AO's assessment order and was produced before the CIT(A) during the pendency of the appeal. The Court found that the CIT(A) was justified in admitting the exemption order under Rule 46A(1)(c) as it went to the root of the grounds of appeal, specifically the charge of Expenditure Tax. The Court observed that the CIT(A) had recorded reasons for admission, stating that the exemption removed the Assessee from the mischief of Section 3 by the first proviso to Section 4(a) of the ET Act. The Court also noted that sub-rule (4) of Rule 46A empowers the CIT(A) to direct production of documents for disposal of the appeal. The Court concluded that the admission of the exemption order was not an arbitrary or perverse exercise of power and that the requirements for admitting additional evidence were satisfied. The ITAT had confirmed the CIT(A)'s view, leading to concurrent findings.
The High Court held that the reassessment proceedings initiated were unsustainable due to a violation of the procedure prescribed under Section 148A(b) of the Income Tax Act, 1961. The Court found that the Assessing Officer failed to provide the requisite material which ought to have been supplied along with the information, as mandated by the section and clarified by the Supreme Court in Union of India V/s. Ashish Agarwal. The Petitioner was handicapped in submitting an effective reply without this material, rendering the purpose of Section 148A(b) illusive. The Court quashed the order passed under Section 148A(d) and the notice under Section 148. However, it was open to the revenue to proceed from the stage of the notice under Section 148A(b) by supplying the relevant material, if otherwise permissible considering limitation issues. The Court did not deem it necessary to deal with other arguments raised regarding prior approval and inquiry under Section 148A(a).