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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Banyan Real Estate Fund Mauritius – Appellant
Versus
Assistant Commissioner of Income Tax Circle International Tax 1 1 2 & Anr. – Respondents
W.P.(C) 10485 of 2023 & CM Appl. 40642 of 2023
Decided On : 09-08-2023
Income Tax - Assessment Year 2016-17 - Income Tax Act, 1961 [Section 148A(b), Section 47(vii), Section 50, Rule 11UA] - The court discussed the allegations of remittances to non-resident/foreign company and payment for acquiring shares, the petitioner's response, and the denial of benefit of the Double Tax Avoidance Agreement (DTAA) executed between India and Mauritius. The court highlighted the erroneous assumptions in the notice, the disclosure of transactions in the Return of Income (ROI), and the denial of DTAA benefit for AY 2014-15.
Fact of the Case:
The writ petition concerns Assessment Year (AY) 2016-17. The petitioner was issued a notice under Section 148A(b) of the Income Tax Act, 1961, alleging remittances to non-resident/foreign company and payment for acquiring shares. The petitioner responded, claiming errors by the Assessing Officer (AO) and disclosing the transactions in the Return of Income (ROI). The AO continued with reassessment proceedings without correction and flagged the denial of DTAA benefit.
Finding of the Court:
The court found that the AO made erroneous assumptions, failed to correct course despite the petitioner's response, and flagged the denial of DTAA benefit. The court also noted the pending adjudication of the DTAA benefit denial for AY 2014-15 before the Court.
Issues: The issues involved the allegations of remittances and share acquisition, the petitioner's response, the AO's failure to correct course, and the denial of DTAA benefit.
Ratio Decidendi: The court emphasized the importance of correct assessment by the AO, the disclosure of transactions in the ROI, and the pending adjudication of the DTAA benefit denial for AY 2014-15.
Final Decision: The court allowed the application filed on behalf of the petitioner seeking interim relief and stayed the impugned order and notice issued under Section 148 of the Act.
JUDGMENT
[Physical Hearing/Hybrid Hearing (as per request)]
Rajiv Shakdher, J. (Oral):
CM APPL. 40641/2023
1. Allowed, subject to just exceptions.
W.P.(C) 10485/2023 & CM APPL. 40640/2023[Application filed on behalf of the petitioner seeking interim relief].
2. This writ petition concerns Assessment Year (AY) 2016-17.
3. The record, as presently made available to us, shows that there has been no application of mind by the Assessing Officer (AO).
4. Evidently, the petitioner was issued a notice dated 24.03.2023 under Section 148A(b) of the Income Tax Act, 1961 [in short, "The Act"].
5. The allegation levelled against the petitioner concerned the following two aspects:
(i) First, it had remitted monies to non-resident/foreign company.
(ii) Second, it had paid Rs.1 lakh or more, for acquiring shares.
5.1. Insofar as remittances were concerned, in the notice under Section 148A(b) of the Act, there are two amounts mentioned i.e. Rs. 36,70,31,500/- & Rs. 8,98,87,560/-.
5.2. Insofar as the allegations concerning the monies paid by the petitioner for acquiring shares was concerned, it was pegged at Rs. 10,18,59,480/-.
6. As required in the aforesaid notice, the petitioner filed a response dated 04.04.2023, whereby it was conveyed that a serious error was committed by the AO.
7. It was pointed out that the petitioner had, in fact, received monies upon the sale of shares, and not, as alleged, remitted monies through a non- resident/foreign company.
7.1. In this regard, the petitioner indicated that it had sold shares of two entities i.e., Landmark Hi Tech Development Private Limited and Safari Retreats Private Limited.
7.2. Insofar as the amount received on sale of share of Landmark Hi Tech Development Private Limited was concerned, it was asserted that the petitioner had received Rs. 36,70,31,500/-, and, likewise upon sale of shares of Safari Retreats Private Limited, it was averred that the petitioner had received Rs. 8,98,87,560/-.
7.3. Therefore, the cumulative amount that the petitioner claimed it had received on sale of the shares was Rs. 45,69,19,060/-.
8. As regards the other allegation, which is that it had paid Rs.10,18,59,480/- for acquiring shares, the petitioner submitted that it had, in the first instance, acquired 1,41,47,150 shares from a company going by the name Treasured Developers Pvt. Ltd. (TDPL).
8.1. The petitioner further averred that, against these shares, it was allotted 70,73,575. bonus shares. Thus, at the given point of time, the petitioner held 2,12,20,725 equity shares in TDPL.
8.2. The petitioner claims that an amalgamation took place between TDPL and another company, namely, Suncity Dhoot Colonizers Private Limited. It is stated that the scheme of amalgamation concerning these companies was sanctioned via an order dated 22.06.2015 passed by the Delhi High Court in Company Petition No. 417/2015.
8.3. The petitioner claims that, consequent to the amalgamation, it was allotted 1,01,85,948 shares of Suncity Dhoot Colonizers Private Limited, bearing a face value of Rs. 10 per share.
8.4. Thus, the explanation given was that the amount which was flagged by the AO, was nothing but the face value of the aforementioned shares amounting to Rs.10,18,59,490/-.
9. The petitioner also brought to the notice of the AO that the allotment of shares in a scheme of amalgamation was not construed as transfer under the Act. In this regard, the provisions of Section 47(vii) of the Act was mentioned by the petitioner.
10. According to the petitioner, the allegations stemmed from the erroneous assumption in the notice dated 24.03.2023 issued under Section 148A(b) of the Act that the petitioner had not filed its Return of Income(ROI).
11. Mr Indruj Singh Rai, learned counsel, who appears on behalf of petitioner, says that the entire transaction was disclosed by the petitioner in the ROI.
12. In this behalf, our attention was drawn to the copy of the ROI placed on record by the petitioner. A perusal of the ROI shows that t
The central legal point established in the judgment is the importance of correct assessment by the Assessing Officer and the disclosure of transactions in the Return of Income (ROI) for the assessmen....
The Assessing Officer must independently consider the petitioner's response and furnish relevant material before passing an assessment order.
The removal of the foundation leading to the fall of the superstructure is a key legal principle in determining the validity of orders under the Income Tax Act.
Point of Law : Assessment - Unless any income chargeable to tax has escaped assessment for such assessment year by reason o f the failure on the part of the assesse to disclose fully and truly all ma....
The court emphasized the importance of adhering to the original allegation in the notice and found the Assessing Officer's conclusion regarding fair market value to be erroneous, leading to the setti....
The main legal point established in the judgment is that notices issued under the Income Tax Act must be based on proper application of mind, and if found lacking, can be set aside by the court.
Procedural fairness and compliance with notice requirements are essential in the assessment process under the Income Tax Act.
The principle of natural justice and fair opportunity in assessment proceedings under the Income Tax Act.
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