Proceedings initiated based on risk management strategy, valuation of shares to be determined by the assessing officer.

JUDGMENT :

Vijay Bishnoi, J.

1. By way of this writ petition, the petitioner has challenged the validity of the order dated 31.03.2023 passed under Section 148A (d) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The petitioner has also challenged the notice dated 05.04.2023 issued by the Assessing Officer under Section 148 of the Act.

2. Facts, necessary for adjudication, are that the petitioner, a private limited company is engaged in the business of manufacturing/trading of papad, namkeens, snacks and other associated derivatives of such products.

3. A notice dated 03.03.2023 was issued to the petitioner under Section 148(b) of the Act, whereby it was asked to show cause why a notice under Section 148 of the Act should not be issued on the basis of information available, which suggests that the income chargeable to tax has escaped assessment for the relevant assessment year 2019-20. The petitioner was required to file reply to the said notice on or before 13.03.2023.

4. The petitioner submitted its reply on 12.03.2023, however, requested to provide time to furnish further clarification/ information. The matter was adjourned to 20.03.2023 and thereafter the petitioner submitted further clarification by filing another reply dated 31.03.2023, however, after hearing the petitioner, the order dated 31.03.2023 under Section 148A(d) of the Act has been passed followed by notice under Section 148(b) of the Act.

5. Assailing the order dated 31.03.2023 passed under Section 148A(d) of the Act and the consequential reassessment notice issued under Section 148 of the Act, learned counsel for the petitioner has argued that the proceedings initiated against the petitioner are without jurisdiction. It is submitted that from the notice dated 03.03.2023 issued under Section 148A (b) of the Act, it is clear that basis of information, in the case of the petitioner, was a survey conducted on 04.03.2020 under Section 133A of the Act. It is submitted that Explanation-2 (ii) to Section 148 of the Act clearly defines expression ‘information’, on the basis of which, the assessing officer can proceed in the cases of escaped assessment.

6. It is contended that any information gathered during a survey conducted under Section 133A of the Act before 1st April, 2021, cannot be the basis for initiating proceedings against an assessee under Section 148 of the Act. It is argued that in the notice dated 03.03.2023 issued under Section 148A (b) as well as the order dated 31.03.2023 passed under Section 148A(d) of the Act, the assessing officer has mentioned that the basis of information with him which suggests the income chargeable to tax has escaped assessment, is the survey conducted on 04.03.2020 though he has no authority to take into consideration any information gathered during survey conducted prior to 1st of April, 2021. It is, therefore, argued that the order dated 31.03.2023 issued by the assessing officer under Section 148A (d) of the Act and consequential notice under Section 148 of the Act are without jurisdiction and are liable to be quashed and set aside.

7. Learned counsel for the petitioner has further argued that another ground for initiating proceedings against the petitioner was that the petitioner-company issued shares on the basis of valuation made by the accountant and not by the merchant banker. It is submitted that as per Section 56(2)(viib) of the Act and Rules 11UA of the IT Rules, the fair market value of unquoted shares are required to be determined by merchant banker from 24.05.2018. However, in the present case, the assessee had executed Share Subscription Agreement and Share Holders Agreement on 22.02.2018 in which all terms and conditions of allotment of shares are mentioned and in those agreements, the valuation report of the chartered accountant valuing the shares as on 15.02.2018 has already been given. The Rule 11UA as it stood on 15.02.2018 permitted the determination of fair market value of unquoted equity sha