October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u (^21379)
Arguments of the Revenue
- The Revenue countered the argument of
the petitioners, both on facts and on law. The
Revenue effectively countered the grounds
and it could be listed as under:
(i) The High Courts have consistently been
taking the validity of “reasons to be-
lieve” recorded by the Assessing Officer
and has never substituted its own
reasons to believe. Also, the recording
of reasons is a tentative exercise and
the Assessing Officer need not record
conclusive opinion. The sufficiency of
reasons or correctness or adequacy of
reasons is generally not looked into
while deciding a writ petition.
(ii) So long as the reasons are recorded based
on tangible material, the High Court
would not interdict the proceedings at
the stage of section 147. Even if the
‘reason to believe’ recorded by the As-
sessing Officer have a second plausible
view, the court normally would refrain
from interfering at the stage of issuance
of notice under section 147. Reliance
was placed on the decision of Acorus
Unitech Wireless (P.) Ltd. v. Asstt. CIT
[2014]43 taxmann.com 62/223 Taxman
181 (Mag.)/362 ITR 417 (Delhi).
(iii) Reason to believe does not require es-
tablishment of the fact of escapement
of income. When the materials avail-
able can decisively prove escapement
of income chargeable to tax if in the
subjective opinion of the Assessing
Officer it is eligible for reopening of
assessment, he may do so. Reliance
was placed on Asstt. CIT v. Rajesh
Jhaveri Stock Brokers (P.) Ltd. [2007] 161
Taxman 316/291 ITR 500 (SC).
(iv) The sufficiency or correctness of ma-
terial is not a thing to be considered
at the stage of issue of notice under
section 148. Further, the assessee had
not disclosed acquisition of shares truly
and fully in the return filed by him.
As regards Ms. Sonia Gandhi and Mr.
Oscar Fernandes the returns were ac-
cepted under section 143(1) and, hence,
there was no change of opinion in the
absence of an assessment. Mr. Rahul
Gandhi in response to a query under
section 142(1) stated that it was not a
director of any company.
(v) The assigned debt of ` 90.21 crore is
an asset of YI and the value of shares
allotted to each shareholder has to be
calculated keeping the value of this asset
in mind. Further, the petitioners have
received shares at the face value and
if their fair market value is computed
it would work out to be ` 90.21 crores
to be divided by 5,000 shares. Further,
by getting 99% of shareholding in AJL,
the value of immovable property of AJL
worth ` 413.40 crores became beneficial
interest of YI and the shareholders, i.e.,
the petitioners.
(vi) The cancellation of registration under
section 12AA was w.e.f. assessment
year 2011-12 and the subject matter
of dispute also belonged to the same
assessment year. Thus, the sharehold-
ing would not fall in the exempted
category given in section 56(2)(vii).
(vii) The non-profit company YI allotted shares
on 22.01.2011 for a consideration which
is less than aggregate fair market value
and it received the assignment of debts
and 99% of the shareholding in AJL
on 21.01.2011. Thus, on the date of
allotment of shares to the petitioners
the fair market value of the shares of
YI was far above the face value.
(viii) The contention of the shareholder that
interest in section 25 company need
not be disclosed is not acceptable for
the reason that it is possible to convert
a section 25 company into a normal
company, since there is no prohibition
in law. It is possible that a few share-CuriOus Case OF ‘naTiOnal Herald’