Touchstone Holdings Pvt. Ltd. Vs ITO (Delhi High Court)
Delhi High Court allows reopening of AY 2013-14 (despite being beyond 6 years from 1st April 2021), basing on extension as per Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
The time limit for issuing notice under unamended Section 149 which was falling from 20th March 2020 till 31st March 2021 was extended by Section 3 of TOLA read with Notification No. 20/2021 dated 31st March, 2021, and Notification No. 38/2021 dated 27th April, 2021, until 30th June, 2021.
The initial notice in the present proceedings was issued on 29th June, 2021 i.e. extended time limit. The said notice was quashed by this Court following its judgment in Mon Mohan Kohli Vs. Assistant Commissioner of Income Tax and Another, reported in 2021 SCC OnLine Del 5250 as the mandatory procedure of Section 148A of the Act was not followed before issuing the said notice. In the said judgment, this Court struck down the Explanations A(a)(ii) and A(b) to the said notifications. However, the relevant portion of the notification which extended the time limit for issuance of time barring reassessment notices until 30th June, 2021 was not struck down by this Court and in fact, this Court categorically held at paragraph 98 that power of re-assessment that existed prior to 31st March 2021 stood extended till 30th June 2021.
Subsequently, Supreme Court in Ashish Agarwal (supra) held that the Section 148 notices issued between 1st April 2021 to 30th June, 2021, will be deemed to have been issued under Section 148A of the Act and therefore the notice dated 29th June, 2021, issued to the petitioner stood revived.
Consequently, since the time period for issuance of reassessment notice for assessment year 2013-14 stood extended until 30th June, 2021, the first proviso of Section 149 (as amended by the Finance Act, 2021) is not attracted in the facts of this case.
As noted above, the time limit for initiating assessment proceedings for AY 2013-14 stood extended till 30th June, 2021. The petitioner does not dispute the said facts, consequently, the reassessment notice dated 29th June, 2021, which has been issued within the extended period of limitation is not time barred.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Present writ petition has been filed challenging the Order dated 20th July, 2022, passed under Section 148A(d) of the Income Tax Act 1961, (‘the Act’), Notice dated 20th July, 2022 issued under Section 148 of the Act for the Assessment Year (‘AY’) 2013-14 and the CBDT Instruction No. 1/2022 dated 11th May, 2022.
2. Learned Senior Counsel for the petitioner states that the information regarding the petitioner’s alleged transaction with M/s BDR Builders and Developers Private Ltd. for the purchase of shares amounting to Rs.69,93,00,000/- is factually wrong as there was no transaction of any sale or purchase of shares in the assessment year under consideration. He states that the petitioner has no concern with the transactions set out in Notice dated 1st June, 2022, as the same were undertaken by petitioner’s shareholders and the assessee has no concern with these transactions.
3. He also submits that as per the first proviso to Section 149 of the Act (as amended by Finance Act, 2021), no notice for re-assessment can be issued for assessment year 2013-14, as the time limit for initiating the proceedings expired on 30th March, 2020, as per the provisions of Section 149 (as it stood prior to its amendment by Finance Act, 2021). He, therefore, contends that the present proceedings initiated by the respondent in pursuance of the initial notice dated 29th June, 2021, and judgment of the Supreme Court in Union of India Ashish Agarwal reported in 2022 SCC OnLine SC 543 are time barred.
4. Learned Senior Standing Counsel for the Revenue, Mr. Puneet Rai submits that Section 3 of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA’) applies to the unamended provisions of Section 149 of the Act (as it stood prior to its amendment by Finance Act, 2021) and therefore, the initial notice dated 29th June, 2021, and the proceedings taken in continuation as per the judgment of Ashish Agarwal (supra) are not time barred. He further states that the information pertaining to the petitioner, which is a part of the BDR Group is duly reflected in the investigation report and the said BDR Group is in the business of providing accommodation entries and as per the Revenue, the petitioner received bogus share premium and capital of 69.93 crores. He stated that in these facts, no interference is warranted in writ proceedings.
5. We have heard the learned counsel for the parties and perused the paper-book. This Court finds that the petitioner has not brought on record anything to prove that the reassessment proceedings are being undertaken in an arbitrary manner.
6. In the information shared with the assessee vide Notice dated 1st June, 2022 it was stated that the transaction of sale and purchase of shares held by the assessee by M/s Bagh Kothi Invest & Finance Private Limited and M/s Nandi Mercantile Pvt. Ltd. on 28.03.2013 is under scrutiny. The notice states that the creditworthiness and genuineness of this transaction of sale and purchase was not established. It was further stated that the petitioner-assessee is a part of the BDR group and it had received share premium to the tune of Rs. 69.93 crores from S.K. Jain group of companies, which are in the business of providing accommodation entries in the form of inter-alia bogus share capital. In support of the information, the Assessing Officer (‘AO’) relied upon the report of the Investigation Wing, Delhi and a survey report in the case of BDR Group.
7. The petitioner in its reply has contended that the said information even if assumed to be correct, evidences that the transactions which are under scrutiny was undertaken between its shareholders and no amount was received by the assessee and therefore, the provisions of Section 68 of the Act are not attracted as no share application money or share capital or share premium was received by the assessee in the relevant assessment year.
8. The AO after considering the reply dated 15th June, 2022 of the petitioner, in the impugned Order referred to the survey action carried out on 13th December, 2018 on the premises of the entities belonging to the BDR Group and in fact survey was also conducted at the premises of the assessee. The said survey as per the AO resulted in impounding of incriminating documents which disclosed that the BDR Group of companies are engaged in unaccounted cash transactions and one of the modus used by the said companies is to provide bogus share capital and bogus share premium to other companies. The AO has summarised the findings against the assessee at paragraph 6.2 of the impugned Order, which read as under:
“6.2 Following are the relevant findings with respect to the assessee M/s Touchstone Holding Pvt. Ltd. (PAN: AAACT1004E):
