In the present case, the Assessing Officer and the DRP had examined the issue of business restructuring. Even the fact that receipts upto and including July 2007 were offered for taxation in the hands of the petitioner and thereafter, that is, from August, 2007 to 31.03.2008, the revenues were to be raised in the hands of the petitioner’s 100% subsidiary, namely, LIG, were clearly, noticed and recorded not only in the final assessment order, but also in the draft assessment order and the proceedings before the DRP. Therefore, we cannot agree with the learned counsel for the revenue that the transaction in question had not been examined by the Assessing Officer or the DRP in the course of the original assessment proceedings. The fact that despite such examination, no addition was made in respect of the said transaction, would lead us to the conclusion that in the original assessment proceedings, an opinion had been formed that the said transaction was not exigible to tax, though no reasons for the same were explicitly given in the assessment order.
Having formed such an opinion, the subsequent initiation of the reassessment proceedings, taking a contrary view that the transaction was exigible to capital gains tax in India, would be nothing but a case of “change of opinion”. In other words, the Assessing Officer is attempting to review the earlier assessment order which is not permissible in law.
It was contended, as noted above, that the Assessing Officer himself had no occasion to examine the said transaction and that the queries with regard to restructuring of the petitioner company had been raised by the DRP and not by the Assessing Officer. Furthermore, it was submitted that because the directions of the DRP are to be followed, the Assessing Officer had no discretion left in the matter and, therefore, the Assessing Officer had not formed any opinion with regard to the said transaction. This argument cannot be accepted for two reasons. First of all, the Assessing Officer himself in the draft assessment order had noticed the restructuring and had specifically recorded that receipts upto and including July 2007 were being taxed in the hands of the petitioner and for the balance period from August 2007 to March 2008 were to be taxed in the hands of the petitioner’s 100% subsidiary ‘LIG’. The Assessing Officer was, therefore, aware of the entire transaction. Secondly, and, in any event, the DRP in the course of the proceedings before it, made specific queries with regard to the business restructuring of the petitioner and the transaction in question. The petitioner gave a detailed reply and the same has been noted in the observations of the DRP which we have extracted in the earlier part of the judgment. The DRP, after examining the entire business restructuring arrangement and the transaction in question, did not make any addition. The Assessing Officer in his final assessment order also did not make any addition on account of the subject transaction. It must be noted that the DRP procedure is part of the assessment proceedings. Queries raised and answered during the DRP proceedings would stand on the same footing as queries raised and answered in the course of an assessment proceedings before an Assessing Officer where the DRP procedure is not applicable. Therefore, on both counts, it cannot be said that an opinion had not been formed in respect of the transaction in question during the assessment proceedings. The fact that no addition was made in respect of the said transaction, would clearly raise the presumption that after having examined the said transaction, it was opined that it was not exigible to tax. The subsequent view being taken, as indicated in the purported reasons for initiating the proceedings under Section 147 of the said Act, would be nothing but a ‘change of opinion’ which is not permissible in law.
No new Material:
We are also in agreement with the learned counsel for the petitioner that no new facts or material had come to the knowledge of the Assessing Officer to enable him to initiate re-assessment proceedings. All the material facts on which the Assessing Officer had based his purported reasons were available on record at the time when the original assessment order was passed.
In Usha International (supra), it has been observed that if new facts, material or information comes to the knowledge of the Assessing Officer which was not on record and available at the time of the assessment order, the principle of ‘change of opinion’ would not apply. In the present case, we have already observed that all the relevant material was on record and available at the time of original assessment proceedings. Therefore, the reassessment proceedings on the basis of the same material would be contrary to law.
One more aspect which needs some discussion is with regard to the submission that the DRP had no occasion to consider the issue of taxability of the transaction involving the transfer of the expired value of the contract in exchange of shares as no variation had been suggested by the Assessing Officer on this aspect of the matter in his draft assessment order. It was submitted by the learned counsel for the revenue that the jurisdiction of the DRP in terms of Section 144C(8) was that it could confirm, reduce or enhance the variations proposed in the draft order, but it could not introduce a new element of tax or variation. In response to this, the learned counsel for the petitioner drew our attention to the Explanation added after Section 144 C(8). It was submitted by the learned counsel for the petitioner that by virtue of the said Explanation, the DRP always had the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. Section 144 C(8) and the Explanation appended thereto reads as under:-
“144C (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
Explanation. – For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.”
The said explanation was introduced through the Finance Act of 2012. But, it was to take effect retrospectively from 01.04.2009. The Dispute Resolution Panel’s directions were issued after the Explanation had come into operation. In any event, the Explanation is clarificatiory. Reading the Explanation with sub-section 144C(8), it is evident that the Dispute Resolution Panel could examine the issues arising out of the assessment proceedings even though such issues were not part of the subject matter of the variations suggested by the Assessing Officer. In this light, it is significant that though the draft order had not proposed any addition with regard to the restructuring and the said transaction, yet, the DRP had asked for details of the restructuring and had examined the matter. After such examination, the DRP did not direct any addition to be made in this regard. It is evident that the DRP formed an opinion that the transaction was not exigible to capital gains tax and, to contend otherwise, in the purported reasons for re-opening of the assessment, would be nothing but a ‘change of opinion’ which is not permissible in law.
For the reasons set out above, the writ petition is allowed. The notice dated 13.10.2011 issued by the Assessing Officer under Section 148 of the said Act in respect of the assessment year 2008-09 is quashed. All proceedings pursuant thereto, including the order dated 19.07.20 12, rejecting the objections, also stand quashed. There shall be no order as to costs.