Starent Network(India)Pvt.Ltd v. The Deputy Commissioner Of Income Tax And 3 ORS

1/4 Digitally signed by PURTI PRASAD PARAB Date:

2022.03.16 16:16:58 +0530 PURTI PRASAD PARAB

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 99 OF 2015 Starent Network (India) Private Limited ....Petitioner V/s.

The Deputy Director of Income Tax Circle 6 and Ors.

...Respondents

---- Mr. Nishant Thakkar a/w Mr. Hiten Chande i/b Lumiere Law Partners for Petitioner.

Mr. Suresh Kumar for Respondents.

---- CORAM : K.R. SHRIRAM & N. J. JAMADAR, JJ.

DATED : 11th MARCH, 2022 P.C. :

1.

When the petition came to be admitted on 8th December, 2014, the court observed as under in paragraph nos.3 to 8. 3 The challenge in this Petition is to the notice dated 29th March, 2014 issued under Section 148 of the Income Tax Act, 1961 (the Act), seeking to re-open the assessment for the Assessment Year 2009-10.

4 The Petitioner had issued share capital to its holding company at a premium. The Petitioner had filed Form 3-CEB with the Revenue along with its return of income for Assessment Year 2009-10. In its annexure to Form 3-CEB, the Petitioner had specifically declared the international transaction inter alia relating to issue of share capital to an Associated Enterprises (AE) having face value of Rs.100/- at a premium of Rs.1200/- per share. The aforesaid transaction was referred to by the Assessing Officer to the Transfer Pricing Officer (TPO).

5 On 28th January, 2013, the TPO accepted the Petitioner's Form 3-CEB in respect of the issue of shares at premium to its AE. Thereafter, during the assessment proceedings, the Assessing Officer asked for details with regard to the issue of share capital to its AE wherein the Petitioner had declared

2/4 that the issue price of the per share including premium was Rs.1300/-, besides indicating that the total amount including premium received thereon was Rs.14.11 Crores. This was accepted by the Assessing Officer in his Assessment Order. 6 The reasons in support of the impugned notice refers to the same material which was disclosed by the Petitioner in their Form 3-CEB and during assessment proceedings. The reasons while indicating that there is no earning per share at the same time indicates that in its return of income, the Petitioner have shown an income of Rs.1.26 Crores. The reasons suspect that the amounts allegedly received from its AE were in fact its own funds. However, this is without any particulars and/or basis.

7 The Petitioner in its objections to the reasons indicated that all the material on which the Assessing Officer has relied upon to issue the notice is material/information available with the Assessing Officer at the time of passing the original Assessment Order and duly considered during the assessment proceedings. The order disposing of the objection states that no opinion was formed.

8 Thus, the issue arising for consideration is, when all facts were a subject matter of enquiry during the original assessment proceedings and the response of the Petitioner was found satisfactory, is it open to infer that no opinion was formed on the issue. The issue to be examined at the final hearing is whether such a notice is bad on account of a change of opinion.

2.

We have also considered the petition and the documents annexed thereto and we are in agreement with the observations made by this court as quoted above.

3.

It is settled law that it is not necessary that the assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that a query raised

3/4 was a subject of consideration of the Assessing Officer while completing the assessment. This court in paragraph no.14 of Aroni Commercials Ltd. vs. Deputy Commissioner of Income Tax 2(1) 1 held as under :

14) We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No.4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007).

It would therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen the assessment for assessment year 2008-09 was considered by the Assessing Officer while originally passing assessment order dated 12 October 2010. This by itself demonstrates the fact that notice dated 28 March 2013 under Section 148 of the Act seeking to reopen assessment for A.Y. 2008-09 is based on mere change of opinion. However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 2008-09.

We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act.

Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. 1 [2014] 44 taxmann.

4/4 The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.

4.

In the circumstances, petition is allowed in terms of prayer clause - (a) which reads as under :

(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner's case and after examining the legality and validity thereof quash and set aside the Impugned Notice dated 29 March 2014 issued by Respondent No.3 under section 148 of the Act, the Impugned Assessment Notice dated 1 August 2014 and the Impugned Order dated 28 October 2014.

5.

Petition disposed.

(N. J. JAMADAR, J.) (K.R. SHRIRAM, J.)