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27-03-2019, MAX VENTURES INVESTMENTS, Section 147, 148, HIGH COURT OF DELHI
Appeal No. - W.P.(C)No.11572/2017 & CM No.47153/2017
Asstt. Year - 2010-11
PER : S. RAVINDRA BHAT, J.
1. This petition under Article 226 of the Constitution of India, challenges a reassessment notice under Sections 147/148 of the Income Tax Act, 1961 (“the Act” hereafter) issued to the writ petitioner.
2. The petitioner (hereafter “assessee”) is a private limited company incorporated in India under the provisions of the Companies Act, 1956 is inter alia engaged in the business of rendering financial services. During F.Y.2009-10, the assessee received share application money of`87,00,00,000/- from its promoter/founder Sh. Analjit Singh towards fresh allotment of equity shares. On 25.09.2010, the assessee filed its return of income for the AY 2010-11 declaring a total income `37,746/. On 06.04.2011, as a part of the exercise of reorganization of the group and consolidation of shareholding, the right to receive allotment of shares against the said share application money of `87 crores, was transferred by Shri Analjit Singh to his family trust, i.e. Neeman Family Foundation through a gift. The assessee‟s return for AY 2012-13 was selected for scrutiny, because a substantial amount was received against unallotted shares. On 16th February, 2015, the AO issued a questionnaire querying the assessee why share application money of `87 crores received should not be added to its income.
3. The assessee‟s reply was that the share application money was received during the A.Y. 2012-13 and that it was holding 5% of paid up share capital of Max India Limited as promoter group entity. The allotment of equity shares by assessee to Neeman Family Foundation, would have resulted in change in ownership status of assessee from individual promoters to Trust. The said allotment of shares to trust would then have triggered the requirement of Public Offer/Announcement finder SEBI Takeover Code, 2011. The assessee also stated that trusts already sought an exemption from SEBI under the applicable provisions during the F.Y. 2014- 15 for allotment of shares against pending share application money, which clarified that it would issue equity shares to Neeman Family Foundation, after obtaining necessary approvals from SEBI in accordance with statutory compliances. Therefore, the assessee stated that the addition of income under Section 68 of the Act was not justified. The assessing officer (AO) however, by an order dated 06.03.2015 added said outstanding amount of share application money to the declared income of the assessee as unexplained income in its hands, also holding that the benefit had been taken by the assessee till date and in future as shares were not allotted even after the expiry of 4 years. It was also held that the family trust did not get any benefit having regard to the purpose it was created which showed that it is just shifting tax burden on deemed income of trust by this route. The AO further held that the assessee had not taken any step to increase the authorized share capital to meet out the requirement of issue of shares as the present authorized share capital was of `20 lakhs against share application money of `87 crores, which was pending for allotment till the year 2015. Further, the assessee filed application to get exemption from SEBI in the year 2014-15 only after questionnaire/notice was issued by the AO. The assessee appealed to the Commissioner. The CIT(A)‟s order dated 09.12.2016 deleted the aforesaid addition made by the ld. AO, inter alia, on the ground that since the aforesaid share application money was not received in the relevant AY i.e. 2012-13, the provisions of Section 68 of the Act were not applicable in that year.
4. On 28th March, 2017, the AO issued a notice of reassessment, under Section 148 of the Income Tax. The relevant extracts of the “reasons to believe” issued to the assessee, in support of the notice are reproduced below:
“3.1 The assessee during the course of stay proceedings for recovery of outstanding demand raised for A.Y. 2012-13 filed certain documents as piece of evidence that share application money has been received from Sh. Analjit Singh during F.Y. 2009-10. In support of its claim the assessee filed copies of extracts of the minutes of the meeting of the Board of Directors of M/s Max Venture Investment Holdings Pvt. Ltd. It was quite surprising that the meeting of board of director was held on 06.01.2010 and 20.04.2010 under the name of M/s Max Venture Investment Holdings Pvt Ltd. and Sh. Sanjiv Malik has signed the Board meeting. While on 06.01,2010 and 20.04.2010 neither M/s Max Venture Investment Holdings Pvt. Ltd. was in existence nor Sh. Sanjeev Malik was the director of that company. The name of company was M/s Dynavast India Pvt. Ltd. and this name was subsequently changed to Max Venture