Mrs.hemalatha Ramaiah v. Assistant Commissioner Of Income Tax,Non Corporate Circle 3,Income Tax Department,Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 09.01.2020CORAM THE HONOURABLE MR.JUSTICE C.SARAVANANW.P.No.3978 of 2017andW.M.P.Nos.4063 to 4065 of 2017and W.M.P.No.31996 of 2015 Mrs.Hemalatha Ramaiah ... Petitioner vs Assistant Commissioner of Income Tax,Non Corporate Circle 3,Income Tax Department,Room No.623-A, VI Floor,New Block, Aayakar Bhawan,No.121, M.G.Road, Nugambakkam,Chennai – 600 034.... Respondent Prayer:-Writ Petition filed under Article 226 of Constitutionof India, to issue Writ of Certiorarified, calling for therecords of the respondent pertaining to the Section 148 noticedated 31.03.2016 issued to the petitioner having PANNo.AABPR1629K for the assessment year 2009-10 along with recordsof all consequential proceedings including the reassessmentorder dated 29.12.2016 passed under Section 143(3) r/w 147 ofthe IT Act, 1961, the demand notice dated 29.12.2016 issuedunder Section 156 of the Income Tax Act, 1961 and the penaltyproceedings dated 29.12.2016 initiated under Section 271(1)(c)of the Income Tax Act, 1961 for the assessment year 2009-10 andquash the same as without jurisdiction. For Petitioner : Mrs.Nalini Chidambaram, Senior Counsel for M/s.C.Uma. For Respondent : Mrs.Hema Muralikrishnan Senior Standing Counsel. ____________ Page No 1 of 15 O R D E R The petitioner has challenged the impugned order dated29.12.2016 passed by the respondent under Section 143 (3) r/w.Section 147 of the Income Tax Act, 1961. The impugned order waspassed pursuant to the notice issued to the petitioner on31.03.2016, being the last date on which the re-assessment couldbe made under the proviso to Section 147 of the Income Tax Act,1961. 2.The petitioner had entered into agreement dated 01.04.2006with Trent Ltd and its affiliates for sale of her shares inLandmark Ltd. In the agreement the non-compete clause reads asunder:- 10.Non-competition restrictions:10.1.4: Save for those business which is carriedon by the Shareholder as at the date of thisagreement, at any time hereafter and until theexpiration of one year from the date it ceasesto be beneficially interested in any Shares,either alone or jointly with any other personthrough or as manager, adviser, agent,consultant, employee or agent for or shareholderin any person, firm or company directly orindirectly carry on or be engaged or concernedor interested in the provision of retailing ofbooks, magazines, stationary items. 3.The petitioner sold 1/25[th] share in Landmark and itsAssociates Companies to Trent Ltd and affiliates forRs.5,76,00,000 in the Assessment year 2006-07 (30.08.2015 &10.03.2006). On 30.04.2008, the petitioner entered into ananother agreement with Trent Ltd and its affiliates for sale of21% stake in the Land Mark Group Companies. The said agreementcontained non-compete clause which reads as under:- “10.(c). At any time hereafter and upto 30[th]April, 2009 shall not start her own retail storedealing in books, music, magazines andstationary items.” 4.The petitioner thus sold 849900 equity shares, 525000warrants and 25350 cumulative preference shares for an aggregateconsideration of Rs.39,25,34,400/- to Trent Ltd. and itsassociates on 30.04.2008. Meanwhile, the assessment wascompleted under Section 143(3) of the Income Tax Act, 1961accepting the profit on sale of shares as Capital Gains. ____________ Page No 2 of 15 5.Later, the petitioner sold 2,00,000 shares in LandmarkLimited to Trent for total consideration of Rs.10,50,00,000/-.In the return filed by the petitioner for the assessment year2008-09, the consideration amount received from the sale above2,00,000 shares was treated as Capital Gains by the petitioner.The return filed by the petitioner was also accepted underSection 143(1) of the Income Tax Act, 1961 vide assessment orderdated 02.11.2009. ____________ Page No 2 of 15 5.Later, the petitioner sold 2,00,000 shares in LandmarkLimited to Trent for total consideration of Rs.10,50,00,000/-.In the return filed by the petitioner for the assessment year2008-09, the consideration amount received from the sale above2,00,000 shares was treated as Capital Gains by the petitioner.The return filed by the petitioner was also accepted underSection 143(1) of the Income Tax Act, 1961 vide assessment orderdated 02.11.2009. 6.On 30.11.2009, the petitioner filed return, wherein thepetitioner admitted a total income at Rs.40,70,64,770/-including Long Term Capital Gains (LTCG) on sale of shares inLandmark group companies at Rs, 37,91,81,581/-. 7.Notice was issued under Section 142(1) of Income tax Act,1961 for Assessment Year 2009-10. Pursuant to the same, thepetitioner had replied on 11.08.2011. Notice under Section 142(1) of the Income Tax Act, 1961 was issued by the respondent on25.10.2011 asking the petitioner to produce documents amongothers, share holders agreement on 01.04.2006 with LandmarkLimited, details of calculation of capital gains, return ofincome copies for Assessment Years 2007-08 and 2008-09 alongwith the computation statements. Thereafter, the petitioner hasproduced the same on 09.11.2011. 8.On 21.12.2011, the regular assessment under Section 143(3)of the Income Tax Act, 1961 for the assessment year 2009-10 wascompleted after scrutiny accepting the income returned videorder dated 21.12.2011 raising a demand of Rs.3,020. Completedetails including copy of agreement for sale of shares dated30.04.2008 were submitted by the petitioner in the course ofassessment proceedings. A petition under Section 154 was filedseeking credit for TDS Rs.2,132/- which was omitted to be givenand which resulted in the above demand. 9.The respondent issued notice under Section 156 of IncomeTax Act on 21.12.2011 specifying a sum of Rs.3020/- as payablefor the assessment year 2009-10. A petition was filed underSection 154 of the Income Tax Act, 1961 for rectification ofmistake on 29.12.2011 before the respondent stating that TDS oninterest receipts amounting to Rs.2,132 has not been allowed. 10.The Assessing Officer wrote a letter to the petitioner on05.02.2014 and asked for clarification on the sale of shares.In the letter, the respondent has stated as under:- ____________ Page No 3 of 15 https://hcservices.ecourts.gov.in/hcservices/ “Since the shares were alloted on non competitorrestriction, the gain on sale of the samerequires to be reconsidered as business incomeu/s 28(va). Hence the long term capital gains ofRs.37,91,81,581/- requires to be taxed asbusiness profit of the assessee. In thisconnection you are required to submit aclarification for the same.” 11.Pursuant to the above letter, the Charted Accountant ofthe petitioner appeared and has explained the transaction ofsale of shares stating that the consideration received for thetransfer of shares was not remotely connected to any businessactivity or coming under ambit of Section 28(va) of the IncomeTax Act, 1961. The respondent had become functus officio afterthe assessment order was passed for the assessment year 2009-10under Section 143(3) of the Income Tax Act, 1961 and had nopower to seek any clarification vide letter dated 05.02.2016from the petitioner. 12.The petitioner offered her explanation and assumed thatthe respondent was satisfied with the explanation. 11.Pursuant to the above letter, the Charted Accountant ofthe petitioner appeared and has explained the transaction ofsale of shares stating that the consideration received for thetransfer of shares was not remotely connected to any businessactivity or coming under ambit of Section 28(va) of the IncomeTax Act, 1961. The respondent had become functus officio afterthe assessment order was passed for the assessment year 2009-10under Section 143(3) of the Income Tax Act, 1961 and had nopower to seek any clarification vide letter dated 05.02.2016from the petitioner. 12.The petitioner offered her explanation and assumed thatthe respondent was satisfied with the explanation. 13.It was the contention of the respondent that the amountreceived by the petitioner from sale of share ought to betreated as “business profit” under Section 28 (va) of the IncomeTax Act, 1961 and they cannot be treated as “Long Term CapitalGains (LTCG)” of the petitioner. The respondent took the viewbased on a decision of this Court which is explained in the saidletter. The relevant portion of the letter dated 05.02.2014asking for the clarification from the petitioner reads as under:-It is seen from the records that you havefiled ROI on 30.11.2009 admitting a taxableincome of Rs.40,70,64,770/- and the assessmentwas completed u/s.143(3) on 21.12.2011 and theincome was assessed at Rs.40,70,64,770/- The non-complete convenant on its own cannotamount to a transfer of any right. A meredetrainment from carrying on an activity wouldbe taxed under Section 28(va). In this case theassessee had entered into an agreement with acompany which had purchased a certain plot onwhich the assessee was carrying on fish farming.By the agreement the assessee had agreed to stopfish farming in the said ponds, for which he had ____________ Page No 4 of 15 received a certain sum from the said company.The High Court was of the view that the assesseehad received the said sum from the said company.The High Court was of the view that the assesseehad received the said sum for not carrying onany activity in relation to fish farming samebeing taxable under Section 28 (vz) (a) Assesseecontended that the said sum be taxed underSection 45 as capital gains. To this the HighCourt held that for the application of section45 there should be a transfer of capital assetwhich was absent in the case. On scrutiny of records, it was observed thatthe assessee offered income from capital gain asfollows:-Long term capital gain: Rs.37,91,86,581Short term capital gain: Rs.43,71,148 As per the shareholders agreement of TrentLtd. A company and others with the assessee whowere the partners of M/s.Landmark a firm inwhich the Trent Ltd held 78% and the assesseeheld 21% of share in the firm was converted intoa limited company ins pursuant to the provisionof sec.565-578 of the Companies Act and inconsideration of the same for which the assesseeentered into non-competition restrictions (videSl.No.10 of the share holder agreement), theconsideration was paid as share warrant andshares redeemable at pre-fixed minimum rate.Since the shares were allotted on non-competitorrestriction, the gain on sale of the samerequires to be considered business income u/s.28(va). Hence the long Term Capital Gain ofRs.37,91,81,581/- requires to be taxed asbusiness profit of the assessee.In this connection you are required tosubmit a clarification for the same. Your replyshould reach this office on or before 06.03.2014. ____________ Page No 5 of 15 https://hcservices.ecourts.gov.in/hcservices/ Hence the long Term Capital Gain ofRs.37,91,81,581/- requires to be taxed asbusiness profit of the assessee.In this connection you are required tosubmit a clarification for the same. Your replyshould reach this office on or before 06.03.2014. ____________ Page No 5 of 15 https://hcservices.ecourts.gov.in/hcservices/ 14.After lapse of two years thereafter, on 31.03.2016, theabove notice was issued under Section 148 of the Income Tax Act,1961. The notice merely stated that the officer concerned hasreason to believe that the income declared by petitionerchargeable to tax for the assessment year 2009-10 has escapedassessment within the meaning of Section 147 of the Income TaxAct, 1961 and thereafter proposed to assess/re-assess the incomefor the said assessment period and called upon the petitioner todeliver a return in the prescribed form for the said assessmentyear. It states that the notice was issued after obtainingnecessary to the satisfaction of the Pr. Commissioner of Income– 5, the Central Board of Direct Taxes. 15.The learned senior counsel for the petitioner wouldsubmit that to invoke the jurisdiction under Section 148 r/wSection 147 of the Income Tax Act, 1961, the respondent was dutyto bound, to come a conclusion that they had reasons to believethat there was failure on the part of the assessee to make areturn under Section 139 or in response to a notice issued underSection 142(1) or Section 148 or to disclose fully and truly allmaterial facts necessary for assessment. 16.It is submitted that the issue as to whether the incomewas to be treated as “Long Term Capital Gain (LTCG)” or“business profit” in the hands of the petitioner cannot bereopened by invoking the Section 148 of the Income Tax Act, 1961beyond the period of four years under proviso of Section 147 ofIncome Tax Act, 1961. It is submitted that the notice ought tohave been issued within 4 years from the date of relevant dateunder Section 147 of the Income Tax Act, 1961. In thisconnection, the learned senior counsel for the petitioner, itstrongly relied on the following decisions:- i. Calcutta Discount Company Vs. Income-TaxOfficer, Companies, AIR 1961 SC 372.ii.Jeans Knit (P.) Ltd. Vs. Deputy Commissioner ofIncome-tax, Bangalore, (2017) 77 taxmann.com176 (SC).iii.Martech Peripherals (P.) Ltd. Vs. DeputyCommissioner of Income-tax, Company Circle IV(1), Chennai, (2017) 81 taxmann.com 73 (Madras).iv.Fenner (India) Ltd. Vs. Deputy Commissioner ofIncome Tax, 2000 241 ITR 672 Mad. 17.The learned Senior Counsel for the petitioner also placedreliance on the following decisions:- ____________ Page No 6 of 15 https://hcservices.ecourts.gov.in/hcservices/ i. Commissioner of Income Tax, Delhi Vs.M/s.Kelvinator of India Ltd., (2010) 2 SCC 723.ii.ITO vs Tech Span India Pvt. Ltd., (SupremeCourt), dated 24.04.2018.iii.Mobis India Ltd. Vs. DY CIT Madras High Court,(2018) 90 Taxmann.com 386 (Madras).iv.Madras Suspensions Ltd. Vs. Deputy Commissionerof Income Tax, (2017) 88 Taxmann.com 256(Madras). 18.Defending the impugned order, the learned Senior StandingCounsel for the respondent Income Tax Department submits thatthe petitioner having rightly opted to file an appeal before theAppellate Commissioner, cannot file Writ Petition to quash theimpugned order. 19.In this connection, the learned senior Standing Counselrelies on the decision of the Hon'ble Supreme Court in KisanAgro Mart (P.) Ltd. Vs. Income Tax officer, (2019) 109taxmann.com 496 (SC), wherein the Hon'ble Supreme Court directedthe Appellant therein to approach the concerned AppellateCommissioner as the Appellant had already availed remedy ofappeal by filing a substantive appeal before the CommissionerAppeals challenging the Assessment Order. 18.Defending the impugned order, the learned Senior StandingCounsel for the respondent Income Tax Department submits thatthe petitioner having rightly opted to file an appeal before theAppellate Commissioner, cannot file Writ Petition to quash theimpugned order. 19.In this connection, the learned senior Standing Counselrelies on the decision of the Hon'ble Supreme Court in KisanAgro Mart (P.) Ltd. Vs. Income Tax officer, (2019) 109taxmann.com 496 (SC), wherein the Hon'ble Supreme Court directedthe Appellant therein to approach the concerned AppellateCommissioner as the Appellant had already availed remedy ofappeal by filing a substantive appeal before the CommissionerAppeals challenging the Assessment Order. 20.The learned Senior Standing Counsel for the respondentIncome Tax Department referred to the decision of the Hon'bleSupreme Court of India in S.Narayanappa Vs. Commissioner ofIncome-tax, (1967) 63 ITR 219 (SC), wherein the Hon'ble SupremeCourt of India had earlier held that there was no necessityunder any of the provision of Act or any Section laying down asa condition for the initiation of the proceedings that thereasons which induced the Commissioner to accord sanction toproceed under Section 34 must also be communicated to theassessee. 21.The learned Senior Standing Counsel for the respondentsubmits that it is only after the decision of the Hon'bleSupreme Court in G.K.N.Driveshafts (India) Ltd. Vs. Income TaxOfficer and Others, (2003) 1 SCC 72, a procedure was devised forgiving reasons to invoke the Section 148 r/w proviso to Section147 of the Income Tax Act, 1961. It is submitted that theappellant did not ask for reasons for invoking Section 148though four years had lapsed from the end of the financial years. 22.Heard the learned Senior Counsel for the petitioner and ____________ Page No 7 of 15 the learned Senior Standing Counsel for the respondent. 23.The notice under Section 148 of the Income Tax Act, 1961was issued on 31.03.2016, which gives no reasons. It howeverrecords that it was issued after obtaining necessarysatisfaction of the Pr. Commissioner of Income Tax-5, theCentral Board of Direct Taxes (probably means necessarypermission). The reasons were not communicated to the petitioneras the petitioner also did not ask for such reasons. 24.The learned Senior Standing counsel Income Tax Departmentfor the respondent was therefore asked to furnish the reasonsfor invoking the jurisdiction under Section 148 r/w proviso toSection 147 of the Income Tax Act, 1961 as prima facie itappeared the impugned order dated 29.12.2016 was passed holdingthat the petitioner was liable to pay tax on amounts received byher as income from business and not from Long Term Capital Gains(LTCG) as was claimed by the petitioner. 25.The learned Senior Standing Counsel for the respondentfurnished the reasons, which read as under:- 24.The learned Senior Standing counsel Income Tax Departmentfor the respondent was therefore asked to furnish the reasonsfor invoking the jurisdiction under Section 148 r/w proviso toSection 147 of the Income Tax Act, 1961 as prima facie itappeared the impugned order dated 29.12.2016 was passed holdingthat the petitioner was liable to pay tax on amounts received byher as income from business and not from Long Term Capital Gains(LTCG) as was claimed by the petitioner. 25.The learned Senior Standing Counsel for the respondentfurnished the reasons, which read as under:- The order u/s.143(3) was passed on 21.12.2011accepting the income returned by the assessee ofRs.40,70,64,770/- As per the memo ofcomputation of total income, the income offeredto tax includes salary of Rs.2,32,10,958/-income from house property of Rs.3,94,164/- LTCGof Rs.37,91,81,581/- STCG of Rs.43,71,148/- andincome from other sources of RS.1,06,916/-. Theassessee was also in receipt of divided incomeof Rs.2,95,41,951/- and the same was claimed asexempt u/s.10 (34). On examination of Annexure2 to the memo of computation of total incomewhich provides the particulars of computation ofSTCG, it is seen that on a total redemption ofmutual funds worth Rs.48,44,15,981/-= theassessee has derived a STCG of Rs.43,71,148/-.As per the statement of income accounts held bythe assessee at HSBC and CITI Bank, the totalredemption value of mutual funds credited intothese accounts for a sum of Rs.79,59,41,282/-.The assessee has not offered any LTCG exemptU/s.10(38), in the memo of computation of totalincome. Under the circumstances, due tomismatch of turnover, it is clear that thetaxable income in the form of STCG on the ____________ Page No 8 of 15 differentialvalueofredemptionofRs.31,12,25,363/- has escaped assessment withinthe meaning of S.147. Further, it is also seenthat in computing the eligible quantum U/s.10(34) the provisions of S.94(7) and 94 (8) havenot been enforced STCL in respect of Mirea Asset(Rs.7,14,922/-) Reliance medium Term Fund(Rs.30,808/-). Franklin Templeton Short TermIncome (Rs.47,111/-) and Sundaram BNPP interestFund (Rs.12,014) summing up to Rs.8,04,855/-therefore it cannot be allowed. For the reasonsdiscussed above, I have clear reasons to believethat the income of the assessee has escapedassessment within the meaning of S.147 and Isolicit the approval of the CIT for issue ofnotice U/s.148. S/-(I.P.ROOPA)Assistant Commissioner of Income Tax Non-Corporate Circle 3, Chennai.Date: 29/03/2016 12. Whether the Joint- Yes I am Commissioner is satisfied satisfiedwith the reasons Recommended.recorded by the ACIT that it is a fit case for issue of Notice U/s.148 Sd/-(K.N.DHANDAPANI)Assistant Commissioner of Income Tax Non-Corporate Circle -3, Chennai.Date: 13.Whether the Commi- - Yes I am -ssioner is satisfied satisfied with the reasons that it isrecorded by the ACITfit for re-openingthat it is a fit case for U/s.147 of the IT issue of Notice U/s.148Act.Act ____________Page No 9 of 15 26.The above reasons given for invoking Section 148 readwith proviso to Section 147 of the Income Tax Act, 1961 has beengiven a go by in the Assessment Order dated 29.12.2016 by therespondent. Instead, the reasons given in the impugned orderdated 29.12.2016 read as under:- As on 1.4.2007, the assessee held 21% share inLandmark & Associated Companies. M/s Landmark wasconverted into Landmark Ltd. and in lieu of her holdingsin the above firm/companies, the assessee was alloted thefollowing: During the year, the assessee sold the following sharesand warrants in Landmark Limited to Trent Ltd: 5,25,000 share warrants @ Rs.278per Warrant= Rs.14,59,50,000/-25,350 preference shares @ Rs.38per preference share = Rs. 93,63,300/-8,49,900 equity shares @ Rs.289per equity share= Rs.24,56,21,100/- As on 1.4.2007, the assessee held 21% share inLandmark & Associated Companies. M/s Landmark wasconverted into Landmark Ltd. and in lieu of her holdingsin the above firm/companies, the assessee was alloted thefollowing: During the year, the assessee sold the following sharesand warrants in Landmark Limited to Trent Ltd: 5,25,000 share warrants @ Rs.278per Warrant= Rs.14,59,50,000/-25,350 preference shares @ Rs.38per preference share = Rs. 93,63,300/-8,49,900 equity shares @ Rs.289per equity share= Rs.24,56,21,100/- On this, after claiming cost of acquisition as well asexpenses in relation to transfer, the assessee arrived ata Long term Capital Gains of Rs.37,91,81,581/-. Howeverin the shareholders agreement between Trent Ltd and theassessee, certain Non-Competition restrictions have put onthe assessee. Point No.10.1.2 states that the assessee ____________ Page No 10 of 15 will not disclose any information regarding the company,its business, accounts or clients to others. The nextpoint states that she will not directly or indirectly tryto entice away the clients, suppliers or employees of thecompany. Point No.10.1.4, which is crucial to the non-complete aspect states that the assessee shall not, “Save for those business which is carried on by theshareholder as at the date of this agreement, at any timehereafter and until the expiration of one year from thedate it ceases to be beneficially interested in anyshares, either alone or jointly with any other personthrough or as manager, adviser, agent, consultant,employee or agent for a shareholder in any person, firm orcompany directly or indirectly carry on or be engaged orconcerned or interested in the provision of retailingbooks, magazines, stationary items.” Hence, there is a clear non-compete clause. Section 28(va) of the Income Tax Act states that,“any sum, whether received or receivable, in cash or kind,under an agreement for- (a) not carrying out any activity in relation to anybusiness [or profession]; or (b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business orcommercial right of similar nature or information ortechnique likely to assist in the manufacture orprocessing of goods or provision for services:” There is a clear cut restriction on the assessee to carryout any business in the field of retailing books,magazines, stationary items. Hence, as per the provisionsof section 28 (va) of the Income Tax Act, the amountreceived in return for this is in the nature of businessreceipts. The assessee however, has shown theconsideration received under the head Long Term CapitalGains, whereas it should be taxable as a business income @30% tax. Hence, this net receipt is re-classified asIncome from Business and taxed at 30%.The assessment is completed and the total income iscomputed as under: ____________ Page No 11 of 15 Tax Calculation sheet and demand notice are enclosedseparately. Since the assessee Individual has furnished Inaccurateparticulars of Income, Penal Proceedings u/s 271 (1) (c)of the Income Tax Act, 1961 are initiated separately. 27.I have considered the arguments advanced by the learnedSenior Counsel for the petitioner and the learned SeniorStanding counsel for the respondent. 28.For the Assessment Year 2009-10, the petitioner filedreturns on 27.11.2009. Thereafter, a notice under Section 142(1)of the Income Tax Act, 1961 was issued to the petitioner on11.07.2011 to finalise the assessment. Thereafter, an AssessmentOrder dated 21.12.2011 was passed by the respondent underSection 143(3) of the Income Tax Act, 1961. Thereafter, thepetitioner suo moto approached the respondent for rectificationof mistake under Section 154 of the Income Tax Act, 1961 on29.12.2011. However, no order was passed in the applicationfiled by the petitioner for rectification of mistake. 27.I have considered the arguments advanced by the learnedSenior Counsel for the petitioner and the learned SeniorStanding counsel for the respondent. 28.For the Assessment Year 2009-10, the petitioner filedreturns on 27.11.2009. Thereafter, a notice under Section 142(1)of the Income Tax Act, 1961 was issued to the petitioner on11.07.2011 to finalise the assessment. Thereafter, an AssessmentOrder dated 21.12.2011 was passed by the respondent underSection 143(3) of the Income Tax Act, 1961. Thereafter, thepetitioner suo moto approached the respondent for rectificationof mistake under Section 154 of the Income Tax Act, 1961 on29.12.2011. However, no order was passed in the applicationfiled by the petitioner for rectification of mistake. 29.Thus, it is clear that almost after five years, thepetitioner's scrutiny Assessment was completed and thereafterclarification sought from the petitioner vide letter dated05.02.2014. The petitioner replied to the said notice throughits Chartered Accountants on 05.03.2014. 30.The petitioner filed return along with annexure. Thisresulted in passing of the impugned order of assessment on29.12.2016 by the respondent. The petitioner filed a furtherappeal before the Appellate Commissioner. At the stage ofconsideration of stay application, the petitioner has approachedthis Court stating that the notice was issued dated 31.03.2016under Section 148 of the Income Tax Act, 1961 to re-open theassessment to re-assess the income was clearly barred under lawas it was on account of change of opinion of the respondent. ____________ Page No 12 of 15 31.It is noticed that before regular scrutiny assessment wascompleted, on 11.07.2011 details were called from thepetitioner. The petitioner furnished the same vide letter dated11.08.2011. Thereafter, notice under Section 142(1) was issued,which called upon the petitioner to furnish shareholderagreement dated 01.04.2006 with Land mark and other particulars.These were furnished by the petitioner on 04.11.2011. Thus,there was full disclosure by the petitioner. 32.That apart, the reason to invoke proviso to Section 147r/w. Section 148 is not the basis of impugned order. The amountwhich has been made liable to tax in the impugned order dated29.12.2016 was subject matter of discussion with the respondentprior to passing of the impugned notice dated 31.03.2016 videcommunications exchanged pursuant to letter dated 05.02.2014seeking clarification from the petitioner. After the scrutinyassessment order dated 21.12.2011 came to be passed, the saidletter dated 05.02.2014 was issued to the petitioner callingupon the petitioner to furnish explanation regarding computationof income. 33.In the said notice dated 05.02.2014, it was stated thatnon-compete covenant on its own cannot amount to transfer of anyright and therefore the amount received by the petitioner was tobe taxed under Section 28(va) of the Income Tax Act, 1961.Having entertained a view that the amount received under thesaid Clause in the agreement was to be taxed under Section 28(va) of the Income Tax Act, 1961, the respondent ought to haveissued a notice within 4 years from the relevant date underSection 148 r/w. Section 147 of the Income Tax Act, 1961. 34.After notice dated 31.03.2016 was issued after invokingthe jurisdiction under Section 148 read with proviso to Section147 of the Income Tax Act, 1961, on 08.12.2016, the petitionerwas asked to explain the profit arising from the agreement andwhy it should be treated as business profit and not as Long TermCapital Gain as shown by the petitioner. The petitioner repliedto the same on 14.12.2016. 34.After notice dated 31.03.2016 was issued after invokingthe jurisdiction under Section 148 read with proviso to Section147 of the Income Tax Act, 1961, on 08.12.2016, the petitionerwas asked to explain the profit arising from the agreement andwhy it should be treated as business profit and not as Long TermCapital Gain as shown by the petitioner. The petitioner repliedto the same on 14.12.2016. 35. From a over all reading of the facts, it is clearthat the respondent has sought to re-surrect a stale issuewhich had already been examined during the course of regularassessment pursuant to which assessment order was passed on21.12.2011 but was also a subject matter of discussion pursuant ____________ Page No 13 of 15 https://hcservices.ecourts.gov.in/hcservices/ to letter dated 05.02.2014 of the respondent. 36.The last date of the assessment year 2009-10 was31.03.2010. Therefore, the respondent was entitled to issue sucha notice under Section 148 on or before 31.03.2014 i.e within 4years for the purpose of Section 147 of the Act. Instead, therespondent failed to issue a notice in time and obtainedpermission from the Pr. Commissioner of Income Tax – 5, Chennaion 30.03.2016 at the eleventh hour by giving an altogetherdifferent reason for issuing notice under Section 148 of theIncome Tax Act, 1961. 37.The reasons given that the respondent had a belief thatthe income had escaped assessment for invoking Section 148 on31.03.2016 is in complete variance with the reasons given in theimpugned order dated 29.12.2016. It shows that the impugnedorder has been passed due to change of opinion of the respondentwhich was entertained on 05.02.2014. After missing anopportunity which came to the respondent within the period of 4years seeking clarification from the petitioner, Section 148 ofthe Income Tax Act, 1961 was invoked. 38.Since the invocation of jurisdiction under Section 148for the purpose of proviso to Section 147 of the Income Tax Act,1961 on 31.03.2016 was in variance with the so calledrecommendation/ concurrent & permission of the AssistantCommissioner of Income Tax & Pr. Commissioner on 29.03.2016 &30.03.2016, the impugned order cannot be sustained. It alsodoes not state that there was failure on the part of thepetitioner to disclose fully and truly all material factsnecessary for the purpose of the assessment for the assessmentyear. 39.In my view, the entire proceedings were based on thechange of view. Further, having entertained a view as early as05.02.2014 that amount was a business income, the respondentought to have issued the notice on or before 31.03.2014.Instead, the respondent waited till 31.03.2016 to issue noticeto the petitioner. Therefore, the impugned order cannot besustained. 40.Though under similar circumstances, the Hon'ble SupremeCourt in Kisan Agro Mart (P.) Ltd. Vs. Income Tax Officer,[2019] 109 taxmann.com 496 (SC), had directed the appellanttherein to workout the remedy before the Appellate Commissioner,it is evident there is no ratio discernible from such direction. ____________ Page No 14 of 15 https://hcservices.ecourts.gov.in/hcservices/ Therefore, the said decision cannot be applied to four cornersof the facts of the present case. 41.The Hon'ble Supreme Court in P.Singaravelan & Ors. Etc.Vs. The District Collector, Tiruppur and DT & Ors. Etc., 2019SCC OnLine SC 1641, has also held that non speaking order is notaffirmation of High Court order. 42.In the light of the above discussion, the present WritPetition stands allowed. No cost. Consequently, connectedMiscellaneous Petitions are closed. Sd/- Assistant Registrar(CCC) //True Copy// Sub Assistant RegistrarjenToAssistant Commissioner of Income Tax,Non Corporate Circle 3,Income Tax Department,Room No.623-A, VI Floor,New Block, Aayakar Bhawan,No.121, M.G.Road, Nugambakkam,Chennai – 600 034. ____________ Page No 14 of 15 https://hcservices.ecourts.gov.in/hcservices/ Therefore, the said decision cannot be applied to four cornersof the facts of the present case. 41.The Hon'ble Supreme Court in P.Singaravelan & Ors. Etc.Vs. The District Collector, Tiruppur and DT & Ors. Etc., 2019SCC OnLine SC 1641, has also held that non speaking order is notaffirmation of High Court order. 42.In the light of the above discussion, the present WritPetition stands allowed. No cost. Consequently, connectedMiscellaneous Petitions are closed. Sd/- Assistant Registrar(CCC) //True Copy// Sub Assistant RegistrarjenToAssistant Commissioner of Income Tax,Non Corporate Circle 3,Income Tax Department,Room No.623-A, VI Floor,New Block, Aayakar Bhawan,No.121, M.G.Road, Nugambakkam,Chennai – 600 034. +1 cc to M/s.C.Uma Advocate sr2632+1 cc to M/s.Hemamuralikrishnan Standing Counsel sr2442 W.P.No.3978 of 2017andW.M.P.Nos.4063 to 4065 of 2017and W.M.P.No.31996 of 2015 sv(co)aa20/02/2020 ____________ Page No 15 of 15 https://hcservices.ecourts.gov.in/hcservices/