Assessments Possible even after concluded assessment u/s 153A: Madras High Court
ACIT v. Dalmia Bharat Ltd (WP(MD)Nos.19202 of 2018, 19825 of 2018 & 19826 of 2018
Facts:
1. KKR Mauritius Cement Investment Ltd., which invested ₹500 crores in DCBL in 2010–11 for a 14.99% stake in the assessee company.
2. In 2016, DBL bought back KKR’s shares for ₹1,218 crores (₹600 crores in cash and ₹618.75 crores in DBL shares), and KKR later sold these shares for ₹1,538 crores, earning total returns of ₹2,138 crores.
3. The companies had already been assessed under Section 153A of the Income Tax Act following a search in 2014–15. However, based on a Tax Evasion Petition (TEP) received on March 28, 2018, the Income Tax Department issued reassessment notices under Section 148 of the Income Tax Act on March 31, 2018.
4. Key legal issues include the validity of reassessment under Section 148 post-search assessment under Section 153A, the use of a TEP as new material, potential change of opinion, and violation of natural justice.
Hon Madras HC held as below:
1. When an equity firm invests a sum of Rs.500/- crores and walks away with Rs.2138/- crores in a span of few years, there is something that more than meets the eye. It is possible that there were exit clauses in the investment agreements.
2. KKR Mauritius Cement Investment Limited is a shell company. The scale of returns and the manner in which the transactions had been conducted also prima facie suggest round tripping.
3. The Audit Report of the assessee specifically noted that the holding company as well as DCBL have entered into definitive agreements, namely, share subscription agreement and shareholders agreement on 07.05.2010 with KKR Mauritius Cement Investment Limited. But copies of the agreement were not placed before the assessing officer.
4. The statutory provision does not stipulate that at the stage of issuing notice under Section 148 of the Act, the authority must point out the default on the part of the assessee.
5. When the course of action adopted by the assessee as well as the assessing officer are in consonance with GKN Driveshafts decision, the question of quashing the impugned proceedings does not arise.
Conclusion:
1. Based on this precedent, it will not be necessary to record, at the time of reopening assessment, lapses in disclosures by the assessee, even where revenue’s case hinges on such lapses.
2. The judgement supports the tax department’s power to reopen assessments based on new information, especially when dealing with potential tax avoidance schemes involving foreign entities or shell companies.
