NEW DELHI: Holding that the income tax department is not precluded from conducting reassessment upon discovering evidence suggesting income had escaped assessment, Supreme Court upheld a Delhi high court order allowing the agency to reassess the income of the sons of former Chief Justice of India YK Sabharwal for 2008-09 and 2009-10.A bench of Justices J B Pardiwala and K Vinod Chandran dismissed the Sabharwals’ appeal and said the notice issued by the department in 2015 was valid as it was based on reasons duly recorded and on tangible material of a report of its investigation unit.
2015 notice of assessing officer issued on reasons duly recorded and is valid: SC
Recording details of financial transactions, the Supreme Court bench noted Chetan Sabharwal along with his brother Nitin Sabharwal and two other shareholders entered into two share purchase agreements with GYS Real Estate Pvt Ltd (buyer company) for a sale of 7.5 lakh equity shares of Pawan Impex (P) Ltd and 2.5 lakh equity shares of SVIIT Software (P) Ltd held by each of the parties for a sale consideration of Rs 195 crore and Rs 60 crore, respectively. The appellant and other selling shareholders were each entitled to 1/4th share of the total consideration. “We are of the firm view that the impugned notice dated March 31, 2015, issued by the assessing officer under Section 148 of Income Tax Act, for initiating reassessment for assessment years 2008-09 and 2009-10, was issued on reasons duly recorded and is valid,” the bench said.“The reasons rest on tangible material, namely the report of the DGIT Investigation Unit, Noida, which concluded that shares of company No. 1 (Pawan Impex (P) Ltd) and company No. 2 (SVIIT Software (P) Ltd) were overvalued when compared with the cost of their land and building, and they have a rational nexus and a live link with the belief formed by the assessing officer,” it said.
Subsequent to completion of assessment, the investigation unit conducted enquiries into the value of the shares of Pawan Impex (P) Ltd and SVIIT Software (P) Ltd and prepared a report. The report concluded, prima facie, that the shares were overvalued when compared with the cost of their land and building, which was much lower than the transaction amounts of Rs 195 crore and Rs 60 crore, respectively.The enquiries revealed the appellants purchased one-half share of the property at Sikandara Road, Delhi, in April 2010 through a court auction, and that the major source of this investment was the sale proceeds of the shares of the companies. On perusal of the investigation report and after a gap of four years, the department issued a notice under Section 148 of the act for reassessment.