Sections 147 and 148 – Reassessment – Notice after four years – Validity – Transfer of assets to subsidiary company and subsequent transfer by subsidiary company to third party – Transaction disclosed and accepted during original assessment – Notice after four years on ground that transaction was not genuine – Notice not valid

10. Bharti
Infratel Ltd. vs. Dy. CIT; 411 ITR 403 (Delhi): Date
of order: 15^th January, 2019 A.Y.:
2008-09

Sections
147 and 148 – Reassessment – Notice after four years – Validity – Transfer of
assets to subsidiary company and subsequent transfer by subsidiary company to
third party – Transaction disclosed and accepted during original assessment –
Notice after four years on ground that transaction was not genuine – Notice not
valid

BAL
transferred telecommunications infrastructure assets worth Rs. 5,739.60 crores
to the assessee, its subsidiary (BIL), on 31.01.2008 for Nil consideration
under a scheme of arrangement approved by the Delhi High Court. According to
the scheme of arrangement, BIL revalued the assets to Rs. 8,218.12 crore on the
assets side of the balance sheet for the year ending 31.03.2008. Within 15 days
of the approval of the scheme of arrangement, a shareholders’ agreement on
08.12.2007 was entered into by BIL whereby the passive infrastructure was
transferred by it to a third party, namely, I. The return for the A.Y. 2008-09
was taken up for scrutiny assessment by notices u/s. 143(2) and 142 of the
Income-tax Act, 1961. Questionnaires were issued to which BIL responded
furnishing details and documents. Assessment was made. Thereafter, reassessment
proceedings were initiated and notice u/s. 148 issued on 01.04.2015.

The
assessee filed a writ petition and challenged the validity of the notice. The
Delhi High Court allowed the writ petition and held as under:

“i)   Explanation 1 to section 147 would not apply
as all the primary facts were disclosed, stated and were known and in the
knowledge of the Assessing Officer. This would be a case of ‘change of opinion’
as the assessee had disclosed and had brought on record all facts relating to
transfer of the passive infrastructure assets, their book value and fair market
value were mentioned in the scheme of arrangement, as also that the transferred
passive assets became property of I including the dates of transfer and the
factum that one-step subsidiary BIV was created for the purpose.

ii)   These facts were within the knowledge of the
Assessing Officer when he passed the original assessment order for A.Y.
2008-09. The notice of reassessment was not valid.”