DCIT 6(2)(1), MUMBAI V. CEAT LTD, MUMBAI

ITA 673/MUM/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4253 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR; MANPRIT DUGGAL
• Keywords: Reopening of assessment; Capital asset; Search and seizure; Retrospective amendment; Question of law; Tangible material; Bad and doubtful debts; Difference of opinion; Validity of assessment; Scheme of amalgamation; Reason to believe; Change of opinion; Reassessment proceedings; Capital Gains
• Section: 143(3); 244A; 195; 48; 13; 153; 22; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAVAN KUMAR G ADALE, JM ITA NO.673/MUM/2017 (ASSESSMENT YEAR: 2008-09) DCIT-6(2)(1) ROOM NO.563, AAYKAR BHAWAN M.K.ROAD, CHURCHGATE MUMBAI-400 020 VS. M/S. CEAT LTD. RPG HOUSE, 463 DR. ANNIE BESANT ROAD, WORLI MUMBAI-400 030 PAN/GIR NO. AAACC1645G ( RE VENUE ) : ( ASSESSEE ) & ITA NO.74/MUM/2017 (ASSESSMENT YEAR: 2008-09) M/S. CEAT LTD. RPG HOUSE, 463 DR. ANNIE BESANT ROAD, WORLI MUMBAI-400 030 VS. ACIT, RANGE-6(2)(1) AAYKAR BHAWAN M.K.ROAD, CHURCHGATE MUMBAI-400 020 PAN/GIR NO. AAACC1645G ( ASSESSEE ) : ( RE VENUE ) ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI V. SREEKAR & SHRI MANPRIT DUGGAL DATE OF HEARING : 13.08.2021 DATE OF PRONOUNCEMENT : 22.09.2021 O R D E R PER SHAMIM YAHYA, A. M.: THERE ARE CROSS-APPEALS FILED BY THE ASSESSEE AND T HE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(A)-12, MUMBAI DATED 01 .01.2016 PERTAINING TO THE ASSESSMENT YEAR 2008-09, WHICH IN TURN HAS ARISEN F ROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 31.03.2015 UNDER SECTION 14 3(3) R.W.S 147 OF THE INCOME TAX ACT 1961 (IN SHORT 'THE ACT'). 2. THE GROUND OF APPEAL IN ASSESSEES APPEAL READ A S UNDER :- 2 ITA NOS.673 & 74/MUM/2017 GROUND NO. 1: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE HON'BLE CIT(A) ERRED IN AFFIRMING THE ACTION OF A.O. OF REOPENING THE ASSES SMENT UNDER SECTION 147 OF THE ACT AND HOLDING THAT IT DID NOT FIND ANY INFIRMITY IN T HE ACTION OF A.O FOR RE-OPENING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE APPELLANT PRAYS THAT THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT MAY BE DECLARED AS BA D IN LAW AND THE REASSESSMENT ORDER MAY PLEASE BE CANCELLED. GROUND NO. 2: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE HON'BLE CIT(A) ERRED IN AFFIRMING THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.10,19,80,709/- IN RESPECT OF INTEREST ON INCOME TAX REFUND TO THE APPELLANT'S TO TAL INCOME. 3. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUN D. THIS GROUND READ AS UNDER :- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE EDUCATION CESS AND HIGHER AND SE CONDARY EDUCATION CESS PAID BY THE APPELLANT IS ALLOWABLE AS DEDUCTION WHILE COMPU TING INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. 4. THE GROUND OF APPEAL IN REVENUES APPEAL READ AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 332,65,62,293/- ON ACCOUNT OF CAPITAL GAIN'. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT SCHEME OF DEMERGER O F INVESTMENT UNDERTAKING BUSINESS ACTIVITY HAS BEEN CARRIED OUT UNDER THE PR OVISION OF COMPANIES ACT 1956 AND THE SAID SCHEME IS NOT AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961 HENCE, THE DEMERGER OF THE ABOVE ACTIVITY OF THE CO MPANY DOES NOT FALL WITHIN THE AMBIT OF SECTION 47(VIB) R.W.S. 2 (19AA) OF THE I T ACT 1961.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT THE PROPERTY IN THE NATURE OF SHARE TRANSFERRED ON DEMERGER TO M/S CHI INVESTMENT LTD. WAS MERELY A CO MBINATION OF ASSETS AND LIABILITIES AND DID NOT CONSTITUTE A BUSINESS ACTIV ITY OR A UNIT OR A DIVISION OF AN UNDERTAKING AS ENVISAGED IN EXPLANATION 1 TO SECTIO N 2(19AA) OF THE ACT.' 4. 'ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E THE ORDER RELIED UPON BY THE CIT(A) IN THE CASE OF INDO RAMA TEXTILE LTD. (DELHI HIGH COURT) THE DECISION WAS NOT GIVEN IN INCOME TAX CASE.' 5. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE ASS ESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER ALIA , ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF AUTOMOTIVE TY RES. THE ASSESSEE FILED A RETURN OF INCOME ON 20.09.2008 DECLARING A TOTAL INCOME OF RS. 92,29,76,730/-. THE 3 ITA NOS.673 & 74/MUM/2017 ORIGINAL ASSESSMENT WAS COMPLETED VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 28.12.2010 ASSESSING THE TOTAL INCOME AT RS. 130,69,49,382/-. SUBSEQUENTLY, A NOTICE DATED 08.03.2013 WAS ISSUED UNDER SECTION 148 OF THE ACT FOR REOPENING THE ASSESSMENT ON THE GROUND THAT INT EREST ON INCOME TAX REFUND WAS NOT OFFERED TO TAX. DURING THE PENDENCY OF THE SAID PROCEEDINGS, ANOTHER NOTICE DATED 25.03.2013 WAS ISSUED UNDER SECTION 148 OF TH E ACT FOR THE REASON THAT ASSESSEE IS NOT ELIGIBLE FOR BENEFIT OF SECTION 47( VIB) R.W.S 2(19AA) OF THE ACT AND ACCORDINGLY, CAPITAL GAINS TO THE EXTENT OF RS. 318 CRORES HAD ESCAPED ASSESSMENT. THE REASONS FOR REOPENING RECORDED UNDER BOTH THE N OTICES WERE COMMUNICATED TO THE ASSESSEE VIDE LETTER DATED 06.12.2013. THE ASS ESSEE FILED ITS OBJECTIONS AGAINST THE REOPENING OF ASSESSMENT, HOWEVER, THE ASSESSING OFFICER, WITHOUT DISPOSING OFF THE OBJECTIONS, PASSED AN ORDER UNDER SECTION 147 R .W.S. 143(3) OF THE ACT DATED 03.03.2014. THE ASSESSEE FILED A WRIT PETITION BEFO RE THE HON'BLE BOMBAY HIGH COURT AGAINST THE SAID ORDER AND AGAINST ISSUING TW O NOTICES SINCE THE ASSESSING OFFICER HAD PASSED THE ORDER WITHOUT DISPOSING OFF THE OBJECTIONS OF THE ASSESSEE. THE HON'BLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 14.07.2014 IN WRIT PETITION NO. 980 OF 2014 SET-ASIDE THE ORDER PASSED BY THE A SSESSING OFFICER DATED 03.03.2014 AND DIRECTED THE ASSESSING OFFICER TO PA SS A FRESH ORDER AFTER DISPOSING OFF THE OBJECTIONS FILED BY THE ASSESSEE. THE ASSES SEE FILED ITS OBJECTIONS VIDE LETTER DATED 25.07.2014 BEFORE THE ASSESSING OFFICER. THE SAME WERE DISPOSED OFF BY THE ASSESSING OFFICER VIDE ORDER DATED 19.12.2014. SUBS EQUENTLY, THE ASSESSING OFFICER PASSED THE IMPUGNED ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 147 OF THE ACT DATED 31.03.2015 WHEREIN ADDITION ON ACCOUN T OF INTEREST ON INCOME TAX REFUND AND LONG TERM CAPITAL GAINS, REJECTING THE D EMERGER UNDER SECTION 47(VIB) R.W.S2(19AA) OF THE ACT, WAS MADE. THIS ORDER IS T HE SUBJECT MATTER OF DISPUTE IN THE CAPTIONED PROCEEDINGS. BEFORE CIT(A), ASSESSEE REITERATED THIS OBJECTIONS RAISED BEFORE THE ASSESSING OFFICER WITH RESPECT TO THE VALIDITY OF REASSESSMENT PROCEEDINGS.. IT WAS FURTHER SUBMITTED THAT NO FRES H MATERIAL WAS AVAILABLE WITH THE 4 ITA NOS.673 & 74/MUM/2017 ASSESSING OFFICER FOR REOPENING THE ASSESSMENT AND HENCE, THE REOPENING MADE BY THE ASSESSING OFFICER WAS BAD IN LAW. THE CIT(A) DI D NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND UPHELD THE REOPENING OF ASSESSMENT. THE ASSESSEE ALSO ASSAILED THE ADDITION ON MERITS. THE CIT(A) HA S UPHELD THE ADDITION ON ACCOUNT OF INTEREST ON INCOME-TAX REFUND, WHILE TH E ADDITION ON ACCOUNT OF CAPITAL GAIN HAS BEEN DELETED. AGGRIEVED BY THE ORDER OF TH E CIT(A), BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. FIRST, WE SHALL TAKE UP THE GROUNDS RAISED BY THE ASSESSEE PERTAINING TO THE VALIDITY OF ASSESSMENT INITIATED U/S.147/148 OF THE ACT. BEFORE US, LEARNE D COUNSEL OF THE ASSESSEE SHRI VIJAY MEHTA SUBMITTED THAT REOPENING OF ASSESSMENT BY ASSESSING OFFICER BY ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT DATED 08.03. 2013 IS BAD IN LAW. A PERUSAL OF THE REASONS RECORDED FOR REOPENING SHOW THAT THE ASSESSING OFFICER HAS SOUGHT TO REOPEN THE ASSESSMENT ON THE GROUND THAT INTERES T ON INCOME TAX REFUND, WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT, WAS NOT OFFERED TO TAX. IT IS EXPLAINED THAT THIS FACT WAS VERY MUCH IN THE KNOWLEDGE OF TH E ASSESSING OFFICER WHILE PASSING THE ORIGINAL ORDER UNDER SECTION 143(3) OF THE ACT DATED 28.12.2010; IT WAS ALSO SUBMITTED THAT THE AMOUNT OF RS. 1503.65 LAKHS MENTIONED IN THE REASONS IS AVAILABLE IN THE FINANCIAL STATEMENTS OF THE ASSESS EE FOR THE YEAR ENDED 31.03.2007. THE SAID AMOUNT IS THE AGGREGATE OF EXCESS PROVISIO N OF INCOME TAX REFUND OF RS. 455.23 LAKHS AND INTEREST ON INCOME TAX REFUND OF RS. 10,48.42 LAKHS APPEARING IN SCHEDULE 20 OF THE FINANCIAL STATEMENTS. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, IT WAS S PECIFICALLY EXPLAINED TO THE ASSESSING OFFICER, VIDE LETTER DATED 15.12.2010. IN RESPONSE TO A SPECIFIC QUERY THAT, THE INTEREST ON INCOME TAX REFUND HAS BEEN RE DUCED IN THE COMPUTATION OF INCOME. HENCE, THIS FACT WAS KNOWN TO THE ASSESSING OFFICER WHILE PASSING THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) OF T HE ACT. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT FOR REOPENING T HE ASSESSMENT UNDER SECTION 148 5 ITA NOS.673 & 74/MUM/2017 OF THE ACT, THE ASSESSING OFFICER MUST HAVE A REASO N TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HOWEVER, REOPENING ON THE SAME SET OF FACTS, IN ABSENCE OF ANY TANGIBLE MATERIAL IN POSSE SSION OF ASSESSING OFFICER IS NOT VALID. IT WAS CONTENDED THAT BETWEEN THE DATE OF PA SSING THE ORDER UNDER SECTION 143(3) OF THE ACT AND THE DATE OF ISSUANCE OF NOTIC E U/S 148 OF THE ACT, NO NEW TANGIBLE MATERIAL CAME IN THE POSSESSION OF THE ASS ESSING OFFICER, HENCE THE REOPENING OF ASSESSMENT BASED ON THE NOTICE DATED 0 8/03/2013 IS BAD IN LAW. IN SUPPORT OF THE ABOVE, RELIANCE WAS PLACED ON THE JU DGMENT OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF ASIAN PAINTS V. DY. CIT 308 ITR 195 (BOM.) AND DECISION OF CIT VS. JET SPEED AUDIO PVT. LTD. (ITA NO. 285 OF 2 013 VIDE ORDER DATED 28.1.2015). AT THIS STAGE, REFERENCE HAS BEEN MADE TO THE REASONS RECORDED FOR ISSUANCE OF 1 ST NOTICE U/S 148 OF THE ACT DATED 08.03.2013, WHICH READS AS UNDER:- THE ASSESSEE COMPANY, DURING THE YEAR, HAS CREDITE D PROFIT & LOSS ACCOUNT BY RS.1503.65 LAKHS UNDER THE HEAD REFUND & INTEREST ON INCOME TA X REFUND. INTEREST ON INCOME TAX REFUND HAS NOT BEEN OFFERED TO TAX. THEREFORE, I HAVE REAS ON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON PART OF TH E ASSESSEE TO DISCLOSE TRULY ALL MATERIAL FACTS NECESSARY TO ASSESSMENT. 7. ON MERITS, IT WAS SUBMITTED BY THE LEARNED COUNS EL OF THE ASSESSEE THAT INTEREST ON INCOME TAX REFUND RECEIVED BY THE ASSES SEE CANNOT BE TAXED IN THE CURRENT YEAR AS THE ASSESSEE FOLLOWS MERCANTILE SYS TEM OF ACCOUNTING. IT IS SUBMITTED THAT IN THE REFUND COMPUTATION THE DATE O F GRANT OF REFUND IS 12.03.2007 WHICH FALLS IN ASSESSMENT YEAR 2007-08, AND, THUS T HE INCOME PERTAINS TO PERIOD UP TO MARCH 2007. IT IS SUBMITTED THAT INTEREST ON INC OME TAX REFUND IS TAXABLE IN THE YEAR IN WHICH IT IS GRANTED TO THE ASSESSEE. IN THE PRESENT CASE, THE INTEREST WAS GRANTED ON 12.03.2007, I.E. IN ASSESSMENT YEAR 2007 -08, HENCE THE SAME CANNOT BE TAXED IN THE CURRENT YEAR. IN ORDER TO SUPPORT THE SAID CONTENTION, RELIANCE IS PLACED ON THE ORDER OF THE TRIBUNAL IN CASE OF HINDUSTAN UNILEVER LTD V. ADDL. CIT IN ITA NO. 7868/MUM/2010 WHEREIN THE TRIBUNAL, AFTER RELYING ON THE ORDER O F THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AVADA TRADING CO. (P) LTD V ACIT, 100 ITD 6 ITA NOS.673 & 74/MUM/2017 131 (SB)(MUM-TRIB) , HELD THAT INTEREST ON INCOME TAX REFUND IS TAXABL E IN THE YEAR IN WHICH IT IS GRANTED. 8. IT WAS NEXT ARGUED THAT DURING THE PENDENCY OF P ROCEEDINGS ARISING FROM 1 ST NOTICE, THE ASSESSING OFFICER ISSUED ANOTHER NOTICE UNDER SECTION 148 OF THE ACT DATED 28.03.2013. IT IS A WELL-SETTLED POSITION OF LAW AND AN ADMITTED POSITION THAT A SECOND NOTICE OF REOPENING DURING THE PENDENCY OF F IRST ONE IS NON-EST IN THE EYES OF LAW. IT IS CONTENDED THAT THE AFORESAID IS IMPLI EDLY ACCEPTED BY THE DEPARTMENT, IF ONE GOES BY THE STAND OF THE ASSESSING OFFICER I N THE WRIT PETITION FILED BY THE ASSESSEE BEFORE THE HONBLE BOMBAY HIGH COURT. IT W AS POINTED OUT THAT THE ASSESSEE FILED A WRIT PETITION CHALLENGING THE ORDE R PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 03 .03.2014, WHEREIN THE RESPONDENT, DEPARTMENT FILED AN AFFIDAVIT, WHEREIN THE DEPARTMENT HAS ACCEPTED THAT FOR MAKING ADDITION IN RESPECT TO THE ISSUE ME NTIONED IN THE SECOND NOTICE, THE ASSESSING OFFICER HAS INVOKED EXPLANATION 3 TO SECT ION 147 OF THE ACT. ON THIS BASIS, IT IS CANVASSED, THE VALIDITY OF THE REASSES SMENT HAS TO BE LISTED ON THE BASIS OF THIS 1 ST NOTICE ISSUED U/S 148 OF THE ACT, DATED 08/02/2013 . IN OTHER WORDS, AS PER, LEARNED COUNSEL OF THE ASSESSEE IF THE PLEA OF THE ASSESSEE THAT REOPENING ON THE BASIS OF NOTICE DATED 08.03.2013 (1 ST NOTICE) IS BAD IN LAW, THEN THE ASSESSMENT ORDER WOULD NOT SURVIVE SINCE THE SAME IS MADE IN P URSUANCE TO PROCEEDINGS ARISING FROM THE 1 ST NOTICE. HE FURTHER SUBMITTED THAT THE AFORESAID W OULD PREVAIL, EVEN IF IT IS HELD THAT THE 2 ND NOTICE ISSUED UNDER SECTION 148 OF THE ACT IS VALI D. 9. INSOFAR AS, THE 2 ND NOTICE ISSUED ON 25/03/2013 IS CONCERNED, IT WAS E XPLAINED THAT THE ASSESSING OFFICER HAS SOUGHT TO REOPEN THE ASSESSMENT ON THE GROUND THAT THE CAPITAL GAINS ARISING ON DEMERGER HAVE NOT BEEN OFFERED TO TAX. THE REASONS FOR ISSUE OF 2 ND NOTICE HAVE BEEN REFERRED TO WHICH READ AS UNDER: ( AS PER LETTER OF ASSESSING OFFICER DATED 06/12/2013):- 7 ITA NOS.673 & 74/MUM/2017 IN THE A.Y. 2008-09 IT IS OBSERVED THAT M/S, CHI I NVESTMENTS LTD. DEMERGED FROM ASSESSEE COMPANY. IT RESULTED IN CAPITAL GAINS ARIS ING TO THE TUNE OF RS.318 CRORES IN THE HANDS OF THE ASSESSEE COMPANY WHICH HAVE NOT BEEN O FFERED TO TAX. M/S. CEAT LTD. (DEMERGED COMPANY) HAD DEMERGED ITS INVESTMENTS TO M/S. CMS INVESTMENTS LTD., THEN A SCHEME OF ARRANGEMENT APPROVED BY HON'BLE BOMBAY HI GH COURT W.E.F 1/7/2007. AS PER THE SCHEME, SHARES OF NON-TYRE BUSINESS WERE HIVED OFF FROM M/S, CEAT LTD. TO M/S. HI INVESTMENTS LTD. AS PER ANNUAL REPORTS OF THE ASSES SEE COMPANY FOR F.Y. 2005-06 AND 2006-07, IT IS SEEN THAT M/S. CEAT LTD. IS ENGAGED IN ONE SEGMENT 'TYRE BUSINESS'. NO SPECIFIC/DEDICATED EMPLOYEES WERE EARMARKED TO LOOK AFTER INVESTMENT PORTFOLIO. NO FRESH INVESTMENT/SALE WAS MADE IN INVESTMENT PORTFOLIO BE TWEEN F.Y. 2005-06 TO 2008-09. IN A SURVEY CONDUCTED BY THE INVESTIGATION WING, STATEME NT OF MR. PARAS KUMAR CHOUDHARY, M.D. OF M/S. CEAT LTD. WAS RECORDED. ALSO STATEMENT OF MR. HARSH GOENKA WAS RECORDED. FROM THE SAME IT TRANSPIRED THAT NATURE OF SHARES W HICH WAS DEMERGED TO CHI LTD, WAS MERELY A COMBINATION OF ASSETS AND LIABILITIES AND DID NOT CONSTITUTE A BUSINESS ACTIVITY OR A UNIT OR DIVISION OF AN UNDERTAKING AS IS ENVISAGE D IN EXPLANATION 1 TO SECTION 2(19AA) OF THE I.T. ACT. EVEN THOUGH THE ORDER OF THE HONB LE BOMBAY HIGH COURT DATED 23.11.2007 SANCTIONING THIS DEMERGER UNDER THE COMP ANIES ACT HAS MENTIONED ABOUT DEMERGER OF AN INVESTMENT UNDERTAKING THE REFERENCE TO THE TERM UNDERTAKING MADE BY THE HONBLE BOMBAY HIGH COURT IS UNDER THE PROVISIO N OF THE COMPANIES ACT, 1956 AND NOT AS PER THE PROVISIONS OF THE INCOME TAX ACT, 19 61. HENCE, THIS DEMERGER DOES NOT FALL WITHIN THE AMBIT OF SEC.47(VIB) R.W. SECTION 2(19AA ) OF THE I.T. ACT. HENCE, TRANSFER OF SHARES OF M/S. CEAT LTD. TO M/S. CHI INVESTMENTS LTD. ATTRACTS THE PROVISIONS OF CAPITAL GAINS. THEREFORE, I HAVE REAS ON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON PART O F THE ASSESSEE TO DISCLOSE FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 10. IT WAS SUBMITTED THAT THE FACT THAT DEMERGER TO OK PLACE IN THE CURRENT YEAR WAS MENTIONED IN THE ANNUAL FINANCIAL STATEMENTS OF THE ASSESSEE AS WELL AS IN THE DIRECTORS REPORT FOR THE YEAR ENDED 31.03.2008 WHI CH WERE AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T PROCEEDINGS. THE ASSESSEE HAD CLAIMED DEMERGER EXPENDITURE UNDER SECTION 35DD OF THE ACT AND THE SAID FACT WAS MENTIONED IN THE TAX AUDIT REPORT THAT WAS AVAI LABLE WITH THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 15.12.2 010 FURNISHED DETAILS TO THE ASSESSING OFFICER REGARDING ALLOWABILITY OF CLAIM O F EXPENSES RELATING TO DEMERGER. HENCE, THE ASSESSING OFFICER WAS AWARE ABOUT THE FA CT THAT DEMERGER HAD TAKEN PLACE DURING THE YEAR AT THE TIME OF ORIGINAL ASSES SMENT PROCEEDINGS. IT WAS ALSO SUBMITTED THAT THE DECISION OF THE HON'BLE BOMBAY H IGH COURT APPROVING THE SCHEME OF DEMERGER OF INVESTMENT UNDERTAKING OF THE ASSESSEE WAS AVAILABLE WITH 8 ITA NOS.673 & 74/MUM/2017 THE ASSESSING OFFICER. NO NEW MATERIAL CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUENT TO THE ORDER PASSED UNDER SECTIO N 143(3) OF THE ACT DATED 28.12.2010. IN THE ABSENCE OF ANY NEW TANGIBLE MATE RIAL, REOPENING ON THE SAME SET OF FACTS IS NOT PERMISSIBLE, AND RELIANCE IN THIS R EGARD WAS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF ASIAN PAIN TS (SUPRA) AND JET SPEED AUDIO (SUPRA). 11. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER ARG UED THAT THE SO-CALLED FRESH INFORMATION LIKE INVESTMENT DIVISION NOT HAVING EMP LOYEE, ETC. ARE NEITHER RELEVANT NOR CONTRARY TO INFORMATION ALREADY AVAILABLE ON RE CORD. THE ASSESSING OFFICER IN THE REASONS RECORDED HAS STATED THAT THE COMPANY FO RMED AFTER DEMERGER WAS MERELY A COMBINATION OF ASSETS AND LIABILITIES AND DID NOT CONSTITUTE BUSINESS ACTIVITY OR A UNIT OR DIVISION AS ENVISAGED IN EXPL ANATION 1 TO SECTION 2(19AA) OF THE ACT. IN THIS REGARD, IT WAS SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT VIDE THEIR ORDER DATED 23.11.2007 APPROVED THE SCHEME OF DEMERGER AND HELD THAT INVESTMENT UNDERTAKING WOULD BE DEMERGED FROM THE A SSESSEE. IT HAS FURTHER SUBMITTED THAT THE BUSINESS OF ASSESSEE COMPRISES O F TWO UNDERTAKINGS I.E. TYRE UNDERTAKING AND INVESTMENT UNDERTAKING, AS NOTED BY THE HONBLE HIGH COURT IN THE ORDER DATED 23.11.2007 (SUPRA). IT WAS SUBMITTE D THAT THE SCHEME OF DEMERGER IS APPROVED BY THE HON'BLE HIGH COURT AFTER ENSURIN G THAT SAME IS NOT PREJUDICIAL TO THE INTEREST OF ITS MEMBERS OR PUBLIC INTEREST; THA T A NOTICE WAS DULY GIVEN TO THE CENTRAL GOVERNMENT, AND IT HAD A RIGHT TO MAKE OBJE CTIONS TO THE SCHEME. HENCE, IT WAS SUBMITTED THAT IF THERE WAS ANY OBJECTION OF TH E INCOME-TAX DEPARTMENT REGARDING THE SCHEME, THE SAME OUGHT TO HAVE BEEN R AISED PRIOR TO SANCTION OF SCHEME BY THE COURT. IT WAS SUBMITTED THAT IN THE P RESENT CASE NO OBJECTION WAS TAKEN BY THE INCOME-TAX DEPARTMENT REGARDING THE SC HEME OF DEMERGER BEFORE THE HON'BLE BOMBAY HIGH COURT AND EVEN AGAINST THE ORDE R PASSED BY THE HON'BLE BOMBAY HIGH COURT. THE ASSESSING OFFICER NOW CANNOT HAVE A BELIEF CONTRARY TO THE ORDER OF THE HON'BLE BOMBAY HIGH COURT. IN ORDE R TO SUPPORT THE SAID 9 ITA NOS.673 & 74/MUM/2017 CONTENTION, RELIANCE WAS PLACED ON THE ORDER OF KOL KATA BENCH OF THE TRIBUNAL IN CASE OF ELECTROCAST SALES INDIA LTD V. DY. CIT [170 ITD 507 (KOL)] . IT WAS SUBMITTED THAT THE ASSESSING OFFICER CANNOT ENTERTA IN A BELIEF THAT INVESTMENT UNDERTAKING WAS NOT A SEPARATE UNDERTAKING OF ASSES SEE, ESPECIALLY WHEN NO OBJECTION HAS BEEN TAKEN BY THE DEPARTMENT BEFORE T HE HON'BLE HIGH COURT AT THE TIME OF APPROVAL OF SCHEME OF DEMERGER. 12. IT WAS FURTHER SUBMITTED THAT WHILE REOPENING T HE ASSESSMENT THERE WAS COMPLETE NON-APPLICATION OF MIND BY THE ASSESSING O FFICER. IN THE AFFIDAVIT FILED BEFORE THE HON'BLE BOMBAY HIGH COURT IN RESPONSE TO THE WRIT PETITION FILED BY THE ASSESSEE, THE DEPARTMENT HAS STATED IN PARA NO. 13 THAT INFORMATION WAS RECEIVED FROM DEPUTY DIRECTOR OF INCOME TAX (INV.) UNIT - VI I(1), MUMBAI VIDE LETTER DATED 25.03.2013 THAT CAPITAL GAINS AMOUNTING TO MINIMUM OF RS. 328 CRORES HAS ARISEN IN HANDS OF ASSESSEE AND THE SAME HAS NOT BEEN OFFE RED TO TAX. IT WAS SUBMITTED THAT ON THE VERY SAME DAY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT AND IN THE REASONS, STATED THAT CAPITAL GAINS O F RS. 318 CRORES HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE. IT WAS SUBMITTED TH AT THE ASSESSEE REPEATEDLY SOUGHT DETAILS FROM THE ASSESSING OFFICER AS TO HOW HE ARR IVED AT THE FIGURE OF RS. 318 CRORES, HOWEVER, THE ASSESSING OFFICER HAS NEVER CL ARIFIED THE BASIS ON WHICH HE CAME TO THE BELIEF THAT AN INCOME OF RS.318 CRORES HAS ESCAPED ASSESSMENT. THUS, REOPENING HAS BEEN MADE IN COMPLETE HASTE AND WITHO UT INDEPENDENT APPLICATION OF MIND ON THE PART OF ASSESSING OFFICER WHILE REOPENI NG THE ASSESSMENT. 13. THE LEARNED COUNSEL SUBMITTED THAT IN THE SCHEM E OF DEMERGER THERE WAS NO TRANSFER OF ASSETS BY THE COMPANY. THE SHAREHOLDERS OF THE COMPANY DECIDED TO PART WITH THEIR RIGHTS IN THE COMPANY AND HENCE, THERE W AS NO TRANSFER OF CAPITAL ASSET BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT ON ACCO UNT OF DEMERGER, NO CONSIDERATION HAS ACCRUED TO THE ASSESSEE, HENCE IT WOULD NOT BE POSSIBLE TO COMPUTE CAPITAL GAIN TAX IN ABSENCE OF ANY CONSIDER ATION RECEIVED BY THE ASSESSEE. 10 ITA NOS.673 & 74/MUM/2017 IT WAS SUBMITTED THAT ON THESE SET OF FACTS, NO REA SONABLE PERSON WOULD COME TO A BELIEF THAT CAPITAL GAIN TAX HAS ESCAPED ASSESSMENT . 14. THE LEARNED COUNSEL SUBMITTED THAT IN THE ORDER DISPOSING-OFF THE OBJECTIONS RAISED BY ASSESSEE, THE ASSESSING OFFICER HAS INDEE D RECORDED THE OBJECTION TAKEN BY THE ASSESSEE THAT NO CONSIDERATION ACCRUED TO TH E ASSESSEE UNDER SCHEME OF DEMERGER HOWEVER, THE SAID OBJECTION OF THE ASSESSE E WAS NOT DISPOSED OFF BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT IF THE OBJ ECTIONS ARE NOT DISPOSED OFF BY THE ASSESSING OFFICER, THE REOPENING NOTICE ISSUED BY THE ASSESSING OFFICER IS BAD IN LAW. IN ORDER TO SUPPORT THE SAID CONTENTION, RE LIANCE WAS PLACED ON THE DECISIONS OF THE HON'BLE BOMBAY HIGH COURT IN CASE OF SHIVALIK VENTURES (P) LTD V. DY. CIT (247 TAXMAN 226) AND KSS PETRON PVT. LTD. V. ASST. CIT IN ITA NO: 224 OF 2014 DATED 03.10.2016 . ACCORDINGLY, IT WAS ARGUED THAT THE REOPENING BY THE ASSESSING OFFICER IS BAD IN LAW. 15. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAS DULY RESPONDED TO ALL ASSESSE E OBJECTIONS. THAT ASSESSEE HAS ALREADY GONE IN WRIT BEFORE HIGH COURT AND THE ASSE SSING OFFICER HAS DULY ACTED UPON THE ORDER OF HIGH COURT. HENCE, HE SUBMITTED T HAT THERE IS NO INFIRMITY IN THE REOPENING. 16. THE FACTS WITH RESPECT TO DEPARTMENTS APPEAL I N ITA NO.673/MUM/2017 ARE THAT DURING THE PREVIOUS YEAR, THE ASSESSEE DEMERGE D ITS INVESTMENT DIVISION TO M/S CHI INVESTMENTS LTD. THROUGH A SCHEME OF ARRANGEMEN T APPROVED BY THE HON'BLE BOMBAY HIGH COURT W.E.F. 01.07.2007. THE INVESTMENT IN SHARES WAS A NON-TYRE BUSINESS OF ASSESSEE HAVING A BOOK VALUE OF RS. 126.20 CRORES WHICH HAD BEEN HIVED OFF FROM ASSESSEE TO M/S CHI INVESTMENTS LTD. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INVESTMENT IN SHARES TRANSFERRED BY ASSESSEE TO M/S CHI INVESTMENTS WAS MERELY A COMBINATION OF ASSETS AND LIABILITIES AND DID NOT 11 ITA NOS.673 & 74/MUM/2017 CONSTITUTE A BUSINESS ACTIVITY OF THE ASSESSEE OR A UNIT OR DIVISION OR UNDERTAKING AS ENVISAGED IN EXPLANATION 1 TO SECTION 2(19AA) OF TH E ACT. THE ASSESSING OFFICER HELD THAT SINCE THE INVESTMENT WAS NOT A SEPARATE U NDERTAKING OF ASSESSEE, PROVISIONS OF SECTION 2(19AA) WERE NOT SATISFIED AN D HENCE, THE ASSESSEE WAS LIABLE TO PAY CAPITAL GAIN TAX ON THE SAID DEMERGER . 17. BEFORE THE CIT(A), ASSESSEE SUBMITTED THAT THE INVESTMENT ACTIVITY WAS A SEPARATE UNDERTAKING OF THE ASSESSEE AND HENCE THE PROVISIONS OF SECTION 2(19AA) OF THE ACT WERE SATISFIED. IT WAS FURTHER SUBMITTED THAT THE FACT THAT INVESTMENT UNIT WAS AN UNDERTAKING OF THE ASSESSEE HAS ALSO BEEN AC CEPTED BY THE HON'BLE BOMBAY HIGH COURT VIDE ORDER DATED 23.11.2007. IT WAS FURT HER SUBMITTED THAT M/S CHI INVESTMENTS LTD HAS EARNED PROFITS IN THE FIRST YEA R OF ITS OPERATIONS. IT WAS FURTHER SUBMITTED THAT NO OBJECTION HAD BEEN RAISED BY THE REGIONAL DIRECTOR, UNDER THE COMPANIES ACT, 1956 IN RESPECT OF THE SCHEME. IN TH IS CONTEXT, RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CASE OF INDO RAMA TEXTILES LTD (212 TAXMAN 462) . 18. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSES SEE THAT THE INVESTMENT UNDERTAKING WAS A SEPARATE UNDERTAKING OF THE ASSES SEE AS ENVISAGED IN EXPLANATION TO SECTION 2(19AA) OF THE ACT; AND ACCORDINGLY, THE CIT(A) CONCLUDED THAT NO CAPITAL GAIN TAX LIABILITY WOULD ARISE ON ACCOUNT O F DEMERGER AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 19. BEFORE US, LD. DR RELIED ON THE ORDER OF THE AS SESSING OFFICER TO CONTEND THAT THE ASSESSEES CASE DOES NOT FALL UNDER SECTION 2(1 9AA) OF THE ACT AND, THEREFORE, BENEFIT OF SECTION 47(VIB) OF THE ACT WAS NOT AVAIL ABLE TO THE ASSESSEE AND THE CAPITAL GAIN ARISING OUT OF THIS TRANSACTION WAS CH ARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. WITH REGARD TO THE ORDER OF THE HON'BLE B OMBAY HIGH COURT, THE LD. DR STATED THAT TERM 'UNDERTAKING' REFERRED TO BY THE H ON'BLE HIGH COURT IS UNDER THE 12 ITA NOS.673 & 74/MUM/2017 PROVISIONS OF COMPANIES ACT, 1956 AND NOT INCOME-TA X ACT. HE ALSO REFERRED AND REITERATED THE VARIOUS OBJECTION RAISED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER. HE SUBMITTED THE SAME STANDS UNREBUTTED. 20. IN RESPONSE, LEARNED COUNSEL FOR THE ASSESSEE D EFENDED THE DECISION OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE FILED A PETI TION BEFORE THE HON'BLE BOMBAY HIGH COURT FOR DEMERGING ITS INVESTMENT UNIT FROM THE TYRE BUSINESS. IT WAS SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT IN ITS ORDER DATED 23.11.2007 APPROVED THE SCHEME OF ARRANGEMENT OF DEMERGER WHER EIN IT WAS STATED THAT EXISTING BUSINESS OF ASSESSEE CONSISTS OF TWO UNDER TAKINGS I.E. TYRE UNDERTAKING AND INVESTMENT UNDERTAKING. IT WAS SUBMITTED THAT THE H ON'BLE BOMBAY HIGH COURT HAS RECOGNIZED THE FACT THAT ASSESSEE WAS HAVING AN IND EPENDENT INVESTMENT UNDERTAKING. AS PER PROVISIONS OF SECTION 394A OF T HE COMPANIES ACT, 1956, BEFORE A SCHEME OF DEMERGER IS APPROVED, NOTICE IS TO BE GIVEN TO THE CENTRAL GOVERNMENT, WHEREIN THE CENTRAL GOVERNMENT CAN RAIS E OBJECTIONS, IF ANY, AGAINST THE SANCTION OF THE SCHEME. IT WAS SUBMITTED THAT T HE CENTRAL GOVERNMENT INCLUDES INCOME-TAX DEPARTMENT, AND IF IT HAD ANY OBJECTIONS TO THE SCHEME, THE SAME COULD HAVE BEEN RAISED PRIOR TO SANCTION OF SCHEME BY THE COURT. ONCE THE SCHEME IS APPROVED, IT IS IMPLIED THAT THE SAME HAS BEEN APPR OVED AFTER CONSIDERING THE REPRESENTATIONS FROM THE GOVERNMENT. IN THE PRESENT CASE, NO OBJECTION WAS RAISED EITHER BY THE REGIONAL DIRECTOR OR CENTRAL GOVERNME NT AGAINST THE SCHEME OF DEMERGER. ONCE THE SCHEME IS APPROVED, THE DEPARTME NT CANNOT CONTEND THAT INVESTMENT WAS NOT A SEPARATE UNDERTAKING OF THE AS SESSEE, ESPECIALLY IN LIGHT OF THE FACT THAT THE SAME HAS BEEN TREATED AS A SEPARATE U NDERTAKING BY THE HON'BLE BOMBAY HIGH COURT. RELIANCE WAS PLACED ON THE DECIS ION OF THE KOLKATTA BENCH OF THE TRIBUNAL IN CASE OF ELECTROCAST SALES INDIA LTD V. DY. CIT [170 ITD 507 (KOL)] . 21. IT WAS SUBMITTED THAT IN ANY CASE 'UNDERTAKING' IS NOT DEFINED UNDER THE COMPANIES ACT, 1956 OR THE INCOME-TAX ACT, 1961. IT IS SUBMITTED THAT THE WORD 13 ITA NOS.673 & 74/MUM/2017 'UNDERTAKING' USED IN EXPLANATION 1 TO SECTION 2(19AA) OF THE AC T INCLUDES PART OF UNDERTAKING AND COMBINATION OF ASSETS AND/OR LIABIL ITIES IF IT CONSTITUTES A BUSINESS. THERE IS NO REQUIREMENT REGARDING PERIOD OF EXISTEN CE OF UNDERTAKING PRIOR TO DEMERGER. IT WAS SUBMITTED THAT 'PART OF UNDERTAKING ' MEANS NEWLY SET UP UNDERTAKING CAN ALSO BE AN UNDERTAKING WHICH CAN BE DEMERGED. THEREFORE, THE ONLY REQUIREMENT IS THAT THE RESULTING UNDERTAKING SHOULD BE COHESIVE, SELF- CONTAINED AND INDEPENDENT BUSINESS UNIT. IN THE PRE SENT CASE, POST-DEMERGER M/S CHI INVESTMENT LTD WAS HAVING AN INDEPENDENT BUSINE SS UNIT, I.E. INVESTMENT UNDERTAKING AND, HENCE, IT SATISFIES THE CONDITION OF 'UNDERTAKING' AS ENVISAGED IN EXPLANATION 1 TO SECTION 2(19AA) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE COMPANY HAS MADE PROFIT IN THE FIRST YEAR OF EXISTE NCE ITSELF. 22. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER COU NTERED THE VARIOUS ASPECTS OF ASSESSING OFFICERS ORDER. THE ASSESSING OFFICER HA S RAISED VARIOUS OBJECTIONS IN THE ASSESSMENT ORDER TO CONTEND THAT INVESTMENT UNI T OF ASSESSEE IS NOT A SEPARATE 'UNDERTAKING . FIRST OBJECTION WAS THAT NO SEPARATE EMPLOYEES O R OFFICE OR ACCOUNTS OF EXPENSES WITH REGARD TO THE INVESTMENT UNIT ETC. IN THIS REGARD, IT WAS SUBMITTED THAT HAVING AN EMPLOYEE IS NOT A LEGAL REQUIREMENT. IT WAS SUBMITTED THAT EVEN M/S CHI INVESTMENT LTD. DOES NOT HAVE ANY EMPLOYEES. IT WAS SUBMITTED THAT ALL THE INVESTMENTS ARE LOOKED AFTER BY THE BOARD OF DIRECT ORS BEFORE AND AFTER DEMERGER. HIS NEXT OBJECTION WAS NO FRESH INVESTMENTS MADE DU RING FINANCIAL YEAR 2005-06 TO 2008-09. IT WAS SUBMITTED THAT MAJOR INVESTMENTS AR E IN THE NATURE OF HOLDING COMPANY. FURTHER, IT IS NOT NECESSARY THAT TO CONST ITUTE AN INVESTMENT UNDERTAKING ONE MUST MAKE INVESTMENTS EVERY YEAR. IT WAS SUBMIT TED THAT MANAGING THE INVESTMENTS, WHICH ARE IN THE NATURE OF HOLDING COM PANY, IS ALSO VERY IMPORTANT FOR AN INVESTMENT COMPANY. THIRD OBJECTION WAS NO SEPAR ATE SEGMENTAL REPORTING OF INVESTMENT SEGMENT. IT WAS SUBMITTED THAT ASSESSING OFFICER HAS MERELY RELIED UPON NOTE 21 IN SCHEDULE 20 TO THE FINANCIAL STATEM ENTS OF THE ASSESSEE TO CONTEND THAT INVESTMENT SEGMENT WAS NOT A SEPARATE ACTIVITY OF THE ASSESSEE SINCE THE SAME 14 ITA NOS.673 & 74/MUM/2017 WAS NOT SPECIFICALLY MENTIONED. IN THIS REGARD, IT WAS SUBMITTED THAT NOTE 21 IN SCHEDULE 20 WAS BASED ON AS-17 (SEGMENT REPORTING) WHEREIN IT IS CLEARLY STATED THAT IT IS ONLY ESSENTIAL TO DISCLOSE ' REPORTABLE SEGMENTS IN THE FINANCIAL STATEMENTS. IT WAS SUBMITTED THAT THE CONDITION OF REPORTABLE SEGMENT WAS NOT MET FOR INVESTMENT ACTIVITY AND HENCE, THE SAME WAS NOT DISCLOSED AS A SEPARATE SEGMENT. HENCE, IT WAS SUBMITTED THAT INVESTMENT AC TIVITY WAS NOT SHOWN AS A SEPARATE SEGMENT. FORTH OBJECTION WAS SCHEME OF DEM ERGER IS AN ARRANGEMENT AMONGST FAMILY MEMBERS OF GOENKA GROUP. IT WAS SUBM ITTED THAT THE ASSESSING OFFICER HAS NOT ALLEGED THAT THE TRANSACTIONS ARE U NLAWFUL. MERELY BECAUSE THE TRANSACTIONS ARE WITHIN THE SAME GROUP, IT CANNOT B E CONCLUDED THAT THE SAME ARE UNDERTAKEN WITH A MOTIVE TO EVADE TAX UNLESS SOME M ATERIAL IS BROUGHT ON RECORD BY THE ASSESSING OFFICER. IT WAS ARGUED THAT, IN AN Y CASE, THE SAID SCHEME HAS BEEN APPROVED BY THE HON'BLE BOMBAY HIGH COURT WHEREIN N O SUCH OBJECTION HAS BEEN RAISED. 23. THE LEARNED COUNSEL MADE WITHOUT PREJUDICE ARGU MENT THAT EVEN IF IT IS HELD THAT THE DEMERGER IS NOT IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 2(19AA) OF THE ACT, THE CAPITAL GAIN TAX WOULD NOT ARISE IN TH E HANDS OF THE COMPANY. IT IS SUBMITTED THAT DETAILED SUBMISSIONS WERE MADE IN TH IS REGARD BEFORE THE ASSESSING OFFICER, WHICH HAVE BEEN EVEN NOTED BY THE ASSESSIN G OFFICER, HOWEVER HE HAS NOT DEALT WITH THIS ISSUE IN HIS ORDER. FURTHER, SUBMIS SIONS IN THIS REGARD WERE ALSO MADE BEFORE THE CIT(A). 24. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIALS ON RECORD. FIRSTLY, WE SHALL DEAL WITH TH E LEARNED COUNSEL CHALLENGE TO REOPENING OF ASSESSMENT INITIATED VIDE NOTICE U/S 1 48 OF THE ACT DATED 08.03.2013. SINCE THE FACTS OF THE CASE ARE DISCUSSED IN DETAIL IN EARLIER PART OF THE ORDER, THE SAME ARE NOT AGAIN DISCUSSED FOR SAKE OF BREVITY. A DMITTEDLY, THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT VIDE ORDER DATED 15 ITA NOS.673 & 74/MUM/2017 28.12.2010. IN THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSEE HAD SUBMITTED ITS FINANCIAL STATEMENT TO THE ASSESSING OFFICER WHEREI N AT SCHEDULE 20, THE INTEREST ON INCOME TAX REFUND WAS REFLECTED AT RS.10,48.42 LACS . FURTHER, IN RESPONSE TO THE QUERY RAISED IN THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 15.12.2010 AT Q.3. REPLIED THAT INTERE ST ON INCOME TAX REFUND HAS BEEN REDUCED FROM INCOME IN THE COMPUTATION. THUS, THIS ISSUE WAS VERY MUCH CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS AND IT IS NOT THE CASE WHERE THE ISSUE WAS NOT AT A LL RAISED BY THE ASSESSING OFFICER. NOTHING NEW HAS HAPPENED BETWEEN THE DATE OF PASSIN G OF ORIGINAL ASSESSMENT ORDER AND THE DATE OF ISSUING NOTICE UNDER SECTION 148 OF THE ACT AS CAN BEEN SEEN FROM THE REASON SUPPLIED BY THE ASSESSING OFFICER W HICH CATEGORICALLY STATES THAT ASSESSEE HAS CREDITED ITS PROFIT & LOSS ACCOUNT BY RS. 1503.65 LACS UNDER THE HEAD REFUND AND INTEREST ON INCOME TAX REFUND AND SINC E INTEREST ON INCOME TAX REFUND HAS NOT BEEN OFFERED TO TAX, HE HAD REASON TO BELIE VE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. ON A P ERUSAL OF THE REASONS FOR REOPENING, IT EMERGES THAT THE ASSESSING OFFICER HA S GATHERED THE INFORMATION FROM THE FINANCIAL STATEMENT OF THE ASSESSEE AND UNDISPU TEDLY THE FINANCIAL STATEMENT OF THE ASSESSEE WAS VERY MUCH BEFORE THE ASSESSING OFF ICER AT THE TIME OF ORIGINAL ASSESSMENT AND MORE SO HE HAD ALSO INQUIRED ON THIS ISSUE AND ASSESSEE HAD REPLIED TO THE SAME. THUS, NO TANGIBLE MATERIAL HAS COME IN POSITION OF THE ASSESSING OFFICER WHICH CAN LEAD TO THE INFERENCE THAT THERE IS ESCAPEMENT OF INCOME DUE TO THE FAULT OF THE ASSESSEE. THE ACTION OF THE ASSESS ING OFFICER, THUS, CLEARLY AMOUNTS TO FORMING OF NEW OPINION ON THE VERY SAME SET OF F ACTS WHICH WAS ALREADY AVAILABLE ON RECORDS, WHICH IS NOT PERMISSIBLE IN L AW. THE CHANGE OF OPINION IS NOT ALLOWED. IT IS WELL SETTLED LAW THAT THE ASSESS ING OFFICER CANNOT REVIEW HIS OWN ORDER UNDER THE GARB OF REASSESSMENT. IN THIS REGAR D, IT IS PERTINENT TO REFER TO THE 16 ITA NOS.673 & 74/MUM/2017 DECISION OF THE HON'BLE BOMBAY HIGH COURT IN CASE O F ASIAN PAINTS V. DY. CIT 308 ITR 195, 198 WHEREIN THE HON'BLE BOMBAY HIGH COURT HELD AS UNDE R: IT IS FURTHER TO BE SEEN THAT THE LEGISLATURE HAS N OT CONFERRED POWER ON THE ASSESSING OFFICER TO REVIEW ITS OWN ORDER. THEREFOR E, THE POWER UNDER SECTION 147 CANNOT BE USED TO REVIEW THE ORDER . IN THE PRESENT CASE, THOUGH THE ASSESSING OFFICER HAS USED THE PHRASE 'REASON TO BE LIEVE', ADMITTEDLY BETWEEN THE DATE OF THE ORDER OF ASSESSMENT SOUGHT TO BE RE OPENED AND THE DATE OF FORMATION OF OPINION BY THE ASSESSING OFFICER, NOTH ING NEW HAS HAPPENED, THEREFORE, NO NEW MATERIAL HAS COME ON RECORD, NO N EW INFORMATION HAS BEEN RECEIVED, IT IS MERELY A FRESH APPLICATION OF MIND BY THE SAME ASSESSING OFFICER TO THE SAME SET OF FACTS AND THE REASON THAT HAS BE EN GIVEN IS THAT THE SOME MATERIAL WHICH WAS AVAILABLE ON RECORD WHILE ASSESS MENT ORDER WAS MADE WAS INADVERTENTLY EXCLUDED FROM CONSIDERATION . THIS WILL, IN OUR OPINION, AMOUNT TO OPENING OF THE ASSESSMENT MERELY BECAUSE THERE IS C HANGE OF OPINION. THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGMENT IN TH E CASE OF KELVINATOR [2002] 256 ITR1 REFERRED TO ABOVE, HAS TAKEN A CLEAR VIEW THAT REOP ENING OF ASSESSMENT UNDER SECTION 147 MERELY BECAUSE THERE I S A CHANGE OF OPINION CANNOT BE ALLOWED. IN OUR OPINION, THEREFORE, IN TH E PRESENT CASE ALSO, IT WAS NOT PERMISSIBLE FOR RESPONDENT NO. 1 TO ISSUE NOTIC E UNDER SECTION 148. (UNDERLINED FOR EMPHASIS BY US) 25. IT MAY ALSO BE GAINFUL HERE TO REFER TO THE EXP OSITION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF JET SPEED AUDIO PVT. LTD. (SUPRA) AS UNDER :- WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL HA S RENDERED A FINDING OF FACT ON THE BASIS OF MATERIAL BEFORE IT, IN PARTICULAR T HE FACT THAT DURING ORIGINAL ASSESSMENT PROCEEDINGS A QUERY WAS MADE WITH REGARD TO THE SAME ISSUE WHICH WAS RESPONDED TO BY THE RESPONDENT - ASSESSEE AND O N SATISFACTION OF THE SAME, THE ASSESSING OFFICER HAD PASSED AN ASSESSMENT ORDE R. THEREFORE, REOPENING OF ASSESSMENT ON AN ISSUE IN RESPECT OF WHICH A QUERY WAS RAISED AND RESPONDED TO BY THE ASSESSEE WOULD AMOUNT TO A CHANGE OF OPINION . THE TANGIBLE MATERIAL BEING URGED BEFORE US BY MR. CHHOTARAY, IS THE AUDI T OBJECTIONS RECEIVED BY THE ASSESSING OFFICER. HOWEVER, AS WOULD BE CLEAR FROM THE REASONS REPRODUCED HEREINABOVE, THERE IS NO MENTION OF ANY TANGIBLE MA TERIAL IN THE REASONS RECORDED FOR ISSUING REOPENING NOTICE UNDER SECTION 148 OF THE ACT. THUS, WE FIND NO FAULT WITH THE FINDINGS OF THE TRIBUNAL THA T THERE IS NO TANGIBLE MATERIAL MENTIONED IN THE REASONS RECORDED BY THE REVENUE WH ICH WOULD WARRANT A DIFFERENT OPINION BEING TAKEN THEN WHICH WAS TAKEN WHEN THE ORIGINAL ORDER OF ASSESSMENT WAS PASSED. IT IS A SETTLED POSITION IN LAW THAT A REOPENING NOTICE CAN BE SUSTAINED ONLY ON THE BASIS OF GROUNDS MENTIONED IN THE REASONS RECORDED. IT IS NOT OPEN TO THE REVENUE TO ADD AND/OR SUPPLEMENT LATER THE REASONS RECORDED AT THE TIME OF ISSUING REOPENING NOTICE. MR.CHHOTARAY, LEARNED COUNSEL FOR THE REVENUE URGED ON MERITS OF THE REVENUE'S CASE TO CHARGE RS.1.34 CRORES ALLOWED AS BAD DEBTS, HAS TO BE 17 ITA NOS.673 & 74/MUM/2017 APPROPRIATELY BROUGHT TO TAX AS CAPITAL LOSS. WE PO INTED OUT TO MR.CHHOTARAY, LEARNED COUNSEL FOR THE REVENUE THAT THE SCOPE OF T HE PRESENT PROCEEDINGS IS ONLY WITH REGARD TO REOPENING NOTICE UNDER SECTION 148 OF THE ACT AND WE ARE NOT DEALING WITH THE MERITS OF THE ASSESSIBILITY OF THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT. ON THIS MR.CHHOTARAY SUBMITTED THAT THE ISSUE WHICH HE SEEKS TO URGE IS THAT MERELY BECAUSE THE ASSESSING OFFICER HAS BEEN CARELESS IN BRINGING TO TAX A PARTICULAR AMOUNT WHICH IS CHARGE ABLE TO TAX, THE REVENUE SHOULD NOT BE PRECLUDED FROM ISSUING NOTICE UNDER S ECTION 148 OF THE ACT. THIS SUBMISSION OF MR.CHHOTARAY OVERLOOKS THE FACTS THAT POWER TO REOPEN IS NOT A POWER TO REVIEW AN ASSESSMENT ORDER. AT THE TIME OF PASSING ASSESSMENT ORDER, IT EXPECTED OF THE ASSESSING OFFICER THAT HE WILL A PPLY MIND AND PASS AN ORDER. AN ASSESSMENT ORDER IS NOT A MERE SCRAP OF PAPER. T O ACCEPT THE SUBMISSION OF MR.CHHOTARAY, WOULD MEAN TO NEGATE THE WELL SETTLED POSITION IN LAW AS STATED BY THE SUPREME COURT IN THE CASE CIT VS. KELVINATO R OF INDIA LTD., [(2002) 256 ITR 1 (DELHI)(FB)] THAT THE CONCEPT OF 'CHANGE OF OPINION' BROUGHT IN SO AS TO HAVE IN BUILT TEST TO CHECK ABUSE OF POWER. IN V IEW OF THE ABOVE, WE FIND NO SUBSTANCE IN THE SUBMISSIONS RAISED BY MR.CHHOTARAY . 11. THE DECISIONS CITED BY MR.CHHOTARAY, LEARNED COUNSEL ON BEHALF OF THE R EVENUE IN SUPPORT OF HIS SUBMISSIONS THAT OVERSIGHT IN PASSING ASSESSMENT OR DER WILL GIVE ASSESSING OFFICER JURISDICTION TO ISSUE NOTICE, PLACED HEAVY RELIANCE UPON THE CASE KALYANJI MAVJI & CO. (SUPRA). HOWEVER, ON THE ABO VE ASPECT IT HAS BEEN HELD TO BE NO LONGER GOOD LAW BY THE SUBSEQUENT DECISION OF THE SUPREME COURT IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY V S. COMMISSIONER OF INCOME TAX, NEW DELHI, (119 ITR 996) WHEREIN THE S UPREME COURT HAS OBSERVED THUS:- NOW, IN THE CASE BEFORE US, THE ITO HAD, WHEN HE M ADE THE ORIGINAL ASSESSMENT, CONSIDERED THE PROVISIONS OF S.9 AND 10 . ANY DIFFERENT VIEW TAKEN BY HIM AFTERWARDS ON THE APPLICATION OF THOSE PROVISIONS WOULD AMOUNT TO A CHANGE OF OPINION ON MATERIAL ALREADY C ONSIDERED BY HIM. THE REVENUE CONTENDS THAT IT IS OPEN TO HIM TO DO S O, AND ON THAT BASIS TO REOPEN THE ASSESSMENT UNDER S.147(B). RELIANCE IS P LACED ON KALYANJI MAVJI & CO. V. CIT (1976) 102 ITR 287 (SC), WHERE A BENCH OF TWO LEARNED JUDGES OF THIS COURT OBSERVED THAT A CASE W HERE INCOME HAD ESCAPED ASSESSMENT DUE TO THE OVERSIGHT, INADVERTE NCE OR MISTAKE OF THE ITO MUST FALL WITHIN S.34(1)(B) OF THE INDIAN I .T.ACT,1922. IT APPEARS TO US, WITH RESPECT THAT THE PROPOSITION IS STATED TOO WIDELY AND TRAVELS FARTHER THAN THE STATUTE WARRANTS IN SO FAR AS IT C AN BE SAID TO LAY DOWN THAT IF, ON REAPPRAISING THE MATERIAL CONSIDERED BY HIM DURING THE ORIGINAL ASSESSMENT, THE ITO DISCOVERS THAT HE HAS COMMITTED AN ERROR IN CONSEQUENCE OF WHICH INCOME HAS ESCAPED ASSESSMENT, IT IS OPEN TO HIM TO REOPEN THE ASSESSMENT. IN OUR OPINION, AN ERROR DISCOVERED ON A RECONSIDERATION OF THE SAME MATERIAL (AND NO MORE) DOES NOT GIVE HIM THAT POWER. THAT WAS THE VIEW TAKEN BY THIS COURT I N MAHARAJ KUMAR KAMAL SINGH V. CIT (1959)35 ITR 1 (SC), CIT V. A.RA MAN AND CO. 18 ITA NOS.673 & 74/MUM/2017 (1968)67 ITR 11 (SC) AND BANKIPUR CLUB LTD. V. CIT (1971) 82 ITR 831 (SC) AND WE DO NOT BELIEVE THAT THE LAW HAS SIN CE TAKEN A DIFFERENT COURSE. ANY OBSERVATIONS IN KALYANJI MAVJI & CO. V. CIT (1976) 102 ITR 287(SC) SUGGESTING THE CONTRARY DO NOT, WE SAY WITH RESPECT, LAY DOWN THE CORRECT LAW. (EMPHASIS SUPPLIED) 12. THE AFORESAID VIEW ON THE ABOVE PROPORTION HAS BEEN REITERATED BY THE APEX COURT IN A.L.A.FIRM VS COMMISSIONER OF INCOME TAX 1 83 ITR 285 WHEREIN THE COURT HELD THAT CHANGE OF OPINION WHERE OPINION WAS FORMED EARLIER DOES NOT GIVE THE ASSESSING OFFICER JURISDICTION TO REOPEN A N ASSESSMENT. THE APEX COURT INTERALIA ON THE ABOVE ISSUE HELD AS UNDER: EVEN MAKING ALLOWANCES FOR THIS LIMITATION PLACED ON THE OBSERVATIONS IN KALYANJI MAVJI (1976) 102 ITR 287 (SC) THE POSIT ION AS SUMMARISED BY THE HIGH COURT IN THE FOLLOWING WORDS REPRESENTS , IN OUR VIEW THE CORRECT POSITION IN LAW (AT P.620 OF 102 ITR) : THE RESULT OF THESE DECISIONS IS THAT THE STATUTE DOES NOT REQUIRE THAT THE INFORMATION MUST BE EXTRANEOUS TO THE RECO RD. IT IS ENOUGH IF THE MATERIAL ON THE BASIS OF WHICH THE REASSESSM ENT PROCEEDINGS ARE SOUGHT TO BE INITIATED, CAME TO THE NOTICE OF T HE INCOME TAX OFFICER SUBSEQUENT TO THE ORIGINAL ASSESSMENT. IF T HE INCOME TAX OFFICER HAD CONSIDERED AND FORMED AN OPINION ON THE SAID MATERIAL IN THE ORIGINAL ASSESSMENT ITSELF THEN HE WOULD BE POWERLESS TO START THE PROCEEDINGS FOR REASSESSMENT . WHERE, HOWEVER THE INCOME TAX OFFICER HAD NOT CONSIDERED T HE MATERIAL AND SUBSEQUENTLY CAME BY THE MATERIAL FROM THE RECO RD ITSELF, THE SUCH A CASE WOULD FALL WITHIN THE SCOPE OF SECTION 147 (B) OF THE ACT (EMPHASIS SUPPLIED). 26. IN LIGHT OF OUR ABOVE DISCUSSION, THE REOPENING OF THE ASSESSMENT ON ABOVE REASONS IS BAD IN LAW AND VOID AB INITIO . 27. ON MERITS OF THE ISSUE RAISED IN ASSESSEES APP EAL, WE FIND THAT AS PER THE REFUND COMPUTATION FORM THE DATE OF GRANT OF REFUND WAS 12.03.2007 I.E. ASSESSMENT YEAR 2007-08. IT WAS ARGUED BY THE LEARN ED COUNSEL THAT THE INTEREST ON INCOME TAX REFUND IS TAXABLE IN THE YEAR OF GRANT O F REFUND, WHICH IN THE PRESENT CASE IS ASSESSMENT YEAR 2007-08. THE YEAR UNDER CON SIDERATION FOR WHICH REOPENING IS MADE IS ASSESSMENT YEAR 2008-09. THUS, EVEN IF THE INTEREST INCOME WOULD HAVE ESCAPED ASSESSMENT, IT WOULD BE FOR ASSE SSMENT YEAR 2007-08 AND NOT 19 ITA NOS.673 & 74/MUM/2017 ASSESSMENT YEAR 2008-09. IN THIS REGARD, THE LEARNE D COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF HINDUSTAN UNILEVER LTD V. ADDL. CIT (SUPRA) WHEREIN THE TRIBUNAL, AFTER RELYING ON THE ORDER OF THE SPECIAL BENCH OF TRIBUNAL IN CASE OF AVADA TRADING CO. (P) LTD V ACIT (SUPRA), HELD THAT INTEREST ON INCOME TAX REFUND IS TAXABLE IN THE YEAR IN WHICH IT IS GRANTED. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER: 66. BRIEFLY STATED, AO GRANTED INTEREST ON RS. 589,81,7 40 UNDER SECTION 244A ON PROCESSING OF RETURN FOR ASSESSMENT YEAR 2005-06 ON 31.3.2006. AS ASSESSEE RECEIVED THE AMOUNT IN APRIL 2006 THIS AMOUNT WAS T AKEN AS INCOME IN THAT YEAR. AO WAS OF THE OPINION THAT ASSESSEE SHOULD HA VE OFFERED THE AMOUNT FOR TAXATION IN ASSESSMENT YEAR 2006-07 AS HAVING BEEN GRANTED ON 31.03.06. ACCORDINGLY, HE BROUGHT TO TAX AN AMOUNT OF RS. 589 ,81,740 IN ADDITION TO THE INTEREST ON INCOME TAX REFUNDS ALREADY OFFERED BY A SSESSEE OF RS. 6.03 CRORES. SINCE THE SAME WAS CONFIRMED BY THE DRP, ASSESSEE I S AGGRIEVED. 67. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE OPINION THAT THIS ISSUE HAS CRYSTALLIZED BY THE SPECIAL BENCH OF THE ITAT IN THE CASE OF AVADA TRADING CO. (P) LTD VS. ACIT, 100 ITD 131 (MUM)SB, WHEREIN IN WAS HELD AS UNDER: ACCORDING TO THE CHARGING PROVISIONS OF SECTIONS 4 AND 5, THE INCOME IS CHARGEABLE IN THE YEAR IN WHICH IT EITHER ACCRUES O R IS RECEIVED AS THE CASE MAY BE. THE ISSUE REGARDING ACCRUAL OF INCOME IS CONCLUDED BY THE JUDGMENT OF THE SUPREME COURT RENDERED IN THE CASE OF E.D. SASSOON & CO. LTD. V. CIT [1954] 26 ITR 27, WHEREIN IT HAS BE EN HELD THAT INCOME ACCRUES WHEN RIGHT TO RECEIVE IS ACQUIRED AND SUCH RIGHT CAN BE SAID TO HAVE BEEN ACQUIRED WHEN AN ENFORCEABLE DEBT IS CREA TED IN FAVOUR OF THE ASSESSEE. A BARE LOOK AT THE PROVISIONS OF SUB-SECT ION (1) OF SECTION 244A REVEALS THAT AS SOON AS ANY REFUND BECOMES DUE UNDE R ANY PROVISIONS OF THE ACT, THE ASSESSEE BECOMES ENTITLED TO RECEIVE T HE INTEREST IN RESPECT OF SUCH REFUND CALCULATED IN THE MANNER PROVIDED IN CL AUSES (A) AND (B) OF SUCH PROVISIONS. THEREFORE, THE MOMENT THE REFUND I S GRANTED, AN ENFORCEABLE DEBT IS CREATED IN FAVOUR OF THE ASSESS EE IN RESPECT OF INTEREST DUE ON SUCH REFUND. CONSEQUENTLY, INCOME CAN BE SAI D TO ACCRUE ON THE DATE OF REFUND ITSELF. THEREFORE, WHEN SUCH INTERES T IS ACTUALLY GRANTED ALONG WITH THE REFUND, THEN THE REQUIREMENTS OF SEC TIONS 4 AND 5 ARE FULLY SATISFIED AND THE SAME CAN BE TAXED IN THE YEAR OF RECEIPT. THERE WAS NO 20 ITA NOS.673 & 74/MUM/2017 MERIT IN THE CONTENTION OF THE ASSESSEE THAT SUCH R IGHT WAS CONTINGENT AS THE INTEREST SO RECEIVED COULD BE VARIED OR WITHDRA WN AFTER THE ASSESSMENT UNDER SECTION 143(3). ACCORDING TO THE D ICTIONARY MEANING, A RIGHT OR AN OBLIGATION CAN BE SAID TO BE CONTINGENT WHEN SUCH RIGHT OR OBLIGATION IS DEPENDENT ON SOMETHING NOT YET CERTAI N. ACCORDING TO SECTION 244A, THE ONLY CONDITION FOR GRANT OF INTER EST IS THAT THERE MUST BE A REFUND DUE TO THE ASSESSE UNDER ANY PROVISION OF THE ACT. THERE IS NO OTHER CONDITION IN THE SAID PROVISION AFFECTING SUC H RIGHT. THEREFORE, THE MOMENT A REFUND BECOMES DUE TO THE ASSESSEE, AN ENF ORCEABLE DEBT IS CREATED IN FAVOUR OF THE ASSESSEE AND THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INTEREST. SUB-SECTION (3) OF SECTION 24 4A ONLY AFFECTS ITS QUANTIFICATION UNDER CERTAIN CIRCUMSTANCES AND NOT THE RIGHT OF INTEREST. THE SUPREME COURT IN THE CASE OF CIT V. SHRI GOVERD HAN LTD. [1968] 69 ITR 675 HAS OBSERVED THAT ONCE A DEBT IS CREATED, T HEN THE LIABILITY CANNOT BE SAID TO BE CONTINGENT MERELY BECAUSE IT IS TO BE QUANTIFIED AT LATER DATE. UNDER SECTION 244A, EVEN THE INTEREST IS QUAN TIFIED IMMEDIATELY WHENEVER A REFUND IS ISSUED. HENCE, THE RIGHT TO GR ANT INTEREST IS ABSOLUTE SINCE EXISTENCE OF SUCH RIGHT IS NOT DEPENDENT ON A NY EVENT. IT IS WELL SETTLED FROM THE JUDGMENT OF THE SUPREME COURT REND ERED IN THE CASE OF KEDARNATH JUTE MFG. LTD. V. CIT [1971] 82 ITR 363 T HAT IF AN ENFORCEABLE DEBT IS CREATED UNDER A STATUTE, THEN ANY SUBSEQUEN T EVENT WOULD NOT AFFECT THE EXISTENCE OF SUCH RIGHT/OBLIGATION DESPI TE THE FACT THAT SUCH DEBT IS SUBJECT-MATTER OF APPEAL. THE RIGHT TO INTEREST UNDER SECTION 244A IS NOT DEPENDENT UPON ANY ASSESSMENT INASMUCH AS THERE IS NO COMPULSION OR OBLIGATION UPON THE ASSESSING OFFICER TO MAKE AN ASSESSMENT UNDER SECTION 143(3). THE MOMENT THE RETURN IS PROCESSED UNDER SECTION 143(1)(A) AND REFUND IS ISSUED ON THE BASIS OF INTI MATION UNDER SECTION 143(1)(A), AN ENFORCEABLE LEGAL RIGHT IS CREATED IN FAVOUR OF THE ASSESSEE UNDER SECTION 244A AND SIMULTANEOUSLY THE ASSESSING OFFICER IS UNDER LEGAL OBLIGATION TO GRANT THE INTEREST. MERELY BECA USE QUANTUM OF SUCH INTEREST MAY VARY ON ASSESSMENT MADE UNDER SECTION 143(3), IT CANNOT BE SAID THAT LEGAL RIGHT WAS NOT ACQUIRED ON THE DATE OF REFUND. THE EFFECT OF ASSESSMENT UNDER SECTION 143(3) WOULD BE THAT INTER EST ON REFUND UNDER SECTION 244A WOULD GET SUBSTITUTED IN TERMS OF SUB- SECTION (3) OF SECTION 244A WITHOUT AFFECTING RIGHT ALREADY ACCRUED. FURTHER, THE JUDGMENT OF THE SUPREME COURT RENDERED IN THE CASE OF CIT V. CHUNILAL V. MEHTA & SONS (P.) LTD. [1971] 82 ITR 54 CLEARLY SHOWS THAT ONCE A RIGHT ACCRUES UNDER AN AGREEMENT, THEN SUCH ACCRUAL IS NOT AFFECTED BY DISPUTE BETWEEN THE PARTIES. FURTHER, I N CASE OF DISPUTE, THE 21 ITA NOS.673 & 74/MUM/2017 FINAL OUTCOME WOULD ULTIMATELY RELATE BACK TO THE Y EAR OF ACCRUAL. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT IT WOULD BE WIT HOUT REMEDY IF THE INTEREST WAS REDUCED BY VIRTUE OF ASSESSMENT UNDER SECTION 143(3). THAT APPREHENSION WAS UNFOUNDED. IF INTEREST IS REDUCED BY VIRTUE OF SUB- SECTION (3) OF SECTION 244A ON ACCOUNT OF ASSESSMEN T UNDER SECTION 143(3), THE INTEREST GRANTED IN EARLIER YEAR GETS S UBSTITUTED AND IT IS THE REDUCED AMOUNT OF INTEREST THAT WOULD FORM PART OF INCOME OF THAT YEAR. THUS, IT WOULD AMOUNT TO MISTAKE RECTIFIABLE UNDER SECTION 154. IF THE BASIS ON WHICH INCOME WAS ASSESSED IS VARIED OR CEA SES TO EXIST, THEN SUCH ASSESSMENT WOULD BECOME ERRONEOUS AND CAN BE R ECTIFIED. SIMILARLY, ANYINCOME ASSESSED MAY BECOME NON-TAXABLE BY VIRTUE OF RETROSPECTIVE AMENDMENT AND, CONSEQUENTLY, ERRONEOUS ASSESSMENT CAN BE RECTIFIED. THEREFORE, IF THE INTEREST GRANTED UNDER SECTION 24 4A(1) IS VARIED UNDER SUB-SECTION (3) OF SUCH SECTION, THEN THE INTEREST ORIGINALLY GRANTED WOULD BE SUBSTITUTED BY THE REDUCED/INCREASED AMOUNT, AS THE CASE MAY BE. THUS, INCOME ON ACCOUNT OF INTEREST IF ASSESSED CAN BE RECTIFIED UNDER SECTION 154. THEREFORE, INTEREST ON REFUND UNDER SE CTION 244A(1) GRANTED TO THE ASSESSEE IN THE PROCEEDINGS UNDER SECTION 14 3(1)(A) WOULD BE ASSESSABLE IN THE YEAR IN WHICH IT IS GRANTED AND N OT IN THE YEAR IN WHICH PROCEEDINGS UNDER SECTION 143(1)(A) ATTAIN FINALITY . 68. THEREFORE, WHILE UPHOLDING IN PRINCIPLE THAT THE AM OUNT IS TO BE TAXED IN THE YEAR OF GRANTING THE REFUND , AO IS FURTHER DIRECTED TO EXAMINE WHETHER ASSESSEE WAS ENTITLED FOR ANY INTEREST UNDER THE SA ME PROVISIONS AFTER AN ORDER UNDER SECTION 143(3) WAS PASSED AND IF SO MODIFY TH E ORDER TO THE EXTENT ASSESSEES QUANTUM OF INTEREST TO BE BROUGHT TO TAX . IN CASE THE ENTIRE INTEREST GRANTED WAS WITHDRAWN BY ANY ORDER SUBSEQUENTLY, TH E RELIEF TO THE EXTENT HAS TO BE PROVIDED TO ASSESSEE. WITH THESE DIRECTIONS, THE GROUND 32 IS PARTLY ALLOWED. (UNDERLINED FOR EMPHASIS BY US) 28. FROM ABOVE, IT IS EVIDENT THAT DATE OF GRANT OF INTEREST AND NON-RECEIPT OF INTEREST IS RELEVANT TO DETERMINE THE YEAR OF TAXAB ILITY OF THE SAME. UNDISPUTEDLY, THE INTEREST HAS BEEN GRANTED IN ASSESSMENT YEAR 20 07-08 AND, THEREFORE, THE INTEREST WAS NOT CHARGEABLE TO TAX IN THE CURRENT Y EAR, AND THUS, THE ASSESSING OFFICER CANNOT HAVE A REASON TO BELIEVE THAT IN THE CURRENT YEAR, ANY INCOME HAS ESCAPED ASSESSMENT. 22 ITA NOS.673 & 74/MUM/2017 29. ACCORDINGLY, ON MERITS ALSO, QUA THE ISSUE IN A SSESSEES APPEAL FOLLOWING THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THIS TRIBUN AL IN CASE OF AVADA TRADING CO. (P) LTD V ACIT (SUPRA) AND FOLLOWED IN THE CASE OF HINDUSTAN UNILEVER LTD . (SUPRA), WE FIND THAT INTEREST ON INCOME TAX CANNOT BE SAID TO BE CHARGEABLE TO TAX IN CURRENT YEAR AS THE SAME WAS GRANTED IN ASSESSME NT YEAR 2007-08 AND THUS, THE REOPENING INITIATED BY THE ASSESSING OFFICER WAS BA D IN LAW. 30. COMING TO THE NEXT REASON RECORDED BY THE ASSES SING OFFICER WHILE ISSUING SECOND NOTICE U/S 148 OF THE ACT DATED 25.03.2013, WHICH STATES THAT DEMERGER OF THE ASSESSEE COMPANYS INVESTMENT BUSINESS TO M/S. CHI INVESTMENTS LTD. DOES NOT FALL UNDER THE DEFINITION OF DEMERGER SPECIFIED IN SECTION 2(19AA) OF THE ACT AND, THEREFORE, THE SAID TRANSACTION WAS NOT ELIGIBLE TO BENEFIT U/S 47(VIB) R.W.S. 2(19AA) OF THE ACT. IN THIS REGARD, WE FIND THAT THE FACT T HAT DEMERGER TOOK PLACE IN THE CURRENT YEAR WAS MENTIONED IN THE FINANCIAL STATEME NTS OF THE ASSESSEE AS WELL AS IN THE DIRECTORS REPORT FOR THE YEAR ENDED 31.03.2008 WHICH WERE AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T PROCEEDINGS. IT WAS FURTHER POINTED OUT THAT THE ASSESSEE HAD CLAIMED DEMERGER EXPENDITURE U/S 35DD OF THE ACT AND THE SAID FACT WAS MENTIONED IN THE TAX AUDI T REPORT THAT WAS AVAILABLE WITH THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THA T DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DA TED 15.12.2010 FURNISHED DETAILS TO THE ASSESSING OFFICER REGARDING ALLOWABILITY OF CLAIM OF EXPENSES RELATING TO DEMERGER. HENCE, THE ASSESSING OFFICER WAS AWARE AB OUT THE FACT THAT DEMERGER HAD TAKEN PLACE DURING THE YEAR AT THE TIME OF ORIG INAL ASSESSMENT PROCEEDINGS. THE DECISION OF THE HON'BLE BOMBAY HIGH COURT APPROVING THE SCHEME OF DEMERGER OF INVESTMENT UNDERTAKING OF THE ASSESSEE WAS AVAILABL E WITH THE ASSESSING OFFICER. THUS, NO NEW MATERIAL CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUENT TO THE ORDER PASSED U/S 143(3) OF THE ACT DATED 28. 12.2010. IN THE ABSENCE OF ANY NEW TANGIBLE MATERIAL, REOPENING ON THE SAME SET OF FACTS IS NOT PERMISSIBLE. AS 23 ITA NOS.673 & 74/MUM/2017 DISCUSSED IN EARLIER PARA OF THIS ORDER, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASIAN PAINTS (SUPRA) AND JET SPEED AUDIO PVT. LTD. (SUPRA), WE HOLD THAT THE SECOND REOPENING NOT ICE ISSUED BY THE ASSESSING OFFICER IS INVALID AND BAD IN LAW. 31. IT WAS FURTHER POINTED OUT BY THE LEARNED COUNS EL THAT THE ASSESSING OFFICER CANNOT HAVE REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT, WHICH IN FACT IS AMOUNTING TO CHALLENGE THE FINDING OF THE HONBLE B OMBAY HIGH COURT. THE TRANSACTION OF DEMERGER CANNOT BE SAID TO BE FOR TH E PURPOSE OF EVASION OF TAX. THE OBJECTION, IF ANY, COULD HAVE BEEN RAISED BY THE AS SESSING OFFICER AT THE TIME WHEN THE SCHEME WAS PENDING WITH THE HONBLE BOMBAY HIGH COURT. NO SUCH OBJECTION WAS RAISED BY THE DEPARTMENT, AND NOR THE DECISION OF HONBLE BOMBAY HIGH COURT APPROVING THE SCHEME OF DEMERGER WAS CHALLENG ED BEFORE THE HONBLE SUPREME COURT. THE ASSESSING OFFICER CANNOT NOW FOR M AN OPINION TO THE CONTRARY AND OBJECT TO THE SCHEME OF DEMERGER. IN THIS REGAR D, RELIANCE WAS PLACED ON THE DECISION OF KOLKATA BENCH OF THE TRIBUNAL IN THE CA SE OF ELECTROCAST SALES INDIA LTD V. DY. CIT [170 ITD 507 (KOL)] . THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE REPRODUCED AS UNDER:- '4.7 IT WOULD BE RELEVANT TO NOTE THAT THE SCHEME O F AMALGAMATION WAS APPROVED ON 6.10.2010 AND INTIMATION TO THIS EFFECT WAS SENT BY THE ASSESSEE TO THE INCOME TAX DEPARTMENT IN JANUARY 2011 (COPIES O F LETTERS ENCLOSED IN PAGES 33 TO 37 OF PAPER BOOK). THE SAME WAS ACTED UPON BY THE ASSESSEE ASSUMING ACCEPTANCE FROM THE INCOME TAX DEPARTMENT SINCE NO APPEAL AGAINST THE SAID JUDGEMENT OF THE HON'BLE HIGH COURT WAS FILED BEFOR E THE HON'BLE SUPREME COURT THUS, AT THIS JUNCTURE IF THE REVENUE IS ALLO WED TO CHALLENGE THE SAME U/S 391(7) OF THE COMPANIES ACT 1956 THEN IT WOULD BE C LEARLY BARRED BY THE DOCTRINE OF ACQUIESCENCE AND ESTOPPEL. IN LAW, ACQU IESCENCE OCCURS WHEN A PERSON KNOWINGLY STANDS BY WITHOUT RAISING ANY OBJE CTION TO THE INFRINGEMENT OF HIS OR HER RIGHTS WHILE SOMEONE ELSE UNKNOWINGLY AND WITHOUT MALICE AFORETHOUGHT ACT IN A MANNER INCONSISTENT WITH THEI R RIGHTS. AS A RESULT OF ACQUIESCENCE, THE PERSON WHOSE RIGHTS ARE INFRINGED MAY LOSE THE ABILITY TO MAKE A LEGAL CLAIM AGAINST THE INFRINGER OR MAY BE UNABLE TO OBTAIN AN 24 ITA NOS.673 & 74/MUM/2017 INJUNCTION AGAINST CONTINUED INFRINGEMENT . THE DOCTRINE INFERS A FORM OF PERMISSION' THAT RESULTS FROM SILENCE OR PASSIVENES S OVER AN EXTENDED PERIOD OF TIME . APPLYING THIS PRINCIPLE TO THE INSTANT CASE BEFORE US, THE ASSESSEE PROBABLY PAID A CONSIDERATION FOR THE SET OFF OF AC CUMULATED LOSSES TAKEN OVER FROM THE AMALGAMATING COMPANIES AND ACCORDINGLY THE SHARE EXCHANGE RATIO (AS APPROVED UNDER THE SCHEME) WAS ACTED UPON ASSUM ING ACCEPTANCE FROM THE INCOME TAX DEPARTMENT. THUS BY APPLYING THE DOCTRIN E OF ACQUIESCENCE, THE DEPARTMENT WOULD BE NOW BARRED FROM RAISING AN OBJE CTION TO THE SCHEME. FURTHER A CLAIM OF ESTOPPEL ARISES WHEN ONE PARTY G IVES LEGAL NOTICE TO A SECOND PARTY OF A FACT OR CLAIM, AND THE SECOND PAR TY FAILS TO CHALLENGE OR REFUTE THAT CLAIM WITHIN A REASONABLE TIME . 32. IN VIEW OF THE ABOVE, WE FIND THAT THE ASSESSIN G OFFICER CANNOT HAVE A REASON TO BELIEVE THAT THE INVESTMENT UNDERTAKING W AS NOT A SEPARATE UNDERTAKING OF ASSESSEE, ESPECIALLY WHEN NO OBJECTION HAS BEEN TAK EN BY THE ASSESSING OFFICER BEFORE THE HON'BLE HIGH COURT. HENCE, REOPENING IS INVALID ON THIS ACCOUNT ALSO. 33. IT ALSO PERTINENT TO NOTE HERE THE OBSERVATION MADE BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CASBY CFS(P) LTD. IN RE [2015] 231 TAXMAN 89 (BOMBAY) . THE RELEVANT PORTION OF THE CATCH NOTE IS REPRODUCED AS UNDER:- SECTION 143, READ WITH SECTION 139(5), OF THE INCO ME-TAX ACT, 1961 AND SECTION 232 OF THE COMPANIES ACT 2013/SECTION 394 O F THE COMPANIES ACT, 1956- ASSESSMENT GENERAL (PROTECTIVE ASSESSMENT) - WHETHER IF REGIONAL DIRECTOR NURTURES ANY DOUBT QUA ANY OF CLAUSES IN A SCHEME OF AMALGAMATION, INCLUDING DATE CHOSEN AS APPOINTED DATE, AND FINDS THAT SAME IS CONTRARY TO LAW OR APPREHENDS THAT ON STRENGTH OF SUCH A CLAUSE CON TAINED IN SCHEME, COMPANY, AFTER OBTAINING SANCTION FROM COURT, MAY U SE OR MISUSE SAME FOR CONTRAVENTION OF ANY LAW INCLUDING PROVISIONS OF IN COME-TAX, HE IS ENTITLED TO VOICE HIS DOUBT/APPREHENSION BEFORE COURT, AT TIME COURT CONSIDERS GRANT OF SANCTION TO SCHEME AND IT IS ALWAYS OPEN TO COURT T O CONSIDER DOUBT/APPREHENSION EXPRESSED BY REGIONAL DIRECTOR A ND PASS NECESSARY ORDERS EITHER REJECTING SCHEME OR SANCTIONING SAME WITH/OR WITHOUT NECESSARY CLARIFICATIONS - HELD, YES WHETHER SINCE COURT IS R EQUIRED TO ENSURE THAT A SCHEME OF AMALGAMATION DOES NOT CONTRAVENE ANY PROV ISION OF LAW, REGIONAL DIRECTOR IS NOT ONLY ENTITLED TO BUT IS DUTY BOUND TO BRING TO ATTENTION OF COURT ANY PROVISION IN SCHEME WHICH MAY CONTRAVENE/CIRCUM VENT PROVISIONS OF ANY 25 ITA NOS.673 & 74/MUM/2017 LAW INCLUDING LAW PERTAINING TO INCOME-TAX LEGISLAT URE INTENDED THAT REGIONAL DIRECTOR WILL EXAMINE A SCHEME FROM ALL ASPECTS AND PLACE HIS OBSERVATIONS AND VIEWS BEFORE COURT AND COURT WILL CONSIDER SAME BEFORE SANCTIONING SCHEME-HELD, YES WHETHER MERELY BECAUSE A PROTECTIV E ASSESSMENT IS MADE, IT DOES NOT MEAN THAT INCOME-TAX DEPARTMENT HAS ACCEPT ED A SCHEME OF AMALGAMATION - HELD, YES. 34. IT IS EVIDENT FROM THE ABOVE DECISIONS THAT INC OME-TAX DEPARTMENT HAS A CHANCE TO OBJECT TO THE SCHEME PRIOR TO SANCTION OF SCHEME BY COURT WHEN NOTICE IS SENT TO CENTRAL GOVERNMENT IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 394A OF THE COMPANIES ACT, 1956. THE REGIONAL DIRECTOR IS E MPOWERED AND DUTY BOUND TO BRING TO THE ATTENTION OF THE COURT IF HE FEELS THA T THE SCHEME, AFTER OBTAINING SANCTION FROM THE COURT, WOULD BE MISUSED FOR CONTR AVENTION OF ANY LAW INCLUDING PROVISIONS OF INCOME TAX ACT. IN THE PRESENT CASE, NO OBJECTION WAS TAKEN BY THE REGIONAL DIRECTOR OR THE CENTRAL GOVERNMENT BEFORE THE SANCTION OF THE SCHEME. HENCE, TO REITERATE THE FACT THAT THE INVESTMENT UN IT WAS A SEPARATE 'UNDERTAKING' OF THE ASSESSEE CANNOT BE DISPUTED BY WAY OF REOPENING OF ASSESSMENT AS IN SUCH CASE THE ASSESSING OFFICER CANNOT BE SAID TO HAVE A VALI D BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. 35. IT WAS FURTHER ARGUED THAT THE SECOND REOPENING NOTICE U/S 148 OF THE ACT DATED 25.03.2013 WAS ISSUED EVEN WHEN THE PROCEEDIN GS UNDER THE FIRST REOPENING NOTICE U/S 148 OF THE ACT DATED 08.03.2013 WERE PEN DING AND, THEREFORE, THE SAME IS INVALID. IT WAS POINTED OUT THAT WHILE ISSUING S ECOND REOPENING NOTICE, THE ASSESSING OFFICER RELIED ON EXPLANATION 3 TO SECTIO N 147 OF THE ACT. IT WAS FURTHER ARGUED THAT IF THE REOPENING PURSUANT TO THE FIRST REOPENING NOTICE DATED 08.03.2013 IS HELD TO BE INVALID, IT WILL AUTOMATICALLY RENDER THE ENTIRE REOPENING PROCEEDINGS AS VOID AS THE ASSESSMENT ORDER HAS BEEN PASSED PUR SUANT TO THE FIRST NOTICE U/S 148 OF THE ACT. 26 ITA NOS.673 & 74/MUM/2017 36. WE FIND SUBSTANCE IN THE ARGUMENT OF THE LEARNE D COUNSEL OF THE ASSESSEE. AT THE OUTSET, WE FIND THAT WHEN THE REASSESSMENT PROC EEDING WERE ALREADY ONGOING, THERE WAS NO NEED TO ISSUE FRESH NOTICE U/S 148 OF THE ACT AS THE ASSESSING OFFICER HAD SUFFICIENT POWER UNDER EXPLANATION 3 TO SECTION 147 OF THE ACT TO MAKE ADDITION ON OTHER GROUND IF THE ADDITION ON THE GRO UND STATED IN THE REASON FOR REOPENING IS MADE. FURTHER, MERE ISSUANCE OF NOTICE U/S 148 OF THE ACT IS NOT SUFFICIENT. THERE SHOULD BE AN ASSESSMENT ORDER PUR SUANT TO THE NOTICE ISSUED U/S 148 OF THE ACT. SECTION 153 OF THE ACT PROVIDES FOR TIME PERIOD OF NINE MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE NOT ICE U/S 148 OF THE ACT IS ISSUED FOR PASSING THE ORDER U/S 147 OF THE ACT. ADMITTEDL Y, NO SEPARATE ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER PURSUANT T O THE SECOND REOPENING NOTICE AS REQUIRED U/S 153 OF THE ACT. AS SUCH, THE SECOND RE OPENING NOTICE, EVEN IF TREATED AS VALID, LOSES ITS IMPORTANCE AS NO SEPARATE ASSES SMENT ORDER HAS BEEN PASSED PURSUANT TO THE SAID NOTICE. 37. SINCE WE HAVE ALREADY HELD THAT THE REOPENING P URSUANT TO THE FIRST REOPENING NOTICE IS INVALID, THE ENTIRE REASSESSMENT PROCEEDI NGS WILL BE TREATED AS INVALID. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 0236 HAS HELD THAT IF NO ADDITION IS MADE ON THE REASON S RECORDED FOR REOPENING, THE ASSESSING OFFICER IS NOT FREE TO MAK E ADDITION ON THE OTHER GROUNDS. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT ALSO, WE HOLD THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON THE OTHER GROUND OF DENIAL OF BENEFIT OF DEMERGER, WHICH WAS NOT FORMING PART OF THE ORIGINAL REASONS FOR REOPENING OF ASSESSMENT, IS INVALID AND BAD IN LAW. ON THIS GROUND ALONE, WE HOLD THAT THE ADDITION MADE ON SECOND GROUND SHALL NOT S URVIVE. WE MAKE IT CLEAR THAT THE ADDITION PURSUANT TO THE SECOND REOPENING NOTIC E IS BAD IN LAW IN VIEW OF THE FACT THAT NO SEPARATE ASSESSMENT ORDER HAS BEEN PAS SED BY THE ASSESSING OFFICER 27 ITA NOS.673 & 74/MUM/2017 EVEN AFTER RECORDING THE SEPARATE REASONS FOR REOPE NING AND ISSUING SEPARATE NOTICE U/S 148 OF THE ACT. 38. AS REGARDS THE ADDITIONAL GROUND WE NOTE THAT I T IS THE PLEA THAT THE EDUCATION CESS AND HIGHER AND SECONDARY EDUCATION CESS PAID B Y THE APPELLANT IS DEDUCTIBLE WHILE COMPUTING INCOME UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION ('PGBP') OF THE ASSESSEE WHICH WAS INADV ERTENTLY OMITTED TO BE RAISED. THAT THE CIT(A) HAS PASSED THE ORDER ON 1.11.2016 A GAINST WHICH THE APPELLANT HAS FIELD THE PRESENT APPEAL BEFORE THE TRIBUNAL. THAT FURTHER, IN THE GROUNDS OF APPEAL FILED BEFORE THE ITAT, A GROUND STATING THAT THE ED UCATION CESS AND HIGHER AND SECONDARY EDUCATION CESS PAID BY THE-APPELLANT IS D EDUCTIBLE WHILE COMPUTING INCOME UNDER THE HEAD PG8P WAS INADVERTENTLY OMITTE D TO BE RAIDED. THAT IT SHALL BE NOTED THAT THE APPELLANT HAS RECENTLY COME ACROS S THE ORDER OF THE HON'BLE BOMBAV HIGH COURT IN THE C ASE OF SESA GOA LTD VS. CIT (117 TAXMANN.COM 96 DATED 28.2.2020) WHEREIN A SIMILAR CONTENTION WAS RAISED BY THE ASSESSEE AND THE HON'BLE BOMBAY HIGH COURT ADJUDICATED THE MATTER IN FAVOUR OF THE ASSESSEE. THAT GIVEN THE FACTUAL MATRIX IN THE INSTANT CASE PENDIN G BEFORE YOUR HONORAND THE FAVORABLE DECISION OF THE HON'BLE BOMBAY HIGH COURTSUPRA CLARIFYING THE INTENT OF THE LEGISLATURE, THE APPELLANT IS NOW FILING AN ADDITIONAL GROUND OF APPEAL WHEREIN THE APPELLANT PLEADS THAT THE EDUCATION CESS AND HI GHER AND SECONDARY EDUCATION CESS PAID BY THE APPELLANT IS DEDUCTIBLE WHILE COMP UTING INCOME UNDER THE HEAD PGBP. THAT IT IS STATED THAT THE ADDITIONAL GROUND OF APPEAL RAISES PURELY QUESTION OF LAW AND NO NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. IT IS THEREFORE HUMBLY PRAYED THAT THE ADDITIONAL GROUND OF APPEAL MAY KIN DLY BE ADMITTED AND ADJUDICATED BY YOUR HONOR. THAT IN THIS REGARD, REL IANCE IS PLACED ON THE FOLLOWING DECISIONS: A. NATIONAL THERMAL POZVER CORPORATION V, CIT (22 9 ITR 383)(SC) B. JUTE CORPORATION OF INDIA LTD V. CJT[187 ITR 6 88 (SUPREME COURT) L . AHEMDABAD ELECT RID I Y CO. LTD V. CIT [199 ITR 351 (BOM) (FB). 28 ITA NOS.673 & 74/MUM/2017 D. MARUTI SUZUKI INDIA LTD VS. DY. CIT 16(1), NEW D ELHI [ITA NO: 961/DEL/20151 IN INTERIM ORDER DATED 31.10.2019 F. GRASIM INDUSTRIES LTD (SUCCESSOR TO THE ADITYA BIRLA NUVO LTD) V. ADDL. CIT (LTU/I.T.A 2525/MUM/2014 DATED 20.12 2019. WE FIND THAT THIS ISSUE IS DULY COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SESA GOA L TD. (SUPRA). ACCORDINGLY,THIS GROUND STANDS ALLOWED. 39. NOW COMING ON THE MERITS OF THE CASE FOR WHICH DEPARTMENT HAS CHALLENGED THE ACTION OF THE CIT(A) IN ALLOWING THE APPEAL OF THE ASSESSEE, WE FIND THAT THE CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE, AND AGGRIEVED BY THE SAME, DEPARTMENT HAS FILED THE APPEAL BEFORE US. IN THIS REGARD, WE MAY REFER TO THE RELEVANT OBSERVATION OF THE CIT(A) WHILE ALLOWING T HE APPEAL OF THE ASSESSEE. THE RELEVANT PARA OF THE CIT(A) ORDER ARE REPRODUCED HE REUNDER:- 12.16 I HAVE CONSIDERED THE SUBMISSIONS OF THE APP ELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD, INCLUDING COPIES OF JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT AS WELL AS THE ORDER OF HON'B LE MUMBAI HIGH COURT DATED 23.11.2007 , APPROVING THE SCHEME OF ARRANGEMENT OF DEMERGER. THE ISSUE FOR DETERMINATION BEFORE ME IS, WHETHER CAPIT AL GAIN HAS ACCRUED / ARISEN IN THE HANDS OF THE APPELLANT DUE TO OF THE APPELLA NT'S BUSINESS BY VIRTUE OF MUMBAI HIGH COURT DECISION DATED 23.11.2007 , APPROVING THE DEMERGER OF THE APPELLANT'S BUSINESS. 12.17 IT IS SEEN THAT THE AO'S CONTENTION REGARDING THE LONG TERM CAPITAL GAIN WAS ON ACCOUNT OF TRANSFER OF SHARES BY THE APPELLA NT TO THE DEMERGED COMPANY. THE APPELLANT COMPANY HAD DEMERGED ITS INV ESTMENTS ACTIVITY TO M/S.CHI INVESTMENTS LTD. THROUGH A SCHEME OF ARRANG EMENT APPROVED BY THE HON'BLE MUMBAI HIGH COURT W.E.F. 01.07.2007 . IT WAS SEEN BY THE AO THAT INVESTMENT IN SHARES BY THE APPELLANT IS A NON-TYRE BUSINESS OF THE APPELLANT HAVING BOOK VALUE OF RS.126.20 CRORES WHICH HAD BEE N HIVED OFF FROM APPELLANT COMPANY TO CHI INVESTMENT LTD, BUT SUCH D EMERGER DOES FALL WITHIN THE PURVIEW OF SECTION 2(19AA) OF ACT. ACCORDINGLY, THE INVESTMENT IN SHARES IS IN THE NATURE OF CAPITAL ASSETS AND THE TRANSFER OF THE SAID INVESTMENTS BY THE APPELLANT TO CHI INVESTMENT LTD. ATTRACTS PROVISION S OF CAPITAL GAINS. 29 ITA NOS.673 & 74/MUM/2017 12.18 IT IS SEEN THAT THE DEMERGER OF THE APPELLANT 'S BUSINESS WAS W.E.F. 01.07.2007 . THE ARS OF THE APPELLANT HAVE DRAWN ATTENTION TO THE PROVISIONS OF SECTION 2(19AA) OF THE ACT WHICH ARE RELEVANT IN TH E MATTER. AS PER THESE PROVISIONS WHEN A DEMERGER TAKES PLACE IN RELATION TO THE COMPANY CERTAIN CONDITIONS ARE TO BE FULFILLED. THE ARS THEREFORE W HILE DRAWING ATTENTION THROUGH THE PROVISIONS OF SECTION 2(19AA) HAVE CONT ENDED THAT THE APPELLANT HAVE FULFILLED ALL THE REQUIREMENTS AS PER THE PROV ISIONS OF SECTION 2(19AA) OF THE ACT, NAMELY, ALL THE PROPERTIES PERTAINING TO I NVESTMENT UNDERTAKING ARE TRANSFERRED TO THE RESULTING COMPANY AT THEIR BOOK VALUE. ALL THE LIABILITIES RELATING TO THE INVESTMENT UNDERTAKING ARE TRANSFER RED TO THE RESULTING COMPANY AT THEIR BOOK VALUES. SHARES OF THE RESULTING COMPA NY ARE ISSUED TO THE SHAREHOLDERS OF THE DEMERGED COMPANY ON PROPORTIONA TE BASIS. SHAREHOLDERS HOLDING NOT LESS THAN 75% IN VALUE OF SHARES OF THE DEMERGED COMPANY BECOME SHAREHOLDER OF THE RESULTING COMPANY. THE DEMERGED COMPANY HAS TRANSFERRED THE UNIT, DIVISION OR BUSINESS ACTIVITY ON A GOING CONCERN BASIS AS IS EVIDENT FROM THE FINANCIALS OF CHI INVESTMENTS LTD. POST DE MERGER. 12.19 IT IS THEREFORE SEEN THAT THE APPELLANT HAS F ULFILLED ALL THE CONDITIONS STIPULATED U/S 2(19AA) OF THE ACT INASMUCH AS THAT AS PER THE SCHEME OF DEMERGER OF THE INVESTMENT UNDERTAKING/ BUSINESS AC TIVITY AS APPROVED BY THE HON'BLE MUMBAI HIGH COURT THAT THE APPELLANT COMPAN Y HAS TRANSFERRED ALL THE ASSETS AS WELL AS LIABILITY PERTAINING RELATABL E TO THE INVESTMENT ACTIVITY TO CHI INVESTMENT LTD. ASSETS AND LIABILITIES PERTAINI NG/RELATABLE TO THE INVESTMENT UNDERTAKINGS HAVE BEEN TRANSFERRED TO CH I INVESTMENT LTD. AT BOOK VALUE. ON ACCOUNT OF DEMERGER OF INVESTMENT ACTIVIT Y/UNDERTAKING, THE SHAREHOLDERS OF THE APPELLANT HAVE BEEN ISSUED SHAR ES IN CHI ON A PROPORTIONATE BASIS. AS A RESULT SHAREHOLDERS HAVIN G NOT LESS THAN 75% IN VALUE OF SHARES OF APPELLANT BECOMES SHAREHOLDER OF CHI. THE INVESTMENT ACTIVITY/ UNDERTAKING HAS BEEN TRANSFERRED ON A GOI NG CONCERN BASIS. IT IS ALSO SEEN THAT THE DEMERGED INVESTMENT ACTIVITY/ UNDERTA KING WAS AN INDEPENDENT REVENUE GENERATING ACTIVITY. 12.20 IT IS SEEN THAT THE AO WAS OF THE VIEW THAT T HE PHRASE 'UNDERTAKING REFERRED IN THE ORDER OF THE HON'BLE MUMBAI HIGH CO URT I.E. 23.11.2007 , APPROVING THE SCHEME OF DEMERGER IS UNDER THE PROVI SIONS OF COMPANIES ACT, 1956 ONLY AND NOT AS PER THE INCOME TAX ACT 1961, I FIND THAT THIS VIEW OF THE A.O. IS NOT TENABLE. IT IS SEEN THAT THE TERM UNDER TAKING HAS NOT BEEN DEFINED EITHER UNDER COMPANIES ACT OR UNDER TAX ACT. HOWEVE R, THE COURTS HAVE INTERPRETED THE PHRASE UNDER BOTH THESE LAWS TO MEA N PHYSICALLY SEPARATE 30 ITA NOS.673 & 74/MUM/2017 VIABLE INDEPENDENT UNIT WHICH CAN BE EXISTENT ON IT S OWN AS VIABLE UNIT. INVESTMENT UNDERTAKING OF THE APPELLANT COMPANY, WH ICH GOT DEMERGED INTO CHI INVESTMENT LTD, IN MY VIEW, IS AN INDEPENDENT U NIT, VIABLE PROFIT MAKING UNIT. 12.21 IT IS FURTHER SEEN THAT AS PER THE SCHEME OF DEMERGER, THE INVESTMENTS ACTIVITY/UNDERTAKING CONSISTED OF ALL SPECIFIED INV ESTMENTS IN QUOTED AND UNQUOTED SHARES, SECURITIES, DEBENTURES, LOANS AND ADVANCES AND RECEIVABLE AS SHOWN IN THE BOOKS OF ACCOUNT OF THE APPELLANT IMME DIATELY BEFORE THE APPOINTED DATE ALONG WITH ALL DEBT LIABILITIES, DUT IES AND OBLIGATIONS OF THE APPELLANT, IF ANY, PERTAINING TO ANY OR ARISING OUT OF INVESTMENT ACTIVITIES STANDS TRANSFERRED. IN A COMPOSITE BUSINESS, ALL BU SINESS ACTIVITIES ARE EQUAL AND DESERVE THE SIMILAR ATTENTION AND FOCUS SO THAT WHOLE BUSINESS IS FLOURISHED. IN THIS REGARD, THE PROVISIONS OF SECTI ON 2(19AA) OF THE ACT DEFINES THE TERM' DEMERGER TO MEAN ANY TRANSFER OF A UNIT, DIVISION OR BUSINESS ACTIVITY OF A COMPANY TO ANOTHER COMPANY PURSUANT TO THE SCH EME OF ARRANGEMENT U/S.391 TO 394 OF THE COMPANIES ACT. THUS, IN MY VI EW, AS PER THE PROVISIONS OF SECTION 2(19AA) WHAT HAS BEEN DEMERGED FROM THE APP ELLANT COMPANY TO THE RESULTING COMPANY WAS A UNIT DIVISION OR A BUSINESS ACTIVITY AS PER THE PROVISIONS OF SECTION 2(19AA) OF THE ACT. THE APPELLANT HAS THUS MET ALL THE CONDITIONS LAID DOWN IN SECTION 2(19AA) OF THE I.T ACT, 1961. 12.22 IT IS SEEN THAT THE AO HAS CONTENDED IN THE A SSESSMENT ORDER THAT BEFORE DEMERGER NO SEPARATE STAFF WAS ALLOCATED FOR INVEST MENTS ACTIVITY AND NO SEPARATE OFFICE ,AREA OR FLOOR WAS DEMARCATED FOR T HIS ACTIVITY. IT IS SEEN THAT IT IS NOT ESSENTIAL TO EARMARK SEPARATE STAFF OR SEPAR ATE AREA FOR INVESTMENT ACTIVITY. THE APPELLANTS BUSINESS I.E. TYRE BUSINES S AND INVESTMENT ACTIVITIES HAD COMMON ASSET AND COMMON STAFF WORKING FOR BOTH THE BUSINESS. WHAT IS ESSENTIAL UNDER DEMERGER IS THE TRANSFER OF ASSETS AND LIABILITIES WHICH CONSTITUTE A RUNNING BUSINESS AND THE BUSINESS CAN BE CARRIED ON UNINTERRUPTEDLY WITH SUCH ASSETS AND LIABILITIES AL ONE. THIS HAS BEEN DONE IN THE APPELLANT'S CASE. HON'BLE DELHI HIGH COURT JUDG MENT IN THE CASE OF INDO RAMA TEXTILE LTD., NEW DELHI, VS. ITO RELIED UPON B Y THE APPELLANT HAS ALSO HELD THE SAME VIEW AND THE RATIO OF THE JUDGMENT OF THIS CASE IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE HER E. 12.23 IT IS FURTHER SEEN THAT THE CHI INVESTMENTS P VT. LTD. HAD EARNED PROFITS IN THE FIRST YEAR OF ITS OPERATION ITSELF. IT IS THERE FORE QUITE CLEAR THAT WHAT HAS 31 ITA NOS.673 & 74/MUM/2017 BEEN TRANSFERRED BY THE APPELLANT TO CHI UNDER THE SCHEME OF DEMERGER IS AN INDEPENDENT REVENUE GENERATING ACTIVITY OR UNDERTAK ING AND HENCE, THE CONDITIONS STIPULATED U/S.2(19AA) OF THE ACT HAVE D ULY BEEN FULFILLED. SECTION 47(VIB) OF THE ACT PROVIDES THAT ANY TRANSFER OF CA PITAL ASSET BY THE DEMERGED COMPANY TO THE RESULTING COMPANY BY VIRTUE OF DEMER GER IS EXEMPT FROM CAPITAL GAIN TAX. THE ASSETS/LIABILITIES ARE TRANSF ERRED UNDER A SCHEME OF DEMERGER AS DEFINED IN SECTION 2(19AA) OF THE ACT I .E. IF THE SCHEME SATISFIES ALL THE CONDITIONS MENTIONED IN SECTION 2(19AA) OF THE ACT THEN THE TRANSFER OF THE CAPITAL ASSETS WOULD NOT ATTRACT LIABILITY TO CAPIT AL GAIN TAX. IT IS SEEN THAT THE APPELLANT HAS FULFILLED ALL THE CONDITIONS LAID DOW N U/S.2(19AA) OF THE ACT AND THEREFORE, IN MY VIEW, THE TRANSFER OF ASSETS BY TH E APPELLANT TO RESULTING COMPANY UNDER THE SCHEME OF DEMERGER IS EXEMPT U/S. 47(VIB) OF THE I.T. ACT, 1961. 12.24 LOOKING AT THE FACTS AND LEGAL POSITION OF TH E MATTER, IT IS SEEN THAT THE APPELLANT HAS FULFILLED THE CONDITIONS LAID DOWN U/ S. 2(19AA) OF THE ACT AT THE TIME OF DEMERGER OF ITS INVESTMENT UNDERTAKING. THE APPELLANT'S CASE IS DULY COVERED UNDER THE PROVISIONS OF SECTION 47(VIB) OF THE ACT AND THEREFORE, THERE IS NO QUESTION OF COMPUTING ANY CAPITAL GAINS IN TH E MATTER. ACCORDINGLY, THE CAPITAL GAINS COMPUTED BY THE AO ATRS.3,32,65,62,29 3/- IS DELETED. 12.25THE APPELLANT HAS RAISED ANOTHER ISSUE WITHOUT PREJUDICE THAT IN CASE DEMERGER IS NOT CONSIDERED AS VALID AND PURSUANT TO PROVISIONS OF SECTION 2(19AA) OF THE ACT, IT HAD INCURRED CAPITAL LOSS OF RS.1,82,55,27,144/- ON THIS ACCOUNT AND NOT EARNED ANY CAPITAL GAIN. THIS ISSUE RAISED WITHOUT PREJUDICE TO THE ABOVE ISSUE BECOMES IRRELEVANT AS THE ADDITION OF CAPITAL GAIN HAS BEEN DELETED. THE ISSUE IS THEREFORE NOT ADJUDICATED AND IS THEREFORE DISMISSED. 40. AS IS EVIDENT FROM THE ABOVE, THE CIT(A) HAS MA DE DETAILED OBSERVATIONS ON VARIOUS OBJECTIONS RAISED BY THE ASSESSING OFFICER WHILE ALLOWING ASSESSEES CLAIM OF DEMERGER AND HAS ALSO CONSIDERED THE FULFILLMENT OF REQUIREMENT OF SECTION 2(19AA) OF THE ACT. HERE WE NOTE THAT ASSESSEE HAS CLEARLY RAISED THE OBJECTION WITHOUT PREJUDICE THAT EVEN IF IT IS HELD THAT THE DEMERGER IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(19AA) THE CAPITAL GAIN TAX WOULD NOT ARISE IN THE HANDS OF THE ASSESSEE. DETAILED SUBMISSIONS WERE MADE IN THIS REGARD BEFORE THE ASSESSING OFFICER, WHICH HAVE BEEN NOTED BY THE ASS ESSING OFFICER IN HIS ORDER 32 ITA NOS.673 & 74/MUM/2017 HOWEVER, HE HAS NOT DEALT WITH THIS ISSUE IN HIS OR DER. FURTHER, SUBMISSIONS IN THIS REGARD WERE ALSO MADE BEFORE THE CIT(A). LEARNED CO UNSEL OF THE ASSESSEE SUBMITTED THAT IN FACT ASSESSEE HAS SUFFERED A LOSS , IN THIS REGARD IN PLACE IS CAPITAL GAIN WHICH HAS BEEN ASSESSED BY THE ASSESSING OFFIC ER. 41. UPON CAREFUL CONSIDERATION WE ARE OF THE OPINIO N THAT WE HAVE ALREADY HELD THAT REOPENING IN THIS CASE IS NOT JUSTIFIED ON SEV ERAL COUNTS. HENCE, THIS ASPECT OF DEPARTMENTAL CLAIM OF CAPITAL GAIN AND THE COUNTER CLAIM MADE BY ASSESSEE THAT IN FACT ASSESSEE HAS SUFFERED A LOSS ARE ONLY OF ACADE MIC INTEREST. MOREOVER, THE CLAIM OF THE ASSESSEE REGARDING LOSS WOULD ALSO NEED REFE RENCE TO VARIOUS FACTUAL DETAILS WHICH ARE NOT AVAILABLE ON RECORD. ADJUDICATION OF THIS ASPECT WOULD CALL FOR A REMAND ALSO FROM THE ASSESSING OFFICER. WHEN WE HAV E ALREADY HELD THAT REOPENING IS INVALID FOR A PLETHORA OF REASONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO INITIATE MULTIPLICITY OF PROCEEDINGS. HENCE , WE ARE NOT ENGAGING INTO ADJUDICATION OF THESE ASPECTS AND TREAT THEM AS INF RUCTUOUS. 42. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D, AND DEPARTMENTAL APPEAL IS TREATED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 22.9.202 1 SD/- SD /- (PAVAN KUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 22.09.2021 THIRUMALESH, SR. PS/PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 33 ITA NOS.673 & 74/MUM/2017 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI