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Supreme Court bars I-T deptartment from reassessing NuPower accounts

The income tax department sought to reopen the accounts of NuPower last year to examine the genuineness of investments of about Rs 50 crore by Firstland Holdings in 2011.

Oct 11, 2019, 08.43 AM IST
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Subsequently, the department challenged the ruling in the Supreme Court, where a division bench of Justice Rohinton Fali Nariman and Justice Surya Kant dismissed its petition.
Mumbai | New Delhi: The Supreme Court has disallowed the income tax department’s bid to reassess the accounts of Deepak Kochhar-owned NuPower Renewables to investigate an investment made in the company eight years ago, agreeing with a high court ruling that the matter was time-barred and would fall in the realm of “fishing enquiries.”

The income tax department sought to reopen the accounts of NuPower last year to examine the genuineness of investments of about Rs 50 crore by Firstland Holdings in 2011.

Kochhar is the husband of Chanda Kochhar, former MD of ICICI Bank, who was charged with alleged criminal conspiracy, cheating and abuse of official position for dishonestly sanctioning loans to the Videocon Group.

NuPower is being investigated for receiving quid pro quo investments for loans sanctioned to various industrial houses by ICICI when she was at the helm of affairs.

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Deepak Kochhar had business dealings with Videocon Group.

Firstland Holdings is owned by promoter Nishant Kanodia, the son-in-law of Essar Group chairman Ravi Ruia. Several transactions between Firstland and NuPower from 2010-12 are under probe over alleged quid pro quo deals.

The tax department wanted to investigate the investment of Rs 49.9 crore by Mauritius-based Firstland Holdings in NuPower through the purchase of convertible preference shares in 2010-11. In mid-2018, the department claimed the source, genuineness and creditworthiness of Firstland Holdings remain unexplained and needed further investigation.

The revenue department also claimed NuPower had not fully and truly disclosed all material facts necessary for assessment.

NuPower challenged the department’s move in Bombay High Court on December 12, 2018.

It argued that the reopening notice was time-barred since it was issued beyond the permissible period of four years.

NuPower said there was no failure on its part to fully and truly disclose all material facts.

“The ground on which the assessing officer wishes to rely upon was examined by the assessing officer during scrutiny assessment,” NuPower’s lawyers argued. “Without there being any new or additional material, reopening assessment on the basis of the said ground is not permissible.”

The company argued that the information was not new for the assessing officer.

“Through a series of correspondence between the assessee and assessing officer, this information was highlighted time and again,” the company said in its response.

“The channel of movement of the fund, the source of the fund, purpose of investment and ultimate destination of the fund, were all part of the record during the assessment proceedings. There is nothing in the reason recorded by the assessing officer to suggest that such investment is bogus.”

A division bench of the Bombay High Court comprising Justice Akil Kureshi and Justice MS Sanklecha set aside the department’s reopening notice on March 7 and observed that the income tax officer had all the material information in hand when the assessment was framed.

The high court had said there was nothing with the assessing officer to prima facie show that the investments were “not genuine.” The high court rejected the department’s claim that it could reopen assessments even though it may not have additional grounds for doing so.

“The investigation into the source of genuineness and creditworthiness of the investor company would fall within the realm of fishing enquiries, which is wholly impermissible in law in the context of the reopening of the assessment,” the court said.

Subsequently, the department challenged the ruling in the Supreme Court, where a division bench of Justice Rohinton Fali Nariman and Justice Surya Kant dismissed its petition.

“This petition was called on for hearing today,” the two-judge bench said in its order dated August 26. “The special leave petition is dismissed.”

“The Supreme Court has rightly dismissed the petition of the income tax department as this is a settled position that any assessment can be looked through again only if there is fresh material/evidence on record,” said Amit Maheshwari, a partner at Ashok Maheshwary & Associates LLP. “Since the information from the investigation wing in this case didn’t provide any new insight, the reopening of the assessment was devoid of merit.”
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