Assessing Officer must have 'reason to believe' for income escape assessment. Share premium above intrinsic value not taxable.

The High Court held that the Assessing Officer must have a "reason to believe" that income has escaped assessment, even if the original assessment was completed under Section 143(1) of the Income Tax Act. The court emphasized the importance of this condition for issuing reopening notices. Additionally, the court found that charging share premium above intrinsic value cannot be taxed as income, based on previous decisions. The court emphasized that each case must be evaluated independently, and decisions regarding share premium in one case should apply to the present case. Interim relief was granted, and the petition was scheduled for final hearing.

---

---

Issues:
1. Challenge to reopening Notice under Section 148 of the Income Tax Act, 1961.
2. Requirement of "reason to believe" for issuing reopening notices.
3. Justification for charging share premium above intrinsic value.
4. Applicability of previous court decisions on the case.

Analysis:
1. The preliminary issue raised by the respondent's counsel was regarding the challenge to the reopening Notice dated 20th March, 2015, under Section 148 of the Income Tax Act for Assessment Year 2010-11. The Supreme Court's decision in a related case emphasized that if the original return was accepted under Section 143(1) of the Act, there should be no change of opinion for issuing a reopening notice. However, the High Court referred to another Supreme Court decision that required the Assessing Officer to have a "reason to believe" that income has escaped assessment, even if the assessment was completed by Intimation under Section 143(1) of the Act.

2. The court analyzed the requirement of "reason to believe" for issuing reopening notices. It noted that the Supreme Court had not specifically addressed whether the Assessing Officer must have a reason to believe that income has escaped assessment when the original assessment was completed by Intimation under Section 143(1) of the Act. The court emphasized that the "reason to believe" condition is essential even if the assessment was completed by Intimation under Section 143(1) of the Act, based on the precedent set by the Supreme Court in a previous case.

3. The court examined the justification for charging share premium above intrinsic value. The Assessing Officer sought to reopen the assessment based on the belief that charging share premium above intrinsic value constituted income that had escaped assessment. However, the court found that the Notice did not provide sufficient reasoning or quantify the alleged income that had escaped assessment. The court also referred to a previous decision that held share premium on capital amount cannot be taxed as income.

4. The court discussed the applicability of previous court decisions on the case. The respondent's counsel tried to distinguish earlier decisions, but the court found that those decisions did not further the Revenue's case. The court observed that each case must be evaluated on its own merits, and the decision in a specific case regarding share premium should apply to the present case. The court granted interim relief based on these observations and scheduled the petition for final hearing.

---