2023 (12) TMI 500 - AT - Income Tax

AO cannot reopen assessment under section 147 based on change of opinion without new tangible material

The ITAT Mumbai held that the AO's reopening of assessment under section 147 for addition under section 68 regarding share capital/premium was invalid. ... Reopening of assessment - Addition u/s 68 - introduction of the assessee’s unaccounted funds in the guise of share capital/premium and such a transaction was to launder its own unaccounted fund - HELD THAT:- As in Aroni Commercials Ltd. [2014 (2) TMI 659 - BOMBAY HIGH COURT] as observed that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the assessing officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. And further their Lordship observed that if an assessing officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceedings even where he is satisfied, it would be impossible for the assessing officer to complete all the assessments which are required to be scrutinized u/s 143(3) of the Act. In the light of the inquiry made by AO regarding the share capital/premium allotted/received by assessee during the original/abated/scrutiny assessment, the impugned action of AO again to examine the same alleging escapement of income tantamount to review of his own action which is not permissible; and therefore, the action of the AO to reopen the assessment by issuance of notice u/s 148 merely on the basis of “change of opinion”, cannot satisfy requirement of law u/s 147 of the Act to validily reopen the assessment. We find that AO in the reasons recorded had no tangible material in his possession to reopen the assessment, and he has resorted to reopening only after perusal of balance-sheet of the assessee regarding shares allotted on premium, which action itself vitiates the impugned reopening of assessment. Thus we find that the issue regarding share capital/premium allotted to M/s. Balaji Universal Tradelink Pvt. Ltd from whom assessee collected in the year under consideration was subjected to inquiry by AO during the original assessment and thereafter, he framed the assessment order on 30.12.2011 after consideration assessee’s reply and the AO’s action of not making any adverse finding on this issue, implies that AO has accepted the explanation of assessee on this issue. Right or Wrong the action of AO could not have been reviewed by AO himself after reopening the assessment u/s 147 of the Act. May be the Ld. PCIT could have initiated revisional proceeding u/s 263 of the Act. And moreover, we note that year under consideration is AY 2009-10 and share /premium could not have been brought to tax because share premium was brought to tax only w.e.f. 01.04.2013 as held in the case of Gagandeep Infrastructure Pvt. Ltd [2017 (3) TMI 1263 - BOMBAY HIGH COURT] wherein held that share premium can be brought to tax only w.e.f. 1st April, 2013. Therefore, the action of AO to reopen the assessment of assessee cannot be sustained. Decided in favour of assessee. Issues Involved:1. Reopening of the original assessment under Section 147/148 of the Income Tax Act.2. Addition of Rs. 2,85,50,000/- under Section 68 of the Income Tax Act.Summary:Issue 1: Reopening of the Original Assessment:The assessee challenged the reopening of the original assessment framed under Section 153A read with Section 143(3) of the Income Tax Act by issuing a notice under Section 148. The AO reopened the assessment on the grounds that the assessee issued shares at a premium unreasonably higher than their intrinsic value, leading to the belief that the share premium was not genuine and represented unaccounted income. The AO recorded reasons for reopening, stating that the share premium of Rs. 490 per share was not justified given the company's Earnings Per Share (EPS) of Rs. 1.56 and minimal reserves and surplus.The Tribunal noted that the AO had already inquired about the share premium during the original assessment proceedings, and the assessee had provided detailed responses. The AO's reopening was based on the same facts and did not involve any new tangible material. The Tribunal held that the reopening was merely a 'change of opinion,' which is not permissible under the law. The reopening of the assessment without any new tangible material was deemed invalid.Issue 2: Addition of Rs. 2,85,50,000/- under Section 68:The AO made an addition of Rs. 2,85,50,000/- in the reassessment order, alleging that the share premium received by the assessee was unaccounted income introduced in the guise of share capital/premium. The AO cited various judicial precedents to support the addition under Section 68 of the Act.The Tribunal observed that the AO had already scrutinized the share premium during the original assessment proceedings and had not made any adverse findings. The Tribunal emphasized that the AO cannot review his own order by reopening the assessment on the same issue. Additionally, the Tribunal noted that the share premium could not be taxed for the assessment year 2009-10, as the relevant provisions for taxing share premium were applicable only from 01.04.2013, as held by the Hon'ble Bombay High Court in CIT Vs. Gagandeep Infrastructure Pvt. Ltd.Conclusion:The Tribunal concluded that the reopening of the assessment was invalid and the addition of Rs. 2,85,50,000/- under Section 68 could not be sustained. The appeal of the assessee was allowed, and other grounds were not adjudicated as they were deemed academic.Order Pronounced:The order was pronounced in the open court on 29/11/2023.