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. The tribunal found that the AO had already inquired about the share capital/premium transactions during the original assessment proceedings and completed the assessment without adverse findings, indicating acceptance of the assessee's explanation. The reopening based merely on change of opinion without tangible material constituted an impermissible review of the AO's own decision. Additionally, for AY 2009-10, share premium could not be taxed as it became taxable only from April 1, 2013. The appeal was decided in favor of the assessee.

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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.

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