2025 (2) TMI 646 - AT - Income Tax

AO cannot reopen assessment under Section 147 without fresh material after concluding issues were not applicable

ITAT Delhi dismissed Revenue's appeal regarding reopening of assessment under Section 147. The AO had originally examined share premium issues under ... Reopening of assessment u/s 147 - Reason to believe - issue of share premium - applicability of provision of Section 56(2)(viib) - HELD THAT:- In the case on hand, the issue of share premium has been duly examined by the AO in the original scrutiny assessment proceedings u/s 143(3) of the Act and formed his opinion about non-applicability of the provision of section 56(2)(viib). Further, the reason to believe recorded by the AO for initiating re-assessment proceedings on the identical issue does not show any fresh tangible material available with the AO after the original assessment order to change his opinion. AO didn't even consider the material facts available on record in the form of Note to account, queries and written reply filed during assessment proceedings and scrutiny assessment order including office note, etc. AO failed to establish that the Assessee did not disclosed all material facts during the original assessment order. Without considering the Note-12 of the audited financial statement, questionnaire issued by AO and the submission made and the order of the Hon'ble High Court approving the Scheme of Amalgamation the impugned assessment has been framed. The facts recorded in the reason to believe is not correct, as the Assessee did not issue any shares to M/s Allure Imports Pvt. Ltd. in pursuance of the approved Scheme of amalgamation by the Hon'ble High Court, but it was issued to the shareholders of the Amalgamating Company i.e. M/s Allure Imports Pvt. Ltd. CIT(A) rightly held that the AO has not done the reopening of assessment u/s 147 of the Act in accordance to the provisions of the Act. Since the re-assessment proceedings in the present case have been initiated due to change of opinion without having any fresh information/materials in hands of the AO., we find no error or infirmity in the order of the Ld. CIT(A) and find no merit in the grounds of Appeal of the Revenue. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are: Whether the reopening of the assessment under Section 147 of the Income Tax Act was valid, given the circumstances of the case. Whether the reassessment proceedings were initiated based on a change of opinion without any fresh tangible material. Whether the share premium received by the assessee was correctly assessed under Section 56(2)(viib) of the Income Tax Act.ISSUE-WISE DETAILED ANALYSISReopening of Assessment under Section 147 Relevant Legal Framework and Precedents: Section 147 of the Income Tax Act allows for reassessment if the Assessing Officer (AO) has reason to believe that income has escaped assessment. The precedents cited include decisions from the Supreme Court and High Courts emphasizing that reopening on mere change of opinion is not permissible. Court's Interpretation and Reasoning: The Tribunal found that the AO did not have any fresh tangible material to justify reopening the assessment. The AO's reasons were based on the same information available during the original assessment. Key Evidence and Findings: The Tribunal noted that the original assessment was completed after examining the share premium issue, and the AO accepted the returned loss without making any additions related to the share premium. Application of Law to Facts: The Tribunal applied the principle that reopening based on a change of opinion is not permissible, especially when the original assessment considered the same facts. Treatment of Competing Arguments: The Department argued that the AO had reason to believe that income had escaped assessment. However, the Tribunal found that this belief was not based on new information. Conclusions: The Tribunal concluded that the reopening was not justified as it was based on a change of opinion without new material.Assessment of Share Premium under Section 56(2)(viib) Relevant Legal Framework and Precedents: Section 56(2)(viib) deals with the taxation of share premiums exceeding the fair market value. The Tribunal referenced the approved scheme of amalgamation and the financial statements. Court's Interpretation and Reasoning: The Tribunal noted that the share premium was issued as part of an approved amalgamation scheme, which was disclosed in the financial statements and considered in the original assessment. Key Evidence and Findings: The Tribunal found that the shares were issued to the shareholders of the amalgamating company, not the company itself, as part of a court-approved scheme. Application of Law to Facts: The Tribunal applied the legal principle that the issuance of shares under a court-approved scheme does not attract Section 56(2)(viib) when already scrutinized in the original assessment. Treatment of Competing Arguments: The Department contended that the share premium should be taxed under Section 56(2)(viib), but the Tribunal found no basis for this after the original assessment. Conclusions: The Tribunal upheld the CIT(A)'s decision that the share premium was not taxable under Section 56(2)(viib) due to prior examination and lack of new material.SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: 'The re-assessment proceedings in the present case have been initiated due to change of opinion without having any fresh information/materials in hands of the AO.' Core Principles Established: Reopening of assessment cannot be justified on a mere change of opinion without new material. The issuance of shares under a court-approved amalgamation scheme does not automatically attract Section 56(2)(viib) if previously scrutinized. Final Determinations on Each Issue: The Tribunal dismissed the Department's appeal, affirming the CIT(A)'s decision that the reassessment was invalid due to lack of new material and improper application of Section 56(2)(viib).