TaxTMI 
TaxTMI 
2008 (2) TMI 146
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....any named Tata Cellular Limited had amalgamated into the petitioner w.e.f.1^st January 2001. More details of the amalgamation were given in the directors' report annexed to the audited accounts. In the balance-sheet and in Schedule 2 thereof, the petitioner had disclosed that a sum of Rs.9984.15 lakhs was credited to the "Amalgamation Reserve" account under the head "Reserves & Surplus". In note 4(a) of Schedule 19 to the audited accounts, the petitioner had given full details as to how the said sum of Rs.9984.15 lakhs was arrived at. It explained that the assets and liabilities of Tata Cellular Limited had been accounted for in the accounts as per the "Pooling of Interest method" prescribed in the Accounting Standard on Accounting for Amalgamations (AS-14) as issued by the institute of Chartered Accountants of India. It was explained that the said sum of Rs.9984.15 lakhs was the difference between the net book value of the assets and liabilities so acquired and the share capital to be issued there-against. (b) On the filing of the return, on 30.1.2004 respondent no.1 issued notices under Sections 142(1) and 143(2) together with a letter of the same date in which he raised a num....
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....cost of assets. None the less, this discount is income in the hands of the Company and same should be brought to tax. Since it is evident that this discount is earned in the course of acquisition of a business asset, hence the same should be treated as business income. Petitioner was called upon to make his submissions on these issues, along with detailed working as to how this amount has been worked out." (e) In reply to the show cause notice the petitioner addressed a letter dated 5.3.2004 in which he dealt with the contentions raised by respondent no.1. In paragraph-4 of the said letter, the petitioner termed the contention of respondent no.1 of treating the reserve arising on amalgamation as business income as "erroneous and absurd" and went on to explain in detail the process by which shares are allotted in an amalgamation. It was explained that in an amalgamation the intrinsic value of the shares was first determined and based on this intrinsic value, the ratio of exchange was determined by the valuer. It was emphasized that the intrinsic value of the shares was equal to the value of the business taken over. The value of the shares over and above the face value was nothing....
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....ner and it was only after considering the facts and the details that the assessment order under section 143(3) of the Act was passed ; (3) It was emphasized that the present proceedings were based on a mere change of opinion ; (4)\That the petitioner relied on a number of judicial precedents including that of the Hon'ble Supreme Court in CIT vs. Formaer France [2003] 264 ITR 566 and that of this Hon'ble Court in IPCA Laboratories vs. DCIT (No.2) [2001] 251 ITR 416 to emphasise that the assessment could not be reopened where there was no failure to make a full and true disclosure of the material facts and on the basis of a mere change of opinion. (5) Without prejudice, the petitioner also dealt with the merits of the matter in detail to explain that an amalgamation reserve could never have the character of "income". The petitioner explained in detail the nature and circumstances in which an amalgamation reserve is created and why it could never be treated as "Income from other sources". (j) In reply to the aforesaid letter of the petitioner, respondent no.1 passed a further impugned order dated 31.12.2007 in which he made the following points :- (1) That in view of Ex....
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....008 came to be filed. As regards the aforesaid point raised, it was contended that though the assessee was confronted on this issue, no official opinion has been formed in the assessment order by the Assessing Officer and therefore, it was contended that this was not a case of change of opinion. It was contended that since the assessee had failed to disclose the income accruing on amalgamation, provisions of section 147 were applicable. 5. In the affidavit-in-rejoinder dated 7.2.2008 it was contended on behalf of the petitioners that the stand taken by the respondents was casual and was taken without appreciating the statutory precondition for validly assuming jurisdiction under section 147, which was that there must be a "failure to make a full and true disclosure of the material facts". 6. In the circumstances of the present case, we find that this is not a case where it can be said that there was failure on the part of the petitioners to disclose fully and truly all material facts necessary for assessment in the relevant assessment year. The accounting entry for the amount of Rs.9984.15 lakhs was mentioned in the returns for the relevant years. In reply to the requis....