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TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 1079
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....er and further relief deemed just and proper be granted in the interest of justice;" 2. It appears from the materials on record that the writapplicant seeks to challenge the legality and validity of the notice issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short, 'the Act, 1961') dated 30th March 2018. 3. The writ-applicant is engaged in the business of manufacturing industrial automation solutions, rotating machine controls, power controllers, uninterrupted power supply and power conditioning products. The writ-applicant filed its return of income for the Assessment Year 2011-12 on 30th September 2011 declaring the total loss of Rs. 6,50,56,810/- under the normal provisions and claimed refund of Rs. 64,59,979/-. The case was selected for scrutiny and notice under Section 143(2) of the Act, 1961, was issued to the writ- applicant. The Assessing Officer, ultimately, passed an order under Section 143(3) of the Act, 1961, dated 31st October 2013 at Rs. 6,58,26,003/-. The impugned notice issued by the respondent under Section 148 of the Act, 1961, reads thus : "1. The assessee had filed its return of income for A.Y. 2011-12 declaring total in....
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....o disclose truly and fully all the material facts. He submitted that merely having a reason to believe that the income had escaped assessment is not sufficient to reopen the assessment beyond the period of four years. The escapement of income must also be occasioned by a failure on the part of the writ-applicant to disclose truly and fully all the material facts. Mr.Soparkar would submit that in the case on hand, there is no failure on the part of the writ-applicant to disclose truly and fully any material facts. Mr.Soparkar submits that the grounds for reopening the assessment are absolutely misconceived and baseless. He submits that all the details relating to the share premium were duly furnished to the Assessing Officer, and after due scrutiny of all such details by the respondent at the time of the original assessment, the order was passed. Having scrutinized the details, it is not permissible for the respondent now to reopen the assessment merely for the purpose of recomputation taking a different view on the same materials available with him. 8. Mr.Soparkar also submitted that there is no tangible material on record, or to put it in other words, there is no live link with ....
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.... premium, had declared his own income just with a view to evade tax. It is submitted that the income to the tune of Rs. 10.11 crore escaped assessment, and for that, notice under Section 148 of the Act, 1961, came to be issued. 13. According to Mr.Bhatt, the crucial link between the information made available to the Assessing Officer and the formation of the belief, is present. The reasons are self-evident and they speak for themselves. 14. In the last, Mr.Bhatt submitted that merely because certain material, which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax had escaped assessment, formed part of the original assessment record per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression 'tangible material' does not mean the material alien to the original record. 15. He submitted that the decision to reopen the assessment on the basis of the report of the investigation wing cannot always be condemned or dubbed as a fishing or roving inquiry. 16. In such circumstances referred to above, Mr.Bhatt prays that there being no merit in the present writ-....
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....cer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied - a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the....
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....material" does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the "reasons to believe". (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression "reason to believe" appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer ente....
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....rmation as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the Assessing Officer regarding the escapement of the income but then, while recording the reasons for the belief formed, the Assessing Officer is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the Assessing Officer had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 20. In the reply to the impugned notice issued by the respondent under Section 148 of the Act, 1961, the following was brought to the notice of the respondent as regards the share premium of Rs. 10,01,38,886=00. "2.1.2. Therefore, upon perusal of the table above, your goodself would observe that such shares have been issued at a premium to a third party, non-resident Mauritius based comp....
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.... account transaction not separately brought within the definition of income. In view of the same, the relevant portion of the press note is reproduced below. "c) The tax can be charged only on income and in the absence of any income arising, the issue of applying the measure of Arm's Length Pricing to transactional value/consideration itself does not arise. d) If its income which is chargeable to tax, under the normal provisions of the Act, then alone Chapter X of the Act could be invoked. Sections 4 and 5 of the Act brings/charges to tax total income of the previous year. This would take us to the meaning of the word income under the Act as defined in Section 2 (24) of the Act. The amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2)(viib) of the Act. Thus such capital account cannot be brought to tax as already discussed herein above while considering the challenge to the grounds as mentioned in impugned order. e) The issue of shares at a premium is on Capital account and gives rise to no income. The submission on behalf of the revenue that the s....
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....f assessment proceedings. A copy of the said submission is attached as Annexure 9. Also, the said information relating to list of shareholders holding more than 10 percent shares is also included in ITR 6 submitted by HHPE. In view of the same, the contention of your goodself that share premium received could not be examined during the course of assessment proceedings as the information was received later is factually incorrect." 21. This Court, in Kothi Steel Ltd. v. Assistant Commissioner of Income-tax, reported in (2016)72 taxmann.com 252 (Gujarat), observed as under : "12. Before adverting to the merits of the case, it would be necessary to examine as to whether on the reasons recorded, the Assessing Officer could have formed the belief that income chargeable to tax has escaped assessment. As noticed hereinabove, all that is stated in the reasons recorded is that the Assessing Officer has received information from the I & CI that certain corporate entities have issued shares at a premium. It appears that the petitioners name was also included in such list. However, it cannot be gainsaid that per se an information that the petitioner has issued shares at a premium would by ....
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..... It is also stated in the affidavit-in-reply that during the course of assessment proceedings for assessment year 2009-10, the petitioner could not place on record any documentary evidence either with respect to future profitability of the unit or that the value of assets belonging to the company had appreciated substantially so as to justify collection of such a high premium and that the onus under section 68 of the Act squarely lies on the assessee. In the opinion of this court, insofar as the onus under section 68 of the Act is concerned, it is for the assessee to prove the identity, genuineness, creditworthiness of the parties and not to show its profitability or value of assets etc., as is sought to be contended in the affidavit-in-reply. Besides, all that is stated in the reasons recorded is that the assessee is not doing financially well, without stating any facts as regards the financial status of the assessee. 13. The learned counsel for the respondent has placed strong reliance upon the decision of this court in the case of Olwin Tiles (India) (P) Ltd. v. Deputy Commissioner of Income Tax (supra) wherein, the court had dismissed the petition challenging the reopening ....
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....ccepted the stand of the assessee. Any re-visit of such an issue without there being additional or undisclosed information would be merely in the nature of change of opinion. We are conscious that the Courts have made distinction between the concept of change of opinion and mere change of opinion and in that context if there is any material which was originally not on record, which the Assessing Officer has later on at his disposal, in a given situation, it may be open for him to contend that reopening of the assessment would not be based on a mere change of opinion. However, in the present case, we do not find any such material pointed out to us. 10. In this context as also in the context of the basis for the Assessing Officer to form a belief that income chargeable to tax has escaped assessment, we may refer to reasons recorded by him. In such reasons, he referred to some information received from CCIT, Mumbai as per which the assessee company had allotted shares at a high premium. Barring this statement, we notice no further reference to this information in the reasons recorded. The contents of such information thus are completely unknown. Further the Assessing Officer then g....
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....uch link being the material at the command of the Assessing Officer to form such a belief." 23. A Division Bench of the Bombay High Court, in the case of NuPower Renewables Pvt. Ltd. v. Asst. Commissioner of Income Tax 1-(2)(2) and others (Writ Petition No.3618 of 2018, decided on 7th March 2019), observed as under : "14. However, whether the Assessing Officer had any such information at his command and the manner in which, the Assessing Officer processed such additional information(s) to form a belief that, income chargeable to tax has escaped assessment, shall have to be gathered from reasons recorded by him for issuing the notice. In this context, we may peruse the reasons more minutely and analyze the contents thereof. The core of the reasons recorded by the Assessing Officer is found in paragraph 2 thereof. In paragraph 2, the Assessing Officer has recorded that, he has received information from the Investigation Wing under a letter dated 15th March, 2018, stating that, the assessee had received an amount of Rs. 49.90 Crores from Firstland a Mauritius based company toward subscription for 4,99,048 compulsorily convertible cumulative preference shares. The Assessing Offic....
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....re not genuine. The investigation into the source of genuineness and creditworthiness of the investor company would fall within the realm of fishing enquiries, which is wholly impermissible in law in the context of the re-opening of the assessment. For such reasons, impugned notice is set aside. " 24. The ambit and scope of powers to be exercised under Section 147 of the Act, 1961, by the Assessing Officer, while reopening the assessment beyond the period of 4 years is discussed by this Court in the case of Gujarat Lease Financing Ltd. v. Dy. CIT [2013] 36 taxmann.com 359/219 Taxmann 70/360 ITR 496 (Guj.) wherein, it has been observed and held in para 16, 17 and 27 as under : "16. The Assessing Officer is authorized to make reassessment in the even of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per the first proviso to Section 147 of the Act, assessment can be reopened under Section 147 of the Act after expiry of 4 years only if [i] the assessee failed to make a return under Section 139 of the Act or in response to notice issued under section 142 [1], or under Section 148 of the Act, he failed to disclose tr....
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....cord that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error either on the part of the Assessing Officer himself or because he choose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him." 25. Indisputably, the impugned notice issued by the Assessing Officer itself is beyond the period of four years from the end of the relevant assessment year and did not comply with the requirements of the proviso to Section 147 of the Act, 1961. The Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of the assessment under Section 143(3) of the Act, 1961, and therefore, on this short count alone, the impugned notice is liable to be quashed and set-aside. 26. In the overall view of the matter, we have reached to the conclusion that there is no basis to proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was received in the nature of share premiu....