TaxTMI 
TaxTMI 
2019 (10) TMI 1079
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....proceedings for assessment for A.Y. 2011-12; (c) any other 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 as....
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....mpugned notice is not tenable in law as there was no failure at the end of the writ-applicant to 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 t....
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....tified. He further pointed out that the Assessing Officer has reason to believe that the assessee, in the garb of high share 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....
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.... Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer 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 eviden....
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....he income chargeable to tax has 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. (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....
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....very of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information 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 w....
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.... attention towards Press Note dated 28 January 2015 issued by the Press Information Bureau released by the Government of India which accepted the order of the High Court of Bombay in the case of Vodafone India Services Private Limited wherein it was held that amount received on issue of shares is a capital 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)(vii....
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....g securities premium. 2.1.8. Further, during the course of assessment proceedings, vide submission dated 19 August 2013, HHPE had submitted details of shareholders holding more than 10 percent shares as Point no.3 of the said submission. Therefore, the information of such non-resident shareholder was available on records before the Learned AO during the course of 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....
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....nsactions would be rarely available. The case of the respondent in the affidavit-in-reply is that issuing shares at 900% premium of loss making unlisted company is undisputedly unusual and lacks commercial substance. It is further the case of the Assessing Officer that the assessee being a loss making unit, is habitual in infusing money by way of share capital at higher premium. 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 a....
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....(2016)71 taxmann.com 326 (Gujarat), this Court observed as under : "9. It can thus be seen that question of issuance of share at premium, to whom such shares were allotted and the premium received, the resultant increase in the share premium were all placed before Assessing Officer for his verification of original assessment proceedings. He however, raised no further question and accepted 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 a....
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....ment was completed, if the Assessing Officer had tangible material to form a belief that the allocation of shares at a premium was a mere device to route some unaccounted money of the company or that the genuineness and creditworthiness of the investors was doubtful, the re-opening could not have been resorted to. However, in the present case, we find the vital link missing from the reasons recorded, such 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 Asse....
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.... to the Assessing Officer by the Investigation Wing, suggested that such investment was non-genuine. In this context, Assessing Officer refers to the requirement of verifying the genuineness of investor and requirement of further investigation. These observations in para 3 of the reasons, would not further the case of the Revenue, these being no information with the Assessing Officer, prima facie, indicating that the investments were 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....
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....action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of such assessment. The onus is on the assessee to reveal the primary facts and to draw the inferential facts would be responsibility of the Assessing Officer. Once having revealed from the record 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 procee....