TaxTMI 
TaxTMI 
2019 (1) TMI 1840
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.... Ld. CIT(A) erred in confirming the action of the Ld. Assessing Officer (hereinafter referred to as Ld AO) of re-opening the assessment." 3. Briefly stated facts are that the assessee filed its return of income for the relevant AY 2009-10 on 31.08.2009. The assessee is engaged in the business of manufacturing and trading of M S Structures Rounds and Bars and End Cuts. The return was processed under section 143(1) of the Act. Subsequently, the AO issued noticed under section 148 of the Act dated 20.03.2014 and reopened the assessment under section 147 of the act after recording the reasons. The assessee in response to notice under section 148 of the Act filed letter dated 22.03.2014, stating that original return of income filed on 31.08.2009 be treated as return filed in response to notice under section 148 of the Act. The AO subsequently, issued notice under section 142(1) of the Act dated 23.07.2014 and also supplied reasons recorded for reopening of assessment and the relevant reasons reads as under: - Reasons of reopening The assessee, M/s Balbir Ispat Pvt. Ltd, PAN AADCB2038F is an assessee of this circle. The assessee for the AY 2009-10 has filed its return of i....
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.... the law. If as a consequence of this there is escapement of income, the jurisdictional requirement of section 147 is fulfilled on the confirmation of a reason to believe that income has escapement assessment. A reason to believe is what is relevant and not an established fact of escapement of income. Reliance is placed on judgement in the case of M/s Usha International, 348 ITR 485 (Delhi High court). In view of the above facts and the judicial decisions, I have reason to believe that income, in the grab of excess share application money received has escaped assessment in terms of provisions of Section 47 of the IT Act. 4. The assessee raised objection against reopening of the assessment, which was rejected by the AO vide letter dated 21.01.2015. The assessee raised the objection that there is no income which has escaped assessment and as a matter of fact that no scrutiny assessment was done and that the share premium received by the assessee was not examined would not automatically lead to the fact that the income has escaped assessment. The assessee objected that the AO has not brought on record any tangible/ intangible or old / new material which concludes tha....
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....b) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the fact value of such share, the aggregate consideration received for such shares as exceeds the fair market value of the shares. Though this insertion of section is retrospective or not is other issue but the intend of the introduction of this provision is much more important. This provision through applicable from 1.4.2013 gives clear thought that the amount shares issued at excess over fair market value is taxable in the hands of the assessee as income from other sources. ........................................... 3.3 Insertion of Section 56(2)(viib) w.e.f 01.04.2013 does not imply that addition on account of excessive share premium under section 68 cannot be made from years prior to the amendment. The Bombay High Court in the case of Major metals Ltd. vs. Union of India 207 Taxman 185 (Bom) has upheld the stand of the department. 3.4 It may also be noted that mere re-opening of the assessment by A.O. in accordance with the provisions of ....
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....ssessment proceedings, the appellant has failed to establish the genuineness of the share application/ share premium money. The AO noted in the assessment order that the investor from whom share application/ share premium money was received are run by Mukesh Chokshi & other person, Shri Jayesh Krishnaraj Sampat. The AO noted this on the basis of information provided by DDIT, Unit 1(4). Even during the appellant proceedings, it is seen that the appellant has not explained as to how the company had fetched such a huge share premium. The appellant's main argument that it was capital receipt is not acceptable. It is seen from various judicial rulings that the addition was confirmed on account share application share premium money bought in by the assessee in the garb of share capital. Hence, there is no merit in the submission of the appellant that whatever is shown in the books is correct and no reassessment proceedings were initiated. Further, the tangible material is not something which must receive from the outside of records. Even the tangible material is something which is within the records on which no opinion is formed by the Assessing Officer. In the case here, ....
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....ai-400 055 AADCA9890L 80,000 40,00,000 8. Buniyad Chemicals Ltd. Block H, Shri Sadashiv CHS, 6th Road, Santacruz (E), Mumbai-400 055 AABCB6954G 60,000 30,00,000 9. Mihir Agencies Pvt. Ltd. Block H, Shri Sadashiv CHS, 6th Road, Santacruz (E), Mumbai-400 055 AABCH7898H 60,000 30,00,000 10. Talent Infoway Ltd. Block H, Shri Sadashiv CHS, 6th Road, Santacruz (E), Mumbai-400 055 AACCT944L 80,000 40,00,000 Addition made in assessment Total 8,90,000 4,45,00,000 6. The learned Counsel for the assessee first of all drew our attention to the reasons recorded and stated that the AO admitted in the reasons recorded that the information is obtained from the records that the assessee has received share premium amounting to Rs. 4,56,00,000/-. According to AO as there was no scrutiny assessment done in this year, the so called share premium have been received by the assessee was not examined and accordingly, the AO formed opinion or reason to believe that the income in the guise of excess share application money received has escaped assessment in terms of the provisions of section 147 of the Act. The learned Counse....
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....remium is excessive and, therefore, income. Moreover, the Notice also does not dispute that this is a share premium but seek justification for charging the share premium over and above intrinsic value of the share premium. Primafacie, we are of the view that the basis of the impugned Notice stands concluded by the decision of this Court in Vodafone India Services Ltd. Vs. CIT 368 ITR 01, wherein it has been held that the share premium being on the capital amount cannot be subjected to tax as income." 7. As far as the return processed under section 143(1) of the Act and the reasons to believe is a mandatory requirement, the learned Counsel for the assessee relied on the Hon'ble Delhi High court in the case of Madhukar Khosla vs. ACIT (2014) 367 ITR 0165 (Delhi), wherein it is categorically held that the reasons indicates specially the new material facts even though the return income was processed under section 143(1) of the Act on the basis of which reopening is initiated under section 148 of the Act. The learned Counsel for the assessee referred to para 9 and 10 as under: - "9. In this case, the reasons provided under Section 148 are that in "absence of the source of th....
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....d in a liberal manner where the finality of intimation under Section 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in Section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-à-vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of ....
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....cted to section 147 proceedings, for, that section covers only an "assessment" and we wonder if the revenue would be prepared to concede that position. It is nobody's case that an "intimation" cannot be subjected to section 147 proceedings; all that is contended by the assessee, and quite rightly, is that if the revenue wants to invoke section 147 it should play by the rules of that section and cannot bog down. In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they....
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.... and cannot be considered to be income. (b) It is further pertinent to note that the definition of income as provided under Section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from 1st April, 2013 and thus, would have, no application to the share premium received by the Respondent - Assessee in the previous year relevant to the assessment year 2012 - 2013. Similarly, the amendment to Section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject Assessment year 2012-13 and cannot be invoked. It may be pointed out that this Court in Commissioner of Income Tax vs. M/s. Gangadeep Infrastructure (P) ltd (Income Tax Appeal No.1613 of 2014 decided in 20 March 2017) has while refusing to entertain a question with regard to Section 68 of the Act has held that the proviso to Section 68 of the Act introduced with effect from 1 April 2013 will not have retrospective effect and would be effective only from Assessment year 2013-14." 9. The learned Counsel for the assessee also referred to the CBDT ....
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...., has escaped assessment. The reasons are reproduced above but for the sake of brevity the relevant part of reasons are that, "from the records, it is seen that the assessee is in receipt of huge share premium amounting to Rs. 4,56,00,000 during the F.Y. 2008-09 relevant to AY 2009-10. As there was no scrutiny assessment done for this year, the so-called share premium having been received by the assessee was not examined. The assessee is an unlisted company and the source of the share premium so received as well as the nature of the share application received (the intrinsic value of the share in comparison to the excess premium received) is not substantiated." We also find from the above that the AO stated that income in the grab of share application money received in this case has escaped assessment but he could not point out on what basis / material does he belief that the share capital is not genuine. In the similar circumstances, Hon'ble Bombay High Court in the case of Khubchandani Healthparks Pvt. Ltd. (supra) held that regular Return of income was assessed by Intimation under Section 143(1) of the Act and no scrutiny assessment was done. In the above view, to ascertain the n....