TaxTMI 
TaxTMI 
2023 (3) TMI 619
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....ed notice. The impugned notice relates to Assessment Year 2015-2016 for the previous year ending on 31/03/2015. The facts which have led to the filing of the present petition, as stated by the petitioner, are as under :- a] The petitioner being engaged in investment business had initial share capital of Rs.47,69,000/- being 47,690 shares at face value of Rs.100/- each; against this share capital, the petitioner's Reserves and Surplus stood at Rs.64,00,87,789/- as on 30/09/2014 with securities held by it at the book value of Rs.19,74,88,254/- and fair market value for the shares quoted was at Rs.30,11,66,00,359/-. With a view to raise further share capital, the petitioner issued rights shares to its existing share holders in the proportion of 10 shares to every share held at face value of Rs.100/- each, had a issue price of Rs.5,75,000/- per share. It received during that year 5% of the value of rights share and the balance 95% of the issue price was to be received upon making subsequent of calls, thus, the petitioner received an aggregate share of Rs.2,74,16,98,100/-, which transaction was duly reflected in its financial statement with necessary disclosures....
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....a Note on the issue of rights shares made during the year. Thereafter, respondent No.1 passed an assessment order dated 19/12/2017 under Section 143(3) of the Act accepting the income returned by the petitioner. It is the petitioner's contention that though there was no discussion in the assessment order on the question of rights shares issued at premium, the issue had been thoroughly examined by the Assessment Officer and had been accepted. e] Since the assessment order contained certain mistakes apparent on the face of record, the petitioner filed an application under Section 154 of the Act on 15/01/2018 requesting corrections, which were allowed on 07/02/2018. f] Thereafter, the petitioner received the impugned notice dated 30/03/2021 under Section 148 of the Act alleging therein that the reasons to be recorded, the petitioner's income chargeable to tax for assessment year 2015-2016 had escaped assessment and required the petitioner to deliver to the respondent No.2 an income return in the prescribed form; the petitioner filed its return of income tax in reply to the notice on 26/04/2021 declaring a total income of Rs.1,36,07,94,512/-. ....
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....or the respondents. Also, perused the material on record of the case. 5. It is submitted by the learned counsel for the petitioner that the Assessing Officer would assume jurisdiction under Section 147 of the Act, only if he had reason to believe that the assessee's income chargeable to tax for the relevant year had escaped assessment, it is submitted that in the present case, the Assessment Officer had previously accepted the method of determining the Fair Market Value of the rights shares issued which was based upon the methods provided under the Act; The Assessing Officer had recorded satisfaction in its assessment order dated 19/12/2017 passed under Section 143 (3) of the Act, and thus, there was no ground available at law to reopen the assessment. It is further argued that the belief formed by the Assessing Officer should not be based on Audit objections, which is the case as demonstrated herein; it is further submitted that the respondents have failed to produce the relevant information, namely, the correspondence with the Audit Department, since it would obviously favour the petitioner's case; that observations made in the impugned order that the petitioner did....
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....ragraph No.22 of the petition, the petitioner has specifically averred that in response to its submission that the Revenue Audit objections were never given to the petitioner and the same could not be the basis on which a notice for reopening could be issued, it is the contention of the revenue that the petitioner had never given any suggestion regarding the methodology of remedial measures and that in the present case, the Assessing Officer has applied his mind and formed his own opinion on the basis of material available before him. However, there does not appear to be any documents or material referred to in the impugned notice under Section 148 or even a discussion by the Assessing Officer to lead us to believe that such material was considered, or that there was application of mind to such material before proceedings to reopen the assessment. 8. A perusal of the impugned order dated 25/11/2021 would reveal that in Paragraph No.2, the respondent No.1 has only reproduced the figures which had already been considered in the earlier assessment order passed on 19/12/2017 after scrutiny and after notices were issued under Section 143(2) and under Section 142(1). In that scrutiny ....
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....m total non-application of mind, in that, respondent No.1 has not considered all the documents furnished by the petitioner along with its reply / objections to the reopening notice, wherein its valuation report of all the details of calculation and disclosures made in the earlier scrutiny proceedings had been produced. The impugned notice does not even deal with a single line of the objections of the petitioner to conclude that there was some element of suppression of material by the petitioner in the previous scrutiny assessment, or that, there was any material facts, which the assessee had failed to disclose in the earlier assessment, which had now come to the knowledge of the Assessing Officer to conclude that there was escapement of income which was assessable to tax. In ITO Vrs. Lakhmani Mewal Das, reported in (1976) 103 ITR 437, the Hon'ble Supreme Court interpreted the provisions of Section 147 of the Act and held as under :- " ..... the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material ....
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....ect. In the absence of the order of objections dealing with the assertion of the assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the Revenue. 7. Thus, we are of the view that even in cases where the return of income has been accepted by processing under section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under section 143(1) of the Act, does not give the Assessing Officer a carte blanche to issue a reopening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the Assessing Officer has proceeded on fundamentally wrong facts to come to the reasonable belief/conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the petitioner, the Assessing Officer in his order disposing of the objection do....