AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 1311
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....nce and brevity. 3. The grounds of appeal in ITA No. 9/GAU/2021 read as under:- (1) On the facts and in the circumstances of the case and in law, the ld. C IT (A) has erred in allowing appeal of the assessee without appreciating the facts of the case. (2) On facts and circumstances of the case and as well as in law, the Ld. CIT(A) erred in deleting the addition of Rs.98,42,000/- as share capital and Rs.12,07,58,000/- as share premium made by the AO under section 143(3)/147 of the IT Act, 1961. (3) On facts and circumstances of the case, the Ld. CIT(A) erred in quashing the order passed by the AO under section 143(3)/147 of the Act holding that the order passed by the AO is illegal, void and is a nullity at law. (4) On facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition of Rs 13,06,00,000/- made under section 68 of the IT Act, 1961 holding that there was no failure on the part of the assessee to disclose truly all material facts necessary for his assessment. However, the fact is that neither the Director of the assessee company nor the directors of the allotted companies appeared before the AO to verify the genuinene....
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....under section 147 of the Act were recorded and notice under section 148 of the Act was issued. However, the objections raised by the assessee were addressed by the ld. Assessing Officer and reassessment proceedings were carried out. The ld. Assessing Officer noticed that during the year under consideration, the assessee-company issued equity shares and received Rs.98,42,000/- towards share capital and share premium of Rs.12,07,58,000/-. The assessee was asked to prove the identity and creditworthiness of the share applicants and genuineness of the transactions. The assessee furnished various documents but failed to produce the Directors of all the share subscriber companies before the ld. Assessing Officer to verify the authenticity and genuineness of such share transactions. Due to such non-appearance, summons was issued under section 131 of the Act. The ld. Assessing Officer doubted the nature and source of the alleged share application money and formed an opinion that the assessee had adopted a colourable device and camouflaged its unaccounted money in the form of share application money to legalize its own unaccounted income. Accordingly Section 68 of the Act was invoked and ta....
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....r alongwith all the financial documents including identity proof, income tax return, Bank statement, confirmations, audited balance-sheet etc. The ld. CIT(Appeals) also noticed that during the course of original assessment proceedings, the appellant had disclosed all the preliminary facts, which were necessary for completing the assessment. The ld. CIT(Appeals) further held that if at the time of original assessment proceedings, the ld. Assessing Officer has raised wrong inference from the facts disclosed by the appellant, then, appellant cannot be penalized for the wrong inference of facts and law by the ld. Assessing Officer and the assessment of the appellant cannot be reopened after four years from the end of relevant A.Y. once again under section 147 of the Act. In support of this finding, reliance was placed by ld. CIT(Appeals) on the judgment of the Hon'ble Supreme Court in the case of ITO, Ward- 16(2) -vs.- M/s. Techspan India Private Limited & Another (2018) 4 TMI 1376 (Supreme Court) and in the case of CIT, Delhi -vbs.- M/s. Kelvinator India Limited (2010) 1 TMI 11 (SC). Further ld. CIT(Appeals) held that there is no failure on the part of the appellant to disclose fully ....
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....ssed about the facts of M/s. Linkstar Promoters Pvt. Limited and the same being identical in the case of M/s. Winner Dealtrade Pvt. Limited, we notice that both the assessees were subjected to scrutiny proceedings under section 143(3) of the Act subsequent to filing of their return of income for A.Y. 2012-13. It is not in dispute that thorough examination of all the share applicants have been carried out by the ld. Assessing Officer during the course of original assessment proceedings. Notices under section 133(6) of the Act were sent to all the share subscribers, which were duly served and replies to each of such notices were received by the ld. Assessing Officer alongwith all the financial documents including identity proof, income tax return, Bank statement, confirmations, audited balance-sheet etc. All these details were filed by the assessee to prove the nature and source of the share application money and to prove the identity and creditworthiness of the share applicants and genuineness of the transactions. After carrying out the thorough examination of these documents, ld. Assessing Officer was satisfied with the explanation offered by the assessee to explain the alleged sum....
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....ed the same and replied to the said notice under section 133(6) of the Act based on which ld. Assessing Officer was satisfied with the nature and source of the alleged sum. Thus we find that there was no failure on the part of appellant to disclose fully and truly all material facts necessary for reassessment during the course of original scrutiny proceedings. Therefore, the first proviso to section 147 of the Act which requires for recording the reasons to believe is not satisfied because the reasons for reopening have already been addressed by the assessee in the course of original assessment proceedings and such reopening is only based on the change of opinion. The ld. CIT(Appeals) has quashed the impugned reopening proceedings, which have been commenced on a mere change of opinion by referring to the judgment of the Hon'ble Supreme Court in the case of M/s. Techspan India Private Limited & Another (supra) and in the case of M/s. Kelvinator India Limited (supra) observing as follows:- "Thus, a perusal of the aforesaid replies (each reply duly stamped by the office of the AO) received from the share applicants of the Appellant in response to the notices issued to them by the AO....
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.... assessment order, dated 31.03.2015, passed under Section 143(3) of the Act in which the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine. Enquiries had been duly conducted by the AO with regard to the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- by issuing of notices under Section 133(6) of the Act and replies to the said notices had been obtained from various share-capital subscribers by the AO. Only after due examination of the aforesaid share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/-, it was accepted, as genuine, by the AO and not added back to the income of the Appellant. Thus, there was a full disclosure of all material facts by the Appellant before the AO. From a perusal of the material placed before me during the course of the appellate proceedings, I see no evidence of any information/material which was hidden/suppressed by the Appellant from the AO during the course of the original round of assessment proceedings. Thus, as far as the disclosure of material facts by the Appellant in the original round of assessment proceedings is concerned, I find the ....
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.... been considered by him during the original assessment proceedings. Such could not be the intention of the legislature. The said provision was incorporated in the scheme of the I.T. Act so as to empower the Assessing Authorities to re-assess any income on the 1 round which was not brought on record during the original proceedings and escaped his knowledge; and the said fact would have material bearing on the outcome of the relevant assessment order. (9) Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to reassess and not the power to review. (10) To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The word change of opinion implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing of....
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....ddress itself to a given aspect sought to be examined in the reassessment proceedings." In the case of Income Tax Officer Ward No. 16 (2) vs. M/s. Techspan India Private Ltd. & Another [2018 (4) TMI 1376 - Supreme Court], it was held, as follows, by the Hon'ble Supreme Court: "However, a bare perusal of notice dated 09.03.2004 which was issued in the original assessment proceedings under Section 143 makes it clear that the point on which the re-assessment proceedings were initiated', was well considered in the original proceedings. In fact, the very basis of issuing the show cause notice dated 09.03.2004 was that the assessee was not maintaining any separate books of account for the said two categories and the details filed do not reveal proportional allocation of common expenses be made to these categories. Even the said show cause notice suggested how proportional allocation should be done. All these things leads toan unavoidable conclusion that the question as to how and to what extent deduction should be allowed under Section 10A of the IT Act was well considered in the original assessment proceedings itself. Hence, initiation of the re-assessment proceedings unde....
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....r se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfillment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then,in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws(Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-in....
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....ITO (2010) 329 ITR 110. We are of the view that the reassessment proceedings carried out under section 147 of the Act after the lapse of four years from the end of the relevant assessment year and there being no reason to believe that the assessee had failed to disclose fully and truly all material facts necessary for his assessment are bad and illegal. The finding of the ld. CIT(Appeals) on this issue extracted below is in consonance to our observation:- "Thus, in this case there was a full and true disclosure of primary facts by the Appellant in the original round of assessment proceedings which culminated in the assessment order, dated 31.03.2015, passed under Section 143(3) of the Act in which the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine. Enquiries had been duly conducted by the AO with regard to the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- by issuing of notices under Section 133(6) of the Act and replies to the said notices had been obtained from various share-capital subscribers by the AO. Only after due examination of the share capital of Rs. 98,42,000/- and the share ....
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....osed or otherwise, the assessing authority has to draw inferences as regards certain other facts and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. In view of the above discussion, I hold that there was no failure on the part of the Appellant to disclose fully and truly all material facts necessary for his assessment during the course of the original scrutiny assessment proceedings under Section 143 of the Act which culminated in the assessment order dated 31.03.2015 passed under Section 143(3) of the Act and in which the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine. Further, 4 years had already elapsed from the end of the relevant ....
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.... "After a careful perusal of the aforesaid material i.e. the submission, dated 24.12.2019, made by the Appellant before the AO, the submission, dated 27.12.2019, made by the Appellant before the AO and the note-sheets of the appellate proceedings before the AO, I tend to agree with the contention of the Appellant that in the circumstances wherein even curfew was imposed in Guwahati and the internet connectivity was absent, the Appellant indeed did not get a meaningful and proper opportunity of being heard and presenting evidence in the matter before the AO. From a perusal of the note-sheets of the appellate proceedings before e AO, I also note that notices under Section 133(6) of the Act to various share-capital subscribers of the Appellant and the summonses to Directors under Section 131 of the Act have been issued by the AO at the fag end of the assessment proceedings on 23.12.2019, the compliance for which has been fixed on 26.12.2019, which in itself renders the process of enquiry as a mere eyewash since it is impossible for the share-capital subscribers of the Appellant and the Directors of the Appellant to collect the necessary material and respond at such a short notice es....
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....ellant, how could the AO aware whether these would be complied with or not? And, in that scenario, the show-cause could not have been issued prior to the result of the enquiry under Section 133(6) and 131. Thus, in the absence of a meaningful and proper opportunity of being heard and presenting evidence, the AO was not correct in holding, in the impugned assessment order, that the share capital of Rs.98,42,000/- and the share premium of Rs.12,07,58,000/- was "bogus" especially when in the original assessment proceedings, the same share capital of Rs.98,42,000/- and the share premium of Rs. 12,07,58,000/- had been accepted as "genuine". In view of the above discussion, the impugned assessment order does not pass the test of Principles of Natural Justice and is, therefore, illegal, void and is a nullity at law. I hold so and, hence, the impugned assessment order is quashed on this ground also". 17. The above finding of the ld. CIT(Appeals) is supported by the judgment of the Hon'ble Supreme Court in the case of CIT -vs.- Dhakeshwari Cotton Mills Limited (1955) AIR 65 and GKN Driveshafts (India) Ltd. -vs.- ITO reported in 259 ITR 19. Thus to conclude we find that on the legal gro....