TaxTMI 
TaxTMI 
2023 (12) TMI 500
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent u/s 153A/143(3) of the Act on 30.12.2011 and determined the total income at Rs. 16,34,85,660/- (hereinafter "the original assessment order"). In the original assessment order, the AO notes that the department had carried out search operation in Madhu Kodah Group of cases, and assessee's premises were also covered in the search action; and based on that event, assessee's case was centralized before the ACIT, Central Circle-40, Mumbai; who thereafter, issued notice u/s 153A of the Act dated 01.08.2011 as well as notices u/s 143(2)/142(1) of the Act, and after considering the reply of the assessee, framed original assessment order on 30.12.2011 by determining income at Rs. 16,34,85,660/- as under: - Description Amount (Rs.) Amount (Rs.) Income from business 5,45,372/- Add: Expenses disallowed as discussed above 48,028/- Add: Unexplained investments u/s 69B of the Act as discussed above 13,65,92,256/- Add: Undisclosed investments u/s 69B of the Act as discussed above 2,63,00,000/- 16,34,85,656/- Gross Total Income 16,34,85,656/- Less: Chapter VIA Deductions --- Net Total Income &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctional High Court in the case of Major Metal Ltd. V/s. Union of India held that if, the past performance of the assessee company did not justify such huge premium then the purported transaction were not genuine. 8. In view of the above, the transaction relating to share premium is not a genuine transaction, amount received by the assessee in form of share capital, securities premium/share application money amounting to Rs. 14,63,50,000/- is nothing but unaccounted income of the assessee company introduced into the business in the form of share Capital, Securities Premium & share application, which is otherwise chargeable to tax u/s.68 of the I. T. Act. 9. Hence, I have a reason to believe that in the case of the assessee, income of Rs. 14,63,50,000/- chargeable to tax escaped assessment for A.Y.2009-10 within the meaning of section 147 of the I. T. Act,1961, and therefore, it is a fit case for issue of notice u/s.148 of the |. T. Act,1961. 10. Issue notice u/s 148 of the I. T. Act, 1961. (Bhopal Singh Bist) Dy. Commissioner of Income Tax, Central Circle-40, Mumbai. 6. On the strength of the aforesaid reasons, the AO reopened the assessment an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n premium from outside agency. So, according to Ld AR, it can be seen that there was no tangible material in AO's possession to reopen the completed assessment, therefore, his action to reopen the assessment was not permissible in law. Secondly, according to Ld AR, in the original assessment itself AO had inquired about the shares allotted on premium, therefore, the action of AO (to reassess the shares allotted on premium) tantamount to change of opinion, which is not permissible because AO does not have power to review his own order by invoking jurisdiction u/s 147 of the Act. The Ld AR, explained the relevant facts relating to the legal issue by pointing out that pursuant to search operation u/s 132 of the Act on 31.10.2009 (AY. 2010-11), the original assessment for AY 2009-10 was framed in December 2011 u/s 153A/143(3) of the Act. And for purpose of assessment u/s 153A of the Act, assessment proceedings of AY 2009-10 was abated [as per second proviso to section 153A of the Act]; and it is trite law that in an abated proceedings, the AO had power to assess the income of assessee without any restriction, in other words, there was no requirement that addition/disallowance can be ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing to Ld. AR, AO has not mentioned anything about receiving any tangible material to facilitate reopening of the assessment since AO in the original assessment after inquiry has passed the assessment order u/s 153A/143(3) of the Act dated 30.12.2011, wherein he has not made any adverse view against the assessee. Moreover, according to Ld. AR, from the discussion of facts supra, it can be seen that all the relevant facts related to allotment of shares at premium was in the knowledge of AO in the original assessment proceedings, therefore, the impugned action of the AO to again rack-up the issue (i.e. about equity shares (57,100) allotted to M/s. Balaji Universal Tradelink Pvt. Ltd for a premium of Rs. 490/-) tantamount to "change of opinion". According to the Ld. AR, the action of the AO to have resorted to reopening is bad in law. And the Ld. CIT(A) rejecting the legal issue on the specious plea that since the AO had framed the assessment u/s 153A of the Act, he could not have made the addition for absence of incriminating material is fallacious and legally flawed. 8. Per contra, the Ld. DR appearing for the department supported the action of the Ld. CIT(A) and submitted that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eopen the assessment, wherein he should record the "reason to believe, escapement of income". It is settled position of law that "reason to believe" postulates a foundation based on information and belief based on reason. After a foundation based on information is there, still, there must be some reason which should warrant the holding of a belief that income chargeable to tax has escaped assessment. In other words, before the AO issues notice u/s 148 of the Act, he must have recorded the reason to believe escapement of income. It is no doubt true that this Tribunal cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the AO on the point as to whether action should be initiated for re--opening the assessment. At the same time, we have to bear in mind that it is not, any and every material, howsoever vague and indefinite or distant or remote and far--fetched, which would warrant the formation of belief relating to escapement of income. Further, it is trite law that AO does not have power to review his own action/assessment. So if an AO during scrutiny assessment has enquired about certain issue/relevant facts pertaining to the income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hare and booked a loss of Rs. 2,39,82,000/- which according to AO clearly shows that there was no justification in valuing the shares at a high premium of Rs. 490/- per shares when EPS was only Rs. 1.56 per shares. According to the AO, the premium on shares could have been fixed having regard to the net asset value of the company, or the past record of earnings. According to the AO, it cannot be based on hypothetical presumptions as to the potential growth of earnings that may be achieved at some unspecified date in the future. Therefore, according to the AO, the valuation of the share capital at a premium of Rs. 490/- per share cannot be accepted. And thereafter, he was pleased to make an addition of Rs. 2,85,50,000/- u/s 68 of the Act. 11. From a perusal of the aforesaid reasons recorded by the AO to reopen as well as frame the reassessment, it is noted that he reopened the assessment alleging escapement of income to the tune of Rs. 14,63,50,000/-. And ultimately had made an addition of only Rs. 2,85,50,000/-. According to the Ld. AR, in the original assessment u/s 143(3)/153A of the Act dated 30.12.2011, the AO had conducted inquiry in respect of share capital/premium raised ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s. Bonafide Exports Pvt. Ltd on 26.03.2009 @ Rs. 80 per share and booked a loss of Rs. 2,39,82,000/-). On the aforesaid facts, the AO made an addition of Rs. 2,85,50,000/- us/ 68 of the Act in the hands of the assessee. 13. As noted (supra), in the original assessment framed u/s 143(3)/153A of the Act dated 30.12.2011, the AO had inquired about 57,100 shares allotted to M/s. Balaji Universal Tradelink Pvt. Ltd and the assessee had disclosed the details of share-subscriber as well as the premium of Rs. 490/- per share and assessment of before AO that no addition u/s 68 of the Act can be made in respect of Rs. 2,85,50,000/- received from M/s. Balaji Universal Tradelink Pvt. Ltd because it was a regular income tax assessee and payments were made through banking channel and it was capital receipt. And the AO had not made any adverse finding in the original assessment. In this factual background, even though the AO has not made any discussion on this issue in the assessment order it is implied that AO has accepted the transaction since no adverse view was recorded by him in the assessment order. In this factual context, it is gainful to refer to the decision of Hon'ble Bombay High ....