2024 (9) TMI 1572

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....essee for the AY-2014-15. Petitioner was selected for scrutiny under Section 143 (3) of the Act. 3. During the course of assessment proceedings, petitioner was, inter alia, asked about the share holding pattern of M/s Centrodorstory (India) Pvt. Ltd., in whose shares an investment of Rs. 2 crores was made. Petitioner submitted its reply. After considering the submissions of the petitioner, and after being fully satisfied, Assessment Order dated 21.12.2016 was passed, thereby, assessing the income of the petitioner as 'Nil'. 4. After completion of assessment proceedings, notice under Section 263 of the Act was issued to the petitioner by the Principal Commissioner of Income Tax-II ["PCIT"], stating therein as under:- "2. As per the financials, during the year under consideration, the assessee company had purchased 20,00,000 equity shares of Rs. 10/- each from M/s Centrodorstroy (India) Pvt. Ltd. against the fair market value of Rs. 40/-. As per provisions of section 56 (2) (viia) of the IT Act, 1961, if a closely held company purchases any share of any other closely held company for a consideration which is less than fair market value of the share, then such differenc....

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.... it is a clear case of "change of opinion", which is not permissible in view of the ratio of the decision rendered by the Supreme Court in the case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited (2010) 2 Supreme Court Cases 723. 10. Alternatively, it has also been submitted by the learned counsel for the petitioner that provisions of Section 56 (2) (viia) of the Act are not applicable as the assessee had acquired and subscribed the equity shares of a closely held company at below fair market value under the 'Right Issue'. However, the order under Section 148A (d) of the Act is completely a non-speaking order and does not set out the reasons for not accepting the right of the petitioner. 11. Per contra, the learned counsel for the respondent has argued that the assessee made investment in M/s. Centrodorstory (India) Pvt. Ltd. by purchasing 20 lakh equity shares. The fair market value for each share was Rs. 39.53/- or Rs. 40/- (each) approximately, as evident from the balance sheet of M/s. Centrodorstory (India) Pvt. Ltd. as on 31.03.2013, as against the assessee company allegedly purchasing the same at Rs. 10/- each and therefore, it is a clear case of es....

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....nd the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139: xxx xxx (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 13. Section 147 certainly empowers the AO to initiate action for reassessment of escaped income subject to Section 148 to 153 of the Act. However, such power is subject to the condition that the AO has reasons to believe that income has escaped assessment. The use of words "reasons to believe" in Section 147 has to be interpreted schematically as any other interpretation would lead to the consequence of conferring arbitrary powers on the AO, who may even initiate such reassessment proceedings merely on a change of opinion on the basis of same facts and circumstances already considered during the original assessment proceedings. The provision for reassessment was brought into the statute book to empower the AO to reassess any income only on the ground which was not brought on record during the original proceedings and escaped its knowledge. The law regarding reassessment is no more res-in....

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.... 14. The decision rendered in Income Tax, Delhi vs. Kelvinator of India Limited (supra) was also taken note by the Hon'ble Supreme Court in the case of Income Tax Officer Ward No. 16(2) v. M/s. TechSpan India Private Ltd. & Anr. Civil Appeal No. 2732/2007, wherein, it has been observed as under:- "9) Section 147 of the IT Act does not allow the re-assessment 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 officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection." 15. Reverting to ....