2019 (7) TMI 1735 - AT - Income Tax

Reopening of assessment u/s 147 - addition made u/s 56(2)(viib) - HELD THAT - gone through the original assessment order and the details filed before the AO during the course of original assessment proceedings and noted that the assessee vide letter dated 17.12.2011 has filed complete details of share premium account and also the valuation report of the assessee company valuing the share premium at ₹ 6400/- per share The original assessment was passed under section 143(3) of the Act after perusal of the documents as required by the AO with respect to issue of share subscription money received after proper application of mind. We noted that the AO had called for assessee s explanation on issue, which is in his opinion needed consideration and only after verification of details passed the original assessment order. Once an assessment is completed under section 143(3) of the Act after raising a query on a particular issue and accepting assessee s reply to the query, the AO had no jurisdiction to reopen the assessment unless and until there is additional information/tangible material before the AO to come to the conclusion that there is an escapement of income. This issue has been dealt in by Hon ble Bombay High Court in the case of Godrej Agrovet Ltd 2010 (2) TMI 27 - BOMBAY HIGH COURT wherein it is held that the Assessing Officer cannot act in excess of the restrains on his jurisdiction to reopen an assessment in exercise of the powers under section 147 read with section 148 - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under Section 147/148 of the Income Tax Act.
2. Validity of the addition of share premium as unexplained income under Section 68 of the Act.

Detailed Analysis:

1. Reopening of Assessment under Section 147/148 of the Income Tax Act:

Background:
The initial assessment was completed under Section 143(3) of the Income Tax Act for the A.Y. 2009-10. The reassessment was initiated by issuing a notice under Section 148 on 28.03.2014, with reasons recorded by the Assessing Officer (AO) indicating that the share premium amounting to ?1.92 crores had not been verified during the original assessment.

Contentions:
- The assessee argued that the reopening was merely a "change of opinion" since the issue of share premium was already examined during the original assessment proceedings.
- The assessee provided evidence that all necessary details, including the valuation report, were submitted during the original assessment.
- The Revenue contended that the AO had not formed any opinion on the share premium during the original assessment, thus justifying the reopening.

Tribunal's Findings:
- The Tribunal noted that the original assessment order was passed after a detailed examination of the share premium account, including the valuation report and other relevant documents.
- It was observed that the AO had raised queries and accepted the assessee's explanations during the original assessment, indicating that an opinion had been formed.
- The Tribunal referenced the Bombay High Court's rulings in Godrej Agrovet Ltd. vs. DCIT and Siemens Information System Ltd. vs. ACIT, which held that reopening an assessment based on a mere change of opinion is not permissible.
- The Tribunal concluded that there was no new tangible material to justify the reopening and that it was merely a change of opinion.

Conclusion:
The Tribunal quashed the reopening of the assessment, deeming it bad in law due to the absence of new tangible material and the reopening being based on a change of opinion.

2. Validity of the Addition of Share Premium as Unexplained Income under Section 68 of the Act:

Background:
The AO had made an addition of ?2,95,10,000/- under Section 68, treating the share premium as unexplained and unsubstantiated.

Contentions:
- The assessee argued that the share premium was justified and all necessary documents, including the valuation report, were provided during the original assessment.
- The CIT(A) had deleted the additions on merits, although it upheld the reopening of the assessment.

Tribunal's Findings:
- Since the Tribunal quashed the reopening of the assessment on jurisdictional grounds, it did not delve into the merits of the addition under Section 68.
- The Tribunal noted that the CIT(A) had already decided the issue in favor of the assessee on merits.

Conclusion:
The Tribunal did not adjudicate on the merits of the addition under Section 68 due to the quashing of the reopening on jurisdictional grounds.

Final Order:
- The appeal of the Revenue was dismissed.
- The Cross Objection of the assessee was also dismissed as the primary issue of reopening was quashed.

Order Pronounced: The order was pronounced in the open court on 19-07-2019.