2016 (7) TMI 176 - HC - Income Tax

Reopening of assessment - issuance of share at premium - reasons to believe - Held that - Question of issuance of share at premium to whom such shares were allotted and the premium received the resultant increase in the share premium were all placed before Assessing Officer for his verification of original assessment proceedings. He however raised no further question and accepted the stand of the assessee. Any re-visit of such an issue without there being additional or undisclosed information would be merely in the nature of change of opinion. In reasons recorded AO referred to some information received from CCIT as per which the assessee company had allotted shares at a high premium. Further AO observed from the balance sheet of assessee-company that it had received share premium of 1.45 crores during the year under consideration. He therefore recorded that the assessee has not explained the nature of such credit and has failed to prove the genuineness and justification of huge share premium received in its books of accounts. Hence such receipts need detailed verification. The approach of AO cannot be approved. His entire focus is on share premium amount of 1.45 crores and without any tangible material on record he proceeds on the basis that shares were issued at a high premium. For any re-assessment AO must have some tangible material to enable him to form a belief that the income chargeable to tax had escaped assessment. We find reference to no such material in the reasons recorded. There is no basis even to prima facie proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was received in the nature of share premium during the year under consideration would not automatically mean that the same was artificially increased. Re-opening of assessment which was framed after scrutiny would not be permissible for a fishing inquiry. In the present case we find the vital link missing from the reasons recorded such link being the material at the command of the Assessing Officer to form such a belief - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice for reopening the assessment for the assessment year 2009-2010.
2. Whether the Assessing Officer had tangible material to form a belief that income chargeable to tax had escaped assessment.
3. Whether the reopening of the assessment was merely a change of opinion.

Detailed Analysis:

1. Validity of the notice for reopening the assessment for the assessment year 2009-2010:
The petitioner challenged the notice dated 14.3.2014 issued by the respondent Assessing Officer for reopening the assessment for the year 2009-2010. The petitioner had initially filed a return of income on 5.9.2009 and a revised return on 31.3.2011. The original assessment was completed under section 143(3) of the Income Tax Act, 1961, on 30.12.2011. The Assessing Officer had noticed a share premium of ?1.45 crores but did not make any adjustments regarding this amount in the original assessment. The notice for reopening was based on information received from CCIT(CCA), Mumbai, indicating that the assessee had issued shares at a very high premium, which required detailed verification.

2. Whether the Assessing Officer had tangible material to form a belief that income chargeable to tax had escaped assessment:
The petitioner contended that the issue of share premium was thoroughly examined during the original assessment proceedings, and all relevant details were provided to the Assessing Officer. The Assessing Officer, after being satisfied with the explanations, did not make any additions. The petitioner argued that the reopening notice was based on a mere doubt about the genuineness of the share premium, which is not permissible in law. The court noted that the petitioner had filed audited accounts, including the balance sheet, which disclosed the share premium. During the scrutiny assessment, the Assessing Officer had raised multiple queries about the share premium, and the petitioner had provided detailed responses. The court found that the Assessing Officer had no additional or undisclosed information to justify reopening the assessment, making it a mere change of opinion.

3. Whether the reopening of the assessment was merely a change of opinion:
The court observed that the Assessing Officer's reasons for reopening the assessment did not indicate any new material or information that was not available during the original assessment. The reasons recorded by the Assessing Officer primarily focused on the share premium amount and the need for detailed verification without any tangible material to form a belief that income chargeable to tax had escaped assessment. The court emphasized that reopening an assessment based on a mere change of opinion is not permissible. The court also noted that the Assessing Officer's reference to information from CCIT, Mumbai, was vague and did not provide any concrete basis for reopening the assessment.

Conclusion:
The court concluded that the notice for reopening the assessment was invalid as it was based on a mere change of opinion without any tangible material. The court set aside the impugned notice dated 14.3.2014, allowing the petition and disposing of the case.