2016 (12) TMI 1285 - HC - Income Tax

Reopening of assessment - genuineness of the transactions with respect to the share capital /share holders /share investment doubted - Held that - As in response to the notice under Section 142(1) of the Income Tax Act in scrutiny assessment under Section 143(3) of the Income Tax Act the petitioner assessee furnished necessary particulars more particularly with respect to the details of the share capital and share application money received alongwith the name of the members of share holders with their confirmation alongwith copy of the income tax return and copy of the bank account and their PAN Number and only thereafter the Assessing Officer framed the issue under Section 143(3) of the Income Tax Act without making any addition. Under the circumstances it cannot be said that there was non disclosure on the part of the petitioner assessee in not disclosing true and correct facts necessary for the purpose of assessment. All the necessary facts /material which were required which were called for were given by the petitioner assessee. Under the circumstances the condition precedent to exercise the jurisdiction under Section 147 of the Income Tax Act to reopen the assessment for the Assessment Year 2010-11 beyond four years are not satisfied. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the reopening of assessment under Section 147 of the Income Tax Act beyond four years.
2. Non-disclosure of true and correct facts by the petitioner during the original assessment.

Detailed Analysis:

1. Legality of the reopening of assessment under Section 147 of the Income Tax Act beyond four years:

The petitioner challenged the notice dated 01/10/2015 for reopening the assessment for the Assessment Year (AY) 2010-11 under Section 147 of the Income Tax Act. The petitioner argued that the reopening was beyond the permissible period of four years and did not meet the conditions precedent required under Section 147. The petitioner contended that all necessary facts and materials were disclosed during the original assessment under Section 143(3), and the Assessing Officer (AO) had accepted these without any additions. The AO's reasons for reopening, which included doubts about the genuineness of the share capital and share premium transactions, were based on the same materials already scrutinized during the original assessment.

The court noted that for reopening beyond four years, it must be established that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The court found that the petitioner had furnished all required details, including the names, addresses, PAN, and bank statements of the shareholders, during the original assessment. Therefore, the court concluded that the conditions precedent for reopening the assessment beyond four years were not satisfied.

2. Non-disclosure of true and correct facts by the petitioner during the original assessment:

The AO's reasons for reopening the assessment included the introduction of share capital and share premium amounting to ?75,00,000 from 14 persons, with transactions that appeared to be a device to introduce unaccounted money. The AO noted that shares were issued at a premium despite the company not commencing business, and there were fund transfers among investors suggesting a lack of genuineness.

The petitioner argued that there was no non-disclosure of material facts, as all relevant information was provided during the original assessment. The court examined the reasons recorded by the AO and the materials provided by the petitioner. It was found that the AO had all the necessary information during the original assessment and had accepted the genuineness of the transactions. Therefore, the court held that there was no failure on the part of the petitioner to disclose true and correct facts.

Conclusion:

The court concluded that the reopening of the assessment for AY 2010-11 beyond four years was not justified as the petitioner had disclosed all necessary facts during the original assessment. The impugned notice and reassessment proceedings under Section 147 were quashed and set aside. The petition was allowed, and the rule was made absolute with no order as to costs.