2019 (2) TMI 1196 - AT - Income Tax

Reopening of assessment - tangible material either from assessment record or from other source as come in the notice of AO for his reason to believe that any income has escape assessment - HELD THAT - The expression reason to believe cannot have two was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of change of opinion is not available to him, it would still be open to him to contest the income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the pronouncements. In the present case the reasons disclose that the Assessing Officer reached the belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier deprecated by the Supreme Court in Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ). The reason to believe vis- -vis intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147 - Decided against revenue

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 147 of the Income Tax Act.
2. Treatment of share application money/share capital/share premium as unexplained cash credit under section 68 of the Income Tax Act.

Detailed Analysis:

1. Validity of the Reopening of Assessment:

The Revenue appealed against the order of the Commissioner (Appeals) which invalidated the reopening of assessment under section 147. The original assessment was processed under section 143(1) and later reopened on 29th March 2014. The Commissioner (Appeals) held that the basic requirement of "reason to believe" was not fulfilled at the time of recording the reasons for reopening. The Revenue contended that the Assessing Officer had valid reasons based on the receipt of a huge share premium by the assessee. However, the Tribunal noted that the reasons recorded by the Assessing Officer did not indicate any tangible material that could substantiate the belief that income had escaped assessment.

The Tribunal referred to several judicial precedents, including decisions from the Hon'ble Bombay High Court and the Hon'ble Gujarat High Court, which emphasized that the reasons for reopening must be based on tangible material and not merely on suspicion or for verification purposes. The Tribunal concluded that the Assessing Officer's reasons did not meet the legal requirements for reopening the assessment, thus upholding the Commissioner (Appeals)'s decision to invalidate the reopening.

2. Treatment of Share Application Money/Share Capital/Share Premium as Unexplained Cash Credit:

The Assessing Officer had added the entire amount of ?1.36 crore received as share application money/share capital and share premium as unexplained cash credit under section 68. The assessee argued that section 68 was not applicable as the shares were subscribed by the holding and associate companies, whose identities and creditworthiness were not in doubt.

The Commissioner (Appeals) did not adjudicate this issue since the reopening itself was held invalid. Consequently, the Tribunal also did not delve into the merits of this issue, as the primary ground of appeal regarding the validity of reopening was dismissed.

Conclusion:

The Tribunal dismissed the appeal of the Revenue, upholding the Commissioner (Appeals)'s order that the reopening of assessment was invalid due to the lack of "reason to believe" based on tangible material. The grounds raised in the Cross Objection by the assessee became infructuous as the primary appeal was dismissed.

Order:
- The appeal of the Revenue is dismissed.
- The Cross Objection of the assessee is dismissed as infructuous.

Pronouncement:
The order was pronounced in the open court on 26/09/2018.