2019 (3) TMI 1125 - HC - Income Tax

Reopening of assessment u/s 147 - original assessment u/s 143(3) - unexplained investment made by a Mauritius based Company towards share allocation money in Compulsory Convertible Cumulative Preference Shares - genuineness and creditworthiness of the foreign entity - information received from the investigation wing - beyond limitation - no failure on the part of the assessee to declare fully and truly all material facts - no new or additional material - desire to carry out enquiries - HELD THAT - The reasons only refer to a simple piece of information supplied to the Assessing Officer by the Investigation Wing, stating that the assessee- company had received share application money of ₹ 49.99 Crores from Firstland. To reiterate, this information is nothing which the Assessing Officer did not have at his command when the Assessment was framed. The reasons do not specify that the information supplied to the AO by the Investigation Wing, suggested that such investment was non- genuine. AO refers to the requirement of verifying the genuineness of investor and requirement of further investigation. These observations in para 3 of the reasons, would not further the case of the Revenue, these being no information with the Assessing Officer, prima facie, indicating that the investments were not genuine. The investigation into the source of genuineness and creditworthiness of the investor company would fall within the relam of fishing enquiries, which is wholly impermissible in law in the context of the re opening of the assessment. For such reasons, impugned notice is set aside. - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice for re-opening of assessment.
2. Alleged failure of the assessee to disclose fully and truly all material facts.
3. Examination of the genuineness and creditworthiness of the foreign investor.

Issue-wise Detailed Analysis:

1. Validity of the Notice for Re-opening of Assessment:
The Petitioner challenged the notice dated 28th September 2018, for re-opening the assessment for the Assessment Year 2011-12, issued beyond four years from the end of the relevant assessment year. The Petitioner argued that there was no failure on their part to declare fully and truly all material facts. The Respondent contended that the notice was based on additional information received from the investigation wing of the Department after the original assessment, which necessitated re-opening.

2. Alleged Failure of the Assessee to Disclose Fully and Truly All Material Facts:
The reasons recorded by the Assessing Officer (AO) for re-opening the assessment included the receipt of ?49.90 Crores from Firstland Holdings Limited, Mauritius, towards the subscription of Compulsory Convertible Cumulative Preference Shares. The AO claimed that the source, genuineness, and creditworthiness of the foreign entity remained unexplained and required further investigation. The Petitioner had disclosed all relevant details during the original assessment, including balance sheets, cash flow statements, and other financial documents, which were scrutinized by the AO. The AO had issued multiple notices during the original assessment, and the Petitioner had provided detailed responses, including the Certificate of Foreign Inward Remittance and the tax residence certificate of Firstland Holdings Limited.

3. Examination of the Genuineness and Creditworthiness of the Foreign Investor:
The AO's reasons for re-opening the assessment were based on information that was already available during the original assessment. The AO did not have any new or additional material suggesting that the investment was non-genuine. The court noted that the information regarding the share application money from Firstland Holdings Limited was part of the original assessment record and had been scrutinized. The AO's observations about the need for further investigation into the genuineness and creditworthiness of the investor were deemed to fall within the realm of fishing enquiries, which are impermissible for re-opening an assessment.

Conclusion:
The court concluded that the re-opening of the assessment was not justified as the AO did not possess any new or additional information indicating that the investment was non-genuine. The reasons recorded for re-opening were based on information already scrutinized during the original assessment. Therefore, the impugned notice for re-opening the assessment was set aside, and the petition was allowed.

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