2021 (12) TMI 998 - HC - Income Tax

Reopening of assessment u/s 147 - increase of authorised share capital - HELD THAT - By a letter dated 5th October 2015 the AO had called upon petitioner to produce the evidence in support of increase of authorised share capital, produce the evidence of share allotment and name and address of the parties from whom share premium was received, among other things. Petitioner by its letter dated 23rd December 2015 provided the details of share premium received including name of the party from whom it was received. After considering the same, the assessment order has been passed on 10th February 2016. Therefore, it is not permissible for an Assessing Officer to reopen the assessment based on the very same material with a view to take another view without consideration of material on record one view is conclusively taken by the Assessing Officer. It is also not permissible to reopen purely on change of opinion. A general statement that the escapement of income is by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him.

Summary

Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act for reopening assessment for Assessment Year 2013-2014.
2. Requirement of disclosing fully and truly all material facts necessary for assessment.
3. Jurisdiction of the Assessing Officer under Sections 147 and 148 of the Act.

Issue 1: Validity of Notice under Section 148:
The petitioner's assessment for Assessment Year 2013-2014 was reopened under Section 148 of the Income Tax Act based on the issuance of shares at a premium. The reasons for reopening highlighted concerns regarding the valuation of shares at a high premium using the Discounted Cash Flow method and exceeding the Fair Market Value, potentially leading to tax liability under section 56(2)(viib) of the Act. The court found the reasons provided for reopening to be speculative and lacking concrete evidence. The Assessing Officer failed to specify the fair market value of shares, the basis for the valuation, or the undisclosed material facts during the assessment proceedings, rendering the reopening unjustified.

Issue 2: Disclosure of Material Facts:
The respondent relied on a judgment to argue that failure to specifically state the non-disclosure of material facts does not invalidate the reopening of assessment under Sections 147 and 148 of the Act. However, the court emphasized the necessity of a clear indication in the reasons supplied for reopening, demonstrating the failure to disclose material facts. The court held that if the reasons do not establish such failure, the assumption of jurisdiction under Sections 147 and 148 would exceed statutory constraints. The petitioner had previously provided details regarding share premium and other relevant information, which had been considered in the assessment order, further supporting the insufficiency of the reasons for reopening.

Issue 3: Assessing Officer's Jurisdiction:
The court reiterated that an Assessing Officer cannot reopen an assessment based on the same material or to change a previously concluded view without considering the existing record. Reopening assessments solely on a change of opinion is impermissible, requiring specific identification of the undisclosed material facts. The court emphasized that a general statement alleging failure to disclose material facts is insufficient; the Assessing Officer must pinpoint the undisclosed information. In this case, as the reasons for reopening lacked clarity and failed to establish non-disclosure, the court allowed the petition and quashed the notice issued under Section 148 for Assessment Year 2013-2014.

In conclusion, the High Court of Bombay ruled in favor of the petitioner, highlighting the importance of concrete evidence and clear reasoning in the process of reopening assessments under the Income Tax Act. The judgment emphasized the necessity of disclosing all material facts and the Assessing Officer's obligation to provide specific grounds for reopening assessments, ensuring transparency and adherence to statutory requirements.