2022 (5) TMI 62 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - Petitioner has issued shares at premium - addition of excess premium u/s 56(2)(viib) - e Goodwill was internally generated by erstwhile firm and not acquired or purchased by paying any consideration, the cost of the same should have been shown at Nil and internally generated Goodwill should not be recognised as an asset - HELD THAT - The reason to reopen is purely on the basis of change of opinion Indisputably queries have been raised during the assessment proceedings regarding large share premium received during the year, the details of investors and petitioner has provided all details sought for. While providing the workings, petitioner also explained that the Goodwill of Rs.26 Crores has been factored while arriving at the share premium. Even in the assessment order, the Assessing Officer has referred to notice issued under section 143(2) as well as 142(1) of the Act and the Assessing Officer has also confirmed having received all information. There can be no doubt in the present facts that very issue of share premium and Goodwill was a subject matter of consideration by the Assessing Officer during the original assessment proceedings. In our view, the reopening of assessment by impugned notice dated 30.03.2021 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. Since all these details have been disclosed in the documents filed along with return of income including balancesheet and answers to all queries raised have been provided, admittedly it cannot be stated that there was any failure on the part of petitioner to truly and fully disclose any material facts. Statement in the reasons recorded that there was failure to fully and truly disclose material facts, in our view, is only to get over the restrictions provided in proviso to section 147 - Decided in favour of assessee.

Summary

Issues:
1. Impugning a notice under section 148 of the Income Tax Act, 1961 for assessment year 2014-15.
2. Reopening of assessment based on failure to disclose material facts regarding share premium and Goodwill.

Analysis:
1. The petitioner challenged a notice dated 30.03.2021 under section 148 of the Income Tax Act, 1961 for assessment year 2014-15, along with the order on objections dated 15.12.2021. The assessment for the said year was completed earlier, accepting the returned income. The notice for reopening the assessment was issued after the expiry of 4 years from the end of the relevant assessment year, triggering the application of the proviso to section 147 of the Act. This proviso restricts reopening unless there is a failure on the part of the petitioner to fully and truly disclose material facts during the initial assessment.

2. The reasons recorded for reopening highlighted two main issues. Firstly, it was alleged that the petitioner had charged excess premium on shares issued during the year under consideration, resulting in an additional income under section 56(2)(viib) of the Act. Secondly, the inclusion of self-generated Goodwill in the books of account was contested, arguing that such Goodwill should not be recognized as an asset. The petitioner had provided detailed responses and explanations during the assessment proceedings regarding these issues.

3. The court observed that the reopening of assessment seemed to be based on a change of opinion rather than any failure to disclose material facts. The petitioner had responded to all queries during the assessment proceedings, providing detailed information regarding the share premium and Goodwill. The court referred to previous judgments emphasizing that once an issue is raised during assessment and the assessee responds to it, it is deemed to have been considered by the Assessing Officer, even if not explicitly mentioned in the assessment order.

4. Considering the documents filed along with the return of income and the responses provided to all queries raised, the court concluded that there was no failure on the part of the petitioner to fully and truly disclose material facts. The court held that the reopening of assessment based on a change of opinion was not justified and allowed the petition, quashing the notice under section 148 of the Act and the subsequent order as bad in law.

5. The court's decision was based on the principle that the reopening of assessment should not be merely a result of a change of opinion by the Assessing Officer, especially when all relevant details were disclosed during the original assessment proceedings. The court emphasized the importance of full and true disclosure of material facts by the assessee, highlighting that failure to do so can trigger the reopening of assessment under specific provisions of the Income Tax Act.