2024 (10) TMI 1584 - HC - Income Tax

Reopening of assessment u/s 147 - Addition u/s 68 on share premium received by the petitioner from Gold Singapore - reassessment proceedings had been initiated primarily for the reason that Gold Singapore does not appear to be carrying out any business activities in Singapore and has been floated to act as a conduit for further investments in Indian companies - HELD THAT - As in the assessment order AY 2012-13, AO has accepted the transaction of share application money/share capital received from Gold Singapore without any addition in that regard and also accepted the status of the holding company i.e. Gold Singapore. The identity and creditworthiness of Gold Singapore and the genuineness of the transaction has been accepted by the Department while framing assessments for AY 2012-13, 2015-16 and 2020-2021. The transaction of investment of share capital in the petitioner company has been duly examined in subsequent assessment years and accepted in completed assessments/reassessments under Section 143 (3) - Once the nature and source of receipts have been satisfactorily explained/proved and AO has not contradicted the explanation/information given by the assessee, there lies no cause for initiating the reassessment action for the impugned AYs 2008-09 2011-12. Thus, we are of the opinion that the reasons for initiation of the impugned assessment proceedings do not survive and therefore the impugned notices issued u/s 148 of the Act and the proceedings initiated pursuant thereto are quashed. Decided in favour of assessee.

Issues Involved:

1. Validity of the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961.
2. Examination of the identity and creditworthiness of the foreign investor, Gold Hotels & Resort Pte. Ltd. ("Gold Singapore").
3. Genuineness of the transactions involving share application money/capital.
4. Consistency in the Department's assessment approach across different assessment years.

Issue-wise Analysis:

1. Validity of the Reassessment Proceedings:

The writ petitions challenged the notices issued under Section 148 of the Income Tax Act, 1961, for the Assessment Years (AY) 2008-09 and 2011-12. The reassessment proceedings were initiated based on investigations by the Directorate of Income Tax (Intelligence & Criminal Investigation), which suggested that substantial investments made by Gold Singapore in the petitioners' companies had escaped assessment. The court noted that the reasons for reopening were similar across multiple petitions, and the challenge was primarily based on the contention that the reassessment lacked a valid basis. The court found that the reasons for reopening did not survive due to subsequent assessments where the transactions were accepted, leading to the quashing of the impugned notices and proceedings.

2. Examination of the Identity and Creditworthiness of Gold Singapore:

The Department's investigation raised doubts about the creditworthiness of Gold Singapore, asserting that it did not have sufficient funds to make the investments and was potentially acting as a conduit. However, the court observed that in subsequent assessments for AY 2012-13, 2015-16, and 2020-21, the identity and creditworthiness of Gold Singapore were accepted by the Department without any additions. This acceptance contradicted the basis for the reassessment notices, undermining the Department's position.

3. Genuineness of the Transactions:

The court examined the genuineness of the transactions involving share application money/capital received from Gold Singapore. It was noted that the transactions were scrutinized in subsequent assessment years, and the Department accepted them without adverse remarks. The court highlighted that once the nature and source of receipts were satisfactorily explained and accepted in later assessments, there was no cause for initiating reassessment for AYs 2008-09 and 2011-12.

4. Consistency in the Department's Assessment Approach:

The court emphasized the inconsistency in the Department's approach, as similar transactions were accepted in subsequent years, including in cases that reached the Supreme Court. The court noted that the reassessment for AY 2012-13 was dismissed by the Coordinate Bench, and the subsequent assessment order did not make any additions regarding the capital infusion. This inconsistency led the court to conclude that the reassessment proceedings for AYs 2008-09 and 2011-12 lacked a sustainable basis.

Conclusion:

The court concluded that the reasons for initiating the reassessment proceedings did not survive due to the Department's acceptance of similar transactions in subsequent years. The impugned notices issued under Section 148 and the proceedings initiated pursuant thereto were quashed, and the writ petitions were disposed of accordingly.

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