2016 (9) TMI 647 - HC - Income Tax

Reopening of assessment - receipt of share capital or share premium money - Held that - Assessing Officer had no material to suggest that the petitioner company had during the period relevant to the assessment year 2008-09, received any share capital or share premium money to the tune of ₹ 20 lakhs or any other sum from the companies controlled and managed by Shri Pratik R. Shah. In fact, the order of assessment refers to 10 such companies so managed and controlled by Shri Pratik R. Shah, but does not refer to any of them from whom the petitioner had received any such amounts during the said period. The order of assessment itself thus, falsifies the ground on which the notice for reopening was issued. Revenue however, made a last desperate attempt to save the proceedings by suggesting that the notice of reopening merely carried a reference to a wrong assessment year through a typographical error. On the basis of material pertaining to the financial year 2008-09 by error notice came to be issued for the assessment year 2008-09 instead of assessment year 2009-10. Had this been a mere typographical error so treated by the Assessing Officer, we would have considered the question whether a mere typographical error could invalidate otherwise valid proceedings. However, even the Assessing Officer has not treated the impugned notice as to referring to the assessment year 2009-10 wrongly typed as assessment year 2008-09. He has all along acted as if through the impugned notice, the assessment for the assessment year 2008-09 having been reopened. Whatever doubt one may have would disappear when one refers to multiple notices that the Assessing Officer issued to the assessee for supplying documents pertaining to the said assessment year and the final order of assessment that he passed. The Assessing Officer made multiple additions in the assessment order for the assessment year 2008-09 which obviously he could not have done had he treated the notice for reopening as relatable to the assessment year 2009-10. Thus inescapable conclusion that one would reach is that the notice for reopening the assessment for the assessment year 2008-09, was based on completely wrong reasons. In other words, reasons lacked validity. When the notice itself was thus, defective, it would have no effect of reopening on the assessment. Any action taken by the Assessing Officer subsequent to or in pursuance of such notice would also be invalidated. - Decided in favour of assessee

Summary

Issues:
Challenge to notice reopening assessment for AY 2008-09 based on share capital received, Objections raised by petitioner, Ex parte assessment order passed, Validity of reopening assessment, Typographical error in notice for wrong assessment year, Lack of material to support reopening, Invalidity of notice and subsequent assessment order.

Detailed Analysis:

1. Challenge to Notice Reopening Assessment:
The petitioner challenged a notice dated 30.03.2015 reopening the assessment for AY 2008-09 based on alleged receipt of share capital. The Assessing Officer believed that income of ?20,00,000 had escaped assessment due to share capital and share premium received from entities managed by a specific individual. The petitioner contended that no such amount was received from the mentioned entities and provided evidence to support this claim.

2. Objections Raised by Petitioner:
The petitioner raised objections to the reopening, presenting bank statements and share capital account to prove no receipt of ?20,00,000 from the specified entities. Despite this, the Assessing Officer dismissed the objections citing lack of supporting evidence, leading to an ex parte assessment order being passed.

3. Ex Parte Assessment Order:
The Assessing Officer proceeded with an ex parte assessment order on 23.03.2016, adding ?20,00,000 as bogus share application money and making further substantial additions to total income, totaling ?8.49 crores.

4. Validity of Reopening Assessment:
The High Court emphasized the requirement for the Assessing Officer to have a reasonable belief that income chargeable to tax had escaped assessment before validly reopening an assessment. Even if a return was accepted without scrutiny, this condition must be met.

5. Typographical Error in Notice for Wrong Assessment Year:
The department argued that the notice referred to the wrong assessment year due to a typographical error, but the High Court found that the notice was based on completely wrong reasons, lacking validity. The subsequent assessment order was invalidated as a result.

6. Lack of Material to Support Reopening:
The Court noted that the Assessing Officer had no material to support the claim that the petitioner received share capital from the specified entities, as the order of assessment did not provide any source for the addition of ?20,00,000 to the total income.

7. Invalidity of Notice and Subsequent Assessment Order:
Concluding that the notice for reopening the assessment was defective and lacked validity, the High Court set aside the notice dated 30.03.2015 and invalidated the assessment order dated 23.03.2016. The petition was disposed of accordingly.

This detailed analysis highlights the procedural and substantive issues involved in the legal judgment, focusing on the validity of the notice for reopening assessment, objections raised by the petitioner, the ex parte assessment order, and the ultimate decision of the High Court to set aside the notice and subsequent assessment order due to lack of material and typographical errors.