2016 (12) TMI 875 - HC - Income Tax

Reopening of assessment - capital gain - huge premium higher than the real worth of the share - Held that - The Petitioner s filed its objections by letter dated 20th July, 2016 to the reasons recorded. In its objections, the Petitioner points out that the reasons as recorded have been premised on figures which were incorrect. In particular, the face value of the shares is not ₹ 411/per share as indicated in the reasons recorded but ₹ 10/per share. This, in fact forms the basis of the Assessing Officer doing the exercise to determine whether any income chargeable to tax has escaped assessment. However, the aforesaid objections has not been addressed to by the Assessing Officer in his order dated 9th September, 2016. The face value of the share being ₹ 411/per share is merely reiterated without any supporting evidence to meet the objections of the Petitioner. In the above view, it would be appropriate that the order disposing of the objections dated 9th September, 2016 be set aside and the issue be restored to the Assessing Officer to dispose of the Petitioner s objections as stated and confined to contents of its objections dated 20th July, 2016. AO would dispose of the objections dated 20th July, 2016 within a period of six weeks from today.

Summary

Issues:
Challenge to Assessing Officer's notice under Section 148 of Income Tax Act, 1961 for Assessment Year 2009-10.

Analysis:

1. The petition challenges the Assessing Officer's notice dated 31st March, 2013, seeking to reopen the assessment for the Assessment Year 2009-10 under Article 226 of the Constitution of India. The notice was issued based on information received regarding a substantial share premium issued by the assessee company during the relevant financial year. The reasons for reopening the assessment highlighted discrepancies in the share capital and premium declared by the company, suggesting that the high share premium might be unaccounted funds brought in by the company. The Assessing Officer believed that income chargeable to tax had escaped assessment, citing a judgment from the Gujarat High Court supporting reopening in cases of disproportionate share premium.

2. The petitioner objected to the reasons recorded for the notice, pointing out inaccuracies in the figures mentioned, specifically regarding the face value of the shares. The objections raised were not adequately addressed by the Assessing Officer in the order dated 9th September, 2016. The petitioner emphasized that the face value of the shares was incorrectly stated in the reasons recorded, affecting the assessment exercise. Consequently, the court directed the Assessing Officer to reconsider the objections raised by the petitioner and dispose of them within six weeks, taking into account the correct figures provided by the petitioner.

3. In light of the court's directions, the interim stay on the impugned notice was extended for eleven weeks to allow the Assessing Officer time to address the petitioner's objections and comply with the necessary assessment procedures. The petitioner, through its counsel, clarified that all contentions not raised in the objections dated 20th July, 2016, were withdrawn, emphasizing the importance of addressing the objections based on the correct figures provided by the petitioner. The court disposed of the writ petition accordingly, without any order as to costs, emphasizing the need for a fair and accurate assessment process based on correct and verified information.