2019 (1) TMI 1481 - HC - Income Tax

Reopening of assessment - reopening of beyond the period of four years from the end of relevant assessment year - addition u/s 68 - Held that - We notice that the impugned notice have been issued beyond the period of four years from the end of relevant assessment year. There is neither any allegation, nor any suggestion in the impugned notice that income chargeable to tax has escaped assessment due to the failure of the assessee to disclose truly and fully all material facts. Only on this ground therefore, the impugned notice would be rendered invalid. There is yet another ground why we cannot allow the AO to act on such notice. This is so because in the original scrutiny the assessment, the AO had examined the issue on which he now wants to reopen the assessment. In the reasons recorded he had referred to the authorized capital of the assessee-company of ₹ 4 crores representing 40 lakhs shares of ₹ 10/each, out of which 39 lakhs 90 thousand shares were issued at the premium of ₹ 145 per share. He has recorded that no details as to how the share premium was worked out at ₹ 145 per share was produced on record. It was on account of this that AO held the belief that the share premium sum of ₹ 57.85 crores (rounded off) had escaped assessment. AO now cannot have second innings and re-examine the same issue, in absence of any tangible material outside the record within his possession. Any attempt on his part would be based on mere change of opinion. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice of reopening of assessment for the assessment year 2011-12.

Analysis:
The petitioner, a company, filed a return of income for the assessment year 2011-12 declaring "Nil" income. The Assessing Officer passed an order under Section 143(3) of the Income Tax Act, 1961, computing the petitioner's income at ?99,000. The Assessing Officer issued a notice of reopening of assessment dated 22nd March, 2018, based on reasons related to share premium. The reasons stated that there was an escapement of income amounting to ?57,85,50,000 due to failure to examine the issue of share premium. The notice was issued under Section 147 of the Income Tax Act, 1961. The petitioner raised objections to the notice, which were rejected by the Assessing Officer. However, the High Court noted that the notice was issued beyond the four-year period from the end of the relevant assessment year and lacked any allegation of failure to disclose material facts, rendering it invalid.

The High Court further observed that the Assessing Officer had already examined the issue of share premium during the original scrutiny assessment. The Assessing Officer had made limited disallowance on this ground in the original assessment order. As there was no new material or tangible evidence outside the record, the High Court held that the Assessing Officer could not re-examine the same issue in the absence of any substantial change in circumstances. The High Court concluded that any attempt by the Assessing Officer to reopen the assessment would amount to a mere change of opinion and set aside the impugned notice. Therefore, the petition challenging the notice of reopening of assessment for the assessment year 2011-12 was disposed of in favor of the petitioner.