2019 (4) TMI 836 - HC - Income Tax

Reopening of assessment u/s 147 - original assessment u/s 143(3) - failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment - wrong facts in reasons recorded - Assessee received Share premium from Shri Dalal - addition of pre-operative expenses - HELD THAT - At the time of scrutiny assessment, details of both the issues on which reopening is sought to be made, have been considered by the Assessing Officer at the time of passing the assessment order under section 143(3) and therefore, there is no failure on the part of the assessee to furnish fully and truly all material facts necessary for assessment before the AO. From the records, it also appears that Shri Dalal is issued only 15,75,000 shares and not 10,00,000 shares as recorded in the reasons recorded by the Assessing Officer. Therefore, the reasons recorded by the Assessing Officer are not on the basis of any further materials or details which have come to the knowledge of the Assessing Officer after passing the assessment order, and it is only a guess work on part of the Assessing Officer while recording the reasons amounting to a fishing inquiry. Impugned notice cannot be sustained as the same is issued after expiry of four years from the end of relevant assessment year as proviso to section 147 of the Act would be applicable in absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment year 2011-12.

Summary

Issues Involved:
Challenge to notice under section 148 of the Income Tax Act, 1961 for reopening assessment for assessment year 2011-12 based on alleged discrepancies in share issuance and treatment of pre-operative expenses.

Analysis:
1. The petitioner contested the notice dated 30.3.2018 under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for assessment year 2011-12. The petitioner argued discrepancies in the reasons provided for reopening, specifically regarding the issuance of shares to a particular individual and the treatment of pre-operative expenses.

2. The reasons for reopening the assessment included concerns about the issuance of shares to an NRI individual, Shri Dalal, and the treatment of pre-operative expenses. The Assessing Officer alleged that the share issuance to Shri Dalal was not genuine, leading to an alleged escape of assessment amounting to a significant sum. Additionally, the treatment of pre-operative expenses was questioned, suggesting that certain expenses should not have been allowed, resulting in another alleged escape of assessment.

3. The petitioner refuted the allegations, providing evidence that contradicted the Assessing Officer's claims. The petitioner argued that all necessary details were submitted during the original scrutiny assessment, including documents supporting the share issuance and the treatment of pre-operative expenses. It was contended that the Assessing Officer's reasons for reopening were based on incorrect information and lacked proper application of mind.

4. The High Court analyzed the arguments presented by both parties and reviewed the documents on record. It was observed that the issues raised for reopening had already been considered during the original assessment proceedings under section 143(3) of the Act. The Court noted discrepancies in the reasons provided by the Assessing Officer, such as incorrect details regarding the share issuance to Shri Dalal and the treatment of pre-operative expenses.

5. Ultimately, the Court found that there was no failure on the part of the petitioner to disclose all material facts necessary for assessment. The reasons provided for reopening were deemed to lack proper basis and amounted to a fishing inquiry. As a result, the Court ruled in favor of the petitioner, quashing the impugned notice dated 30.3.2018 under section 148 of the Income Tax Act, 1961, and all consequential actions taken. The petition was allowed, with no order as to costs.