2022 (3) TMI 730 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of reasons to believe - bogus share premium and share application - HELD THAT - Petitioner has made categorical statement that during the assessment year 2009-10 no share of the company was issued to any party let alone at a premium and moreover the payment that was received was through banking channels and not in cash. In the order rejecting objections, the Assessing Officer has not considered or dealt with this factual aspect. Even in the petition there is averment to this effect. Though the petition came to be admitted on 24th November, 2014, no reply has been filed even denying these averments. Therefore, in our view there is no reason to believe that income chargeable to tax has escaped assessment. Moreover, even for a moment we assume that the share premium charged was unjustifiable still on receipt of share premium and share application money no income arises as the receipt is on capital account - we hereby hold that the notice issued under Section 148 is unsustainable - Decided in favour of assessee.

Summary

Issues:
Impugning a notice under Section 148 of the Income Tax Act, 1961 for assessment year 2009-10 based on incorrect information and lack of tangible material.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-10, alleging that it was issued without proper application of mind and relied on unverified information. The notice claimed that the petitioner's income for that year had escaped assessment. The reasons provided for re-opening highlighted discrepancies in the issuance of equity shares at a premium and the receipt of share premium. The petitioner denied issuing shares at a premium and clarified that the payment received was through banking channels, not in cash. The court noted that the reasons for re-opening did not disclose any tangible material and were based on incorrect facts. It was emphasized that even if the share premium charged was unjustifiable, it did not result in taxable income as the receipt was on a capital account. The court concluded that there was no basis to believe that income chargeable to tax had escaped assessment, leading to the quashing of the notice and the order on objections.

Conclusion:
The High Court of Bombay held that the notice issued under Section 148 of the Income Tax Act, 1961, dated 29th March 2014, was unsustainable and therefore quashed and set aside. Additionally, the order on objections was also quashed and set aside. The petition was disposed of in favor of the petitioner.