2023 (1) TMI 280 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - taxability u/s 56(2) (vii)(b) - assessee had issued 6,00,75,029 equity shares and received premium for which excess money received - HELD THAT - No fresh tangible material distinct from what was made available by the petitioner during the assessment proceedings is emerging and specific queries which have been raised with regard to issues now raised have already been explained by the petitioner and the assessing authority having accepted the replies and explanation, no addition is made and as such, a case is made out by the petitioner calling for our interference, since reopening of assessment appears to be on the basis of change of opinion which is against the settled proposition of law as discussed herein-above. At the time of first assessment, there was no conscious consideration of material and no mistake can be said to have been committed by the AO permitting the Revenue to re-open the assessment. No income appears to have escaped assessment as is visible from the explanation offered by assessee and consideration thereof by the authority in the present case on hand. Hence, an attempt has now been made to wriggle out from settled proposition of law by projecting that mistake might have been committed by the authority in not consciously considering the explanation. The said stand is not possible to be accepted by us. Hence, we are of the clear opinion that a case is made out by the petitioner. Special Civil Application is allowed.

Issues Involved:
1. Legality and validity of the impugned notice dated 20.3.2021 under Section 148 of the Income Tax Act.
2. Legality and validity of the impugned order dated 16.11.2021 disposing of objections against the notice under Section 148.
3. Allegation of change of opinion by the Assessing Officer (AO) in reopening the assessment.
4. Applicability of Section 56(2)(vii)(b) of the Income Tax Act to the non-resident shareholders.
5. Requirement of fresh tangible material for reopening the assessment.

Issue-Wise Detailed Analysis:

1. Legality and Validity of the Impugned Notice Dated 20.3.2021 Under Section 148 of the Income Tax Act:
The petitioner challenged the notice issued under Section 148 of the Income Tax Act on 20.3.2021, arguing that it was unjust, arbitrary, and in violation of Article 14 of the Constitution of India. The petitioner contended that the notice was issued without proper application of mind by the higher authority, as the sanction was granted mechanically within a few hours. The court noted that the Assessing Officer had already scrutinized the details during the original assessment and had not made any additions, indicating that the issue had already been considered. The court held that the issuance of the notice under Section 148 was a mechanical exercise of power and was based on a change of opinion, which is impermissible.

2. Legality and Validity of the Impugned Order Dated 16.11.2021 Disposing of Objections Against the Notice Under Section 148:
The petitioner argued that the order dated 16.11.2021, disposing of their objections against the notice under Section 148, violated guidelines that require a clear period to be given to the petitioner to challenge the notice. The court observed that the reasons for reopening the assessment were based on the same material that had already been scrutinized during the original assessment. The court held that the order disposing of the objections was unsustainable as it was based on a mere change of opinion without any new material or information.

3. Allegation of Change of Opinion by the Assessing Officer (AO) in Reopening the Assessment:
The petitioner contended that the reopening of the assessment was based on a change of opinion, which is impermissible under Section 147 of the Income Tax Act. The court agreed with the petitioner, noting that the AO had already scrutinized the details regarding the share premium during the original assessment and had not made any additions. The court held that the reopening of the assessment was based on a mere change of opinion, which is not permissible under the law.

4. Applicability of Section 56(2)(vii)(b) of the Income Tax Act to the Non-Resident Shareholders:
The petitioner argued that Section 56(2)(vii)(b) of the Income Tax Act applies only to resident shareholders and not to non-resident shareholders. The court noted that the petitioner had issued shares to non-resident shareholders and had received the share premium from them. The court held that the provisions of Section 56(2)(vii)(b) were not applicable to the petitioner's case as the consideration was received from non-residents.

5. Requirement of Fresh Tangible Material for Reopening the Assessment:
The petitioner argued that there was no new material or information that came to the knowledge of the respondent authority to justify the reopening of the assessment. The court observed that the reopening of the assessment was based on the same material that had already been scrutinized during the original assessment. The court held that in the absence of any fresh tangible material, the reopening of the assessment was impermissible.

Conclusion:
The court concluded that the reopening of the assessment was based on a mere change of opinion without any new material or information. The court quashed and set aside the impugned notice dated 20.3.2021 under Section 148 of the Income Tax Act and the order dated 16.11.2021 disposing of the objections against the notice. The court allowed the petition and made the rule absolute, with no order as to costs.

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