2023 (1) TMI 1154 - AT - Income Tax

Reopening of assessment u/s 147 - share premium received was in excess of intrinsic value, which has escaped assessment - HELD THAT - A perusal of the reasons recorded specifically shows that there is no quantification of the income which is alleged to have escaped assessment much less the estimate of the income that is alleged to have escaped assessment. A perusal of the decision in the case of Khubchandani Healthparks (P) Ltd. 2016 (2) TMI 710 - BOMBAY HIGH COURT clearly shows that the notice for reopening of assessment itself does not indicate the approximate amount of income, which the AO has reason to believe has escaped assessment nor does it quantify the extent of such income, then the reasons recorded is liable to be held to be invalid and reopening quashed. As the reasons recorded does not quantify even an estimated amount of the alleged income which has escaped assessment and as it is noticed that the reasons recorded do not contain any live link to the alleged illegal mining, the reasons recorded for the purpose of reopening of assessment are invalid and is nothing but fishing enquiry. Consequently, the reasons recorded are held to be invalid and notice issued u/s. 148 of the Act for the purpose of reopening stands quashed. Consequently, the assessment also stands quashed.Appeals of the assessee stand allowed.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act.
2. Adequacy and specificity of the reasons recorded for reopening the assessment.
3. The legal implications of the information received from the Department of Income Tax (Investigation) and other authorities.
4. The role of the Shah Commission Report and its impact on the case.
5. The procedural compliance in issuing the notice under Section 148.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The primary issue was whether the reopening of the assessment under Section 147 was valid. The assessee contended that the reasons recorded for reopening did not quantify the value of the income that allegedly escaped assessment. The Tribunal noted that the reasons recorded did not indicate even an approximate amount of income that had escaped assessment, which is a requirement under Section 149.

2. Adequacy and Specificity of the Reasons Recorded:
The Tribunal observed that the reasons recorded by the Assessing Officer (AO) did not quantify the income that had allegedly escaped assessment. The AO mentioned that a "considerable amount of taxable income" had escaped assessment but did not provide any specific figures. The Tribunal cited the Bombay High Court's decisions in Khubchandani Healthparks (P) Ltd. and Pr. CIT vs. Shodiman Investments Pvt. Ltd., which held that the notice for reopening must indicate the approximate amount of income that has escaped assessment.

3. Legal Implications of Information Received:
The AO relied on information from the Director of Income Tax (Investigation), Bhubaneswar, which referred to the Shah Commission Report. The Tribunal noted that the figures in the reasons recorded were identical to those in the letter from the Director of Income Tax (Investigation). However, these figures were not substantiated and had not been acted upon by the State Government. The Tribunal emphasized that the information must have a "live link" to the alleged illegal mining, which was not present in this case.

4. Role of the Shah Commission Report:
The Shah Commission Report was central to the AO's reasons for reopening the assessment. The Tribunal noted that while the Shah Commission Report talked about substantial illegal mining, it did not result in any actual finding of illegal mining against the assessee. The Supreme Court had restored the issue to the State Government, and no action had been initiated even after seven years. Therefore, the foundation of the reasons recorded for reopening did not exist.

5. Procedural Compliance in Issuing Notice under Section 148:
The Tribunal examined whether the procedural requirements for issuing the notice under Section 148 were met. The AO recorded the reasons on 21.03.2016, and the notice was issued on 28.03.2016 after receiving approval from the CIT-I, Bhubaneswar. The Tribunal found no procedural infirmity in this regard. However, the Tribunal emphasized that the reasons recorded must be valid and specific, which was not the case here.

Conclusion:
The Tribunal concluded that the reasons recorded for reopening the assessment were invalid as they did not quantify the income that allegedly escaped assessment and lacked a "live link" to the alleged illegal mining. Consequently, the notice issued under Section 148 and the subsequent assessment were quashed. Both appeals of the assessee were allowed.

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