9911796707
TMI Blog2016 (1) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied to the petitioner the reasons recorded for issuing such notice, which read as under:- "In this case, on verification of records, it is found that the Assessee is a Private Ltd. Company engaged in the business of Manufacturing of Ceramic Tiles. On the basis of information available with this office, assessee company had issued its shares at huge premiums during F.Y. 2010-11. On verification of "PART-A-BS" of return of income filed by the assessee company, it is found that the assessee company has shown "Issued, Subscribed and Paidup" share capital of Rs. 2,66,57,000/-. During the F.Y. 2010-11, the assessee had issued 60,000/- shares at a face value of Rs. 10 per share with a premium of Rs. 990/- per share. Hence the premium received by the assessee per share is Rs. 990 for the share of face value of Rs. 109/-. On the basis of the assets and liabilities furnished by the assessee company in its balance sheet, and computing the net worth of the company, per share valuation of the assessee company comes out to Rs. 33/-. Hence the shares of the company have been subscribed by the shareholders at a premium which is very high in comparison to the real worth of the shares. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion to the reasons recorded by the Assessing Officer, Counsel contended that merely because some investors had invested in the shares of the company at a value which may seem to be excessive to the Assessing Officer, would not imply that the additional amount represents the unexplained cash credit of the assessee company which would be covered under Section 68 of the Act. 4.2 Counsel lastly submitted that in any case, the assessee company had not commenced its manufacturing activity till such investments were made. Therefore, there cannot be any income till the business commenced. 5. In support of his contentions, Counsel drew our attention to a decision of Division Bench of the Delhi High Court in case of Commissioner of Income Tax Vs. Orient Craft Ltd., reported in 354 ITR, page No.536, in which it was held and observed as under:- "18. In the present case the reasons disclose that the Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 291 ITR, page No.500 (SC), it was held and observed as under:- "16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe# would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "11. It is undoubtedly true that proviso to section 143(2) of the Act prescribes a time limit within which such notice could be issued. It is equally well settled that such notice is mandatory and in absence of notice under section 143(2) of the Act within the time permitted, scrutiny assessment under section 143(3) cannot be framed. However, merely because no such notice was issued, to contend that the assessment cannot be reopened, is not backed by any statutory provisions. Counsel for the petitioner did not even stretch his contention to that extent. The case of the petitioner as we understand is that in guise of reopening of an assessment, the Assessing Officer cannot try to scrutinize the return. This aspect substantially overlaps with the later contention of the petitioner that the reasons recorded by the Assessing Officer were not germane and were not sufficient to permit reopening. 12. We must recall that the return filed by the petitioner was not taken in scrutiny. No assessment, thus, took place. The Assessing Officer without any assessment, merely issued an intimation under section 143(1) of the Act accepting such return. In that view of the matter, it cannot be state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme between a return which is accepted under section 143(1) of the Act as compared to a return of which scrutiny assessment under section 143(3) of the Act is framed, the basic requirement of section 147 of the Act that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment is not done away with. Section 147 of the Act permits the Assessing Officer to assess, reassess the income or re-compute the loss or depreciation if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. This power to reopen assessment is available in either case, namely, while a return has been either accepted under section 143(1) of the Act or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both of cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. 8.1 It was concluded as under:- "16. It would, thus, emerge that even in case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement of reason to believe even after amendment in Section 147 of the Act therefore, must be seen in background of such facts. We are afraid, the Supreme Court never meant to convey that to reopen an assessment, which was accepted under Section 143(1) of the Act, there must be some tangible material, which is alien to the record. 10. In case of Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, reported in 350 ITR, page No.266, the Division Bench of this Court in fact rejected the contention of the assessees that for reopening of assessment, which was previously framed after scrutiny where notice is issued within four years from the end of relevant assessment year, the material to enable the Assessing Officer to form the belief that income chargeable to tax has escaped assessment, must be alien to the record. The Court observed as under:- "30. In the result, we are of the opinion that reopening of an assessment within a period of four years from the end of relevant assessment year after 1.4.1989 could be made as long as the same is not based on mere change of opinion. Merely because a certain material which is otherwise tangible and enables the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g after 4 years as per the proviso, conduct of the assessee and disclosures made by him are relevant. However, when the proviso is not applicable, the said precondition is not applicable. This additional requirement is not to be satisfied when re-assessment proceedings are initiated within four years of the end of the assessment year. The sequitor is that when the proviso does not apply, the re-assessment proceedings cannot be declared invalid on the ground that the full and true disclosure of material facts was made. In such cases, reassessment proceedings can be declared invalid when there is a change of opinion. As a matter of abundant caution we clarify that failure to state true and correct facts can vitiate and make the principle of change of opinion inapplicable. This does not require reference to and the proviso is not invoked. The difference is this; when proviso applies the condition stated therein must be satisfied and in other cases it is not a prerequisite or condition precedent but the defence/plea of change of opinion shall not be available and will be rejected. 25. Thus if a subject matter, entry or claim/deduction is not examined by an Assessing Officer, it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry manner in which he completed the assessment. This does not necessarily mean that wherever the assessing officer has completed the assessment under section 143(3) it must be taken as if he has discharged his duties in a perfunctory manner. The ratio of the judgment is rooted to the salutary principle that the assessees shall not be subjected to harassment if they have furnished full and true particulars at the time of the original assessment, which is what the Supreme Court observed in the judgment in Srikrishna Pvt. Ltd. (supra). It certainly does not imply that every assessment order passed under section 143 (3) without an elaborate discussion of various contentions and claims put forth by the assessee is necessarily a wrong order to be corrected later by resorting to section 147. Making an assessment to income tax represents the quantification of the charge to tax; it is a serious task. Legal consequences follow. A return of income is not a mere scrap of paper. It is to be treated with the respect it deserves. I think the real principle laid down by the Full Bench in Kelvinator (supra) is that if the assessee has discharged his duty of furnishing full and true particulars at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 990/- per share. The Assessing Officer, on the basis of assets and liabilities furnished by the assessee company in its balance sheet, after computing the net worth of the company, noted that the share valuation of the assessee company would come to Rs. 33/-, whereas shares have been allotted at Rs. 1,000/- per share, i.e. at a premium of Rs. 967/- per share. On the basis of such working out, he recorded his reason to believe that income to the extent of Rs. Rs. 5.80 crores had escaped assessment. We do not find that the reasons are perverse or so untenable as to terminate the assessment at this stage on the ground that the Assessing Officer cannot be stated to have any reason to believe or tangible material to form such an opinion that income chargeable to tax had escaped assessment. Prima facie, the facts appear to be glaring. Whether the assessee will be able to discharge the minimal burden of establishing identity, source and creditworthiness of the depositors is a question not possible to answer without scrutiny. Whether the assessee had started its manufacturing activity and consequently its business operations so as to earn income or not are the issues which cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
