9911796707
TMI Blog2016 (7) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) whereby, he seeks to reopen the assessment of the petitioner for assessment year 2010-11. 2. The petitioner, a Limited Company, is engaged in the business of manufacturing M. S. Ingots, R.R. Castings and CTD Bars. The petitioner filed its original return of income for assessment year 2010-11 on 30.10.2010 declaring total income under MAT provisions at ₹ 93,96,941/-. The return was processed under section 143(1) of the Act. The Assessing Officer, thereafter, reopened the assessment under section 147 of the Act upon culmination of which, he passed an assessment order under section 143(3) read with section 147 of the Act on 17.02.2015 whereby, the total income as declared by the petitioner was accepted by him and the proceedings under section 148 of the Act were also dropped. Subsequently, by the impugned notice dated 31.03.2015 issued under section 148 of the Act, the assessment of the petitioner is once again sought to be reopened for assessment year 2010-11. By a letter dated 16.08.2015, the petitioner requested the respondent to provide the reasons for reopening the assessment of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer wants to do is to carry out a fishing inquiry. Referring to the reasons recorded, it was pointed out that the Assessing Officer is not sure as to what is the income that has escaped assessment. 3.2 It was contended that for this year, viz., assessment year 2010-11, receipt of share at a premium by itself cannot become an income and it is for the Assessing Officer to point out that the transaction is sham and that the money has come back to him. 3.3 Reliance was placed upon the decision of this court in the case of Shree Chalthan Vibhag Khand v. Deputy Commissioner of Income Tax, (2015) 376 ITR 419 (Guj.), wherein the court had noted that on the basis of the order passed by the Commissioner of Income Tax (Appeals) in the case of some other assessees, the satisfaction of the Assessing Officer and the formation of opinion in the case of the assessee therein could not be sustained and the same could be said to be a borrowed satisfaction from another officer. Such borrowed satisfaction in the absence of any application of mind and any real finding in the case of the assessee, would not constitute valid reason to believe that the income has escaped assessment. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer having found that the facts of the year under consideration are similar to the facts of the preceding assessment year, viz., 2009-2010, it cannot be said that he had no reason to believe that the income chargeable to tax had escaped assessment. It was submitted that the reasons recorded by the Assessing Officer clearly reflect that he has acted on the basis of the information received from the I CI as well as on the basis of the assessment order passed in the preceding assessment year. It was submitted that it is by now well settled that even an assessment order of a previous year or a subsequent year can constitute information for the purpose of reopening the assessment. 4.2 Reference was made to the decision of this court in the case of Olwin Tiles (India) (P) Ltd. v. Deputy Commissioner of Income Tax, (2016) 283 CTR (Guj.) 200, wherein, the assessment was sought to be reopened on the ground that the assessee had issued 60,000 shares at a face value of ₹ 10/- per share with a premium of ₹ 990 per share. The Assessing officer had formed the opinion that excess premium amount of ₹ 967/- was unexplained cash credit in the hands of the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at this stage. 4.4 It was further submitted that the issuance of shares at 900% premium of loss making unlisted company is undisputedly unusual and lacks commercial substance and hence, reopening of assessment by Assessing Officer within a period of four years is based upon a firm belief that income chargeable to tax has escaped assessment. It was submitted that initially, the return of income was accepted under section 143(1) of the Act and subsequently, during the course of proceedings under section 143(3) read with section 147 of the Act, the Assessing Officer had not gone into this issue and hence, the contention of the petitioner that the reopening is based upon a mere change of opinion, does not merit acceptance. It was, accordingly, urged that the petition being devoid of merits, deserves to be dismissed and that the Assessing Officer should be permitted to proceed further pursuant to the impugned notice. 5. In rejoinder, Mr. B. S. Soparkar, learned counsel for the petitioner submitted that the report of I CI is a quantitative report and not a qualitative report and that the report alone has no legs to stand. It was submitted that if on a perusal of the report the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated, which culminated into an order dated 09.03.2015. In the meanwhile, the assessment for the year under consideration, viz., assessment year 2010-11, came to be reopened by the Assessing Officer and an assessment order came to be made on 17.02.2015. Such order came to be passed under section 143(3)(ii) read with section 147 of the Act by Shri R. P. Murkunde, Assistant Commissioner of Income Tax, Panchmahal Circle, Godhra. Almost immediately thereafter, the assessment of the petitioner is sought to be reopened by issuance of the impugned notice dated 31.03.2015 whereby, the assessment of the petitioner is sought to be reopened once again for assessment year 2010-11. 7. Before adverting to the merits of the rival submissions, it may be germane to refer to the reasons recorded by the Assessing Officer for the purpose of reopening the assessment which read thus: ORDER SHEET M/s. Kothi Steel Ltd. AY 2010-11 31/03/15 The assessee M/s Kothi Steel Ltd. for AY 2010-11 has filed its Return of Income (RoI) on 10/09/2010. The said RoI has been processed u/s 143(1) on 11/01/2011. Information was received from I CI that certain corporate entities have issued shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany which is not doing financially well. This gives prima facie a reason to believe that income pertaining to the share premium received has given an unentitled benefit to the assessee to the tune of ₹ 5,00,00,000/-. Accordingly, I have prima facie reason to believe that income to the tune of at least ₹ 5,00,00,000/- has escaped assessment for the AY 2010-11. Accordingly, I propose to issue notice u/s 148 of the Income Tax Act, 1961 as I have prima facie reason to believe that income to the tune of at least ₹ 5,00,00,000/- has escaped assessment for the AY 2010-11 along with any other income chargeable to tax which may come to my notice subsequently in the course of proceedings u/s 147 of the I T Act, 1961. 8. Thus, the reasons recorded reveal that the assessee had filed return of income on 10.09.2010, which came to be processed under section 143(1) on 11.01.2011. The reasons recorded, however, are silent with regard to the passing of assessment order dated 17.02.2015 under section 143(3)(ii) read with section 147 of the Act. In the reasons, it is further recorded that the information was received from I CI that certain corporate entities have iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined is as to whether in the facts of the present case, it can be said that the Assessing Officer seeks to reopen the assessment based upon a mere change of opinion. From the facts as noted hereinabove, it is apparent that initially, the return of income was accepted under section 143(1) of the Act and subsequently, the assessment was sought to be reopened on the ground that there was a discrepancy in the opening stock mentioned in the profit and loss account and the closing stock of the previous year, which had resulted into the income escaping assessment. On a perusal of the assessment order made under section 143(3) read with section 147 of the Act, it is evident that the issue with regard to issuance of exorbitant share premium was not subject matter of the said assessment. From the material which has been placed on record, there is nothing to show that during the course of the assessment proceedings, the Assessing Officer had called for any information from the petitioner as regards issuance of shares at a premium and had examined the issue, though the same may not have been reflected in the assessment order. According to the assessee, since in relation to assessment year 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year. It is not any and every material, however vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. (See ITO v. Lakhmani Mewal Das, (1976) 3 SCC 757). 12. Before adverting to the merits of the case, it would be necessary to examine as to whether on the reasons recorded, the Assessing Officer could have formed the belief that income chargeable to tax has escaped assessment. As noticed hereinabove, all that is stated in the reasons recorded is that the Assessing Officer has received information from the I CI that certain corporate entities have issued shares at a premium. It appears that the petitioner s name was also included in such list. However, it cannot be gainsaid that per se an information that the petitioner has issued shares at a premium would by itself not constitute an information for the purpose of formation of belief that the income chargeable to tax has escaped assessment. The Assessing Officer has also placed reliance upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence either with respect to future profitability of the unit or that the value of assets belonging to the company had appreciated substantially so as to justify collection of such a high premium and that the onus under section 68 of the Act squarely lies on the assessee. In the opinion of this court, insofar as the onus under section 68 of the Act is concerned, it is for the assessee to prove the identity, genuineness, creditworthiness of the parties and not to show its profitability or value of assets etc., as is sought to be contended in the affidavit-in-reply. Besides, all that is stated in the reasons recorded is that the assessee is not doing financially well, without stating any facts as regards the financial status of the assessee. 13. The learned counsel for the respondent has placed strong reliance upon the decision of this court in the case of Olwin Tiles (India) (P) Ltd. v. Deputy Commissioner of Income Tax (supra) wherein, the court had dismissed the petition challenging the reopening on the ground that the assessee company had issued its shares at a huge premium during the financial year 2010-11. In this regard, a perusal of the said decision reveals that in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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