9911796707
TMI Blog2019 (10) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the share premium would arise when called upon during the assessment or validly reopened assessment. At any rate, the reopening of assessment which was framed after the scrutiny would not be permissible for a fishing or roving inquiry. As observed by this Court in Pushpak Bullion (P.) Ltd. [ 2016 (7) TMI 176 - GUJARAT HIGH COURT] this is not to suggest that after the original assessment was completed, if the Assessing Officer has tangible material to form a belief that the allocation of shares at a premium was a mere device to route some unaccounted money of the company or that the genuineness and creditworthiness of the investors was doubtful, the reopening could not have been resorted to. In the case on hand, we find the vital link missing from the reasons recorded, such link being the material at the command of the Assessing Officer to form such a belief. - Decided in favour of assessee. - R/SPECIAL CIVIL APPLICATION NO. 16575 of 2018 - - - Dated:- 16-9-2019 - MR J.B. PARDIWALA AND MR A.C. RAO, JJ. For The Petitioner (s) : MR B S SOPARKAR For The Respondent (s) : MRS MAUNA M BHATT ORAL JUDGMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.01.2015 that the assessee company had received share premium/share application money to the tune of ₹ 10,01,38,866/-. From the records, it is seen that the assessee company has issued certain shares at a price which was over and above the nominal value and received total share premium of ₹ 10,11,94,866/- during the AY 2011-12. As above information was received after completion of assessment u/s 143(3) of the Act, 1961, the source and reason for receiving of abnormal share premium of ₹ 10,11,94,866/- could not be examined during the assessment proceedings. The assessee company has not given details of high premium received during the course of assessment or in its return of income. 3. In view of the matter, the assessee company has hefty premium of ₹ 10,11,94,866/- is totally unjustified if it is compared with book value of the assessee company and it is clear that in the garb of high share premium, the assessee has introduced its own undisclosed income therefore, to the extent of ₹ 10,11,94,866/- has escaped income for assessment. Therefore, this is a fit case for initiating proceedings u/s.147 of the Act for A.Y. 2011-12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly accounted for and disclosed in the books. He would submit that the share premium is a capital receipt and is not liable to be taxed. He further submitted that the attempt on the part of the respondent in treating the share application as undisclosed income is erroneous as there is not a whisper of any evidence to hold that the writ-applicant had earned any undisclosed income or the same had been routed back by form of share premium. 9. Mr.Soparkar, in support of his submissions, has placed strong reliance on the following decisions : ( 1)Dhruv Dipakbhai Panchal v. Income Tax Officer - Ward, (2018)93 taxmann.com 61 (Gujarat); ( 2)Dhirendra Hansraj Singh v. Assistant Commissioner of Income Tax, (2018)94 taxmann.com 372 (Gujarat); ( 3) Pushpak Bullion (P.) Ltd. v. Deputy Commissioner of Income-tax, Circle-3(1), (2016)71 taxmann.com 326 (Gujarat); ( 4) NuPower Renewables Pvt. Ltd. v. Asst. Commissioner of Income Tax 1-(2)(2) and others (Writ Petition No.3618 of 2018 (Bombay), decided on 7th March 2019. 10. In such circumstances referred to above, Mr.Soparkar prays th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. In such circumstances referred to above, Mr.Bhatt prays that there being no merit in the present writ-application, the same be rejected. 17. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned notice issued by the respondent under Section 148 of the Act, 1961, is tenable in law. 18. On 25th October 2018, a coordinate bench of this Court passed the following order : 1. The petitioner has challenged a notice of reopening of assessment for the assessment year 2011-12 which has been issued beyond a period of four years from the end of the relevant assessment year. Counsel for the petitioner drew our attention to the reasons recorded by the Assessing Officer for issuing notice and contended that there was no failure on part of the assessee to disclose truly and fully all material facts. There is no material with the Assessing Officer outside of the record in connection with share premium money received by the assessee. Merely because the company received share premium, there cannot be an autom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. ( vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. ( vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. ( viii) If the original assessment is processed under Section 143(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment. ( ix) In orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. ( xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a bona fide belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. ( xvi) The concept of change of opinion has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. ( xvii) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assesee's profits have escaped assessment or have been assessed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 20. In the reply to the impugned notice issued by the respondent under Section 148 of the Act, 1961, the following was brought to the notice of the respondent as regards the share premium of ₹ 10,01,38,886=00. 2.1.2. Therefore, upon perusal of the table above, your goodself would observe that such shares have been issued at a premium to a third party, non-resident Mauritius based company named Helix Investments Company. Your goodself would appreciate that it is an India-focused private equity fund that provides growth capital to medium and small size companies in India. The fund's objective is to work with dynamic entrepreneurs and management teams and provide them with capital and strategic advice to support their future growth. in view of the same. Helix investments Company invested in HHPE in alignment with the objectives of such investment company. 2.1.3. Further, the investments in the form of Foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then alone Chapter X of the Act could be invoked. Sections 4 and 5 of the Act brings/charges to tax total income of the previous year. This would take us to the meaning of the word income under the Act as defined in Section 2 (24) of the Act. The amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2)(viib) of the Act. Thus such capital account cannot be brought to tax as already discussed herein above while considering the challenge to the grounds as mentioned in impugned order. e) The issue of shares at a premium is on Capital account and gives rise to no income. The submission on behalf of the revenue that the shortfall in the ALP as computed for the purposes of Chapter X of the Act is misplaced. The ALP is meant to determine the real value of the transaction entered into between AEs. It is a re-computation exercise to be carried out only when income arises in case of an International transaction between AEs. It does not warrant re-computation of a consideration received/given on capital account. Therefore, it is observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e examined during the course of assessment proceedings as the information was received later is factually incorrect. 21. This Court, in Kothi Steel Ltd. v. Assistant Commissioner of Income-tax, reported in (2016)72 taxmann.com 252 (Gujarat), observed as under : 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 petitioners 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 the assessment order for assessment year 2009-10, since the facts of the said year and the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging 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 facts of the said case, the Assessing Officer had made a detailed analysis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made distinction between the concept of change of opinion and mere change of opinion and in that context if there is any material which was originally not on record, which the Assessing Officer has later on at his disposal, in a given situation, it may be open for him to contend that reopening of the assessment would not be based on a mere change of opinion. However, in the present case, we do not find any such material pointed out to us. 10. In this context as also in the context of the basis for the Assessing Officer to form a belief that income chargeable to tax has escaped assessment, we may refer to reasons recorded by him. In such reasons, he referred to some information received from CCIT, Mumbai as per which the assessee company had allotted shares at a high premium. Barring this statement, we notice no further reference to this information in the reasons recorded. The contents of such information thus are completely unknown. Further the Assessing Officer then goes on to observe that on verification of the balance-sheet of the company, it was noticed that the company had received share premium of ₹ 1.45 crores and there is increase in share premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power Renewables Pvt. Ltd. v. Asst. Commissioner of Income Tax 1-(2)(2) and others (Writ Petition No.3618 of 2018, decided on 7th March 2019), observed as under : 14. However, whether the Assessing Officer had any such information at his command and the manner in which, the Assessing Officer processed such additional information(s) to form a belief that, income chargeable to tax has escaped assessment, shall have to be gathered from reasons recorded by him for issuing the notice. In this context, we may peruse the reasons more minutely and analyze the contents thereof. The core of the reasons recorded by the Assessing Officer is found in paragraph 2 thereof. In paragraph 2, the Assessing Officer has recorded that, he has received information from the Investigation Wing under a letter dated 15th March, 2018, stating that, the assessee had received an amount of ₹ 49.90 Crores from Firstland a Mauritius based company toward subscription for 4,99,048 compulsorily convertible cumulative preference shares. The Assessing Officer does not refer to any further information received from the Investigation Wing. In short, according to the Assessing Officer, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of the investor company would fall within the realm of fishing enquiries, which is wholly impermissible in law in the context of the re-opening of the assessment. For such reasons, impugned notice is set aside. 24. The ambit and scope of powers to be exercised under Section 147 of the Act, 1961, by the Assessing Officer, while reopening the assessment beyond the period of 4 years is discussed by this Court in the case of Gujarat Lease Financing Ltd. v. Dy. CIT [2013] 36 taxmann.com 359/219 Taxmann 70/360 ITR 496 (Guj.) wherein, it has been observed and held in para 16, 17 and 27 as under : 16. The Assessing Officer is authorized to make reassessment in the even of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per the first proviso to Section 147 of the Act, assessment can be reopened under Section 147 of the Act after expiry of 4 years only if [i] the assessee failed to make a return under Section 139 of the Act or in response to notice issued under section 142 [1], or under Section 148 of the Act, he failed to disclose truly and fully all material facts necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error either on the part of the Assessing Officer himself or because he choose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him. 25. Indisputably, the impugned notice issued by the Assessing Officer itself is beyond the period of four years from the end of the relevant assessment year and did not comply with the requirements of the proviso to Section 147 of the Act, 1961. The Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of the assessment under Section 143(3) of the Act, 1961, and therefore, on this short count alone, the impugned notice is liable to be quashed and set-aside. 26. In the overall view of the matter, we have reached to the conclusion that there is no basis to proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
