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TMI Blog2019 (1) TMI 1840X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances in the case of Khubchandani Healthparks Pvt. Ltd [ 2016 (2) TMI 710 - BOMBAY HIGH COURT] held that regular Return of income was assessed by Intimation under Section 143(1) of the Act and no scrutiny assessment was done. In the above view, to ascertain the nature and the justification for charging share premium, the Assessing Officer has reason to believe that charging of share premium over and above the intrinsic value of the share is income which has escaped assessment. Notice itself does not indicate the approximate amount of income, which the Assessing Officer has reason to believe has escaped assessment nor does it quantify the extent to which the share premium received was in excess of intrinsic value, which has escaped assessment. It gives no reasons to indicate the basis of coming to the conclusion that share premium is excessive and, therefore, income. Moreover, the Notice also does not dispute that this is a share premium but seek justification for charging the share premium over and above intrinsic value of the share premium. AO has absolutely no material to even suspect, forget believe that income has escaped assessment. Hence, we quash the reopening and acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mium amounting to ₹ 4,56,00,000 during the F.Y. 2008-09 relevant to AY 2009-10. As there was no scrutiny assessment done for this year, the so-called share premium having been received by the assessee was not examined. The assessee is an unlisted company and the source of the share premium so received as well as the nature of the share application received (the intrinsic value of the share in comparison to the excess premium received) is not substantiated. The Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd has held that Section 147 authorized and permits the Assessing Officer to assess or re-assess 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 ascertain the fact by legal evidence or conclusion. This judgement was rendered by the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and same cannot be taxed unless specifically taxable under the provisions of the Act. The learned Counsel for the assessee stated that even amendment brought in section 56(2)(viib) of the Finance Act, 2012 with effect from 01-042013 is applicable for and from AY 2013-14. But the AO rejected the objections raised by assessee vide letter dated 21.01.2015 and the relevant paras reads as under: - "3. I have considered the detailed submissions made by the assessee very carefully but I do not find any merit in the argument put forth by the assessee and therefore the objection raised is hereby rejected from the reason discussed in details in the following paragraphs. 3.1 In determining whether commencement of reassessment proceeding is valid, it has to be seen whether there is prima-facie some material on the basis of which the department opened the case. In the present case, the assessing officer has found that the financial year 2008-09 relevant to assessment year 2009-10. Scrutiny assessment was not done in this case, hence, issue of share premium was not examined. The details and evidences related to issue of shares, premium charged per share is not available on the record. As th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income. Re-opening under section 147 of the Act by AO is aimed at administering the statute with solicitude for the public exchequer with an in-built idea of fairness to taxpayers by giving the opportunity of being heard under section 148/143(2) and 142(1) of the Act and it has been hold to be correct by the Hon'ble Apex court in the case of CIT vs. Rajesh Jhaveri Stoch Brokers (P.) Ltd. (supra). 3.5 The assessment is sought to be reopened, then what is required to 'reason to believe' but not established fact of escapement of income. At the stage of reasonable person can form a requisite belief. Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to the law. If as a consequence of this there is escapement of income, the jurisdictional requirement of section 147 is fulfilled on the confirmation of a reason to believe that income has escapement assessment. A reason believe is what is relevant and not an established fact of escapement of income. Reliance is also placed on the judgement in the case of M/s. Usha International, 348 ITR 485 (Delhi High Court). 3.6. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason to believe that income has escaped tax as the normal human tendency is that it would think of the investment to grow and give benefit in future. But no such fact is seen in the case here. Therefore, AO has correctly formed the belief that income has escaped tax. Hence, I do not find any infirmity in reopening of the assessment and in rejecting the objection raised by the appellant." Aggrieved, now assessee is in appeal before Tribunal. 5. Before us, the learned Counsel for the assessee filed complete detail of shareholders, share allotted and share premium charged from the following 10 parties, which is subject matter of addition: - Name, address and PAN of the disputed shareholders where shares has been issued at ₹ 50/- (Face value of ₹ 10/- and share premium of ₹ 40/-) Sr. No. Shareholders & name Address PAN No. of shares allotted Share Capital/ premium 1. Ecro Artisans Pvt. Ltd. 26.28, Nirnay Sagar, 1st Floor, Room 9/c, Satguru Kadam lane, MB Velkar Street, Kalbadevi, Mumbai400 002 AAACE8119M 90,000 45,00,000 2. Elderado Properties Pvt. Ltd. 26.28, Nirnay Sagar, 1st Floor, Room 9/c, Satguru Kadam lane, MB Velkar Str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that charging of share premium over and above the intrinsic value of the share is income which has escaped assessment. The Notice itself does not indicate the approximate amount of income, which the Assessing Officer has reason to believe has escaped assessment nor does it quantify the extent to which the share premium received was in excess of intrinsic value, which has escaped assessment. It gives no reasons to indicate the basis of coming to the conclusion that share premium is excessive and, therefore, income. Moreover, the Notice also does not dispute that this is a share premium but seek justification for charging the share premium over and above intrinsic value of the share premium. The learned Counsel for the assessee in the present case also drew our attention that exactly on identical reasons were recorded that share premium was received as well as the share application money received and intrinsic value of shares in comparison of excess premium received is taxable. The learned Counsel for the assessee particularly referred to para 9 of this judgement of Hon'ble Bombay High court, wherein it is held as under: - "9. The reason in support of the impugned Notice proceed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly what such objective and new material facts are, on the basis of which a reopening is initiated under Section 148. This reassessment is clearly not on the basis of new (or "tangible") information or facts that which the Revenue came by. It is in effect a reappreciation or review of the facts that were provided along with the original return filed by the assesse. The Supreme Court in Kelvinator (supra) frowned against such exercise of power: "However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But re-assessment has to be based on fulfillment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning and content of the expression "reason to believe" in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(1)may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed. 13. Certain observations made in the decision of Rajesh Jhaveri (supra) are sought to be relied upon by the revenue to point out the difference between an "assessment" and "intimation". The context in which those observations were made has to be kept in mind. They were made to point out that where "intimation" is issued under section 143(1) there is no opportunity to the assessing authority to form an opinion and therefore when its finality is sought to be disturbed by issuing a notice under section 148, the proceedings cannot be challenged on the ground of "change of opinion". It was not opined by the Supreme Court that the strict requirements of section 147 can be compromised. On the contrary, from the observations (quoted by us earlier) it would appear clear that the court reiterated that &q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that held that expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under Section 143(3) of the Act and another applicable where an intimation was earlier issued under Section 143(1) of the Act. It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under Section 148(2) of the Act on the ground that they do not meet the standards set in the various judicial pronouncements. Further, the learned Counsel for the assessee as regards to amount received on issue of share capital as premium held by Hon'ble Bombay High Court in the case PCIT vs. Apeak infotech (2017) (397 ITR 148 (Bom), wherein it is held that share application money and premium are capital receipts and cannot be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In reference to the above cited subject, I am directed to draw your attention to the decision of the High Court of Bombay in the case of Vodafone lndi a Services Pvt. Ltd. for AY 200910(WP No.871/2014), wherein the Court has held, inter-alia, that the premium on share issue was on account of o capital account transaction and does not give rise to income and, hence, not liable to transfer pricing adjustment. 2. lt is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned Writ Petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where this issue is involved. This may also be brought to the notice of the ITAT, DRPs, and CslT(Appeals). 3. This issues with the approval of Chairperson CBDT. Sd/- (Anchal Khandelwal) Under Secretary to the Govt. of India" In view of the above, the learned Counsel for the assessee stated that, the reopening on the above reasons, in view of the precedence cited and arguments made is invalid and is to be quashed. 10. On the other hand, the learned Sr. Departmental Representative Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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