9911796707
TMI Blog2023 (3) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The notice does not refer to any other information forming the basis for the reasons for reopening. This is, therefore, a clear case of a change of opinion on the very same material which was before the earlier Assessment Officer and on which basis, the first assessment order was passed after scrutiny. This line of action is impermissible under Section 147 of the Act. Even otherwise, the impugned notice under Section 148 appears to suffer from total non-application of mind, in that, respondent No.1 has not considered all the documents furnished by the petitioner along with its reply / objections to the reopening notice, wherein its valuation report of all the details of calculation and disclosures made in the earlier scrutiny proceedings had been produced. The impugned notice does not even deal with a single line of the objections of the petitioner to conclude that there was some element of suppression of material by the petitioner in the previous scrutiny assessment, or that, there was any material facts, which the assessee had failed to disclose in the earlier assessment, which had now come to the knowledge of the Assessing Officer to conclude that there was escapement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share. It received during that year 5% of the value of rights share and the balance 95% of the issue price was to be received upon making subsequent of calls, thus, the petitioner received an aggregate share of Rs.2,74,16,98,100/-, which transaction was duly reflected in its financial statement with necessary disclosures made in its Director's Report contained in the Statutory Annual Report of the petitioner for the Financial Year 2014-2015. b] The petitioner filed its return of income for the Financial Year 2015-2016 on 29/09/2015 declaring total income of Rs.1,36,07,94,510/- and since the transaction of issuance of rights shares and the receipt of the share premium was on its capital account, there was no requirement of bringing the said amount to tax; however, the revenue selected the petitioner's return for scrutiny under Section 143 (2) of the Act by its notice dated 29/03/2016 and in the course of assessment proceedings, it issued further notice under Section 142(1) of the Act on 20/07/2017 asking for hard copy of the return of income along with computation thereof, financial statements and details of share premium received during the year along with amount, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax for assessment year 2015-2016 had escaped assessment and required the petitioner to deliver to the respondent No.2 an income return in the prescribed form; the petitioner filed its return of income tax in reply to the notice on 26/04/2021 declaring a total income of Rs.1,36,07,94,512/-. The respondent No.1 provided the petitioner with a copy of the reasons recorded by the Officer on 25/11/2021, purporting to substantiate the reopening of its assessment; the approval obtained under Section 151 for issuance of the said notice was also sent to the petitioner. g] Relying on the Judgment of GKN Driveshafts India Ltd. Vrs. ITO reported in 259 ITR 19 , the petitioner filed its objections to the notice of reopening on 30/12/2021 taking a specific defence therein that the reasons cited in the reopening notice showing that the respondent No.1 has taken Fair Market Value of rights shares at Rs.69,062/- per share as determined under Rule 11UA and taken the premium received in excess of such fair value to be treated as income chargeable to tax, amounted to a change of opinion, which was not permissible under proviso to Section 147 of the Act, which barred the reopening of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as demonstrated herein; it is further submitted that the respondents have failed to produce the relevant information, namely, the correspondence with the Audit Department, since it would obviously favour the petitioner's case; that observations made in the impugned order that the petitioner did not suggest the formation of remedial measures for auditing or coming to a correct valuation were irrelevant and could not form the basis for the formation of the belief by the Assessing Officer for reopening. It is also argued that no specific reason having been cited, it is obvious that the officer has formed his belief as to the escapement of income only on the basis of audit objections and without any independent application of mind. 6. It is further contended by the petitioner that the assessment order having been earlier passed on 19/12/2017 for the relevant year, the assessment cannot be reopened after four years from the end of the relevant assessment year i.e. beyond 31/03/2020, unless there was failure on the part of assessee to disclose fully and truly any material facts necessary for the purposes of his assessment. There being no default on the part of petitioner to discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 25/11/2021 would reveal that in Paragraph No.2, the respondent No.1 has only reproduced the figures which had already been considered in the earlier assessment order passed on 19/12/2017 after scrutiny and after notices were issued under Section 143(2) and under Section 142(1). In that scrutiny proceedings, a questionnaire had been issued and duly answered by the petitioner with a detailed note on the conversion of the investment into Stock in Trade, with a valuation report of M/s. Jignesh Goradiya Associates, which was duly considered in assessment and accepted. Thereafter, the petitioner has submitted on 15/10/2019 a reply to the report of the Deputy Commissioner of Income Tax, titled Incorrect computation of business income , wherein it reiterates all its earlier factual stand that the working adopted towards arriving at Fair Market Value of the shares under Section 56(2) (viib) was determined at Rs.6,96,511/- and issue price of the shares was less than the Fair Market Value determined in terms of those provisions. It had also contended by the petitioner even in the earlier assessment that the capitalization of reserves does not amount to receipt of consideration for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 147 of the Act and held as under :- ..... the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever 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. The fact that the words 'definite information' which were there in Section 34 of the Act of 1922, at one time before its amendment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Assessing Officer has proceeded on fundamentally wrong facts to come to the reasonable belief/conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the petitioner, the Assessing Officer in his order disposing of the objection does not deal with factual position asserted by the petitioner. Thus, it would be safe to conclude that the Revenue does not dispute the facts stated by the petitioner. On the facts as found, there could be no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment. In Ankita A. Choksey (supra), this Court has made specific reference to the fact that the Assessing Officer must deal with the specific objections of the petitioner when the same is pointed out in its reply, while disposing of the objections. It further holds that when the Assessing Officer in its order disposed of objections does not deal with the factual position asserted by the petitioner, it would be safe to conclude that the revenue does not dispute the fact stated by the petitioner and thus, there could be no reason for the Assessing Officer to believe that the income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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