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TMI Blog2024 (2) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 and onwards. Therefore, since the amendments were not applicable to the assessment year in question, i.e., 2009-10, there would be no basis for the AO to form a reason to believe that income had escaped assessment for the said assessment year. Moreover, if one considers the reasons recorded, the AO simply says how a company with no proven track record incorporated on 15th March 2007 command such a huge share premium. AO has not bothered to read the balance sheet or the valuation report. AO s reason to believe, therefore, is purely hypothetical and a matter of conjecture. That cannot be a tangible material for arriving at reason to believe escapement of income. Jurisdictional requirement of Section 147 of the Act also is not fulfilled and hence, the proposed reopening is without jurisdiction. As held in Shodiman Investments (P) Ltd. [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] there is clear breach to the settled position in the law that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. Admittedly, notice has been issued in view of a communication received from his superior officer. It is rather obvious that the AO has not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 87,362/-. The assessment was completed u/s. 143(3) of the Act on 21.12.2011 assessing the total income at (-) ₹ 87,362/- 2. A letter No. CIT-1/Mum/Share Premium/2013-14 dt. 27.03.2014 has been received in this Charge enclosing the letter No. CCIT/Coord/U-III/Share Premium/2013-14/1786 dt. 27.03.2014 for taking necessary action as the time limit of four years for issue of notice u/s. 148 will expire on 31st March, 2014. This letter also encloses a letter No. DIT(I&CI)F. No. 233/ROC/2013-14 dt. 26.03.2014 furnishing the data in respect of companies who have received share premium. during FY 2008-09. The name of the assessee is found in this list having received share premium of ₹ 21,48,44,318/- 3. From the records, it is seen that the authorised share capital of the assessee is 10,00,000/- and the paid up capital is ₹ 6,67,300/-. As per the information provided, during the year assessee has issued 16,730 shares of face value of ₹ 10/- and having total face value of ₹ 1,67,300/- at premium of ₹ 12,842/- per share on 09.07.2008. The total share premium received amounts to ₹ 21,48,44,338/- for the previous year relevant to A.Y. 2009-10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. While granting Rule, the statement of Counsel for Revenue was recorded that the basic issue arising in the present petition is identical to one arising in Writ Petition No. 418 of 2015. The order while admitting Writ Petition No. 418 of 2015 passed on 4th August 2015 reads as under: "Heard. Rule. 2. Challenge in this petition is to the reopening notice dated 30 March 2014 under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for the Assessment year 2009- 2010. 3. The reasons in support of the impugned notice proceed on the basis that the Assessing Officer has reason to believe that the share premium amount received over and above the intrinsic value of shares, is income which has escaped assessment. It is not the case in the reasons to believe that what has been received as share premium is in fact not share premium. In fact the reasons do proceed on the basis that what has been received is indeed share premium. Prima facie, we are of the view that the basis of the impugned notice stands concluded by the decision of this Court in Vodafone India Services Pvt. Ltd. Vs Union of India and others 368 ITR page 1(Bom) and also Central Board Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. (c) The issue of shares and the receipt of share premium were examined during the course of regular assessment proceedings by respondent no. 1 by raising specific queries. Petitioner furnished all the details relating to the receipt of share premium and the issue of shares during the year in the course of the assessment proceedings and also justified the valuation by producing the report of a valuer. The statutory compliance documents relating to the issue of shares and receipt of share premium were filed during the course of the assessment proceedings with respondent no. 1. The same have been examined in the course of the assessment proceedings and hence, there is no fresh material coming into existence in relation to issue of shares and receipt of share premium. Therefore, the reopening is based on a mere change of opinion. Respondent no. 1 has no power of review by engaging in a roving or fishing inquiry under the Act. (d) The charge of tax under the Act is on income. The receipt of share premium on the issue of fresh shares is on capital account and constitutes a capital receipt, which is not chargeable to tax under the Act. There is no provision under the Act t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the AO, there has been underassessment of income received in the garb of share application money. The AO has not considered the valuation report or the balance sheet of the company and, therefore, the basis to reopen is purely hypothetical or a matter of conjecture or speculative. The reasons to believe does not dispute that this is a share premium that the company received but seeks justification for charging the share premium over and above intrinsic value of the share. 6. Mr. Suresh Kumar submitted as under:- (a) As held in Commissioner of Income Tax Vs. Sophia Finance Ltd. (1993) 70 Taxman 69 (Delhi) this would amount to cash credit under Section 68 of the Act and whenever the same is found credited in the books of account of assessee, then irrespective of the colour and nature of the sum received which is sought to be given by assessee, the ITO has the jurisdiction to enquire from assessee the nature and source of the amount. (b) We have to reject this submission because this is not the basis on which the reasons to believe has been arrived at. It is settled law that the reasons to believe cannot be improved upon. In the affidavit in reply opposing the petition als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The only requirement is that the AO ought to have considered, the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. In the case at hand, the AO having raised a query and the petitioner having replied to it, it follows that the query raised was subject of consideration of the AO while passing the assessment order dated 21st December 2011. In our view, the re-opening of assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Paragraph 14 of the Aroni Commercials Ltd. (Supra) reads as under: 14) We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, following that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment." (emphasis supplied) 10. In SLS Energy Ltd. (Supra) the reasons for reopening were similar. In that case also the balance sheet indicated that the assessee had issued paid up capital of Rs. 77,00,000/- and Charged Security Premium at Rs. 6,79,32,00,000/- during the year under consideration. According to the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers(P.)Ltd.[2007] 161 Taxman 316/291 ITR 500 (SC) has clearly held that notice for reopening an assessment under section 148 of the Act could only be justified if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. 26. The reason for the assessing officer to reopen the assessment is his belief that the share premium charged by the Petitioner was excessive and further that the transaction of the so called share premium was not established. In other words, the assessing officer apart from questioning the excessive share premium also is doubting the transaction, whereby the share premium had been received. Whether in the aforementioned facts the assessing officer could be said to have his reason to believe that income had escaped assessment and whether the material with the said assessing officer could be said to have any tangible material justifying the reopening is the issue that falls for our consideration. 27. There is no dispute that in Vodafone India Services (P.) Ltd .'s case (supra) it stands concluded that receipt of share capital including the premium was on capital accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the said shares. 30. We therefore of the opinion that there was neither any basis for the assessing officer for his reason to believe that income had escaped assessment nor was there any tangible material which would have otherwise given jurisdiction to reopen the assessment even when the reopening was sought to be made within a period of four years." (emphasis supplied) 11. Even in the case at hand, the reasons recorded for reopening does not dispute that during the year assessee had issued 16730 shares of face value of Rs. 10/- at premium of Rs. 12842/- per share. The AO is only questioning the excessive share premium but not doubting the transaction itself whereby the share premium had been received. On this ground alone, the impugned notice and order on objections have to be quashed and set aside. 12. In any event, the amendments incorporated in the definition of income under section 2(24)(xvi) and Section 56(2)(viib) of the Act were amendments which were to apply only from 1st April, 2013, i.e., assessment year 2013-14. The amendment to Section 68 of the Act by incorporation of the first proviso also came into effect by virtue of the Finance Act, 2012 w.e.f. 1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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