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TMI Blog2024 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... e act without any independent verification and application of mind, but simply proceeded to initiate proceedings on the basis of information received from AO of Bharat Biotech International Ltd which is nothing but a classic case of borrowed satisfaction and thus, in our considered view, the reopening of the assessment based on borrowed satisfaction is invalid and liable to be quashed. Thus, we quash notice u/s 148 of the Act and consequent assessment order passed u/s 143(3) r.w.s. 147. Assessee has challenged the addition made by the AO towards benefit received on account of purchase of 2,22,222 shares of M/s. Bharat Biotech International Ltd from M/s. Mindtree Trading Co (P) Ltd and argued that said transaction cannot be considered as purchase of shares in light of share purchase agreement dated 30.09.2015 and subsequent cancellation agreement dated 29.04.2013. Although the appellant has made various arguments, but we do not wish to consider the issue on merit because the assessment order passed by the AO u/s 143(3) r.w.s. 147 has been held to be invalid on account of incorrect assumption of jurisdiction u/s 147 - Assessee appeal allowed. - Shri Manjunatha, G. Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be invoked to assess the difference between book value/fair value of the shares as on the date of purchase and consideration paid for purchase of shares as income of the assessee. In response, the assessee submitted that he had entered into a share purchase agreement with M/s. Mind Tree Trading Company Ltd and has transferred 20,00,000 shares @ Rs. 110/- per share. The agreement has been subsequently cancelled on 29.04.2013. The reasons for cancellation of the agreement was that at the time of sale of shares, certain terms conditions were attached to it, but because of non-fulfilment of certain terms and conditions, both parties agreed to cancel the agreement and returned 2,22,222 shares held by M/s. Mind Tree Trading Company Ltd. Therefore, submitted that since it is a case of cancellation of share purchase agreement, the provisions of section 56(2)(vii)(c) cannot be invoked. The Assessing Officer after considering the relevant submission of the assessee and also taken note of certain facts opined that as per provisions of section 56(2)(vii)(c), if any assessee receives any property, other than immovable property for a consideration which is less than the aggregate fair market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd unless the entire material coming before him to come to his prima facie reason to believe, then reasons recorded by the Assessing Officer is valid. Further, at the time of examining the validity of reopening of the assessment what is required to be tested is the reasons recorded by the Assessing Officer which is the foundation for acquiring the jurisdiction, but not the escapement of income. Therefore, rejected the grounds taken by the assessee on reopening of the assessment. As regards the addition made by the Assessing Officer towards the consideration received in the form of benefit accruing to the appellant for acquiring 2,22,222 shares, the learned CIT (A) by following the decision of the ITAT Ahmedabad Bench in the case of Jigar Jaswant Shah vs. ACIT reported in 142 taxmann.com 200 held that the appellant had acquired 2,22,222 shares @ Rs. 1/- per share, whereas the market value of the share was at Rs. 124,92 per share. The appellant had not been able to justify the price of acquisition of shares at Rs. 1 per share when the market price was Rs. 124,92 per share. Although the appellant claims to have acquired the shares on cancellation of share purchase agreement, but said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Overseas (P.) Ltd 6) Hon'ble Delhi High Court in the case of PCIT vs G G Pharma India Ltd 7) Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd 8) ITAT Hyderabad Bench in the case of S. Ranjith Reddy vs DCIT 9) Hon'ble Supreme Court in the case of Indian Oil Corporation vs ITO 10) ITAT Mumbai in the case of Income Tax Officer vs. Everlon Synthetics Pvt. Ltd 11) Hon'ble Gujarat High Court in the case of Sayaji Industries Ltd vs. JCIT 12) Hon'ble Supreme Court in the case of Income Tax Officer vs. Lakhmani Mewal Das 9. The learned Counsel for the assessee further referring to the addition made u/s 56(2)(vii)(c) of the Act, submitted that the Assessing Officer and the learned CIT (A) is totally erred in coming to the conclusion that the assessee has purchased 2,22,222 shares and derived benefit @ Rs. 123.92 per share without appreciating the fact that the assessee has sold shares by a share purchase agreement dated 30.09.2005 and paid the relevant taxes on capital gain. The assessee has cancelled the share purchase agreement vide cancellation agreement dated 29.04.2013 for the terms conditions specified therein and both parties mutually agreed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als with reopening of the assessment and as per the said provisions, if any income chargeable to tax, in the case of an assessee, has escaped assessment in any assessment year, the Assessing Officer may subject to the provisions of section 148 to 153 assess or reassess such income for such A.Y. Before initiating proceedings u/s 147 for re-assessment of any income, escapement of income should be proved and such escapement is based on fresh tangible material come to the possession of the Assessing Officer. In other words, there should be a live link between formation of belief and escapement of income and such formation of belief should be based on fresh tangible material. In the present case, if we go by the reasons recorded for reopening of the assessment, the Assessing Officer has formed reasonable belief of escapement of income on the basis of financial statement of M/s. Bharat Biotech International Ltd and as per the said information, the Assessing Officer has considered the details of shareholders holding more than 5% equity shares in M/s. Bharat Biotech International Ltd for the year ending 31.3.2013 and for the year ending 31.3.2014 and observed that the assessee Shri Krishna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er assessment had occurred by reasons of either nondisclosure or failure on the part of the assessee to make a return of his income or to disclose all material facts necessary for his assessment. In the present case, on a perusal of the details filed by the assessee, the Assessing Officer has formed reasonable belief of escapement of income purely on guess work without there being any tangible material which suggests escapement of income. Although the Assessing Officer has finally made addition u/s 56(2)(vii)(c) of the Act towards benefit derived by the appellant for buy back of shares, but in absence of necessary reason to believe that income had been escaped assessment, the reopening of the assessment cannot be sustained. In this regard it is relevant to refer to the decision of the Hon'ble Guwahati High Court in the case of JCIT vs. George Williamsons (Assam) Ltd reported in (2003) 133 Taxman 110. The Hon'ble Supreme Court in the case of PCIT vs. Manzil Dinesh Kumar Shah (2019) 101 Taxman.com 259 (S.C) had considered an identical issue and held that the re-assessment notice issued u/s 148 by the Assessing Officer to verify the validity of information relating to purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate proceedings on the basis of information received from Assessing Officer of Bharat Biotech International Ltd which is nothing but a classic case of borrowed satisfaction and thus, in our considered view, the reopening of the assessment based on borrowed satisfaction is invalid and liable to be quashed. Thus, we quash notice u/s 148 of the Act and consequent assessment order passed u/s 143(3) r.w.s. 147 of the I.T. Act, 1961 dated 28.12.2019. 16. The assessee has challenged the addition made by the Assessing Officer towards benefit received on account of purchase of 2,22,222 shares of M/s. Bharat Biotech International Ltd from M/s. Mindtree Trading Co (P) Ltd and argued that said transaction cannot be considered as purchase of shares in light of share purchase agreement dated 30.09.2015 and subsequent cancellation agreement dated 29.04.2013. Although the appellant has made various arguments, but we do not wish to consider the issue on merit because the assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 147 has been held to be invalid on account of incorrect assumption of jurisdiction u/s 147 of the I.T. Act, 1961. Therefore, the grounds of appeal taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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