2023 (3) TMI 619 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - Reasons to believe - method of determining the Fair Market Value of the rights shares issued - HELD THAT:- Paragraph No.2 of the reasons for the reopening has referred to the terms of the rights issue being 5% of the issue price per share and the balance unpaid amount of 95% of the issue price amounting to Rs.5,46,250/- per share being capitalized. However, this time around, the respondent No.1 claimed that on the very same transaction and valuation, which was earlier accepted, the excess of the issue price of the share over the Fair Market Value would attract the provisions of Section 56(2) (viib) and excess price or share for the Fair Market Value would be taxable under that provision. 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 income which was assessable to tax.

The order rejecting the objections has not even once adverted to the valuation report submitted by the petitioner during the earlier assessment proceedings after scrutiny, nor does it refer to the method used by the petitioner for valuation. It therefore appears that the only reason and purpose for issuing the impugned notice under Section 148 appears to be that the Assessing Officer has come to a different opinion on the question of valuation from one adopted by the petitioner, which has been accepted in the earlier assessment order dated 19/12/2017.For the reasons stated above, we are of the opinion that the impugned notice dated 30/03/2021 issued under Section 148 of the Act is without jurisdiction and is barred by limitation - Decided in favour of assessee.