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2024 (2) TMI 166 - HC - Income TaxReopening of assessment u/s 147 - excessive share premium - HELD THAT:- 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. The amendments incorporated in the definition of income u/s 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 by incorporation of the first proviso also came into effect by virtue of the Finance Act, 2012 w.e.f. 1st April, 2019 and was to apply for the assessment year 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 applied his mind and arrived at his own satisfaction but on borrowed satisfaction. Decided in favour of assessee.
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