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2015 (4) TMI 831 - BOMBAY HIGH COURT

2015 (4) TMI 831 - BOMBAY HIGH COURT - [2015] 375 ITR 473 (Bom) - Reopening of assessment - nature of share application money received (the intrinsic value of the share in comparison to the excess premium received) is not substantiated by any cogent evidence as could be noticed from records - Held that:- The transaction seems to be entirely an Arms-length transaction. The subscribers are limited companies who are reportedly stated to be public limited companies. The Petitioner is a company in th .....

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in the given facts of the case. There is no lack of disclosure or suppression of any material facts. All queries of Respondent No.2 have been answered by the assessee or the subscribers in question especially when all questionnaires addressed to subscribers were duly answered by the subscribers.

We may add a word of caution here. Although the Petitioner has relied upon the decision of this Court in the case of Vodafone [2014 (10) TMI 278 - BOMBAY HIGH COURT] and the department has acc .....

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D Mistri, Senior Adv. with Mr Madhur Agarwal And Mr Atul Jasani For the Respondents : Mr A R Malhotra With Mr N A Kazi JUDGMENT (Per A. K. Menon, J.) 1. Rule, made returnable forthwith. By consent of the parties taken up for final hearing. 2. By this order, we dispose of both the writ petitions which are on a similar set of facts. Writ Petition (L) No.735 of 2015 pertains to assessment year 2008-09 whereas Writ Petition (L) No.736 of 2015 pertains to assessment year 2009-10. The challenge in th .....

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No.2 is the earlier Assessing Officer who handled the Petitioner's assessment before transfer of the jurisdiction to Respondent No.1. Respondent No.2 has completed the assessment in respect of the Petitioner. Respondent No.2 has issued notice on 29th March, 2014 under section 148 of the Act in respect of the assessment year 2008-09 for reopening of the assessment for the assessment year 2008-09. Respondent No.3 the Additional Commissioner of Income Tax had granted approval under Section 151 .....

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#39;SSA'). Pursuant to the SSA during the financial year 2007-08 (relevant to the assessment year 2008-09), shares of the Petitioner were allotted to subscribers as detailed below:- Sr. No. Name of the Company Allotted shares Total consideration Rs. P Date 1. K2A Hospitality Ltd. 1,39,860 9,99,99,900 14-03-2008 2. Edelweiss Trustee Services Pvt. Ltd. 60,000 4,30,00,000 24-03-2008 3. Sharyans Resources Ltd. 1,20,000 4,60,00,000 04-09-2008 4. Atlas Hospitality Co. Pvt. Ltd. 10,90,000 11,99,00, .....

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was taken up for scrutiny. 5. In the course of the scrutiny, the Petitioner vide letter dated 11th October, 2010 filed a copy of the return of income,annual report along with audited profit and loss account, balance sheet and all its annexures and also a copy of audited report in Form No.3CD. A further show cause notice dated 14th June, 2011 came to be issued asking the Petitioner to submit certain details. On 29th August, 2011 the Petitioner supplied, inter alia, details of secured and unsecure .....

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d. asking them to furnish details of the return of income for assessment year 2009-10, permanent account number along with details of the assessing officer, copy of the bank statement and copy of final accounts. Phoenix Hospitality Co. Pvt. Ltd. vide letter dated 17th August, 2011 filed a reply to the said notice. Sharyans Resources Ltd. also filed reply dated letter dated 17th August, 2011. 7. After considering the submissions of the Petitioner and the details submitted by Phoenix Hospitality L .....

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r. 8. The Petitioner vide letters dated 13th January, 2014, 20th January, 2013, 3rd March, 2014 and 13th March, 2014, provided the information. Respondent No.3 passed an order on 22nd March, 2014 under Section 143(3) of the Act for the assessment year 2011-12. He accepted the submissions of the Petitioner and did not make any addition with respect to the share premium received by the Petitioner. Thereafter, Respondent No.2 issued notice under section 148 of the Act dated 29th March, 2014 stating .....

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provided an extract of the reasons as recorded by him. For ready reference, the extract of the reasons is reproduced below :- " …........ 2. From the records, it is seen that the assessee is in receipt of huge share premium amounting to ₹ 14,10,01,300/- during the financial year 2007-08 relevant to A.Y. 2008-09. As scrutiny assessment u/s. 143(3) of the Income-tax Act, 1961 has not been done in this case for this year, huge share premium having been received by the assessee ha .....

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of the I.T. Act. Thus, it is a fit case for re-opening of the assessment u/s.147 of the Income Tax Act, 1961. Notice u/s.148 is therefore, required to be issued in this case. 6. …...... " 10. On or about 21st August, 2014, the Petitioner filed objections challenging the validity of the reassessment proceedings for the assessment year 2008-09 and inter alia submitted that :- (a) The reasons did not quantify the income which escaped assessment and, therefore, the notice was invalid in .....

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ssessment inter alia observing that under Section 147 of the Act, the Assessing Officer can invoke the provisions of the section for bringing to tax escaped income by reopening the assessment within a period of four years and the proviso to Section 147 of the Act is not applicable. According to the A.O., the quantum of escaped income was equivalent to quantum of share premium amounting to ₹ 14,10,01,300/- which is more than the ceiling of ₹ 1 lac prescribed under the Act and prior sa .....

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not and cannot form the part of income of the Company. He made a quick reference to the pronouncement of the this Court in the case of Vodafone India Services Pvt. Ltd. V/s. Union of India & Ors. reported in [2014] 368 ITR 1 (Bom) in this behalf. He submitted that the revenue had in fact accepted this judgment and the Central Board of Direct Taxes issued a circular F.No..500/15/2014/APA-1 dated 29th January, 2015. The circular is crisply worded and records as follows:- "Subject Acceptan .....

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r pricing adjustment. 2. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned Writ Petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where this DRPs and CsIT (Appeals). 3. This issues with the approval of Chairperson CBDT. " 14. Mr. Mistri then submitted that in any event, the amount of share premium amount cannot .....

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urplus had increased. He then drew our attention to Schedule B under which the securities premium had increased from ₹ 14,10,01,200/- to ₹ 78,56,48,000/-. Thus, according to him, the money having been raised by issue of shares at a premium, this should not in any way included in the income and taxed. He referred to a notice issued by the assessing officer on 14th June, 2011 in respect of the assessment year 2009-10 whereby the assessing officer required the assessee to remain present .....

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Hospitality Ltd; 5) Confirmation of accounts of K2A Hospitality Ltd.; 6) Balance sheet of M/s. Fulda River Ltd. After the receipt of the same, on 22nd March, 2014, the Assessing Officer accepted the assessment under section 143(3) of the Act, the total sum of ₹ 1,46,206/- to the total income under the head of Income Tax from other sources and continued investigation under the penalty proceedings under section 271(1(c) of the Act for having furnished inaccurate particulars of income. Surpr .....

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39;s contention that he had the authority to reassess the income chargeable to tax which he believed had escaped assessment, Mr.Mistri submits that in fact such communication is entirely bereft of any real reasons. 16. Vide letter dated 21st August, 2014 the assessee clarified that the reasons cited were in fact no reasons at all and objected to the reopening of the assessment. Mr.Mistri pointed out the decision of the Hon'ble Supreme Court in the case of Assistant Commissioner of Income-Tax .....

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escaped assessment. According to Mr. Mistri, there was no real reason that could be cited for reopening of the assessment. 17. Mr.Mistri then relied upon the decision of this Court in the case of Hindustan Lever Ltd. V/s. R.K. Wadkar, Assistant Commissioner of Income Tax & Ors. reported in [2004] 268 I.T.R. 332 and submitted that a notice under Section 148 of the Act after four years should clearly specify the materials that were not disclosed earlier, the notice itself must specify reason, .....

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ice was held to be invalid and was quashed. 18. Mr.Mistri relied upon the ratio of the judgment and submitted that in the present case, also notice is issued beyond the period of four years and did not disclose any material which the assessee had failed to disclose. The Assessing Officer had no reason to believe that income had escaped assessment for the relevant year. He then relied upon the decision of this Court in the case of Aroni Commercials Ltd. V/s. Assistant Commissioner of Income-Tax & .....

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terial justifying the issuance of notice in respect of assessment year 2009-10. He submitted relying upon these decisions that the impugned orders as well as the notices in both the above petitions are liable to be set aside. 20. Referring to the decision of this Court in Writ Petition (L) No.2885 of 2014 [M/s. Rockstar Real Estate Pvt. Ltd. V/s. Income Tax Officer 10(1)(4)], Mr.Mistri submitted that this Court found that reasons furnished to the Petitioner-assesee were identical as in the prese .....

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g per share were negligible, in fact it was a loss making company. Referring to the balance-sheet and profit and loss account, he submitted that they were not a hugely profiteering company so as to command such high share premium. According to him, the matter needs to be investigated further, notwithstanding the fact that some public companies are stated to have invested in the assessee company and have subscribed to the share premium. He submitted that there is total absence of business acumen .....

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n Arms-length transaction. The subscribers are limited companies who are reportedly stated to be public limited companies. The Petitioner is a company in the hospitality sector and we do not see how the amount of premium that has been charged from the subscribers can be questioned without the revenue provided valid reasons. We have not entered into the merits of the controversy. Suffice it to say that apart from being public limited companies, the subscribers include other infrastructure hospita .....

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to complete the assessment order and issued an assessment order but did issued a volte face the and a fresh notice under section 148 of the Act just one week after the issuance of the assessment order. This does not augur well for the revenue and particularly in view of the fact that the notice under Section 148 of the Act (Exhibit-Q to the petition) dated 29th March, 2014. It does not contain any tangible reasons for reopening of the assessment. In fact, as rightly appointed by Mr.Mistri, durin .....

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