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2016 (6) TMI 381 - GUJARAT HIGH COURT

2016 (6) TMI 381 - GUJARAT HIGH COURT - [2016] 386 ITR 280 - Reopening of assessment - recording of reasons - formation of belief - petitioner has disclosed loss of ₹ 77,51,810/- and the petitioner has been assessed at an income of ₹ 35,96,518/- on the book profit under section 115JB - Held that:- In the light of the decision of this court in the case of India Gelatine and Chemicals Ltd. v. Assistant Commissioner of Income Tax (No.1) (2015 (2) TMI 808 - GUJARAT HIGH COURT), having re .....

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ction 148 of the Act, therefore, cannot be sustained. - For the foregoing reasons, the petition succeeds and is, accordingly, allowed in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 20109 of 2015 - Dated:- 6-5-2016 - MS. HARSHA DEVANI & MR.G.R.UDHWANI JJ. For the Petitioner: Mr. Manish J Shah, Advocate For the Respondent: Mr. Pranav G Desai, Advocate JUDGMENT ORAL JUDGMENT (Per : Ms. Harsha Devani) 1. Rule. Mr. Pr .....

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the Income Tax Act, 1961 (hereinafter referred to as the Act ), seeking to reopen the assessment of the petitioner for assessment year 2011-12. 4. The petitioner, a Private Limited Company, was incorporated on 15.01.2010. For assessment year 2011-12, the petitioner submitted its return of income on 19.09.2011 showing total loss of ₹ 77,51,810/- and a book profit of ₹ 35,96,518/-. The case was processed under section 143(1) of the Act. Thereafter, the petitioner received a .....

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, learned advocate for the petitioner invited the attention of the court to the reasons recorded for reopening the assessment to submit that on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. It was submitted that there is no new tangible material on record and even in a case covered under section 143(1) of the Act, the Assessing Officer should have fresh tangible material on hand for forming the belief .....

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ent case, the petitioner has been assessed at book profit of ₹ 35,96,518/- under section 115JB of the Act, and that in the normal computation of income the petitioner has shown a total loss of ₹ 77,51,810/-. Therefore, even if the total amount of ₹ 81,18,000/- which is alleged to have escaped assessment is added, there would still be no additional tax liability on the part of the petitioner and that the petitioner would still be taxed on the book profit. Under the circumstances .....

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having escaped assessment does not arise. The court recorded that the order recording reasons itself indicates that in fact no income has escaped assessment and as such, there is no basis for the formation of belief that income has escaped assessment. Reliance was also placed upon the decision of this court in the case of India Gelatine and Chemicals Ltd. v. Assistant Commissioner of Income Tax (No.1), (2014) 364 ITR 649 (Guj.), wherein, the court had recorded that even if the addition proposed .....

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under section 115JA of the Act. The court, placing reliance upon the decision of this court in the case of PKM Advisory Services P. Ltd. v. Income Tax Officer (supra), held that in the original assessment order, against the loss of ₹ 1.44 crores under the normal computation, the assessment was framed on book profit of ₹ 2.89 crores under section 115JA of the Act. Therefore, even if the expenditure of ₹ 116.86 lakhs is disallowed, there would be no resultant change in the petit .....

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as escaped assessment. It was accordingly, submitted that the assumption of jurisdiction on the part of the Assessing Officer is, therefore, without authority of law. 5.2 The learned counsel also placed reliance upon the decision of this court in the case of Siddhi Vinayak Transport v. Assistant Commissioner of Income Tax, (2014) 362 ITR 72. 6. Vehemently opposing the petition, Mr. Pranav Desai, learned Senior Standing Counsel for the respondent placed reliance upon an unre .....

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s of the present case and hence, the Assessing Officer was wholly justified in forming the belief that income chargeable to tax has escaped assessment for the year under consideration. 6.1 Insofar as the second contention raised on behalf of the petitioner that even if the total amount as proposed to be added by the Assessing Officer is sustained, there would be no increase in the tax liability of the petitioner, the learned counsel submitted that this is a case where no scrutiny ass .....

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venue effect will be in the year in which the assessee claims such set off. Therefore, the contention of the petitioner that there will be no revenue effect in its case is not correct. It was submitted that the tax payable/paid by the assessee under section 115JB of the Act is only the minimum alternative tax payable during the year under consideration and that the assessee is eligible to get the credit of such tax paid against the tax liability of the assessment year in which the tax becomes pa .....

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ee s return is accepted under section 143(1) of the Act, there is no question of change of opinion, inasmuch as, while accepting the return under the said provision, no opinion is formed. The learned counsel also placed reliance upon the decision of the Supreme Court in the case of Commissioner of Income Tax (Central), Delhi v. Harprasad and Co. (P) Ltd., (1975) 99 ITR 118, for the proposition that income also includes loss. 6.3 It was further submitted that the petitioner in the comp .....

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. It was submitted that here, there is a loss on which a right accrues as there is carry forward effect which would have a direct impact on future years. Benefit accrues to the assessee which is to the detriment of the revenue. It was, accordingly, urged that at the threshold, at the stage of notice under section 148 of the Act, the revenue should not be precluded from examining the issues. It was contended that the decision of this court in the case of PKM Advisory Services P. Ltd. v. Income Ta .....

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it may be germane to refer to the reasons recorded for reopening the assessment, which read thus: Reasons for reopening of assessment: In this case, on verification of records, it is found that the Assessee is a Private Ltd. Company engaged in the business of manufacturing of Ceramic Tiles. On the basis of the information available with this office,assessee company had issued its shares at huge premiums during F.Y. 2010-11. On verification of PART-A - BS of return of incom .....

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sheet, and computing the net worth of the company, per share valuation of the assessee company comes out to be ₹ 98/-. Hence, the shares of the company have been subscribed by the shareholders at a premium which is very high in comparison to the real worth of the shares. Further, assessee company has shown total income of Rs. NIL for It is difficult to accept the fact that a person will invest in the share capital of a Private Limited Company at such a huge premium which is eve .....

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e assessee. Hence, I have reasons to believe that income to the extent of ₹ 81,18,000/- has escaped assessment in the hands of the assessee for A.Y. 2011-12. I have, therefore, reasons to believe that income/gain chargeable to tax has escaped assessment for the A.Y. 2011-12. The above income / gain chargeable to tax has escaped assessment by reason of the failure on the part of the above named assessee who failed to disclose fully and truly all material fact necessary .....

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gh in comparison to the real worth of the shares. According to the Assessing Officer, per share valuation of the assessee company comes to ₹ 98/-, whereas the shares having face value of ₹ 10/- were sold with a premium of ₹ 990/- per share. Insofar as the basis for reopening the assessment is concerned, on similar grounds, the concerned Assessing Officer had sought to reopen the assessment in the case of Olwin Tiles (India) Pvt. Ltd. v. Deputy Commissioner of Income Tax - Morbi .....

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erits of the reopening, the present case is squarely covered by the above decision against the petitioner. 9. However, on behalf of the petitioner, it has been pointed out that in terms of the reasons recorded, the income chargeable to tax to the extent of ₹ 81,18,000/- has escaped assessment. In the return of income filed by the petitioner, the petitioner has disclosed loss of ₹ 77,51,810/- and the petitioner has been assessed at an income of ₹ 35,96,518/- on the bo .....

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y, if he has not impugned any part of the original assessment order for that year either under sections 246 to 248 or under section 264, claim that the proceedings under section 147 shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made. It was submitted that in view of the above p .....

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