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2016 (9) TMI 647 - GUJARAT HIGH COURT

2016 (9) TMI 647 - GUJARAT HIGH COURT - TMI - Reopening of assessment - receipt of share capital or share premium money - Held that:- Assessing Officer had no material to suggest that the petitioner company had during the period relevant to the assessment year 2008-09, received any share capital or share premium money to the tune of ₹ 20 lakhs or any other sum from the companies controlled and managed by Shri Pratik R. Shah. In fact, the order of assessment refers to 10 such companies so m .....

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ing to the financial year 2008-09 by error notice came to be issued for the assessment year 2008-09 instead of assessment year 2009-10. Had this been a mere typographical error so treated by the Assessing Officer, we would have considered the question whether a mere typographical error could invalidate otherwise valid proceedings. However, even the Assessing Officer has not treated the impugned notice as to referring to the assessment year 2009-10 wrongly typed as assessment year 2008-09. He has .....

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done had he treated the notice for reopening as relatable to the assessment year 2009-10. - Thus inescapable conclusion that one would reach is that the notice for reopening the assessment for the assessment year 2008-09, was based on completely wrong reasons. In other words, reasons lacked validity. When the notice itself was thus, defective, it would have no effect of reopening on the assessment. Any action taken by the Assessing Officer subsequent to or in pursuance of such notice would a .....

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assessment year 2008-09. Brief facts are as under. 2. The petitioner is a company registered under the Companies Act. For the assessment year 2008-09, the petitioner had filed a return of income on 29.09.2008, declaring total income of ₹ 15,94,430/- . Such return was accepted under section 143(1) of the Income Tax Act, 1961 ('the Act' for short) without scrutiny. To reopen such assessment, the Assessing Officer issued impugned notice. In order to do so, he has recorded following r .....

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emium amounting to ₹ 20,00,000/- received from various entities are accommodation entries in the form of share capital and share premium against the receipt of the cash from the assessee company. Therefore, in issue of bogus share capital and share premium is required to be verified. Therefore, the amount of ₹ 20,00,000/- has escaped from the Taxation as per Income Tax Law. In view of the above, I have reason to believe that the income of ₹ 20,00,000/- has escaped assessment wi .....

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by Shri Pratik R. Shah. As a proof of the same we hereby attach all the bank statements of the assessee along with the Share Capital Account of the assessee. Major Share capital is received by the assessee from relatives or other companies. There is no receipt of ₹ 20,00,000/- for Share Capital from entities managed by Shri Pratik R. Shah. Hence we request your honour to kindly drop the proceedings as the reasons recorded are incorrect. Alongwith such letter, the petitioner had also suppl .....

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ly Share Capital A/c and bank statement without any supportings. In absence of the supporting evidences, the legitimacy of the submission cannot be relied upon. 5. Under yet another communication written on or around 23.03.2016, the petitioner requested the Assessing Officer to stay the assessment proceedings since the petitioner had already filed the petition before the High Court challenging the notice for reopening. The Assessing Officer however, proceeded to pass exparte assessment order on .....

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This is clearly demonstrated from the share capital account which was produced before the Assessing Officer alongwith the objections. The Assessing Officer without considering such objections, promptly proceeded to pass exparte assessment order. In the order of assessment also, there is no link established by the Assessing Officer to show that the petitioner company had received such share capital from any other company managed by Shri Pratik R. Shah. He submitted that even in a case where the r .....

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ion to frame the assessment, unless the reopening was validly done. 7. On the other hand, learned counsel Shri Mehta for the department submitted that the Assessing Officer had recorded reasons to reopen an assessment which was previously framed without scrutiny. To the question of the company having received share capital money of ₹ 20 lakhs from Shri Pratik R. Shah managed or controlled companies, counsel stated under the instructions that there was sufficient material on record in the f .....

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he return filed by the petitioner was originally accepted without scrutiny. In that view of the matter, the Assessing Officer would have greater latitude to reopen the assessment since the principle of change of opinion would not apply. However, even in such a situation, the requirement of the Assessing Officer forming a belief that income chargeable to tax had escaped assessment, before assessment can be validly reopen, is not done away with. 9. This Court in case of Inductotherm (India) P. Ltd .....

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147 of the Act permits the Assessing Officer to assess, reassess the income or recompute the loss or depreciation if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. This power to reopen assessment is available in either case, namely, while a return has been either accepted under section 143(1) of the Act or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both of cases is that the Assessing .....

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ion. These were merely accommodation entries against cash receipts from the assessee company. This bogus share capital and share premium amount had therefore, in the opinion of the Assessing Officer, escaped assessment. In this respect, the stand of the petitioner from the outset has been that the petitioner company has not received any such share capital or share premium from any of the companies having any connection with Shri Pratik R. Shah. This was pointed out by the petitioner to the Asses .....

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at this stage to verify the contention of the petitioner which went to the root of the matter, he skirted the issue by taking a stand that in absence of full evidences, it is not possible to accept such a contention at this stage. Had the Assessing Officer been more proactive, he would have realized that issuing notice for the assessment year 2008-09 was a sheer mistake. The department had its command material to reopen the assessment of the petitioner pertaining to the financial year 2008-09 an .....

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al income of the assessee without even once pointing out the source for such addition. The Assessing Officer noted the contention of the petitioner that the company had received no such share capital or share premium amount from any of the companies managed or controlled by Shri Pratik R. Shah. In the order of assessment also, this aspect was not met with. Assessing Officer instead, went on general principles of taxing unaccounted receipts. 11. These aspects leave us with no doubt that the Asses .....

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ng the said period. The order of assessment itself thus, falsifies the ground on which the notice for reopening was issued. 12. Learned counsel for the Revenue however, made a last desperate attempt to save the proceedings by suggesting that the notice of reopening merely carried a reference to a wrong assessment year through a typographical error. On the basis of material pertaining to the financial year 2008-09 by error notice came to be issued for the assessment year 2008-09 instead of assess .....

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