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TMI Blog2018 (9) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 147 of the Act, reasons for reopening of assessment (page- 52 of the paper book), para 4.3. (page-5 of the impugned order) by contending that the reopening was done within four years by following the procedure prescribed in the section and there was information with the Assessing Officer from the ROC that the premium was at higher value. Reliance was placed upon the decision from Hon'ble Apex Court in the case of Rajesh Jhaveri (291 ITR 500) (Supreme Court). It was pleaded that sufficient and correctness is not required at early stages for which reliance was placed upon the decision in Raymond Woollen Mills Ltd. vs Income-Tax Officer And Ors. 236 ITR 34 (Supreme Court). In reply, the ld. counsel for the assessee, Shri Vipul Jain, defended the impugned order by contending that it is not a case of bogus shares and the assessee is a government owned company and the issue pertains to excess share premium. It was pleaded that the source is doubted and the premium is mentioned in the agreement itself. Our attention was invited to paper book pages 43, 44 and 47. In reply, the Ld. CIT-DR, contended that it is a case of abnormal share premium. He relied upon the decision in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allow ance under this Act has been computed. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub- section (2) of section 148." 2.2. If the aforesaid provision of the Act is analyzed, we are of the view that for reopening an assessment made under section 143(3) of the Act, the following conditions are requires to be satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f reading, experience and reflection". 2.5. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection to use the words in Law Lexicon by P. Ramanatha Aiyar. The question of change of opinion arise when an Assessing Officer forms an opinion and decides not to make an addition or holds that the assessee is correct and accepts his position or stand. In Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H), a Division Bench of the Hon'ble Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessed before the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion." 2.7. From the foregoing discussion, the clear position eme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts" means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. A decision of from Hon'ble Delhi High Court dated September 26, 2011 in Dalmia P. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) and another decision from Hon'ble jurisdictional High Court dated November 8, 2011, in Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) are two such cases, which throws light on the issue. In the first case, the Assessing Officer in the original assessment had made addition of Rs. 19,86,551 under section 40(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show nexus that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. At the same time, it is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment takes place when the final or reassessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment." This takes us to the observations of the Delhi High Court in Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] which read as under (page 18): "The Board in exercise of its jurisdiction under the aforementioned provisions had issued the circular on October 31, 1989. The said circular admittedly is binding on the Revenue. The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular." From a perusal of clause 7.2 of the said circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e where income had escaped assessment due to the 'oversight, inadvertence or mistake' of the Income-tax Officer must fall within section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law." 2.12. In A. L. A. Firm (supra), the Hon'ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Maviji's case [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income- tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act'." (emphasis supplied) The aforesaid observations are a complete answer to the issue that if a particular subject-matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of "change of opinion" and the reassessment proceedings will be barred. 2.13. So far as, the reliance by the Ld. CIT-DR upon the decisions from Hon'ble Calcutta High Court/Punjab & Haryana High Court ((supra)) is concerned, those cases are based upon the facts contained therein. The Hon'ble Apex Court in CIT vs Foramer France, vide order dated 16/01/2003, where, there was no failure on the part of the assessee to disclose the material facts, it was held that the notice issued beyond prescribed period cannot be sustained merely on the basis of change of opinion. Even otherwise, when two views are possible, the view, which favours the assessee has to be preferred. 2.14. We are conscious of the fact that the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o plenary. We are aware that Hon'ble Gujarat High Court in Praful Chunilal Patel: Vasant Chunilal Patel vs ACIT (1999) 236 ITR 82, 840 (Guj.) even went to the extent that action under main section 147 is possible in spite of complete disclosure of material facts. The primary condition of reasonable belief having nexus with the material on record is still operative. However, we are of the view, that mere fresh application of mind to the same set of facts or mere change of opinion does not confer jurisdiction to the Assessing Officer even under the post 1989 section 147 of the Act. Our view finds support from the decision from Hon'ble High Courts in following cases:- i. Jindal Photo Films Ltd. vs DCIT (1998) 234 ITR 170 (Del.), ii. Garden Silk Mills Pvt. Ltd. vs DCIT (1999) 151 CTR (Guj.) 533, iii. Govind Chhapabhai Patel vs DCIT 240 ITR 628, 630 (Guj.), iv. Foramer vs CIT (2001) 247 ITR 436 (All.), affirmed in CIT vs Foramer Finance (2003) 264 ITR 566, 567 (SC), v. Ipica Laboratories vs DCIT (2001) 251 ITR 416 (Bom.), vi. Ritu Investment Pvt. Ltd.(2012) 345 ITR 214 (Del.), vii. Ketan B. Mehta vs ACIT (2012) 346 ITR 254 (Guj.), viii. Ms. Praveen P. Bharucha vs DCIT (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It will be a case of the assessing authority having "reason to believe", notwithstanding that full and true particulars were furnished by the assessee which were examined, or presumed to be examined, by him. There was a divergence of opinion amongst various High Courts as to what constitute "Information" for the purposes of section 34(1)(b) of the 1922 Act (which corresponds to section 147(b) of the 1961 Act) the Hon'ble Apex Court in CWT vs Imperial Tobacco Company Ltd. (1966) 61 ITR 461 has noted such divergence of opinion on the point. Hon'ble jurisdictional High Court in CIT vs Sir Mohammad Yusuf Ismail (1944) 12 ITR 8 (Bom.) held that mere change of opinion on the same facts are on question of law or mere discovery of mistake of law is not sufficient information and that in order to sustained action u/s 34 by further holding that reassessment is not permissible. The Hon'ble Apex Court in Simon Carves Ltd. (1976) 105 ITR 212 held that errorless legally correct order cannot be reopened, therefore, it is settled law that without any new information and on the basis of mere change of opinion, reopening of assessment is not permissible. As was held in CIT vs TTK Prestige ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to the ACIT, the statement of share capital and statement of share premium was also duly furnished by the assessee. It is further noted that vide letter dated 23/12/2011 (page-47 of the paper book), addressed to the ACIT, the assessee also furnished the copy of the agreement. The shares subscription and share holders agreement between the parties was executed at New Delhi on 22/11/2007, which contains the necessary details and was duly filed by the assessee before the Ld. Assessing Officer, meaning thereby, the necessary evidence was duly made available by the assessee during assessment proceedings and thus no new material came to the light/possession of the Ld. Assessing Officer. All the correspondence made during original assessment between the assessee and the Ld. Assessing Officer are available in the paper book. It is noted that the Ld. Assessing Officer reopened the assessment framed u/s 143(3) of the Act on the basis of some information from the office of ROC about raising share capital along with share premium. We have perused the reasons recorded by the Ld. Assessing Officer and consequent objections raised by the assessee vide letter dated 16/06/2014 (page-53 to 59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Finance (P.) Ltd. 208 ITR 465 (Cal.), CIT vs Vir Bhan & Sons 273 ITR 206 ( P & H) and ITA No. 525 of 2014. 3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee filed its return on 24/09/2009 declaring income of Rs. 7,80,32,935/-, which was processed under section 143(1) of the Act. The assessment was framed under section 143(3) on 26/12/2011. As per the Revenue, an information was received from ROC that the assessee charged share premium of Rs. 154.72 per shares for 28,66,500 shares issued during the year and thus the amount of Rs. 44,35,01,250/- was collected. The assessee was asked to prove the genuineness of the transactions along with nature and source of funds. As per the Revenue, the assessee did not explain the excess premium so charged and thus addition was made under section 68 of the Act. On appeal before the Ld. Commissioner of Income Tax (Appeal), the additions so made was deleted, against which the Revenue is in appeal before this Tribunal. 3.2. Before adverting further, it is our bounded duty to examine section 68 of the Act, which is reproduced hereunder:- "Where any sum is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess premium charged is as under:- Sr. No. Amount in Rs. 1 Total Assets 19,31,48,494 2. Less Misc. Expenses -77,976 3. Total Assets 19,30,70,518 4. Total number of shares 58,50,000 5. NAV 33 6. Premium Charged per shares 154.72 7. Excess premium charged 121.72 8. Total excess premium charged 34,89,10,380/- If the aforesaid factual matrix is analyzed, the net asset value of shares as on 31/03/2008 comes to Rs. 33/- as the total asset is Rs. 19,30,70,518/-, whereas, the premium charged per share is Rs. 154.72, thus, the excess premium charged comes to Rs. 121.72 resulting into total excess premium comes to Rs. 34,89,10,380/-. However, we note that as per the provisions of section 56(2)(viib), where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration receive for such share as exceed the fair market value of such share was inserted by the Finance Act, 2012, w.e.f. 01/04/2013 and the present assessment year before us is 2009-10, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Being aggrieved, the respondent carried the issue in appeal. By an order dated 24th May, 2011 the Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition of Rs. 7.53 crores made by the Assessing Officer by holding that the Assessing Officer had given no reason to conclude that the investment made (inclusive of premium) was not genuine. This inspite of evidence being furnished by the respondent in support of the genuineness of the transactions. Further he held that the appropriate valuation of the shares is for the subscriber/investor to decide and not a subject of enquiry by the Revenue. Finally he relied upon the decision of the Apex Court in CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 to hold that if the amounts have been subscribed by bogus shareholders it is for the Revenue to proceed against such shareholders. Therefore it held the Assessing Officer was not justified in adding the amount of share capital subscription including the share premium as unexplained credit under Section 68 of the Act. (c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondentassessee had establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained. 4. (a) Admit the substantial q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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