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TMI Blog2023 (7) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 of the Act. 3. The reasons for reopening as communicated to the Respondents are as under:- "In this case return of income for the assessment year 2010-11 was e-filed by assessee company on 1 September 2010 declaring NIL income. The return of income has been processed on 16 April 2011. It is found from the balance sheet of the e-return of income that the assessee has issued paid up capital of Rs. 77,00,000/- and Charged Security Premium at Rs. 6,79,32,00,000/- during the year under consideration. An analysis of the details and information of the Balance Sheet shows that Share Premium and value of the shares can not be justified on the basis of "intrinsic valuation of shares' and "Net Asset Value Method' i.e. Share Premium charged is found excessive as the worth of the company is not found in that extent. In view of the above facts and finding of the case, does not justify issue of Shares at such a huge premium, as such the nature of the transaction of so called Shares Premium is not established. In view of the above facts, I have a reason to believe that the income to the time of Rs. 6,79,32,00,000/-chargeable to tax has escaped assessment for assessment year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that the income to the tune of Rs. 6,79,32,00,000/- chargeable to tax has escaped assessment for assessment year 2010-12 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary in the return of income for his assessment, for that assessment year. I am satisfied that this is the fit case to re-open u/s 147 of the Income Tax Act, 1961. Hence, a Notice u/s 148 of the I.T. Act is issued herewith for reassessment." 7. The case of the Petitioner is that in the year ending 31 March 2011, relevant to the Assessment Year 2011-12, the Petitioner had redeemed the said 68,00,000 preference shares of Re. 1 issued to M/s Pony Infrastructure & Contractors Limited & thereafter issued the same preference shares of Re. 1 each to M/s Mystical Infratech Pvt. Ltd. at the aggregate premium of Rs. 679,32,00,000/- & further than the Petitioner had issued 6,80,000 equity shares of Rs. 10/-each at par to the said company which was the holding company of the Petitioner. 8. The case set up by the Petitioner is that the Petitioner-company was incorporated under the Companies Act, 1956 for purposes of engaging in the business of generation and distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital Account and gives rise to no income _ ......" 11. It was urged that The Finance Act, 2012 brought about two amendments in regard to premium received over and above Fair Market Value of shares. This was done by introduction of Section 56(2) (viib) and introduction of clause (xvi) in Section 2(24). Section 2(24) clause (xvi) and Section 56(2)(viib) read as under : Section 2(24)(xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of Section 56. 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 received for such shares as exceeds the fair market value of the shares. 12. It was also urged that the amendments have prospective application and were to apply only from 1 April 2013, i.e. Assessment Year 2013-14. 13. Apart from the above, it was urged that Section 68 was also amended by The Finance Act, 2012 with effect from the Assessment Year 2013-14 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner, it is stated that M/s Pony Infrastructure & Contractors Limited was assessed under Section 143(3) of the Act and as an assessment Order dated 22 February 2013 passed in that regard. Re-assessment proceeding was initiated in regard to the said assessment Order, however, the Tribunal allowed the appeal vide the Order dated 11 October 2018. It was thus urged that neither the identity of investors nor the transaction had been found to be suspect, and, therefore, there was no basis for the assessing officer to issue notice impugned under Section 148A. 16. Mr. Sridharan, learned Senior Counsel further contended that there was no tangible material with the assessing officer which would give him reasons to believe that income has escaped assessment and that the assessing officer was in fact trying to conduct a roving enquiry, which is therefore without jurisdiction. Reliance was also placed upon the case of Sunrise Education Trust Vs. ITO [2018] Taxmann.com 74 (Guj.). It was in the judgment (supra) held as under : "The assessee had from the outset been contending that the assessee's accounts are duly audited and/ such audited accounts are presented alongwith the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of accounts of the assessee it would be immaterial whether the amount so credited is given the colour of share application as capital. 19. It was contended that the revenue was justified in initiating the reassessment proceedings for the reason that there was tangible material available on record in the shape of analysis of the balance-sheet which clearly suggests that there was no justification for the assessee to have issued shares at such a huge premium of Rs. 6,79,32,00,000/- during the year under consideration and further that the very nature of transaction of the so called share premium had not been established. Reliance is placed upon the judgment of the Apex Court in the case of Commissioner Of Income-Tax Vs. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) to buttress the argument that merely because a company chose to show the receipt as capital receipt would not preclude the Income Tax Officer from giving into the question whether the transaction was actually so, as Section 68 of the Act empowered him to do so and further that whenever an assessee represents that the receipt of shares on the receipt of share application money and an amount received is credited in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons." 24. In the present case neither the reasons recorded nor the order disposing of the objections in any manner reflects that there was any doubt with regard to existence of the entities in whose favour the allotment of shares had been made upon receipt of share money as also the amount of premium paid on the said shares. 25. By virtue of the impugned notice dated 23rd March 2015, the assessing officer seeks to reopen the assessment for the assessment year 2010-11, which is within a period of four years. Admittedly, no scrutiny assessment under Section 143(3) of the Act has taken place in the present case. Even in a case where no scrutiny assessment has taken place, reassessment can be ordered only if the assessing officer has reason to believe that income chargeable to tax had escaped assessment. The Apex Court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 has clearly held that notice for reopening an assessment under Section 148 of the Act could only be justified if the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing taken place between the said two companies with regard to allotment of preference shares and receipt of the share premium amount inasmuch as what was sought to be questioned, was not in fact the transaction, but only the receipt of the share premium amount which was said to be excessive and much beyond the intrinsic value of the shares of the Petitioner company. 29. This can be guessed from the fact that the assessing officer had only flagged the share premium amount of Rs. 6,79,32,00,000/- which according to him was chargeable to tax that had escaped assessment and did not question the amount of Rs. 68 lakhs received by the Petitioner company representing the value of Rs. 68 lakhs shares of the face value of rupee 1 per share. Had the Assessing Officer any real doubts regarding the transaction itself, then there was no justification for him to question only the transaction with regard to the extent of the amount of premium charged for the said shares. 30. We therefore of the opinion that there was neither any basis for the assessing officer for his reason to believe that income had escaped assessment nor was there any tangible material which would have otherwise given jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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