9911796707
TMI Blog2024 (2) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... any. In the cash flow statement filed, petitioner had mentioned that it had received as share premium amount a sum of Rs. 215,011,618/- which was used entirely for redemption of preference shares. In fact, in the communication dated 12th August 2011, petitioner was called upon to furnish "in case of securities premium / share premium received, justify charging of the same with supporting documentary evidences". Petitioner, in its reply dated 12th September 2011, stated that petitioner had issued 16730 equity shares of the face value of Rs. 10/- each at premium of Rs. 12841.86 per equity share to an entity based in Mauritius and that it has taken all necessary permission under Foreign Exchange Management Act (FEMA). Copy of Foreign Inward Remittance Certificate (FIRC) was also filed along with the valuation report. The Assessing Officer (AO) passed the assessment order, in which, of course he has not dealt with the issue of share premium but has accepted the return that petitioner had filed declaring a loss of Rs. 87,362/-. 2. On or about 29th March 2014, petitioner received a notice under Section 148 of the Act for reopening the assessment for AY 2009-10. The reasons for reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat too at 1284.2 times of the face value of a share. The intrinsic value of share is in fact much less than what it has got. As per the Notes to Accounts the Earning Per Share is only Rs. 0.72 for the current A.Y. It is seen from the records that the assessee is a loss making company and the returned income for the last two A. Years are as under: A.Y. Returned Income 2007-08 (-) 9,234/- 2008-09 (-) 2,500/- 2009-10 (-)87,362/- 5. Therefore I have reason to believe that there has been underassessment of income, received in the garb of share application money, has escaped assessment in terms of provisions of section 147 by reason of failure on part of assessee to disclose fully and truly all material facts necessary subject to the provisions of the I.T. Act for its assessment for the A.Y. 2009-10. Therefore, I am satisfied that this is a fit case to issue notice u/s. 148 r.w.s. 147 of the I.T. Act, 1961. The necessary administrative approval of the Addl. CIT, Rg. 1(1), Mumbai u/s. 151(1) has been obtained vide his letter No. Addl. CIT/Rg.1(1)/Appr.148/2013-14 dated 28.03.2014." 3. Petitioner filed objections through its Chartered Accountant's letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction since the receipt of share premium at the time of fresh issue of shares by the company does not constitute income chargeable to tax under the Act so as to escape assessment. It is also petitioner's case that the reasons recorded are vague indicating that there is no material on record whereof a valid belief could be formed that income chargeable to tax has escaped assessment and the reassessment proceedings have been initiated merely to make fishing and roving enquiries which is not permissible under the Act. It is settled law that if, the jurisdictional conditions are not satisfied, the assessment cannot be reopened. 5. Mr Pardiwalla submitted as under: (a) It is a well settled principle of law that the existence of a valid "reason to believe" is a sine qua non for the exercise of jurisdiction under section 147 of the Act. The courts have held that the expression "reason to believe" postulates a bonafide belief that there must exist objective reasons for that belief. (b) The reasons as recorded do not disclose any tangible material on the basis of which a prudent person could have formed a reasonable belief and come to a conclusion that any income has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmann.com 211 (Bombay) held is something which is not illusory, hypothetical or a matter of conjecture. (e) A bare perusal of the reasons recorded indicates that it is an admitted position that the re-opening is initiated at the behest of the higher authority and is not based on the formation of a belief by respondent no. 1. Respondent no. 1 himself has not formed any belief that any income has escaped assessment. As held in Principal Commissioner of Income Tax -5 Vs. Shodiman Investments (P) ltd. (2018) 93 taxmann.com 153 (Bombay) the settled position in law is that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. The reasons indicate that the AO has not applied his mind but has merely issued the reopening notice on the basis of letter dated 27th March 2014 issued by him for taking necessary action as the time limit of four years for issue of notice u/s 148 of the Act will expire on 31st March 2014, and relied on a list in respect of companies who have received the share premium during AY 2009-10. (f) The AO in the reasons to believe only says that when assessee has been incorporated only on 15th March 2007 and asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act? 8. Admittedly, petitioner's case for AY-2009-10 was taken up for scrutiny. During the course of scrutiny assessment, petitioner was called upon by respondent no. 1, vide letters dated 21st February 2011 and 12th August 2011, to provide for certified copy of the annual report alongwith balance sheet, profit and loss account schedule and annexures, details of shareholding patterns of the company and securities premium / share premium received and to justify charging of the same with separate documentary evidences. Petitioner, vide its letters dated 19th July 2011 and 12th September 2011, provided all the documents and materials. In its letter dated 12th September 2011, petitioner also stated that it had charged share premium of Rs. 12841.86 per equity share of face value of Rs. 10/- each on 16,730 equity shares that was issued to a Mauritius resident. Petitioner also provided the documents relating to Foreign Inward Remittance Certificate and forms filed with RBI. After considering all those documents, the assessment order dated 21st December 2011 came to be passed. 9. As held by the Division Bench of this Court in Aroni Commercials Ltd. Vs. Deputy Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change of opinion. However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 2008-09. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onduct a roving enquiry, which is therefore without jurisdiction. The court came to a finding that the receipt of share capital including the premium was on capital account and gave rise to no income and, therefore, there was neither any basis for the AO for reason to believe that income had escaped assessment, nor was there any tangible material which would have otherwise given jurisdiction to re-open the assessment even when the re-opening was sought to be made within a period of four years. Paragraphs 24 to 30 of SLS Energy (Supra) read as under: "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 sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated against the said entity and the appeal allowed vide order dated 11th October, 2018. We therefore agree with the contention of Mr. Shridharan, learned Counsel for the Petitioner that this was not a case where there could be any suspicion with regard to the factum of transaction having taken place between two companies. In any case the assessing officer appears to have not been in doubt regarding the transaction having 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. Admittedly, notice has been issued in view of a communication received from his superior officer. It is rather obvious that the AO has not applied his mind and arrived at his own satisfaction but on borrowed satisfaction. Paragraphs 12 to 14 of Shodiman Investments (P) Ltd. (Supra) read as under: "12. The re-opening of an Assessment is an exercise of extra-ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before reopening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
