Precilion Holdings Limited v. The Deputy Commissioner Of Income Tax,International Taxation -3(3)(2), Mumbai & Ors

(Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. WRIT PETITION NO. 3342 OF 2018 Precilion Holdings Limited..Petitioner Versus The Deputy Commissioner of Income Tax,International Taxation -3(3)(2), Mumbai & Ors...Respondents ................... Mr. Jehangir Mistri, Senior Counsel a/w Mr. Madhur Agrawal i/byAtul Jasani for the PetitionerMr. Jehangir Mistri, Senior Counsel a/w Mr. Madhur Agrawal i/byAtul Jasani for the Petitioner Mr. P.C. Chhotaray for the RespondentsMr. P.C. Chhotaray for the Respondents ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : FEBRUARY 25, 2019. ORAL JUDGMENT(Per Akil Kureshi, J.) 1.The petitioner has challenged a notice of reopening ofassessment dated 3.4.2018. 2.Brief facts are as under:- 2.1 Petitioner is a company incorporated in Cyprus enjoying tax residency certificate issued by the Cyprus Authorities.Petitioner's principal activity is to act as an investmentholding company. During the assessment year 2011-12, thepetitioner had made investment in Compulsory Convertible Debentures of M/s. Wadhwa Residency Pvt Ltd, a companyincorporated in India, of a sum of Rs. 161.31 crore (roundedoff). On such investment, the petitioner had receivedinterest amount of Rs. 11.93 crore (rounded off) during therelevant period. The petitioner had filed return of income forthe assessment year 2012-13 declaring total income of Rs.11.93 crore being the interest eared by the petitioner andoffered the same to tax @ 10%, placing reliance on Article 11of the Double Taxation Avoidance Agreement ("DTAA" forshort) between India and Cyprus. It is undisputed that M/s.Wadhwa Residency Pvt Ltd is an associated enterprise of thepetitioner and the receipt of interest income was subject totransfer pricing mechanism. The order of assessment cameto be passed by the Assessing OfÏcer on the petitioner's saidreturn of income under Section 143(3) of the Income Tax Act,1961 ("the Act) for short) on 23.3.2016. The income wastaxed at 10%, as offered by the petitioner. In order to reopensuch assessment, the Assessing OfÏcer had issued theimpugned notice. For doing so, the Assessing OfÏcer hadrecorded following reasons:- "THE REASONS FOR INITIATING PROCEEDINGS U/S 148 FOR A.Y. 2012-13 The return of income for A.Y. 2012-13 was e-filed on 30.11.2012 declaringtotal income of Rs. 11,93,41,710/- On which assessee has deducted TDS ofRs. 1,19,34,170/. @ 10%. The return was processed u/s 143(1) on31.12.2013. 2. The assessee company ie. Precilion Holding Limited is a companyincorporated in Cyprus. The assessee has offered interest income at taxrate of 10% claiming beneficial ownership of interest income as per Article11 of DTAA. 3.The case was selected for scrutiny and assessment order u/s 143(3)r.w.s. 92CA(3) of the I. T. Act was passed on 23.03.2016 accepting thereturned income. 4.The draft assessment order u/s 143(3) r.w.s 92CA(3) r.w.s. 144C(1)of the Income Tax Act, 1961 was completed for A.Y. 2014-15 on 29.12.2017.During the course of assessment proceedings following facts merged outand assessee was denied beneficial ownership of interest income. 5.In this case for A.Y. 2014-15, assessee is Cyprus based ForeignCompany. It holds investments in Compulsory Convertible Debentures(CCD's) in various Indian companies and offers for tax the interest incomeon such investments on receipt basis. The said income of Rs.55,01,17,499/- has been offered to tax @ 10% as per the provisions ofArticle 11(2) of the DTAA by the assessee as beneficial owner of interestincome. 6. To be beneficial owner of interest income assessee should beindependent and free to utilize its interest income on its own and it shouldhave substantial commercial activity in Cyprus. 7.In order of the interest income at lower tax rate @ 10%, assesseehas to be beneficial owner of such interest income. 5.In this case for A.Y. 2014-15, assessee is Cyprus based ForeignCompany. It holds investments in Compulsory Convertible Debentures(CCD's) in various Indian companies and offers for tax the interest incomeon such investments on receipt basis. The said income of Rs.55,01,17,499/- has been offered to tax @ 10% as per the provisions ofArticle 11(2) of the DTAA by the assessee as beneficial owner of interestincome. 6. To be beneficial owner of interest income assessee should beindependent and free to utilize its interest income on its own and it shouldhave substantial commercial activity in Cyprus. 7.In order of the interest income at lower tax rate @ 10%, assesseehas to be beneficial owner of such interest income. 8.Accordingly in order to verify the same movement of the receiptsand payments through bank account transfer was verified and analyzed.Source of the investment made by the assessee was inquired into and nature of payback to investors was analyzed. A inquiry regarding whetherassessee has any office and employees on its payroll in Cyprus wasmade. Activities of directors were studied and related party transactions ifany were looked into. Articles of Association and memorandum ofassociation of company were gone through and terms and conditions ofissue of various types of shares were studied. 9.Thus, it is clearly established that assessee has invested in CCD'sof Indian company out of its share holders funds. Upon receipt of interestincome related to CCD's, invariably within 6 to 20 days, this income amountis transferred to share holder by paying dividend. Pay out of income isdependent on receipt of interest income in terms of timing and availability offunds. Assessee does not have a single employee and any substantialeconomic activity in Cyprus and working of the company is controlled bybeneficial share holder of the company by hiring of services of working asdirectors from employees of IPS Mauritius by whom local address is givenin Mauritius to beneficial owner of Assessee Company. 10.In the assessment proceedings, it is held that the assessee is notbeneficial owner of this income on these tests and thus treaty benefits aredenied to the assessee to the extent of interest income only in the presentcase. Interest income of Rs. 55,01,17,499/- is taxed at rate @ 20% as perprovision of section 115A(1)(a)(ii) of I.T. Act, 1961 instead of 10% offered bythe assessee. 11.In view of this, it was held that the assessee is not beneficial ownerof this income on these tests and thus treaty benefits are denied to theassessee in respect of interest income. Interest income is taxed at the rate@ 20% as per provision of Section 115A(1)(a)(ii) of I.T. Act, 1961. 12.It is pertinent to note that during the assessment proceedings, orderu/S. 143(3) r.w.s. 92CA(3) of the I.T. Act, 1961 for the A.Y. 2012-13 waspassed on 23.03.2016. The assessing officer has not raised any query onthe above issue and the same was not verified during the course ofassessment proceedings for A.Y. 2012-13. Keeping in view of the abovefact, the issue is required to be verified for the A.Y. 2012-13. 13. In view of the above facts, it is clear that interest income is taxed atlow rate of 10% instead of 20% and I have reason to believe that theprovisions of clause (c) of Explanation 2 to Section 147 of the Income TaxAct are applicable to the facts of this case and the assessment year underconsideration is deemed to be a case where the income which is more thanRs. 1,00,000/- chargeable to tax @ 20% rate tax has escapedassessment. 14.In this case, more than four years have lapsed from the end of theassessment year under consideration. Hence, necessary sanction to issuenotice u/S. 148 has been obtained separately from the Commissioner ofIncome Tax(IT)-3, Mumbai as per the provisions of Section 151 of the Act." 13. In view of the above facts, it is clear that interest income is taxed atlow rate of 10% instead of 20% and I have reason to believe that theprovisions of clause (c) of Explanation 2 to Section 147 of the Income TaxAct are applicable to the facts of this case and the assessment year underconsideration is deemed to be a case where the income which is more thanRs. 1,00,000/- chargeable to tax @ 20% rate tax has escapedassessment. 14.In this case, more than four years have lapsed from the end of theassessment year under consideration. Hence, necessary sanction to issuenotice u/S. 148 has been obtained separately from the Commissioner ofIncome Tax(IT)-3, Mumbai as per the provisions of Section 151 of the Act." 2.2 The petitioner raised objections to the notice ofreopening of assessment under communication dated28.5.2018. Such objections were disposed of by theAssessing OfÏcer by order dated 25.9.2018. Upon which, thispetition came to be filed. 3.Appearing for the petitioner, learned senior counselShri. Mistri raised the following contentions in support ofchallenge:-Shri. Mistri raised the following contentions in support ofchallenge:- i. The impugned notice has been issued beyond theperiod of four years from the end of relevantassessment year. The petitioner had made trueand full disclosures in the return filed. TheAssessing OfÏcer, therefore, could not haveperiod of four years from the end of relevantassessment year. The petitioner had made trueand full disclosures in the return filed. TheAssessing OfÏcer, therefore, could not have reopened the assessment; ii. During the scrutiny assessment, the entire issuewas examined by the Assessing OfÏcer. Only afterwhich the order of assessment was passedaccepting the stand of the petitioner that theinterest income was correctly offered to tax @10%. Even in the order of assessment, thisaspect has been referred by the Assessing OfÏcer;iii. Even on merits, the Assessing OfÏcer's stand iscompletely incorrect. The petitioner enjoys a taxresidency certificate issued by Cyprus Authorities.The Assessing OfÏcer cannot disregard suchcertificate to hold a belief that the assesseecompany is not a genuine company based inCyprus and that, therefore, the benefit of reducedrate of tax as per DTAA was wrongly claimed. 4.On the other hand, learned counsel Shri. Chhotarayopposed the petition contending that the Assessing OfÏcerhas recorded proper reasons. During the course of theassessment of the petitioner assessee for the subsequentassessment years, the entire issue was examined by theAssessing OfÏcer at length and he has come to the conclusion that the assessee had wrongly claimed reducedrate of tax on the interest income. Thus, the formation ofbelief of the Assessing OfÏcer in the present case is based oninformation available subsequent to the framing ofassessment. He relied on several decisions reference towhich would be made at an appropriate stage. 5.Having thus, heard the learned counsel for the parties,we may record that the impugned notice has been issuedbeyond the period of 4 years from the end of relevantassessment year. Under these circumstances, the additionalrequirement flowing from the first proviso of Section 147 ofthe Act that escapement of income chargeable to tax shouldbe due to a failure on the part of the assessee to disclosetruly and fully all material facts, must be satisfied. We mayperuse the materials on record on such basis. 6.The perusal of the reasons recorded by the AssessingOfÏcer would show that according to the Assessing OfÏcer, inorder to claim the benefit of Article 11 of the DTAA, theassessee had to be a beneficial owner of the interest income 5.Having thus, heard the learned counsel for the parties,we may record that the impugned notice has been issuedbeyond the period of 4 years from the end of relevantassessment year. Under these circumstances, the additionalrequirement flowing from the first proviso of Section 147 ofthe Act that escapement of income chargeable to tax shouldbe due to a failure on the part of the assessee to disclosetruly and fully all material facts, must be satisfied. We mayperuse the materials on record on such basis. 6.The perusal of the reasons recorded by the AssessingOfÏcer would show that according to the Assessing OfÏcer, inorder to claim the benefit of Article 11 of the DTAA, theassessee had to be a beneficial owner of the interest income and in turn, the assessee should be independent and free toutilize its interest income on its own and should havesubstantial commercial activities in Cyprus. He has furtherrecorded during the course of assessment for theassessment year 2014-15 to verify the movement and thereceipt of payments, bank account was verified andanalyzed. Source of investment of the assessee was inquiredinto and nature of payback to the investors was analyzed bythe Assessing OfÏcer. He has also verified the activities ofthe directors and related party transactions. He had alsogone through the Articles of Association and Memorandum ofAssociation of the company. On the basis of such material,the Assessing OfÏcer had come to certain importantconclusions ultimately leading to his belief that the assesseewas not the beneficial owner of the interest income and that,therefore, the reduced rate of tax @ 10% was not available,instead, the assessee would have to pay tax at higher rateon such income. 7.In the reasons, the Assessing OfÏcer further records that in respect of the scrutiny assessment for the assessment year 2012-13, "the Assessing OfÏcer has notraised any query on the above issue and the same was notverified during the course of the assessment proceedings forthe assessment year 2012-13". Keeping in view the abovefact, the issue requires to be verified for the assessment year2012-13" 8.We notice that during the course of the assessmentproceedings for assessment year 2012.13, the AssessingOfÏcer had raised multiple queries and elicited replies fromthe petitioner assessee. For example, under a letter dated16.2.2016, the Assessing ofÏcer had called for, besidesother, following information:- "7. Furnish the details of share holding / investments / loans /advances & interest earned / paid with M/s. Wadhwa ResidencyPvt Ltd as on 31.3.2011, 31.3.2012 and 31.3.2013.advances & interest earned / paid with M/s. Wadhwa ResidencyPvt Ltd as on 31.3.2011, 31.3.2012 and 31.3.2013. 8. Furnish details of purchases of debentures / shares fromWadhwa Residency Pvt Ltd;Wadhwa Residency Pvt Ltd; 9. Furnish list of directors of the company along with details of theirshare holdings;share holdings; 10.Furnish details of investments made / interest with M/s. WadhwaResidency this is your associated enterprises."Residency this is your associated enterprises." In reply to such queries, the assessee under communication dated 2.3.2016 had provided following information and documents :- "A. At the outset, we wish to inform you that assessee is aninvestment holding company incorporated in Cyprus on 20April 2011.investment holding company incorporated in Cyprus on 20April 2011. The assessee has made investment in compulsoryconvertible debentures ("CCDs") of Wadhwa ResidencyPrivate Limited ("WRPL") amounting to Rs. 1,61,53,50,000during the year under consideration. Further, the assesseehas received interest on CCDs amounting to Rs.11,93,41,705/- The assessee has earned interest on CCDs and has notearned any other income in India during the year underconsideration. B......... 3.Copy of incorporation certification is enclosed as Annexure III communication dated 2.3.2016 had provided following information and documents :- "A. At the outset, we wish to inform you that assessee is aninvestment holding company incorporated in Cyprus on 20April 2011.investment holding company incorporated in Cyprus on 20April 2011. The assessee has made investment in compulsoryconvertible debentures ("CCDs") of Wadhwa ResidencyPrivate Limited ("WRPL") amounting to Rs. 1,61,53,50,000during the year under consideration. Further, the assesseehas received interest on CCDs amounting to Rs.11,93,41,705/- The assessee has earned interest on CCDs and has notearned any other income in India during the year underconsideration. B......... 3.Copy of incorporation certification is enclosed as Annexure III 5.Copy of financial statements is enclosed as Annexure VI.Further, the assessee is a foreign company and madeinvestment in India and therefore, the assessee is not requiredto prepare tax audit report.Further, the assessee is a foreign company and madeinvestment in India and therefore, the assessee is not requiredto prepare tax audit report. 7.The assessee has earned interest on CCDs from WRPL asfollows:-follows:- AY 2011-12 - Nil. Investment was made in CCDs in AY 2012- 13 AY 2012-13 - Rs. 11,93,41,705 AY 2013-14 - Rs. 32,30,70,000 8.Copy of the agreement in respect of investment in CCDs ofWRPL is enclosed as Annexure VII.WRPL is enclosed as Annexure VII. 9.Directors of the assessee company are as follows: a. Briantserve Limited b. Ceantrust Limited c. Basanta Lala Couldiplall Shareholding structure of the assessee is as under:- Sr. No.Name of the ShareholderPercentage of shareholding1IL & FS Realty Fund II LLC74.46%2Saffron India Real Estate Fund I25.54%Total100% 10.Please refer point A above. 12.Copy of bank account and bank statement is enclosed asAnnexure IX and Annexure X.Annexure IX and Annexure X. Along with this communication, the petitioner hadannexed certain documents which included the bankstatement. On 16.3.2016, the petitioner supplied furtherinformation to the Assessing OfÏcer which included thefollowing:- "The total grossed up amount of interest was INR 119,341,705.WRPL deducted tax at the rate of 10 percent as per Article 11 ofDouble Taxation Avoidance Agreement between India and Cyprus. 3.The assessee company was formed on 20 April 2011. IL&FSRealty Fund II LLC and Saffron India Real Estate I investedinto 74.46% and 25.54% of equity shares of the assesseerespectively.Realty Fund II LLC and Saffron India Real Estate I investedinto 74.46% and 25.54% of equity shares of the assesseerespectively. The assessee had invested the money received against theequity shares into CCDs of WRPL. Copy of the bankstatement depicting the flow is enclosed as Annexure III. 4.Details of the shareholders of the assessee are as under Sr. No.Name of the ShareholderPercentage of shareholding1IL & FS Realty Fund II LLC74.46%Address : IFS Court, Twenty Eight Cybercity, Ebene, Mauritius 2Saffron India Real Estate Fund I25.54%Address : Rogers House, 5 Joh N. President Cennedt Street, Port Lueis MauritiusTotal100% We further confirm that the above entities are tax residents ofMauritius and do not have any upstream shareholders inIndia." Under letter dated 21.3.2016, the petitioner supplied following additional documents: "Further, without prejudice to the above, as requested by yourgoodself, we submit as under:- 1. Shareholding structure of IL&FS Realty Fund II LLC as on 31March 2012 as Annexure IMarch 2012 as Annexure I 2.Shareholding structure of Saffron India Real Estate Fund I ason 31st March 2012 as Annexure IIon 31st March 2012 as Annexure II 3. Bank statement for the period from 1 January 2011 to 31 March 2013 of IL&FS Realty Fund II LLC as Annexure III 2Saffron India Real Estate Fund I25.54%Address : Rogers House, 5 Joh N. President Cennedt Street, Port Lueis MauritiusTotal100% We further confirm that the above entities are tax residents ofMauritius and do not have any upstream shareholders inIndia." Under letter dated 21.3.2016, the petitioner supplied following additional documents: "Further, without prejudice to the above, as requested by yourgoodself, we submit as under:- 1. Shareholding structure of IL&FS Realty Fund II LLC as on 31March 2012 as Annexure IMarch 2012 as Annexure I 2.Shareholding structure of Saffron India Real Estate Fund I ason 31st March 2012 as Annexure IIon 31st March 2012 as Annexure II 3. Bank statement for the period from 1 January 2011 to 31 March 2013 of IL&FS Realty Fund II LLC as Annexure III 4. Bank statement for the period from 1 January 2011 to 31March 2013 of Saffron India Real Estate Fund I as AnnexureIV."March 2013 of Saffron India Real Estate Fund I as AnnexureIV." It was after such exchange of communications that the Assessing OfÏcer had passed the the order of assessment on 23.3.2016 in which he has observed as under:- "4. The assessee i.e Precilion Holdings Limited is a companyincorporated in Cyprus. The Principal activity of the assesseeis to act as an investment holding company.incorporated in Cyprus. The Principal activity of the assesseeis to act as an investment holding company. 5.During the year, the assessee has received interest oncompulsory convertible debentures amounting to Rs.11,93,41,705/- from Wadhwa Residency Private Limited, whichis Associated Enterprises of the assessee.compulsory convertible debentures amounting to Rs.11,93,41,705/- from Wadhwa Residency Private Limited, whichis Associated Enterprises of the assessee. 6.The Arm's length price of the international transaction asreported by the assessee has been accepted by the transferpricing officer. The details furnished by the assessee havebeen verified and discussed.reported by the assessee has been accepted by the transferpricing officer. The details furnished by the assessee havebeen verified and discussed. 7.In view of the facts of the case as discussed above, the totalincome of the assessee is assessed on the income of Rs.11,93,41,705/- i.e income returned.income of the assessee is assessed on the income of Rs.11,93,41,705/- i.e income returned. 8.Assessed accordingly under Section 143(3) r.w.s. 92CA(3) ofthe Act at the total income of Rs. 11,93,41,710 (round off) asinterest income. Give credit for TDS and taxes paid, if anyafter due verification. Charge interest as applicable. IssueD.N./R.O/ Challan accordingly."the Act at the total income of Rs. 11,93,41,710 (round off) asinterest income. Give credit for TDS and taxes paid, if anyafter due verification. Charge interest as applicable. IssueD.N./R.O/ Challan accordingly." 9.It can thus be seen that the entire financial activity ofthe petitioner during the relevant period came up for scrutinybefore the Assessing OfÏcer during the original scrutinyassessment. The petitioner had limited financial activitiesduring the said period resulting into only one principaltransaction of earning interest income. The Assessing ofÏcerhad inquired about the nature of activities of the assesseeand the nature of source of income. Even if, it is believedthat the question of taxing such interest income at theconcessional rate as per the DTAA was not in the mind of theAssessing OfÏcer when such queries were raised and theorder of assessment was passed, one thing that cannot bedenied is that there was no failure on the part of theassessee to disclose truly and fully all material facts necessary for assessment. Whatsoever allegations by theAssessing OfÏcer in the reasons recorded that there was nofailure on the part of the assessee to disclose true and full allmaterial facts. The assessee had filed the return of incomemaking all necessary declaration. Detailed scrutinyexamination during the original assessment was carried out.The assessee supplied full information called for by theAssessing OfÏcer and also placed on record voluminousdocuments for his consideration. Nowhere in the reasons,the Assessing OfÏcer contends that in the process of suchscrutiny also, there was any failure on the part of theassessee to disclose truly and fully all material facts.Whatever be the validity of the Assessing OfÏcer's contentionthat the assessor's interest income in the case on hand couldnot be taxed at the concessional rate, reopening ofassessment beyond the period of four years was simply notpermissible. 10. Even in the reasons, the Assessing OfÏcer's logicrevolves around the further scrutiny carried out by theAssessing OfÏcer for the assessment year 2014-15 during which he formed the belief that the income should have beencharged at high rate of 20%. In the quoted portion of thereasons, he goes on to suggest that the Assessing OfÏcerduring the scrutiny for assessment year 2012.13 had notraised any query on this aspect and had not verified thesame during the assessment. In that view of the matter, hewas of the opinion that the issue requires verification; whichwould tantamount to fishing or roving inquiry. His referenceto the subsequent assessment, in absence of any additionalmaterial outside of the present assessment proceedingswould not form a valid source of information permitting himto reopen assessment. If during the assessment of the laterassessment year, the Assessing ofÏcer collects or chancesupon new material which may have bearing on theassessment of the assessee, and in case where theassessment is sought to be reopened beyond four years, hecan also establish lack of true and full disclosures on the partof the assessee, it may be open for him to reopenassessment of the earlier year. However, merely because inthe later year, the Assessing OfÏcer takes a different view onthe basis of similar material, which may have been collected during such process, would not permit him to reopen theassessment. Under these circumstances, the AssessingOfÏcer's reference to further exercise undertaken whilecarrying out scrutiny assessment for the assessment year2014-15 during which he decided to tax the assessee athigher rate would not enable the Assessing OfÏcer in thepresent case to reopen the assessment beyond four years. 11. We may now refer to the decisions cited by the learnedcounsel for the Revenue. In case of Raymond WoolenMills Ltd Vs. ITO[1], information was obtained in assessmentproceedings for subsequent year which would suggest thatthe disclosures by the assessee during the year underconsideration were untrue. It was on that basis thatreopening of assessment was permitted, however, observingthat at that stage, the Court would consider only whetherthere was prima facie material on which the assessmentcould be reopened. 11. We may now refer to the decisions cited by the learnedcounsel for the Revenue. In case of Raymond WoolenMills Ltd Vs. ITO[1], information was obtained in assessmentproceedings for subsequent year which would suggest thatthe disclosures by the assessee during the year underconsideration were untrue. It was on that basis thatreopening of assessment was permitted, however, observingthat at that stage, the Court would consider only whetherthere was prima facie material on which the assessmentcould be reopened. 12. In case of Rabo India Finance Ltd Vs. Deputy CIT(Bom)[2], this Court observed that the judgments of theSupreme Court lay down a principle that the AssessingOfÏcer acts within jurisdiction in reopening the assessmenton the basis of the information which comes to him after theoriginal assessment and during the course of the assessmentproceedings for subsequent assessment years. This principlewas reiterated in later judgment in case of MultiscreenMedia Pvt Ltd Vs. Union of India & Anr.[3]. With thisproposition, there cannot be any doubt or dispute. What isto be gathered in a given case as in the present one iswhether the Assessing OfÏcer can be stated to have receivedany such additional information during the course ofsubsequent assessment. Significantly, in both these cases,the notice of reopening was issued within the period of fouryears. 13. In case of Sociedade De Formento Industrial P Ltd Vs. Asst. CIT & Anr.[4], this Court had not turned down theassessee's challenge to the notice of reopening of 2[2013] 356 ITR 200 (Bom)3[2010] 324 ITR 54 (Bom)3[2010] 324 ITR 54 (Bom) 4[2011] 339 ITR 595 (Bom) assessment but had merely refused to act in exercise of writjurisdiction observing that the challenge could be moreconveniently dealt with in the proceedings under the IncomeTax Act rather than Writ Petition. 14. Reference to the decision in case of Asst. CIT Vs.Rajesh Jhaveri Stock Brokers P Ltd[5]was limited to theobservations suggesting that at the stage of deciding thelegality of reopening of assessment, the Court would beconsidering only with the prima facie satisfaction of thereasons recorded. 15. In view of the above discussion, the impugned notice of reopening of assessment cannot be sustained. We, however,make it clear that we have not examined the contention ofthe petitioner that even on merits, the additions could nothave been made. In the result, the impugned notice isquashed. The petition is allowed and disposed ofaccordingly. [ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ] 5[2007] 291 ITR 500 (SC)