The Swastic Safe Deposit And Investments Ltd v. The Assistant Commissioner Of Income Tax 8(3)(1) & Ors

(Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.WRIT PETITION NO. 1230 OF 2019 The Swastic Safe Deposit and Investments Ltd.. Petitioner Versus The Assistant Commissioner of Income Tax 8(3)(1) & Ors. .. Respondents ................... Mr. J.D. Mistry, Sr. Advocate a/w Mr. M. Agarwal i/by Mr. AtulJasani for the Petitioner Mr. J.D. Mistry, Sr. Advocate a/w Mr. M. Agarwal i/by Mr. AtulJasani for the Petitioner Mr. Nirmal C. Mohanty for the Respondents Mr. Nirmal C. Mohanty for the Respondents ................... CORAM : AKIL KURESHI & S.J. KATHAWALLA, JJ. Reserved on : JUNE 17, 2019. Pronounced on : JUNE 25, 2019. ORAL JUDGMENT(Per Akil Kureshi, J.) 1.The petitioner has challenged a notice of reopening ofassessment dated 24.3.2018 for the assessment year2011-12. 2. Brief facts are as under:- 2.1The petitioner is a Limited Company. During the period relevant to the assessment year 2011-12,one M/s. Savoy Finance and Investments Pvt Ltdhad sold shares of M/s. Piramal Healthcare Ltd forone M/s. Savoy Finance and Investments Pvt Ltdhad sold shares of M/s. Piramal Healthcare Ltd for 2.2 a total consideration of Rs. 322.36 Crores(rounded off) through recognized stock exchange.According to the petitioner, these shares wereheld by M/s. Savoy Finance and Investments PvtLtd for a period in excess of 12 monthsimmediately before sale. In the hands of the saidcompany, therefore, these shares formed longterm capital asset in terms of Section 2(29A) ofthe Income Tax Act, 1961 ("the Act" for short). M/s. Savoy Finance and Investments Pvt Ltdamalgamated with the petitioner company w.e.f.1.4.2010 which was approved by the order of thisCourt dated 26.11.2010. The petitioner had also sold shares of M/s. PiramalHealthcare Ltd during the period relevant to theassessment year in question. This had given riseto short term as well as long term capital gain.Short term capital gain was offered to tax andreflected in the return of income filed by thepetitioner on 28.9.2011 for the said assessment 2.3 2.4 year 2011-12 declaring total income of Rs. 57.87Lakhs (rounded off). The return of income filed by the petitioner wasaccepted without scrutiny in terms of Section143(1) of the Act. Respondent No. 1 - AssessingOfficer, thereafter, issued impugned notice on24.3.2018 to reopen the petitioner's assessmentfor the said assessment year 2011.12. Strangely,two days later i.e on 26.3.2018, he issued yetanother notice for the same purpose. Copies ofthese notices are annexed at Exhibit "E" andExhibit "B" to the petition which the petitioner haschallenged in the present petition. In order to issue the impugned notices, theAssessing Officer had recorded following reasons:- "Information was received from the office of ITO8(1)(3) Mumbai, wherein it was found that M/s. SavoyFinance and Investments Pvt Ltd being a Non Filer ofReturn of Income for A.Y. 2011-12 had entered in Saleof Shares; On further verification of ITS details of M/s.Savoy Finance and Investments Pvt Ltd for F.Y. 2010-11 relevant to A.Y. 2011-12, it is seen that M/s. SavoyFinance and Investments Pvt Ltd has sold shares ofM/s. Piramal Healthcare for Rs. 322,36,60,636/- duringA.Y. 2011-12. Further it is found that M/s. SavoyFinance and Investments Pvt Ltd has beenamalgamated with M/s. Swastik Safe Deposit &Investments Ltd w.e.f 1.4.2010. The return of income of the assessee wasgenerated from the ITD system. On perusal of thesame, it was observed from Schedule C.G. parting tothe return of income filed by M/s. Swastik Safe Deposit& Investments Ltd that the assessee has only offered asum of Rs. 83,34,78,806/- as the full value ofconsideration against which capital gain of Rs.57,87,762/- has been offered. The return of income of the assessee wasgenerated from the ITD system. On perusal of thesame, it was observed from Schedule C.G. parting tothe return of income filed by M/s. Swastik Safe Deposit& Investments Ltd that the assessee has only offered asum of Rs. 83,34,78,806/- as the full value ofconsideration against which capital gain of Rs.57,87,762/- has been offered. Considering the above fact, I have reasons tobelieve that the share of M/s. Piramal Health of Rs.322,36,60,636/- sold by M/s. Savoy Finance andInvestments Pvt Ltd which is amalgamated in theassessee company i.e the Swastik Safe Deposit andInvestments Ltd has escaped assessment in the handof the assessee company i.e the Swastik Safe Deposit& Investments Ltd for A.Y. 2011-12, within the meaningof Section 147 of the I.T. Act, 1961. 5. Permission for issuance of notice u/s. 148 as perthe provisions of Sec. 151(2) of the I.T. Act, 1961 issolicited." Upon being supplied the reasons for reopening ofassessment, the petitioner raised objections undercommunication dated 26.10.2018 in which thepetitioner inter alia contended that the shares ofM/s. Piramal Healthcare were sold in recognizedstock exchange after holding them for more than12 months. This transaction was subjected toSecurity Transaction Tax ("STT" for short) andtherefore, any gain arising out of sale of shareswas exempted from tax under Section 10(38) ofthe Act and therefore, no income chargeable totax had escaped assessment. The petitionerpointed out that the computation of income filedalong with the return disclosed the exempt longterm capital gain of Rs. 599.72 Crores underSection 10(38) of the Act. This included capitalgain arising out of sale of shares of M/s. PiramalHealthcare. The petitioner also pointed out thatthe sale of shares of M/s. Piramal Healthcarefetched Rs. 322.36 Crores whereas considerationshowed by the petitioner was Rs. 321.90 Crores 2.6 which were attributable to the security transactiontax. In short, the main ground of the petitioner inthe objections raised was that no incomechargeable to tax had escaped assessment. The Assessing Officer disposed of the saidobjections vide order dated 2.11.2018 assertingthat the reason to believe that the incomechargeable to tax had escaped assessment didexist. He, however, did not comment onpetitioner's contention that the entire receipt wasexempt from tax. At that stage, the petitionerfiled Writ Petition No. 3390 of 2018 challengingthe notice of reopening of assessment. Thispetition was disposed by an order dated14.2.2019, relevant portion of which reads asunder:-objections vide order dated 2.11.2018 assertingthat the reason to believe that the incomechargeable to tax had escaped assessment didexist. He, however, did not comment onpetitioner's contention that the entire receipt wasexempt from tax. At that stage, the petitionerfiled Writ Petition No. 3390 of 2018 challengingthe notice of reopening of assessment. Thispetition was disposed by an order dated14.2.2019, relevant portion of which reads asunder:- "9.It is undoubtfully true that in the present caseassessee's return has been accepted without scrutinyand therefore the Assessing Officer can not be statedto have formed any opinion and therefore, theconcept of change of opinion would have noapplicability. In such a case the Assessing Officerassessee's return has been accepted without scrutinyand therefore the Assessing Officer can not be statedto have formed any opinion and therefore, theconcept of change of opinion would have noapplicability. In such a case the Assessing Officer "9.It is undoubtfully true that in the present caseassessee's return has been accepted without scrutinyand therefore the Assessing Officer can not be statedto have formed any opinion and therefore, theconcept of change of opinion would have noapplicability. In such a case the Assessing Officerassessee's return has been accepted without scrutinyand therefore the Assessing Officer can not be statedto have formed any opinion and therefore, theconcept of change of opinion would have noapplicability. In such a case the Assessing Officer would have much wider latitude to reopen theassessment and the scrutiny of this Court would belimited. Nevertheless, it is well established principlethrough series of judgments of this Court and otherCourts that even in such a case the requirement thatthe Assessing Officer forms a belief that incomechargeable to tax had escaped assessment mustexist. Within this narrow confine, it is always openfor the assessee to argue that the reasons recordedby the Assessing Officer lack validity. With this, wemay revert back to the facts of the case. It isundisputed that Savoy Finance before its merger withthe assessee-company had sold substantial number ofshares of Piramal Healthcare for a sale consideration ofRs.322.36 crores. In the return of income filed by thepetitioner for the assessment year 2011-12 relevantto the period of sale of shares after merger of SavoyFinance with the petitioner, this sale was notreflected. In the column requiring the petitioner todeclare if any capital gain exempt from tax isreceived, the petitioner showed a figure of “Nil”. Thisis undoubtedly not a correct declaration. This by itselfwould not be the conclusive of the question whetherthe proceeds of sale of shares was otherwise taxableas a capital gain and that therefore, reopening ofassessment would be necessary. What would berelevant is did Savoy Finance hold the shares whichcame to be sold later on, for a period in excess of oneyear before sale. This exercise, we are ofcourse arenot inclined to undertake in a writ petition. 10.Minute perusal of the reasons recorded would 2.7 show the ground pressed in service by him is that thepetitioner had earned capital gain out of sale of shareswhich was not disclosed and therefore, incomechargeable to tax had escaped assessment. This wasalso the line adopted by the Assessing Officer in theorder disposing of the objection. We have perusedthe detail objections raised by the petitioner and thedocuments produced alongwith the same and also theorder passed by the Assessing Officer disposing ofsuch objections. We do not find that the AssessingOfficer had dealt with the contention of the petitionerthat the petitioner is in a position to establish that theshares in question were held by Savoy Finance for aperiod in excess of one year and therefore, there wasno liability to pay capital gain tax on the proceeds ofsale of shares. 11.In facts of the present case, therefore, we askthe Assessing Officer to consider this objection of thepetitioner and give his specific finding through aspeaking order. For this limited purpose, we placethe matter back before the Assessing Officer. TheAssessing Officer shall pass a further order dealingwith this specific objection of the petitioner. In facts ofthe case, the Assessing Officer may give personalhearing to the authorized representative of thepetitioner. Further order may be passed preferablywithin two months from today. For a period of fourweeks after such order is communicated to thepetitioner, reassessment shall stand stayed. Petitiondisposed of accordingly. " In terms of the said order of the High Court, the 11.In facts of the present case, therefore, we askthe Assessing Officer to consider this objection of thepetitioner and give his specific finding through aspeaking order. For this limited purpose, we placethe matter back before the Assessing Officer. TheAssessing Officer shall pass a further order dealingwith this specific objection of the petitioner. In facts ofthe case, the Assessing Officer may give personalhearing to the authorized representative of thepetitioner. Further order may be passed preferablywithin two months from today. For a period of fourweeks after such order is communicated to thepetitioner, reassessment shall stand stayed. Petitiondisposed of accordingly. " In terms of the said order of the High Court, the petitioner filed additional submissions before theAssessing Officer on 5.4.2019 and reiterated itsposition that in facts of the case, it cannot be saidthat any income in the hands of the petitionerchargeable to tax has escaped assessment. TheAssessing Officer passed order dated 12.4.2019disposing of such objections of the petitioner.Insuch order, he noted that the return filed by thepetitioner was previously accepted withoutscrutiny. He relied upon the decision of theSupreme Court in case of Asst. CIT V/s. RajeshJhaveri Stock Brokers P Ltd[1] and held that allissues can be examined during the course ofassessment. With respect to the petitioner'scentral contention of the sale of shares of M/s.Piramal Healthcare held for more than 12 monthsnot giving rise to any taxable gain, he observed asunder:- "6.The contention of the assessee that the sale ofshares of Piramal Healthcare Limited resulted in LTCGexempt from tax and therefore there is no "escapementof income" as such warranting a notice u/s 148 of the 1(2007) 291 ITR 500 (SC) Act is examined. i. As per the submissions made by the assesseeas part of its objections, the total capital gains (whichincludes capital gain of Rs. 289,19,93,081/- on sale ofshares of Piramal Health by Savoy) which is arguablyexempt is Rs. 599,72,70,602/-. As against this, theProfit on sale of shares appearing in the assessee'saudited P&L account is Rs. 13,41,24,534/- (Schedule 7of the accounts). Thus, it is not clear where thisamount of Rs. 599,72,70,602/- (which includes capitalgain of Rs. 289,19,93,08/- on the sale of sharesmentioned in the reasons for reopening) is appearing inthe P&L account of the assessee. ii. The entire amount of Capital Gains on sale ofshares (excluding the benefit of indexation available incalculating Long Term Capital Gains) shall constitutepart of the assessee's P&L account and accordinglypart of its book profit. The amount is amenable to taxu/s. 115JB of the Act. The assessee is silent about theMAT liability. Thus, there would be income chargeableto tax escaping assessment while calculating theincome under S. 115JB of the Act. iii.It is also seen that while the ITS showstransaction/sale at Rs. 322,36,60,363/-, the statementfiled by the assessee as part of the objections showsthe total consideration at Rs. 321,90,44,141/-. Thus,there is a difference of Rs. 46,16,222/- which needs tobe verified and reconciled. This can only be done in thecourse of reassessment proceedings. iv. For this reason, the contention of the assesseethat since it has only earned LTCG that are exemptedfrom tax, there is no escapement of income is notcorrect. Non-disclosure of receipts is prima facieescapement of assessment of income and wouldrequire deeper examination and enquiries which cannotbe done at the stage of disposing of objections but canonly be undertaken in the course of (re)assessmentproceedings. iii.It is also seen that while the ITS showstransaction/sale at Rs. 322,36,60,363/-, the statementfiled by the assessee as part of the objections showsthe total consideration at Rs. 321,90,44,141/-. Thus,there is a difference of Rs. 46,16,222/- which needs tobe verified and reconciled. This can only be done in thecourse of reassessment proceedings. iv. For this reason, the contention of the assesseethat since it has only earned LTCG that are exemptedfrom tax, there is no escapement of income is notcorrect. Non-disclosure of receipts is prima facieescapement of assessment of income and wouldrequire deeper examination and enquiries which cannotbe done at the stage of disposing of objections but canonly be undertaken in the course of (re)assessmentproceedings. Without prejudice to the above, as directed by theHon'ble HC, prima facie it appears from the documentssubmitted by the assessee as part of its objections thatthe shares of Piramal Healthcare Limited were held bySavoy for a period of more than 12 months immediatelypreceding the date of transfer. However, the matterrequires further investigation / enquiries which can onlybe undertaken in the course of reassessmentproceedings and not at the stage of disposal ofobjections." 3.This order of the Assessing Officer has given rise to the fresh petition at the hands of the petitioner. Learned counselfor the petitioner submitted that from the material on record,the petitioner was able to demonstrate before the AssessingOfficer that no income chargeable to tax had escapedassessment. The reasons recorded by the Assessing Officerfor issuing the impugned notice of reassessment, therefore, lack validity. Even though the return filed by the petitionerwas accepted without scrutiny, the impugned notice must beset aside. Learned counsel took us extensively through thedocuments on record to contend that on the basis ofirrefutable material on record, it would be ex facie,established that the shares of M/s. Piramal Healthcare wereheld by M/s. Savoy Finance and Investments Pvt Ltd for aperiod in excess of 12 months. These shares were soldthrough recognized stock exchange upon payment of STT. Interms of Section 10(38) read with Section 2(29A), gainarising out of sale of shares was exempted from tax.Learned counsel relied on several decisions reference towhich would be made at a later stage. 4. On the other hand, learned counsel Mr. Mohanty forthe Department opposed the petition contending that theAssessing Officer has recorded proper reasons before issuingthe impugned notice. There is prima facie materialsuggesting that the income chargeable to tax had escapedassessment. He pointed out that the return filed by thepetitioner was accepted under Section 143(1) of the Act. In that view of the matter, the Assessing Officer would havemuch wider latitude to reopen the assessment. Since, theAssessing Officer had not formed any opinion, the principleof change of opinion would not apply. Learned counsel reliedon the decisions of the Supreme Court in case of RajeshJhaveri Stock Brokers P Ltd (supra) and in case ofRaymond Woollen Mills Ltd Vs. ITO & Ors.[2] in support ofhis contentions. 5.In the present case, the return of the income filed bythe petitioner was accepted under Section 143(1) of the Actwithout scrutiny. Under the circumstances, as held by theSupreme Court in the case of Rajesh Zhaveri Stock Brokers PLtd (supra), the Assessing Officer would have much widerlatitude in reopening the assessment. Since, no scrutinyassessment was previously framed, the Assessing Officer hadno occasion to form an opinion on any of the controversialissues arising out of the return. The principle of change ofopinion, therefore, would have no applicability. It is also truethat at the stage of issuance of notice, only question wouldbe whether there was relevant material on which a 2(1999) 236 ITR 34 5.In the present case, the return of the income filed bythe petitioner was accepted under Section 143(1) of the Actwithout scrutiny. Under the circumstances, as held by theSupreme Court in the case of Rajesh Zhaveri Stock Brokers PLtd (supra), the Assessing Officer would have much widerlatitude in reopening the assessment. Since, no scrutinyassessment was previously framed, the Assessing Officer hadno occasion to form an opinion on any of the controversialissues arising out of the return. The principle of change ofopinion, therefore, would have no applicability. It is also truethat at the stage of issuance of notice, only question wouldbe whether there was relevant material on which a 2(1999) 236 ITR 34 reasonable person could have formed a requisite belief thatincome chargeable to tax had escaped assessment.Whether such material conclusively proved the escapementcannot be gone into at that stage. These principles flow fromthe decisions of the Supreme Court in the case of RajeshZhaveri Stock Brokers P Ltd (supra) and Raymond WoollenMills Ltd (supra). 6.Despite such position, it is also settled through thedecisions of the High Courts that even in a case where thereturn of the income of an assessee is accepted withoutscrutiny, the fundamental requirement of the incomechargeable to tax having escaped assessment must besatisfied. If from the material on record, it can be gatheredthat this fundamental requirement is not satisfied, the Courtwould intercept and quash the notice of reopening ofassessment since the Assessing Officer would lack thejurisdiction in such a case to reopen the assessment.Reference in this respect can be made to a decision of theDivision Bench of this Court in case of Prashant S. JoshiVs. ITO (Bom) in which the Court observed as under:- "17.Counsel for the revenue submitted before the Court that in thepresent case, no assessment has taken place and at the stage ofsection 143(1), there is only an intimation. Reliance is sought to beplaced on the judgment of the Supreme Court in Asst. CIT V/s.Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500. Thejudgment of the Supreme Court in Rajesh Jhaveri has noticed thedifference between the expression `intimation' and `assessment' andthe Supreme Court held that in the scheme of things an intimationunder section 143(1)(a) cannot be treated as an order ofassessment. The Supreme Court held that there being noassessment under section 143(1)(a), the question of a change ofopinion, as contended did not arise. The judgment of the Supremealso emphasises what is meant by the expression "reason to believe"and the nature of the belief that is to be formed by the AssessingOfficer that the income for any assessment year has escapedassessment. The Supreme Court held that at the stage of theissuance of a notice under section 148, the Assessing Officer musthave reason to believe that income has escaped assessment and atthat stage an established fact that income has escaped assessmentis not required. The Supreme Court held thus (page 511) :- "Section 147 authorises and permits the Assessing Officer toassess or reassess income chargeable to tax if he has reasonto believe that income for any assessment year has escapedassessment. The word "reason" in the phrase "reason tobelieve" would mean cause or justification. If the AssessingOfficer has cause or justification to know or suppose thatincome had escaped assessment, it can be said to havereason to believe that an income had escaped assessment.The expression cannot be read to mean that the AssessingOfficer should have finally ascertained the fact by legalevidence or conclusion....... At that stage, the final outcome ofthe proceeding is not relevant. In other words, at the initiation "Section 147 authorises and permits the Assessing Officer toassess or reassess income chargeable to tax if he has reasonto believe that income for any assessment year has escapedassessment. The word "reason" in the phrase "reason tobelieve" would mean cause or justification. If the AssessingOfficer has cause or justification to know or suppose thatincome had escaped assessment, it can be said to havereason to believe that an income had escaped assessment.The expression cannot be read to mean that the AssessingOfficer should have finally ascertained the fact by legalevidence or conclusion....... At that stage, the final outcome ofthe proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but notestablished fact of escapement of income. At the stage ofissue of notice, the only question is whether there wasrelevant material on which a reasonable person could haveformed a requisite belief. Whether the materials wouldconclusively prove the escapement is not the concern at thatstage. This is so because the formation of belief by theAssessing Officer is within the realm of subjectivesatisfaction." 18.The Supreme Court held that so long as the ingredients ofsection 147 are fulfilled, the Assessing Officer is free to initiateproceedings under section 147 and failure to take steps undersection 143(3) will not render him powerless to initiate reassessmentproceedings even when an intimation under section 143(1) had beenissued. In other words, when an intimation has been issued undersection 143(1), the Assessing Officer is competent to initiatereassessment proceedings provided that the requirements of section147 are fulfilled. In such a case as well, the touchstone to be appliedis as to whether there was reason to believe that income hadescaped assessment." Similar view has been taken by Gujarat High Court in case of Inductotherm (India) P Ltd Vs. M. Gopalan, Deputy CIT (Guj)[3] making following observations:- "13.Despite such difference in the scheme between a return whichis accepted under section 143(1) of the Act as compared to a returnof which scrutiny assessment under section 143(3) of the Act isframed, the basic requirement of section 147 of the Act that theAssessing Officer has reason to believe that income chargeable to 3(2013) 356 ITR 481 (Guj) tax has escaped assessment is not done away with. Section 147 ofthe Act permits the Assessing Officer to assess, reassess the incomeor recompute the loss or depreciation if he has reason to believe thatany income chargeable to tax has escaped assessment for anyassessment year. This power to reopen assessment is available ineither case, namely, while a return has been either accepted undersection 143(1) of the Act or a scrutiny assessment has been framedunder section 143(3) of the Act. A common requirement in both ofcases is that the Assessing Officer should have reason to believethat any income chargeable to tax has escaped assessment.14....... 15....... 16.It would, thus, emerge that even in case of reopening of anassessment which was previously accepted under section 143(1) ofthe Act without scrutiny, the Assessing Officer would have power toreopen the assessment, provided he had some tangible material onthe basis of which he could form a reason to believe that incomechargeable to tax had escaped assessment. However, as held by theapex Court in the case of Asst. CIT vs. Rajesh Jhaveri Stock Brokers(P) Ltd. [2007] 291 ITR 500 (SC) and several other decisions, suchreason to believe need not necessarily be a firm final decision of theAssessing Officer." 15....... 16.It would, thus, emerge that even in case of reopening of anassessment which was previously accepted under section 143(1) ofthe Act without scrutiny, the Assessing Officer would have power toreopen the assessment, provided he had some tangible material onthe basis of which he could form a reason to believe that incomechargeable to tax had escaped assessment. However, as held by theapex Court in the case of Asst. CIT vs. Rajesh Jhaveri Stock Brokers(P) Ltd. [2007] 291 ITR 500 (SC) and several other decisions, suchreason to believe need not necessarily be a firm final decision of theAssessing Officer." 7.With this background, we may peruse the material onrecord. As noted, M/s. Savoy Finance and Investments PvtLtd before its amalgamation with the petitioner company,had sold shares of M/s. Piramal Healthcare Ltd for a totalconsideration of Rs. 322.36 Crores. This was throughrecognized stock exchange and after payment of securitytransaction tax. Undisputedly, in the return of income filed, the assessee did not disclose this sale transaction butaccording to it, since these shares were held by M/s. SavoyFinance and Investments Pvt Ltd for a period in excess of 12months and the transaction was through recognized stockexchange and after payment of STT, the consideration wasexempted from tax under Section 10(38) of the Act. It is alsoundisputed that in the computation of income filed alongwith the return, this transaction was duly reflected by theassessee. It was in this background that the assessee hasbeen taking a ground that when the sale consideration didnot give rise to any taxable income, mere error or oversightin not disclosing the transaction in the return of incomewould not give rise to the income chargeable to tax escapingassessment and if this be so, the Assessing Officer had nooccasion to reopen the assessment. Through multiplesubmissions made before the Assessing Officer, the assesseehas been pressing this point. The Assessing Officer'sresponse can be best gathered from his order dated12.4.2019 disposing of said objections after the High Courtplaced the issue back before the Assessing Officer forconsidering this specific point. His reaction to the petitioner's contention in this respect, we have reproduced inearlier portion of the judgment. His objections flowing from the said order can be summerized as under:- (i) The sale transaction is reported to be worth Rs. 322.36 Croreswhereas the statement filed by the assessee along withobjections reflected consideration of Rs. 321.90 Crores. Thus,there was difference of Rs. 46.16 Lacs between two figures;whereas the statement filed by the assessee along withobjections reflected consideration of Rs. 321.90 Crores. Thus,there was difference of Rs. 46.16 Lacs between two figures; (ii) The assessee was not correct in contending that since longterm capital gain from sale of shares was exempted from tax,there was no escapement of income chargeable to tax since inthe opinion of the Assessing Officer, non disclosure of thereceipt would amount to escapement of income chargeable totax;term capital gain from sale of shares was exempted from tax,there was no escapement of income chargeable to tax since inthe opinion of the Assessing Officer, non disclosure of thereceipt would amount to escapement of income chargeable totax; (iii) According to the Assessing Officer, it does appear from thedocuments on record that shares of M/s. Piramal HealthcareLtd were held by M/s. Savoy Finance and Investments Pvt Ltdfor a period of more than 12 months immediately precedingthe date of transfer. However, in his opinion, the matterrequires further examination;documents on record that shares of M/s. Piramal HealthcareLtd were held by M/s. Savoy Finance and Investments Pvt Ltdfor a period of more than 12 months immediately precedingthe date of transfer. However, in his opinion, the matterrequires further examination; (iii) According to the Assessing Officer, it does appear from thedocuments on record that shares of M/s. Piramal HealthcareLtd were held by M/s. Savoy Finance and Investments Pvt Ltdfor a period of more than 12 months immediately precedingthe date of transfer. However, in his opinion, the matterrequires further examination;documents on record that shares of M/s. Piramal HealthcareLtd were held by M/s. Savoy Finance and Investments Pvt Ltdfor a period of more than 12 months immediately precedingthe date of transfer. However, in his opinion, the matterrequires further examination; (iv) Even if for normal computation, the sale consideration isexempt from tax, the same would form part of the assessee'sbook profit for the purpose of computing tax under Section115JB of the Act. exempt from tax, the same would form part of the assessee'sbook profit for the purpose of computing tax under Section115JB of the Act. 8.All the four objections raised by the Assessing Officercan be dealt with on the basis of the documents on record. 9.In so far as objection No. (i) is concerned, the same is aminor difference of Rs. 41.16 Lacs between the transactionamount of sale of shares and one contained in the statementfiled by the assessee with objections. As correctly pointedout by the learned counsel for the petitioner, this representsthe brokerage component and has nothing to do with thetaxability of the income. 10. In so far as objection No. (ii) is concerned, theAssessing Officer is plainly incorrect in law. Mere non-disclosure of receipt would not automatically implyescapement of income chargeable to tax from assessment. There has to be something beyond an unintentionaloversight or error on the part of the assessee in notdisclosing such receipt in the return of income. In otherwords, even after non-disclosure, if the documents on recordconclusively establish that the receipt did not give rise to anytaxable income, it would not be open for the AssessingOfficer to reopen the assessment referring only to the nondisclosure of the receipt in the return of income. 11. In the third ground, the Assessing Officer virtuallyconceded to the assessee's contention that the shares ofM/s. Piramal Healthcare were held by M/s. Savoy Financeand Investments Pvt Ltd for a period more than 12 monthsimmediately preceding the date of the transfer. Having doneso, he thereafter, resorts to further inquiries that may beneeded during the course of assessment. As held repeatedlyby this Court and other Courts, reopening of assessmentcannot be based on fishing or rowing inquiries or forcarrying out further investigation. If there was any primafacie material suggesting that income chargeable to tax hadescaped assessment, surely, the Assessing Officer wasentitled to carry out further inquiries. In the present case,however, the Assessing Officer does not dispute the followingvital aspects:- (a) The shares of M/s. Piramal Healthcare Ltd were held by M/s.Savoy Finance and Investments Pvt Ltd for a period of morethan 12 months immediately preceding the date of transfer;Savoy Finance and Investments Pvt Ltd for a period of morethan 12 months immediately preceding the date of transfer; (b) The transaction of sale of shares was carried out throughrecognized stock exchange and;recognized stock exchange and; (c) The STT was paid on said transaction; Plainly, therefore, in terms of Section 10(38) of the Act,such income was exempt from tax. (a) The shares of M/s. Piramal Healthcare Ltd were held by M/s.Savoy Finance and Investments Pvt Ltd for a period of morethan 12 months immediately preceding the date of transfer;Savoy Finance and Investments Pvt Ltd for a period of morethan 12 months immediately preceding the date of transfer; (b) The transaction of sale of shares was carried out throughrecognized stock exchange and;recognized stock exchange and; (c) The STT was paid on said transaction; Plainly, therefore, in terms of Section 10(38) of the Act,such income was exempt from tax. 12. The Assessing Officer's sole surviving ground is that forthe purpose of computing assessee's book profit underSection 115JB of the Act, such receipt would not be excluded.In this context, learned counsel for the Department is correctin drawing our attention to the first proviso to Section 10(38)of the Act. Section 10(38) of the Act exempts from tax anyincome arising from the transfer of long term capital asset,being an equity share in a company subject to the conditionscontained therein. The first proviso to Section 10(38)provides that the income by way of long term capital gain ofa company shall be taken into account in computing thebook profit and income tax payable under Section 115JB ofthe Act. Learned counsel is also correct in contending thatthis objection raised by the Assessing Officer in the orderdisposing of the objections does not travel beyond thereasons recorded by him in reopening the assessment. Wehave reproduced the reasons in which the Assessing Officerhas pointed out that M/s. Savoy Finance and Investments Pvt Ltd had sold shares of M/s. Piramal Healthcare Ltd for aconsideration of Rs. 322.36 Crores. In the return filed by theassessee, as an amalgamating company, the assessee hadonly offered a sum of Rs. 83.34 Crores as full value ofconsideration. Thus, he had reason to believe that saidconsideration of Rs. 322.36 Crores had escaped assessment.These reasons are broad enough to include escapement ofincome chargeable to tax whether under the normalprovisions or under the MAT provisions. Learned counsel forthe assessee is not correct in contending that within thescope of reasons recorded, this ground is not available to theAssessing Officer. 13. The question, however, is even on this ground whetherthe Assessing Officer can succeed and even prima facieestablish that the income chargeable to tax had escapedassessment. The documents on record would show that theassessee had submitted its computation of book profit forthe purpose of Section 115JB of the Act in which undercaption "other income" sum of Rs. 13.41 Crores (rounded off)was included for computation of such profit. Same was elaborated in Schedule 7 and pertained to profit on sale ofshares. Thus, the assessee had for the purpose ofcomputation of its book profit in terms of Section 115JB ofthe Act, accounted the profit arising out of the sale of sharewhich was in any case in tune with the first proviso toSection 10(38) of the Act and corresponding provisions ofSection 115JB of the Act. At this stage, learned counsel forthe Department submitted that this requires examinationwhich can be done only during the course of reassessment.We are afraid such a contention will not be valid in view ofthe decision of the Supreme Court in case of Apollo TyresLtd Vs. CIT[4] in which it was held that while determining thebook profit under Section 115J (which is a predecessorprovision to Section 115JB), the Assessing Officer cannotrecompute the profit in the Profit & Loss Account. It was heldthat the Assessing Officer cannot tinker with the auditedaccounts of the assessee while computing book profit underSection 115JB of the Act. 14. The above discussion would show that even primafacie, the counsel for the Assessing Officer was unable to4[2002] 255 ITR 273 14. The above discussion would show that even primafacie, the counsel for the Assessing Officer was unable to4[2002] 255 ITR 273 demonstrate before us on the grounds stated and thereasons recorded that income chargeable to tax hadescaped assessment. His i.e. Assessing Officer's attempt offurther verification would amount to rowing inquiry. There isnothing on record prima facie suggesting that the profit outof sale of shares was taxable under the normal provisions orthat it was excluded for the purpose of computing book profitunder Section 115JB of the Act. Under these circumstances,the impugned notice for reassessment is quashed. Petition isallowed and disposed of. [ S.J. KATHAWALLA, J. ] [ AKIL KURESHI, J ]