Wp/3231/2019 Of Kalpataru Land Pvt.ltd v. Assistant Commissioner Of Income Tax Centreal Circle - 5 And 2 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3231 OF 2019 Kalpataru Land Private Limited ….Petitioner V/s. Assistant Commissioner of Income TaxCentral Circle – 5 (3) & Ors. ….Respondents ---- Ms. Vasanti B. Patel for petitioner.Mr. Suresh Kumar for respondents. ---- CORAM : K.R. SHRIRAM &AMIT B. BORKAR, JJ. DATED : 20[th] DECEMBER 2021 P.C. : 1Prayer clause - (a) of the petition reads as under : (a) this Hon’ble Court may be pleased to issue a Writ ofCertiorari or a writ in the nature of Certiorari or any otherappropriate writ, order or direction under Article 226 of theConstitution of India calling for the records of the petitioner’scase and after examining the legality and validity thereofquash and set aside the notice dated 27[th] March 2019 issuedby respondent no.1 under Section 148 of the Act seeking toreopen the assessment for the assessment year 2013-14 beingExhibit J hereto and the order dated 11[th] November 2019being Exhibit N hereto. 2Petitioner's assessment for Assessment Year 2013-2014 was completed under Section 143(3) of the Income Tax Act, 1961 (the said Act) on 20[th] February 2016 by determining the total income of Rs.Nil. On 27[th] March 2019 notice under Section 148 of the said Act was issued to petitioner for Assessment Year 2013-2014. The reasons for reopening ofassessment read as under : 1. The assessee is engaged in the business of real estate and development and filed its return of income for AY 2013-14on 23/11/2013 declaring total income of Rs. Nil. Theassessment in the instant case was completed u/s. 143(3) on20/02/2016 by determining the total income of Rs. Nil. 2. Thereafter, it is noticed that the assessee company hadissued its shares at premium of Rs.990/- per share in FY2012-13 relevant to AY 2013-14. During the said period, theassessee company had no significant transaction excepthaving capitalized its interest expenses to the cost of the landpurchased. The valuation of shares at a high premium ofRs.990/- per share by the company was based on theDiscounted Cash Flow (DCF) method in which projections ofprofitability was computed on unrealistic future growthprojections which is not correct. The company had receivedconsideration which exceeded the Fair Market Value (FMV)of the shares and therefore liable to be taxed as thedifference between the aggregate value of the shares andFMV u/s 56(2) (viib) of the Act. 3. …...… 4. ……... 3First of all we find the entire view expressed is to be speculative and conjecture. The Assessing Officer has not even indicated what accordingto him should be the fair market value of the shares and how he has arrivedat. The Assessing Officer has also not mentioned why according to him thevaluation of shares were based on projections of profitability computed onunrealistic future growth projections. Moreover, it does not even indicatewhat was the material fact which was not truly and fully disclosed bypetitioner during the assessment proceedings. 4Mr. Suresh Kumar relied upon a judgment of this Court inCrompton Greaves Ltd. V/s. Assistant Commissioner of Income Tax, 3. …...… 4. ……... 3First of all we find the entire view expressed is to be speculative and conjecture. The Assessing Officer has not even indicated what accordingto him should be the fair market value of the shares and how he has arrivedat. The Assessing Officer has also not mentioned why according to him thevaluation of shares were based on projections of profitability computed onunrealistic future growth projections. Moreover, it does not even indicatewhat was the material fact which was not truly and fully disclosed bypetitioner during the assessment proceedings. 4Mr. Suresh Kumar relied upon a judgment of this Court inCrompton Greaves Ltd. V/s. Assistant Commissioner of Income Tax, Circle 6 (2) 4 1 to submit that even if the reason for reopening does notspecifically state that there was any failure on the part of petitioner todisclose fully and truly all material facts necessary for its assessment forthe relevant assessment year, it will not be fatal to the assumption ofjurisdiction under Sections 147 and 148 of the Act. We would certainlyagree with Mr. Suresh Kumar but as held in Crompton Greaves Ltd.(Supra), this is subject to the rider that there must be cogent and clearindication in the reasons supplied, that in fact there was failure on thepart of the assessee to disclose fully and truly all the material factsnecessary for its assessment. If the factum of failure to disclose can beculled down from the reasons in support of the notice seeking to reopenassessment, that will certainly not be fatal to the assumption ofjurisdiction under Sections 147 and 148 of the said Act. The Court held“However, if from the reasons, no case of failure to disclose is made out,then certainly the assumption of jurisdiction under Sections 147 and 148of the Act would be ultra vires, being in excess of the jurisdictionalrestraints imposed by the first proviso to Section 147 of the Act”. 5Moreover, by a letter dated 5[th] October 2015 the AssessingOfficer had called upon petitioner to produce the evidence in support ofincrease of authorised share capital, produce the evidence of shareallotment and name and address of the parties from whom share premium 1 . (2015) 55 taxmann.com 59 (Bombay) was received, among other things. Petitioner by its letter dated23[rd] December 2015 provided the details of share premium receivedincluding name of the party from whom it was received. After consideringthe same, the assessment order has been passed on 10[th] February 2016. 6Therefore, it is not permissible for an Assessing Officer toreopen the assessment based on the very same material with a view to takeanother view without consideration of material on record one view isconclusively taken by the Assessing Officer. It is also not permissible toreopen purely on change of opinion. A general statement that theescapement of income is by reason of failure on the part of the assesseeto disclose fully and truly all material facts necessary for his assessment isnot enough. The Assessing Officer should indicate what was the materialfact that was not truly and fully disclosed to him. 7In the circumstances, we are hereby allow the petition in termsof prayer clause - (a) quoted above. 8Petition disposed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)