Wp/3593/2018 Of Aurum Renewable Energy Pvt Ltd v. Assistant Commissioner Of Income Tax Circle 5(1)(1) And 3 Ors

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3593 OF 2018 Aurum Renewable Energy Private Limited… Petitioner V/s. Assistant Commissioner of Income-taxCircle 5(1)(1), Mumbai and ors. … Respondent --- Mr.Madhur Agrawal i/by Mr.Atul Jasanti for the Petitioner.Mr.Sham Walve for the Respondent. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : JANUARY 24, 2019. P.C.:- 1.Heard learned counsel for the parties for final disposal ofthe petition. 2.Petitioner has challenged a notice of reopening of assessment dated 22[nd] March, 2018 for the assessment year 2011- 12. 3.Brief facts are as under:- Priya Soparkar 217 wp 3593-18-o Petitioner is a company registered under the Companies Act.For the assessment year 2011-12 the petitioner had filed areturn of income on 11[th] June, 2012 declaring “Nil” income. Thereturn was taken in scrutiny by the Assessing Officer who passedorder under Section 143(3) of the Income Tax Act, 1961 (“theAct” for short) on 6[th] March, 2014 computing petitioner's incomeat Rs.99,000/- . To reopen such assessment the Assessing Officerissued the impugned notice. In order to do so he had recorded the following reasons:- “1.In this case, the assessee filed return ofincome on 11.06.2012 declaring total income atRs.NIL. Further, assessment u/s 143(3) of theI.T.Act, 1961 was completed vide order dated06.03.2014 determining total income atRs.99,000/-.income on 11.06.2012 declaring total income atRs.NIL. Further, assessment u/s 143(3) of theI.T.Act, 1961 was completed vide order dated06.03.2014 determining total income atRs.99,000/-. 2.Further on verification it is found that thecompany was incorporated on 16.07.2010 i.e. inthe F.Y. 2010-11 and the A.Y. 2011-12 was thefirst assessment year. It is seen that theauthorized capital of the assessee company is Rs.4,00,00,000/-(40,00,000 shares of Rs.10 each).Out of this 39,90,000 shares were issued at apremium of Rs.145/-per share (total sharepremium 57,85,50,000/-). However, no detailsas to how the share premium was worked out atRs.145/- per share are on record. The assesseehas to explain the claim and source of the creditentry in the books of accounts. It meansexplaining the source alone is not enough butthe nature should also be explained. If the explanation offered by the assessee is notsatisfactory, then the amount of share premiumneeds to be taxed. Therefore, if the assesseeexplains that the amount received is sharepremium, but there is no justification forquantum of premium, then it can safely be heldthat nature of premium is not proved. In thepresent case the nature of premium is notproved.3.In the light of the above, there is anescapement of income on account of failure toexaminethisissueamountingtoRs.57,85,50,000/-, which should have beenbrought to tax.4.In view of the above, I have “reasons tobelieve” that income chargeable to tax, to thetune of Rs.1,00,000/- or more has escapedassessment for A.Y. 2011-12 within the meaningof Section 147 of the I.T.Act, 1961, on account offailure on the part of the assessee to disclosefully and truly all material facts necessary for itsassessment. Accordingly, the assessment is to bereopened u/s 147 of the I.T.Act, 1961 by wayof issuance of notice u/s 148. 5.In view of the above, it is requested thatapproval may be granted to reopen the …...........the authorized capital of the assessee companyis Rs.4,00,00,000/- (40,00,000 shares of Rs.10each) . Out of this 39,90,000 shares were issuedat a premium of Rs.145/- per share (total sharepremium 57,85,50,000/-). However, no detailsas to how the share premium was worked out atRs.145/- per share are on record. The assesseehas to explain the claim and source of the creditentry in the books of accounts. It meansexplaining the source alone is not enough but thenature should also be explained. If theexplanation offered by the assessee is notsatisfactory, then the amount of share premium need to be taxed. Therefore, if the assesseeexplains that the amount received is sharepremium, but there is no justification forquantum of premium, then it can safely be heldthat nature of premium is not proved. In thepresent case the nature of premium is notproved.6.In the light of the above, there is anescapement of income on account of failure toexaminethisissueamountingtoRs.57,85,50,000/-, which should have beenbrought to tax. 7.In view of the above, I have “reasons tobelieve” that income chargeable to tax, to thetune of Rs.1,00,000/- or more has escapedassessment for A.Y. 2011-12 within the meaningof Section 147 of the I.T. Act, 1961, on accountof failure on the part of the assessee to disclosefully and truly all material facts necessary for itsassessment. Accordingly, the assessment is to bereopened u/s 147 of the I.T.Act, 1961 by wayof issuance of notice u/s 148. 8.In view of the above, it is requested thatapproval may be granted to reopen theassessment u/s 147 of the I.T. Act, 1961 and toissue notice u/s 148 of the Act in this case asrequired under provisions of Sec. 151(1) of theAct.” 4.Upon being supplied the reasons, the petitioner raisedobjections to the notice of reopening of assessment under letterdated 26[th] November, 2018. Such objections were rejected by theAssessing Officer by an order dated 10[th] December, 2018. Hence, the petition. 5.Having heard learned counsel for the parties and havingperused the documents on record, we notice that the impugnednotice have been issued beyond the period of four years from theend of relevant assessment year. There is neither any allegation,nor any suggestion in the impugned notice that income chargeableto tax has escaped assessment due to the failure of the assesseeto disclose truly and fully all material facts. Only on this groundtherefore, the impugned notice would be rendered invalid. 6.There is yet another ground why we cannot allow theAssessing Officer to act on such notice. This is so because in theoriginal scrutiny the assessment, the Assessing Officer hadexamined the issue on which he now wants to reopen theassessment. In the reasons recorded he had referred to theauthorized capital of the assessee-company of Rs.4 croresrepresenting 40 lakhs shares of Rs.10/- each, out of which 39lakhs 90 thousand shares were issued at the premium of Rs.145per share. He has recorded that no details as to how the share Priya Soparkar 617 wp 3593-18-o premium was worked out at Rs.145 per share was produced onrecord. It was on account of this that Assessing Officer held thebelief that the share premium sum of Rs.57.85 crores (roundedoff) had escaped assessment. In the order of assessment itself,after putting the petitioner to notice, the Assessing Officer hadmade limited disallowance on this ground as can be seen fromthe below quoted portion of the order of assessment:- “Difference is share subscription: Priya Soparkar 617 wp 3593-18-o premium was worked out at Rs.145 per share was produced onrecord. It was on account of this that Assessing Officer held thebelief that the share premium sum of Rs.57.85 crores (roundedoff) had escaped assessment. In the order of assessment itself,after putting the petitioner to notice, the Assessing Officer hadmade limited disallowance on this ground as can be seen fromthe below quoted portion of the order of assessment:- “Difference is share subscription: It is seen from the Balance Sheet that during theyear the assessee has received funds from itsholding company M/s Aurum Ventures Pvt. Ltd.In the form of share subscription and sharepremium of Rs.61,22,65,500/-. The assessee hasfiled copy of confirmed account of M/s AurumVentures Pvt. Ltd. and the other individual shareholder. It is further seen that the total shareholders fund as reflected in the Balance Sheetof the assessee company is Rs.61,85,50,000/-. Outof which confirmation have been filed of twoshare subscriber which totals Rs. 61,84,50,000/- .Thus there is a difference of Rs.1,00,000/-.Adjusting for the fund of the third nominal shareholder share there is a difference of Rs.99,000/-.This amount remains to be reconciled and theassessee has agreed to the addition of thisamount. Accordingly, an amount of Rs.99,000/-is added u/s 68 of the Act. Penalty proceeding isalso initiated u/s.271(1)(c) for furnishing ofinaccurate particulars of income separately onthis issue.” Priya Soparkar 7 7.The Assessing Officer now cannot have second innings and re-examine the same issue, in absence of any tangiblematerial outside the record within his possession. Any attempton his part would be based on mere change of opinion. 8.In the result, impugned notice is set aside. Petition isdisposed of accordingly. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)….