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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM
आयकर अपील सं/ (निर्धारण वर्ा / Assessment Year: 2010-11) The Income Tax Officer बिधम/ La Cera Mall Pvt. Ltd. Ward-12(3)(3) Plot No.44/A, Govt. Ind. Vs. Room No.224, Aayakar Est., Opp. IPCA Bhavan, M. K. Road, Laboratories, M. G. Road, Mumbai-400020. Charkop, Kandiwali (West), Mumbai-400067. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACL9996K (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee by: Shri Neelkanth Khandelwal Revenue by: Shri Mehul Jain सुनवाई की तारीख / Date of Hearing: 21/10/2021 घोषणा की तारीख /Date of Pronouncement: 30/11/2021 आदेश / O R D E R PER AMARJIT SINGH (JM): The assessee as well as revenue have filed the above mentioned appeals against the order dated 30.10.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2010-11.
461/M/2020 A.Y. 2010-11
2. The assessee has filed the present appeal against the order dated 30.10.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010- 11.
3. The assessee has raised the following grounds: - “
1. The reassessment order u/s 143(3) r.w.s 147 of the Act is bad in law.
2. The reopening of the assessment u/s 147 of the Act is bad in law.
3. The learned Assessing Officer has erred in law as well as on facts in making the addition of Rs.5,91,00,000/- u/s 68 of the Act on account of alleged unexplained share capital and share premium. The learned CIT(A) has erred in confirming the amount of Rs.1,65,00,000/- out of that.”
4. The brief facts of the case are that the assessee filed its return of income on 25.09.2010 declaring total income to the tune of Rs.11,47,232/- for the A.Y.2010-11. Thereafter, the return was processed u/s 143(1) of the Act. Subsequently, the case of the assessee was reopened by issuance of notice u/s 148 of the Act. The necessary notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee is dealing in the business of tiles, sanitary ware, bathroom fittings, accessories and building materials etc. An information was received from the O/o DIT (I & CI), Mumbai in which it was conveyed that the assessee had issued share 461/M/2020 A.Y. 2010-11 capital on premium and was in receipt of share premium during the financial year 2009-10 relevant to A.Y.2010-11. The assessee received security premium amounting to Rs.4,05,00,000/-. It was also observed that the assessee had issued two trenches and had received Rs.5,91,00,000/- during the financial year 2009-10. The details of which is hereby mentioned below:-
Sr. Name of the Party Amount Shares of allotted in F.Y.2009-10 No. Received in FY.2009-10 No of shares Amount at a Premium @ face value of Rs.50 per share Rs.10 per share 1 Hetu Investment & 24,00,000 40,000 4,00,000 20,00,000 Trading Ltd. 2 Ken Securities Ltd. 66,00,000 1,10,000 11,00,000 55,00,000 3 Highland Industries Ltd. 30,00,000 50,000 5,00,000 2500000 4 Nexus Software Ltd. 30,00,000 50,000 5,00,000 25,00,000 5 Genus Commu Trade Ltd. 30,00,000 50,000 5,00,000 25,00,000 6 Nimbus Industries Ltd. 30,00,000 50,000 5,00,000 25,00,000 7 Tribhuvan Housing Ltd. 30,00,000 1,10,000 11,00,000 25,00,000 30,00,000 50,000 25,00,000 8 GFl Financials (I) Ltd. 5,00,000 9 ACIL Cotton Industries 30,00,000 50,000 5,00,000 25,00,000 Ltd. 10 Kosha Cubidor Containers 30,00,000 50,000 5,00,000 25,00,000 Ltd. Total 3,66,00,000 6,10,000 61,00,000 3,05,00,000 B- 2,50,000/- shares of face value of Rs.10, per share and additional premium of Rs.80/- per share 461/M/2020 A.Y. 2010-11 Sr. Name of the Party Amount Shares of allotted in F.Y.2009-10 No. Received in FY.2009-10 No of shares Amount at a Premium @ face value of Rs.50 per share Rs.10 per share 1 Allied Global 45,00,000 50,000 5,00,000 40,00,000 Infrastructure Ltd. 2 Skipper Vintrade P. Ltd. 45,00,000 50,000 5,00,000 40,00,000 3 Zameen Traders P. Ltd. 45,00,000 50,000 5,00,000 40,00,000 45,00,000 50,000 5,00,000 40,00,000 4 Simplex Mercantile P. Ltd. 5 Desktop Dealcom P. Ltd. 45,00,000 50,000 5,00,000 40,00,000 Total 2,25,00,000 250,000 25,00,000 2,00,00,000 Total amount received in F.Y.2009-10 (A+B) = 3,66,00,000 + 2,25,00,000 = Rs.5,91,00,000/-
4. The value of share of the company as on 31.03.2009 was Rs.11.99 per share & on 31.03.2010 was Rs.29.81 per share, if the share premium was not included in the capital. Therefore, the share premium of Rs.50/- and Rs.80/- per share charged was excessive and unreasonable. The notices u/s 133(6) were issued which were received un-delivered in the most of cases. The assessee was asked to produce the necessary books of accounts. The claim of the assessee was found unreasonable, therefore, an amount of Rs.5,91,00,000/- was found unexplained cash credit u/s 68 of the Act and added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs.6,02,47,230. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied, therefore, the assessee has filed the present appeal before us.
461/M/2020 A.Y. 2010-11 ISSUE NOs. 1 & 3 5. Under these issues the assessee has challenged the reopening of the assessment u/s 147 of the Act. The Ld. Representative of the assessee has argued that the reasons recorded by AO nowhere entitled to reopen the case in view of the provisions u/s 147 of the Act because there was no tangible material on record on the basis of which the AO formed reason to believe that the income has escaped assessment. The reopening is not in accordance with law, specifically, on the circumstances, when there is nothing on record to which it can be assumed that the shares were over valued and the premium exceed the valuation of share which leads to escapement assessment, therefore, the reopening u/s 147 of the Act is not liable to be sustainable in view of the decision of the Hon’ble ITAT in dated 28.01.2019 and in view of the decision of Hon’ble ITAT bearing ITA. No.6908/Mum/2018 dated 01.12.2020. However, on the other hand, the Ld. Representative of the Department has refuted the said contention and strongly relied upon the decision of CIT(A). Before going further, we deem it necessary to advert the reasons of reopening u/s 147 of the Act on record: - “The assessee company filed return of income for A.Y.2010-11 on 25/09/2010 declaring total income at Rs.11,47,232/-.The same was processed u/s. 143(1} on 06/06/2010.
An intimation was received from the office of the directorate of Income-tax (I & CI), Mumbai as per which. the assessee issued share capital on premium and is in respect of share premium during the financial year 2009-10 relevant to the A.Y. 2010-11. And it is also 461/M/2020 A.Y. 2010-11 ascertained from Securities Premium Account, mentioned in the Balance Sheet appearing in the ROI of assessee‟s Company: As per the Information, total Premium Amount issued, is as below:
Name of the Assessee PAN Filing Date F.Y. Total Premium Amount on cash issue LA CERA MALL PVT AAACL9996K 16.03.2010 2009-10 30500000 LTD LA CERA MALL PVT AAACL9996K 16.03.2010 2009-10 20000000 LTD Total 50500000
In the case of the assessee, no scrutiny assessment was done and therefore, the genuineness of share capital and share premium received is not examined. The assessee is an unlisted company and the nature of the share capital and share premium received is not substantiated. Apart from the issue of identity and creditworthiness, the genuineness of the transaction is also an important aspect in case where the transactions of this nature pertain a Private Limited Company. The issue of basis of valuation of shares and charging of a premium was also not examined. These details pertaining to the valuation of share capital and share premium were not examined.
In view of the above facts, I have reason to believe that the assessee‟s income to the extent of Rs.5, 05,00,000/- has escaped assessment for the A Y 2010-11 within the meaning of sec 147 of the I. T. Act.
461/M/2020 A.Y. 2010-11 5. The Hon‟ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P} Ltd Vs ACIT (2007) 291 ITR 500 has held that section 147 of the Income-tax Act authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if-he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase „reason to believe‟ would mean cause or justification. If the Assessing Officer has cause of justification to know or suppose that the income had escaped assessment, it can be said to have reason to believe that an income has escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion.
The Hon‟ble Bombay High Court in the case of ECGS vs Addl. CIT, Writ Petition No. 502 of 2012 dated 10-11 January 2013, their Lordships have held that when the assessment is sought to be reopened within a period of four years, then what is required is „reason to believe‟ but not established fact of escapement of income. At this stage of issue of notice, the only question is where there is relevant material on which a reasonable person can fora requisite belief. When an assessment is sought to be reopened within a period of four years, the to be applied is whether there is tangible material to do so, Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to the law. If as a consequence of this there is escapement of income, the jurisdictional requirement of section 147 is fulfilled on the confirmation of a reason to believe that income has escaped assessment. A reason to believe is 461/M/2020 A.Y. 2010-11 what is relevant and not an established fact of escapement of income. Reliance is also placed on the judgement in the case of M/s Usha International 348 ITR 485 (Delhi High Court) 7, In view of the above, I have reason to believe that an amount of Rs. 5,05,00,000/— chargeable to tax has escaped assessment for A.Y.2010-11. By reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the said assessment year, this is a fit case to re-open the assessment for A.Y, 2010-11.” 6. On appraisal of the above mentioned reasons, we noticed that the main reason has been given in para no. 3 of the reasons recorded above. No tangible material on record for reopening the case on the basis of which the AO formed reason to believe that the income has escaped assessment. The main thing which has been said by AO for the reopening of the assessment is that the details pertaining to the share capital and share premium were not examined by AO. There is nothing on record which entitled the AO to reopen the case u/s 147/148 of the Act. Under the same similar circumstances, the Hon’ble ITAT has decided the issue in favour of the assessee in the case titled as Balbir Ispat Pvt. Ltd. Vs. ITO 6953/Mum/2016 dated 28.01.2019. The relevant finding is hereby reproduced as under:-
11. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the reasons recorded reproduced above that the AO failed to appreciate that the law does not permit him to reopen assessment unless he has tangible material 461/M/2020 A.Y. 2010-11 on the basis of which he forms reason to belief that income has escaped assessment. The mere fact that the assessee has issued shares at a certain premium itself cannot be a reason to belief that income has escaped assessment. The AO has neither mentioned by how much the shares are overvalued i.e. by what amount the premium exceeds the instinct value of the shares nor the amount, which according to him, has escaped assessment. The reasons are reproduced above but for the sake of brevity the relevant part of reasons are that, “from the records, it is seen that the assessee is in receipt of huge share premium amounting to ₹ 4,56,00,000 during the F.Y. 2008-09 relevant to AY 2009-10. As there was no scrutiny assessment done for this year, the so-called share premium having been received by the assessee was not examined. The assessee is an unlisted company and the source of the share premium so received as well as the nature of the share application received (the intrinsic value of the share in comparison to the excess premium received) is not substantiated.
We also find from the above that the AO stated that income in the grab of share application money received in this case has escaped assessment but he could not point out on what basis / material does he belief that the share capital is not genuine. In the similar circumstances, Hon‟ble Bombay High Court in the case of Khubchandani Healthparks Pvt. Ltd. (supra) held that regular Return of income was assessed by Intimation under Section 143(1) of the Act and no scrutiny assessment was done. In the above view, to ascertain the nature and the justification for charging share premium, the Assessing Officer has reason to believe that charging of share premium over and above the intrinsic value of the share is income which has escaped assessment. The Notice itself does not indicate the approximate amount of income, 461/M/2020 A.Y. 2010-11 which the Assessing Officer has reason to believe has escaped assessment nor does it quantify the extent to which the share premium received was in excess of intrinsic value, which has escaped assessment. It gives no reasons to indicate the basis of coming to the conclusion that share premium is excessive and, therefore, income. Moreover, the Notice also does not dispute that this is a share premium but seek justification for charging the share premium over and above intrinsic value of the share premium.
Similar are the facts in the present case as was before Hon‟ble Bombay High Court in the case of Khubchandani Healthparks Pvt. Ltd. (supra). Respectfully following Hon‟ble Bombay High Court, we are of the view that the AO has absolutely no material to even suspect, forget believe that income has escaped assessment. Hence, we quash the reopening and accordingly, the issue of assessee‟s appeal on jurisdiction is allowed.”
We also find similar decision was rendered by the Co-ordinate Bench of this Tribunal in the case of ITO Vs. Malchand Dindayal Salts Pvt. Ltd. in dated 01.12.2020. We find that the Ld. DR vehemently relied on the decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. vs. ACIT reported in 291 ITR 500 in support of his contention to justify the reopening of assessment as original assessment was framed u/s 143(1) of the Act. We find that the said decision of Hon’ble Supreme Court never compromised on the aspect of “said reason to believe” and the necessary ingredients of income escaping assessment. We further find that the Ld. DR also placed reliance upon the decision of Hon’ble Jurisdictional High Court in the case 461/M/2020 A.Y. 2010-11 of ECGS in Writ Petition No 502 of 2012 dated 10.11.2013 in support of his contentions. We find that even the said decision specifically mandate that the Ld. AO should have reasons to believe that the income of the assessee has escaped assessment. In the said case, the Hon’ble Supreme Court also stated that should be some tangible material available with the AO which enable him to form to reasonable belief that the income of the assessee has escaped assessment. From the perusal of the reasons recorded by Ld. AO which are reproduced hereinabove, we find that the existence of any tangible material available with the AO is conspicuously absent. Even the existence of reason to believe in the mind of Ld. AO is also conspicuously absent. 7.1 The law is very well settled that the reasons recorded by Ld. AO for reopening assessment at the time of recording reasons itself should speak of his mind clearly. The reasons recorded by AO should speak for itself. There cannot any addition or deletion to the reasons so recorded. Reliance in this regard is placed on the decision of Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd. Vs. R. B. Wadkar reported 268 ITR 332 (Bom). 7.2 In para no. 3 of the reasons recorded by the Ld. AO, it is very clear that the Ld. AO had sought to reopen the assessment only to make fishing and roving enquiries with regard to share capital and share premium received by the assessee. He does not say anywhere in the said reasons with some tangible material is available with him that the said receipt of share capital/share premium is ingenuine which enable him to form a belief that the income of the assessee has escaped assessment. The law is very well settled the reopening of the assessment could not be made for making 461/M/2020 A.Y. 2010-11 fishing and roving inquiry. Reliance in this regard is placed on the decision of Hon’ble Punjab & Harayana High Court in the case of Vipan Khanna Vs. CIT Reported 255 ITR 220.
8. On appraisal of the above mentioned finding, we are of the view that the AO has no tangible material with entitle him or to even suspect that the income has escaped assessment. Accordingly, the finding of the CIT(A) on this legal issue is not liable to be sustainable, hence, we set aside the finding of the CIT(A) on this issue and decide these issues in favour of the assessee against the revenue.
Since the reopening assessment proceeding has been quashed while deciding the issue nos. 1 to 3 in appeal of the assessee bearing ITA. No.337/Mum/2020, therefore, the ground challenged by revenue has become infructuous, therefore, we dismissed the appeal of the revenue. 10. In the result, the appeal filed by the assessee is hereby allowed and the appeal filed by the revenue is hereby dismissed. Order pronounced in the open court on 30/11/2021 Sd/- Sd/- (M. BALAGANESH) (AMARJIT SINGH) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 30/11/2021 Vijay Pal Singh/Sr. P.S.