Gujarat High Court
Pushpak Bullion Pvt Ltd vs Deputy Commissioner Of Income Tax - ... on 27 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
C/SCA/18513/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 18513 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
==========================================================
PUSHPAK BULLION PVT LTD....Petitioner(s)
Versus
DEPUTY COMMISSIONER OF INCOME TAX - CIRCLE - 3 (1)
(1)....Respondent(s)
==========================================================
Appearance:
MR MANISH J SHAH, ADVOCATE for the Petitioner.
MR NITIN K MEHTA, ADVOCATE for the Respondent.
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Page 1 of 10
HC-NIC Page 1 of 10 Created On Fri Jul 01 00:58:15 IST 2016
C/SCA/18513/2015 JUDGMENT
Date : 27/06/2016
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) The petitioner has challenged notice dated 14.3.2014 issued by the respondent Assessing Officer seeking to re-open the petitioner's assessment for the assessment year 2009-2010. Brief facts are as under:
The petitioner is a company registered under the Companies Act and is engaged in the business of imports and trading of bullions. For the assessment year 2009-10, the petitioner had filed a return of income on 5.9.2009 disclosing income of Rs. 4.43 crores (rounded off). Revised return was filed on 31.3.2011 of revised income of Rs. 2.54 crores (rounded off). The return of the company was taken in scrutiny. The Assessing Officer framed the scrutiny assessment under section 143(3) of the Income Tax Act, 1961 ("the Act" for short) on 30.12.2011.
During such assessment, he noticed that the assessee had received share premium of Rs. 1.45 crores (rounded off) upon allotment of a total 16200 shares to five different persons. The Assessing Officer did not make any adjustment in the order of assessment concerning the share premium amount.
2. To re-open such assessment, the Assessing Officer issued impugned notice. He had recorded following reasons for issuing the notice:
" In this case, assessee has filed return of income on 30.9.2009 declaring total income of R. 4,43,44,610/-. Further, assessment order was Page 2 of 10 HC-NIC Page 2 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT passed under section 143(3) on 30.12.2011. Further, in this case information has been received from CCIT(CCA), Mumbai through the office of CIT-4, Mumbai vide letter dated 18.3.2014.
2. As per the information received, assessee company has issued shares at a very high share premium. On verification of Balance sheet ended on 31.3.2009, it has been noticed that assessee has received share premium of Rs. 1,45,80,000/- during the F.Y.2008-09. Hence there is increase in share premium during the year consideration. The assessee has not explained the nature of such credits and has failed to prove the genuineness and justification of huge share premium received in its books of account. Hence such receipts need detailed verification. In view of the decision of the Bombay High Court in the case of Major Metal Ltd. vs. Union of India (2013) 359 ITR 450(Bom) such share premium is to be treated as income of assessee.
3. From the above facts, it is clear that the assessee had filed to disclose fully and truly all material facts in respect of receipt of share premium for its assessment for the A.Y.2009-10. In view of the above facts, I have reason to believe that income to the extent of Rs. 1,45,80,000/- chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts within the meaning of section 147 of the I.T.Act, 1961.
4. In order to bring to tax above mentioned escaped income, as well as any other income which may have escaped assessment, found during the course of proceedings, notice under section 148 is issued."
3. Upon receipt of reasons, the petitioner represented to the Assessing Officer on 27.1.2015 and Page 3 of 10 HC-NIC Page 3 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT pointed out as under:
"3. Company has allotted 16200 shares on 31.3.2009 @ Rs.1000/- including share premium Rs. 900/- per share. Total premium of Rs. 1,45,80,000/-(16200 shares * Rs. 900/- each shares)
4. We herewith give the working of book value of shares as per last audited balance sheet dated 31.3.2008 under:
Net worth as on 31.3.2008 Particulars Amount (Rs) Share capital 58,20,000 Share premium 1,80,000,000 Reserve and surplus 12,98,46,894 Total 153666894 Number of shares before allotment 58200 Book value per share 2640.32 So it is clearly indicating that the assessee has issued shares at much less value then book value of shares. Hence the premium on shares is justified."
4. He also raised detailed objections to the notice for re-opening under a communication dated 16.2.2015. Such objections were however rejected by the Assessing Officer by an order dated 27.2.2015. Hence the petition.
5. Taking us through materials on record, counsel for the petitioner submitted that the issue of allocation of shares at a premium and receipt by the company of share premium amount was examined by the Assessing Officer in detail during the original assessment proceedings. The petitioner had replied to all queries raised by the Assessing Officer and only upon being satisfied by the reply of the Page 4 of 10 HC-NIC Page 4 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT petitioner, the Assessing Officer made no additions. In that view of the matter, the notice for re-opening for the reasons recorded by the Assessing Officer was not permissible. The counsel further submitted that the reasons indicate that the Assessing Officer has doubt about genuineness of the share premium paid by different purchasers and therefore, in order to verify further details, the notice has been issued which is not permissible in law.
6. On the other hand, learned counsel Shri Nitin Mehta for the department submitted that the Assessing Officer has recorded proper reasons for issuing notice for re-opening. During the assessment proceeding, the assessee had not disclosed true and full facts. These aspects were noticed by the Assessing Officer upon information being supplied from CCIT, Mumbai under letter dated 18.3.2014. He therefore, submitted that the notice for re-opening was validly issued.
7. From the record, we notice that alongwith the return, the petitioner had filed audited accounts which included the balance-sheet in which following disclosures were made:
Balance sheet as on 31st March, 2009 Schedule Particulars 31.3.2009 31.3.2008 No. Sources of Fund
(a) Share capital A 7,440,000.00 5,820,000.00
(b) Share Application Money B 121,000,000.00 147,846,894.22.
© Reserve and Surplus 316,677,432.40-- 162,666,894.22
----------------------
(a) Secured loans C 79,081,894.21 Page 5 of 10 HC-NIC Page 5 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT
8. During scrutiny assessment, the Assessing Officer had raised multiple queries including with respect to share premium. In one of the letters written by the assessee to the Assessing Officer, relevant queries are re- produced alongwith the assessee's answers. Relevant portion of this letter reads as under:
" Q-7. Details of increase in share capital giving name and address, PAN and confirmation.
A-7 : As per Annexure 7.
Q-8: Details of share premium.
Ans-8: As per Annexure 8 Q-9: Details of share application money received giving the name, address, PAN and confirmation.
Ans-9: As per annexure-9.
Annexure-7: Details of increase in share capital Sr. Name of allottee Address PAN No of Total value of No shares shares 1 Chandrakant N A/3, Sardar AABPP9011D 3500 3500000 Patel Patel society, Nehru Road, Vile Parle (East), Mumbai 400057 2 Varsha Mahesh B/8, Sardar AGVPP2093B 3000 3000000 Patel Patel society, Nehru road, Vile Parle (E), Mumbai 400057 3 Manish A/3, Sardar AGVPP3740K 3000 3000000 Chandrakant Patel Patel society, Nehru road, Vile Parle (E), Mumbai 400057 4 Yash Mahesh B/8, Sardar AONPP3367F 3000 3000000 Page 6 of 10 HC-NIC Page 6 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT Patel Patel society, Nehru Road, Vile Parle, (East), Mumbai 400057 5 Suchit A/3, Sardar AJTPP1790L 3700 3700000 Chandrakant Patel Patel society, Nehru road, Vile Parle (East), Mumbai 400057 16200 16,200,000.00 Annexure -8 :Details of share premium Sr. Name of allottee Address PAN No. No.of Premiu Amount No. share m 1 Chandrakant N A/3, Sardar AABPP9011D 3500 900 3150000 Patel Patel Society, Nehru Road, Vile Parle (East), Mumbai-
400057 2 Varsha Mahesh B/8, Sardar AGVPP2093B 3000 900 2700000 Patel Patel society,Nehru Road, Vile Parle (East), Mumbai 400057 3 Manish A/3, Sardar AGVPP3740K 3000 900 2700000 Chjandrakant Patel society, Patel Nehru Road, Vile Parle (East), Mumbai 400057 4 Yash Mahesh B/8, Sardar AONPP3367F 3000 900 2700000 Patel Patel society, Nehru Road, Vile Parle (East), Mumbai 400057 5 Suchit A/3, Sardar AJTPP1790L 3700 900 3330000 Chandrakant Patel society, Patel Nehru Road, Vile Parle (East), Mumbai 400057 16200 14580000 Page 7 of 10 HC-NIC Page 7 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT
9. It can thus be seen that question of issuance of share at premium, to whom such shares were allotted and the premium received, the resultant increase in the share premium were all placed before Assessing Officer for his verification of original assessment proceedings. He however, raised no further question and accepted the stand of the assessee. Any re-visit of such an issue without there being additional or undisclosed information would be merely in the nature of change of opinion. We are conscious that the Courts have made distinction between the concept of change of opinion and mere change of opinion and in that context if there is any material which was originally not on record, which the Assessing Officer has later on at his disposal, in a given situation, it may be open for him to contend that re-opening of the assessment would not be based on a mere change of opinion. However, in the present case, we do not find any such material pointed out to us.
10. In this context as also in the context of the basis for the Assessing Officer to form a belief that income chargeable to tax has escaped assessment, we may refer to reasons recorded by him. In such reasons, he referred to some information received from CCIT, Mumbai as per which the assessee company had allotted shares at a high premium. Barring this statement, we notice no further reference to this information in the reasons recorded. The contents of such information thus are completely unknown. Further the Assessing Officer then goes on to observe that on verification of the balance-sheet of the company, it was noticed that the company had received share premium of Page 8 of 10 HC-NIC Page 8 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT Rs. 1.45 crores and there is increase in share premium during the year under consideration. He therefore, recorded "the assessee has not explained the nature of such credit and has failed to prove the genuineness and justification of huge share premium received in its books of accounts. Hence, such receipts need detailed verification." The approach of the Assessing Officer cannot be approved. His entire focus is on share premium amount of Rs. 1.45 crores received by the assessee company. Without there being anything on record, he proceeds on the basis that shares were issued at a high premium. He then refers to the failure on part of the assessee to explain the nature of credits and to prove genuineness and justification of the huge share premium received during the year. He therefore, concludes that such receipts need detailed verification. In order to re-open an assessment which was previously framed after scrutiny, least that the Assessing Officer had to have at his command was some tangible material to enable him to form a belief that the income chargeable to tax had escaped assessment. We find reference to no such material in the reasons recorded. There is no basis even to prima facie proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was received in the nature of share premium during the year under consideration, would not automatically mean that the same was artificially increased. The duty on part of the assessee to explain the nature of credits and genuineness and justification of the share premium would arise when called upon during the assessment or validly re-opened assessment. At any rate, re-opening of assessment which Page 9 of 10 HC-NIC Page 9 of 10 Created On Fri Jul 01 00:58:15 IST 2016 C/SCA/18513/2015 JUDGMENT was framed after scrutiny would not be permissible for a fishing inquiry.
11. This is not to suggest that after original assessment was completed, if the Assessing Officer had tangible material to form a belief that the allocation of shares at a premium was a mere device to route some unaccounted money of the company or that the genuineness and creditworthiness of the investors was doubtful, the re-opening could not have been resorted to. However, in the present case, we find the vital link missing from the reasons recorded, such link being the material at the command of the Assessing Officer to form such a belief.
12. In the result, the impugned notice dated 14.3.2014 is set aside. The petition is allowed and disposed of.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) VC DARJI Page 10 of 10 HC-NIC Page 10 of 10 Created On Fri Jul 01 00:58:15 IST 2016