HITACHI HI REL POWER ELECTORNICS PVT. LTD. V. ASST. COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1)

SCA/16575/2018

AI Insights

The case involves Hitachi Hi Rel Power Electronics Pvt. Ltd., which challenged a notice issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2011-12. The notice was based on the company's receipt of a substantial share premium, which the tax authorities suspected might be undisclosed income. The company argued that all relevant details were disclosed during the original assessment, and the reopening of the assessment was merely a change of opinion by the tax authorities. The court examined the legal standards for reopening assessments and found that the notice did not meet these standards, leading to its quashing.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 771758 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 16-09-2019
• Assessment Year: misc
• Other Referred Cases: Dhruv Dipakbhai Panchal v. Income Tax Officer - Ward, Dhirendra Hansraj Singh v. Assistant Commissioner of Income Tax, Pushpak Bullion (P.) Ltd. v. Deputy Commissioner of Income-tax, Circle-3(1), NuPower Renewables Pvt. Ltd. v. Asst. Commissioner of Income Tax 1-(2)(2) and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Assessment Year 2011-12; Income Tax; Reopening of assessment; Share premium; Writ of Certiorari; Writ of Mandamus
• Section: 147; 148; 143(3); 143(2)

Judgement Text

"C/SCA/16575/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 16575 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MR.JUSTICE A.C. RAO Sd/- ============================================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ============================================================================== HITACHI HI REL POWER ELECTORNICS PVT. LTD. Versus ASST. COMMISSIONER OF INCOME TAX CIRCLE 2 (1) (1) ============================================================================== Appearance: MR B S SOPARKAR for the Petitioner(s) No. 1 MRS MAUNA M BHATT for the Respondent(s) No. 1 ============================================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 16/09/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. By this writ-application under Article 226 of the Constitution of India, the writ-applicant, a private limited company, has prayed for the following reliefs : Page 1 of 32 C/SCA/16575/2018 JUDGMENT “...this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to : (a) quash and set aside the impugned notice at Annexure-A to this Petition; (b) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure-A to this petition and stay further proceedings for assessment for A.Y. 2011-12; (c) any other and further relief deemed just and proper be granted in the interest of justice;” 2. It appears from the materials on record that the writ- applicant seeks to challenge the legality and validity of the notice issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short, 'the Act, 1961') dated 30th March 2018. 3. The writ-applicant is engaged in the business of manufacturing industrial automation solutions, rotating machine controls, power controllers, uninterrupted power supply and power conditioning products. The writ-applicant filed its return of income for the Assessment Year 2011-12 on 30th September 2011 declaring the total loss of Rs.6,50,56,810=00 under the normal provisions and claimed refund of Rs.64,59,979=00. The case was selected for scrutiny and notice under Section 143(2) of the Act, 1961, was issued to the writ- Page 2 of 32 C/SCA/16575/2018 JUDGMENT applicant. The Assessing Officer, ultimately, passed an order under Section 143(3) of the Act, 1961, dated 31st October 2013 at Rs.6,58,26,003=00. The impugned notice issued by the respondent under Section 148 of the Act, 1961, reads thus : “1. The assessee had filed its return of income for A.Y. 2011-12 declaring total income of Rs.6,50,56,810/-. The scrutiny assessment u/s.143(3) was finalized on 14.11.2013 and total income was assessed at 6,58,26,003/-. 2. This office had received information from DIT (I & CI.) Ahmedabad vide letter dated 29.01.2015 that the assessee company had received share premium/share application money to the tune of Rs.10,01,38,866/-. From the records, it is seen that the assessee company has issued certain shares at a price which was over and above the nominal value and received total share premium of Rs.10,11,94,866/- during the AY 2011-12. As above information was received after completion of assessment u/s 143(3) of the Act, 1961, the source and reason for receiving of abnormal share premium of Rs.10,11,94,866/- could not be examined during the assessment proceedings. The assessee company has not given details of high premium received during the course of assessment or in its return of income. 3. In view of the matter, the assessee company has hefty premium of Rs.10,11,94,866/- is totally unjustified if it is compared with book value of the assessee company and it is clear that in the garb of high share premium, the assessee Page 3 of 32 C/SCA/16575/2018 JUDGMENT has introduced its own undisclosed income & therefore, to the extent of Rs.10,11,94,866/- has escaped income for assessment. Therefore, this is a fit case for initiating proceedings u/s.147 of the Act for A.Y. 2011-12. In view of the above, the provisions of clause (c) of explanation 2 to section 147 are applicable to facts of this case and therefore, I have reason to believe that there is escapement of income to the extent of Rs.10,11,94,866/- due to failure on part of the assessee to disclose fully and truly all material facts necessary for his assessment as envisaged in the provisions of section 147 of the Act and accordingly notice u/s.148 is being issued.” 4. On receipt of the notice referred to above, the writ- applicant raised various objections in writing. 5. The respondent, vide its order dated 5th October 2018, overruled all the objections raised by the writ-applicant. 6. In such circumstances referred to above, the writ-applicant is here before this Court with the present writ-application. 7. Mr.B.S.Soparkar, the learned counsel appearing for the writ-applicant, vehemently submitted that the impugned notice is not tenable in law as there was no failure at the end of the writ-applicant to disclose truly and fully all the material facts. He submitted that merely having a reason to believe that the income had escaped assessment is not sufficient to reopen the assessment beyond the period of four years. The escapement of income must also be occasioned by a failure on the part of the Page 4 of 32 C/SCA/16575/2018 JUDGMENT writ-applicant to disclose truly and fully all the material facts. Mr.Soparkar would submit that in the case on hand, there is no failure on the part of the writ-applicant to disclose truly and fully any material facts. Mr.Soparkar submits that the grounds for reopening the assessment are absolutely misconceived and baseless. He submits that all the details relating to the share premium were duly furnished to the Assessing Officer, and after due scrutiny of all such details by the respondent at the time of the original assessment, the order was passed. Having scrutinized the details, it is not permissible for the respondent now to reopen the assessment merely for the purpose of re- computation taking a different view on the same materials available with him. 8. Mr.Soparkar also submitted that there is no tangible material on record, or to put it in other words, there is no live link with the formation of the belief. He pointed out that the share premium received by the writ-applicant had been duly accounted for and disclosed in the books. He would submit that the share premium is a capital receipt and is not liable to be taxed. He further submitted that the attempt on the part of the respondent in treating the share application as undisclosed income is erroneous as there is not a whisper of any evidence to hold that the writ-applicant had earned any undisclosed income or the same had been routed back by form of share premium. 9. Mr.Soparkar, in support of his submissions, has placed strong reliance on the following decisions : (1) Dhruv Dipakbhai Panchal v. Income Tax Officer - Ward, (2018)93 taxmann.com 61 (Gujarat); Page 5 of 32 C/SCA/16575/2018 JUDGMENT (2) Dhirendra Hansraj Singh v. Assistant Commissioner of Income Tax, (2018)94 taxmann.com 372 (Gujarat); (3) Pushpak Bullion (P.) Ltd. v. Deputy Commissioner of Income-tax, Circle-3(1), (2016)71 taxmann.com 326 (Gujarat); (4) NuPower Renewables Pvt. Ltd. v. Asst. Commissioner of Income Tax 1-(2)(2) and others (Writ Petition No.3618 of 2018 (Bombay), decided on 7th March 2019. 10. In such circumstances referred to above, Mr.Soparkar prays that there being merit in this writ-application, the same be allowed and the impugned notice be quashed. 11. On the other hand, this writ-application has been vehemently opposed by Mr.M.R.Bhatt, the learned senior counsel appearing for the respondents. Mr.Bhatt would submit that the assessee Company had received the share premium to the tune of Rs.10,01,38,866=00. Upon verification of the records, it was found that the assessee had issued certain shares at a price which was over and above the nominal value and received a share premium to the tune of Rs.10,11,94,866=00 during the Assessment Year 2011-12. According to Mr.Bhatt, it has been found that the assessee Company had not furnished any details of such high premium received during the course of the original assessment. There was no opinion formed in relation to the high premium received by the assessee during the original assessment. Page 6 of 32 C/SCA/16575/2018 JUDGMENT 12. Mr.Bhatt submits that upon verification, it was found that compared to the book value of the assessee Company, the receipt of high premium by the assessee was unjustified. He further pointed out that the Assessing Officer has reason to believe that the assessee, in the garb of high share premium, had declared his own income just with a view to evade tax. It is submitted that the income to the tune of Rs.10.11 crore escaped assessment, and for that, notice under Section 148 of the Act, 1961, came to be issued. 13. According to Mr.Bhatt, the crucial link between the information made available to the Assessing Officer and the formation of the belief, is present. The reasons are self-evident and they speak for themselves. 14. In the last, Mr.Bhatt submitted that merely because certain material, which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax had escaped assessment, formed part of the original assessment record per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression 'tangible material' does not mean the material alien to the original record. 15. He submitted that the decision to reopen the assessment on the basis of the report of the investigation wing cannot always be condemned or dubbed as a fishing or roving inquiry. 16. In such circumstances referred to above, Mr.Bhatt prays that there being no merit in the present writ-application, the same be rejected. Page 7 of 32 C/SCA/16575/2018 JUDGMENT 17. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned notice issued by the respondent under Section 148 of the Act, 1961, is tenable in law. 18. On 25th October 2018, a coordinate bench of this Court passed the following order : “1. The petitioner has challenged a notice of reopening of assessment for the assessment year 2011-12 which has been issued beyond a period of four years from the end of the relevant assessment year. Counsel for the petitioner drew our attention to the reasons recorded by the Assessing Officer for issuing notice and contended that there was no failure on part of the assessee to disclose truly and fully all material facts. There is no material with the Assessing Officer outside of the record in connection with share premium money received by the assessee. Merely because the company received share premium, there cannot be an automatic assessment that such amount represents assessee's unaccounted income. 2. Notice returnable on 27.11.2018. The respondent may proceed further with the assessment in connection with the impugned notice, final order thereon shall not be passed without leave of the Court. ” 19. The principles of law governing reopening of the assessment under Section 147 of the Act, 1961, may be summarised as under : Page 8 of 32 C/SCA/16575/2018 JUDGMENT (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude Page 9 of 32 C/SCA/16575/2018 JUDGMENT that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied - a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. (vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. (viii) If the original assessment is processed under Section 143(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment. Page 10 of 32 C/SCA/16575/2018 JUDGMENT (ix) In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two conditions are required to be satisfied; (i) The Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; (ii) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority, is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the Page 11 of 32 C/SCA/16575/2018 JUDGMENT income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression “tangible material” does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the “reasons to believe”. (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression “reason to believe” appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a “bona fide” belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. Page 12 of 32 C/SCA/16575/2018 JUDGMENT (xvi) The concept of “change of opinion” has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. (xvii) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assesee's profits have escaped assessment or have been assessed at a low rate. However, nothing would preclude the Income Tax Officer from conducting any formal inquiry under Section 133(6) of the Act before proceeding for reassessment under Section 147 of the Act. (xviii) The “full and true” disclosure of the material facts would not include that material, which is to be used for testing the veracity of the particulars mentioned in the return. All such facts would be expected to be elicited by the Assessing Officer during the course of the assessment. The disclosure required only reference to those material facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries. (xix) The word “information” in Section 147 means instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the Page 13 of 32 C/SCA/16575/2018 JUDGMENT source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the Assessing Officer regarding the escapement of the income but then, while recording the reasons for the belief formed, the Assessing Officer is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the Assessing Officer had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 20. In the reply to the impugned notice issued by the respondent under Section 148 of the Act, 1961, the following was brought to the notice of the respondent as regards the share premium of Rs.10,01,38,886=00. Page 14 of 32 C/SCA/16575/2018 JUDGMENT “2.1.2. Therefore, upon perusal of the table above, your goodself would observe that such shares have been issued at a premium to a third party, non-resident Mauritius based company named Helix Investments Company. Your goodself would appreciate that it is an India-focused private equity fund that provides growth capital to medium and small size companies in India. The fund's objective is to work with dynamic entrepreneurs and management teams and provide them with capital and strategic advice to support their future growth. in view of the same. Helix investments Company invested in HHPE in alignment with the objectives of such investment company. 2.1.3. Further, the investments in the form of Foreign Direct investments ('FDI') have been received through a banking channel. The Certificate of Forward Inward Remittance ('FIRC') dated 8 September 2010 and 7 February 2011 are enclosed as Annexure 3 and Annexure 4. The same substantiate that the share premium has been received from issue of shares to a third party non-resident investment company. 2.1.4. HHPE further submits that it had filed Form FC-GPR through its Authorized Dealer Category ('AD Category') - I bank with the Regional Office of the RBI when the shares were issued to foreign investor namely Helix Investments Company. The copies of Form FC-GPRs dated 20 September 2010 and 22 February 2011 which were filed for the two trenches of shares issued to the foreign investors are enclosed as Annexure 5 and Annexure 6 respectively. Page 15 of 32 C/SCA/16575/2018 JUDGMENT Further, we are also enclosing as Annexure 7 and Annexure 8, the copies of the letter received from the Regional Office of the RBI acknowledging receipt of the Form FC-GPR filed by our AD Category - I Bank. 2.1.5. HHPE also submits that the share premium received on issue of equity shares to a non-resident foreign investor is a capital receipt for the company during the year under consideration. The same did not form a part of the profit and loss account of the company and the same being of capital nature was disclosed in the balance sheet of the company. In view of the same, the question of income escaping assessment does not arise as contended by your goodself. 2.1.6. Further, we would like to draw your goodself’s attention towards Press Note dated 28 January 2015 issued by the Press Information Bureau released by the Government of India which accepted the order of the High Court of Bombay in the case of Vodafone India Services Private Limited wherein it was held that amount received on issue of shares is a capital account transaction not separately brought within the definition of income. In view of the same, the relevant portion of the press note is reproduced below. “c) The tax can be charged only on income and in the absence of any income arising, the issue of applying the measure of Arm's Length Pricing to transactional value/consideration itself does not arise. Page 16 of 32 C/SCA/16575/2018 JUDGMENT d) If its income which is chargeable to tax, under the normal provisions of the Act, then alone Chapter X of the Act could be invoked. Sections 4 and 5 of the Act brings/charges to tax total income of the previous year. This would take us to the meaning of the word income under the Act as defined in Section 2 (24) of the Act. The amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2)(viib) of the Act. Thus such capital account cannot be brought to tax as already discussed herein above while considering the challenge to the grounds as mentioned in impugned order. e) The issue of shares at a premium is on Capital account and gives rise to no income. The submission on behalf of the revenue that the shortfall in the ALP as computed for the purposes of Chapter X of the Act is misplaced. The ALP is meant to determine the real value of the transaction entered into between AEs. It is a re-computation exercise to be carried out only when income arises in case of an International transaction between AEs. It does not warrant re-computation of a consideration received/given on capital account.” Therefore, it is observed that the Government of India vide the above mentioned press-note has accepted that share premium received on shares is a capital account transaction. In view of the same, the question of income escaping assessment does not arise as contended by your goodself. Page 17 of 32 C/SCA/16575/2018 JUDGMENT 2.1.7. Further, your goodself has mentioned that the information of share premium of Rs.10,01,38,886 was received after the completion of assessment proceedings under section 143(3) of the Act and could not be examined during the course of assessment proceedings, In this regard. it is submitted that: The share premium received during the year, formed a part of 'Schedule 2 - Reserves and Surplus' as per the audited financial statements. The said disclosure also formed a part of the balance sheet in return of income filed by HHPE. Further, the investment by Helix Investments Company was also disclosed in the audited financial statements in the note on 'Information in respect of related parties'. Therefore, owing to its investment in equity shares of HHPE in AY 2011-12, Helix Investments Company became the holding company for HHPE and therefore, such transaction was specifically disclosed in the note on transactions with related parties as per AS-18 on related party disclosures and the same was furnished before the Learned AO during the course of assessment proceedings under section 143(3) of the Act. Further, the cash flow statement forming part of the audited financial statements also has a disclosure under ‘financing activities’ regarding proceeds from Page 18 of 32 C/SCA/16575/2018 JUDGMENT issuance of Class A equity shares including securities premium. 2.1.8. Further, during the course of assessment proceedings, vide submission dated 19 August 2013, HHPE had submitted details of shareholders holding more than 10 percent shares as Point no.3 of the said submission. Therefore, the information of such non-resident shareholder was available on records before the Learned AO during the course of assessment proceedings. A copy of the said submission is attached as Annexure 9. Also, the said information relating to list of shareholders holding more than 10 percent shares is also included in ITR 6 submitted by HHPE. In view of the same, the contention of your goodself that share premium received could not be examined during the course of assessment proceedings as the information was received later is factually incorrect.” 21. This Court, in Kothi Steel Ltd. v. Assistant Commissioner of Income-tax, reported in (2016)72 taxmann.com 252 (Gujarat), observed as under : “12. Before adverting to the merits of the case, it would be necessary to examine as to whether on the reasons recorded, the Assessing Officer could have formed the belief that income chargeable to tax has escaped assessment. As noticed hereinabove, all that is stated in the reasons recorded is that the Assessing Officer has received information from the I & CI that certain corporate entities have issued shares at a premium. It appears that the petitioners name was also included in such list. However, it Page 19 of 32 C/SCA/16575/2018 JUDGMENT cannot be gainsaid that per se an information that the petitioner has issued shares at a premium would by itself not constitute an information for the purpose of formation of belief that the income chargeable to tax has escaped assessment. The Assessing Officer has also placed reliance upon the assessment order for assessment year 2009-10, since the facts of the said year and the facts of the present case are similar, for formation of the belief that in the light of the order passed for the assessment year 2009-10, income chargeable to tax has escaped assessment even in the present year. On a perusal of the reasons recorded, it can be seen that it is nowhere stated by the Assessing Officer that the amount received by way of share premium is the undisclosed income of the petitioner or that the same is in the nature of undisclosed cash credit. According to the Assessing Officer, the payment of share premium on private placement from entities hitherto unknown for a company which is not doing financially well, has given unentitled benefit to the petitioner. However, on a reading of the reasons as a whole, there is nothing to indicate that the Assessing Officer, upon verification of facts, has found that the very same entities who had invested in the shares of the petitioner company in assessment year 2009-10 had also invested in the shares of the company in assessment year 2010-11. In the present case, it is the specific case of the petitioner that the Assessing Officer has not made any inquiry pursuant to the information received from I & CI and that the Assessing Officer has merely gone by the fact that the shares were issued at a premium in both the assessment years. It may be noted that the findings in Page 20 of 32 C/SCA/16575/2018 JUDGMENT relation to the previous assessment year on which the Assessing Officer seeks to place reliance to reopen the assessment and which have been reproduced in the reasons recorded, do not indicate any specific material having been found to establish that the transactions in question are not genuine. All that is stated is that, considered in the light of human probabilities, instances of such transactions would be rarely available. The case of the respondent in the affidavit-in-reply is that issuing shares at 900% premium of loss making unlisted company is undisputedly unusual and lacks commercial substance. It is further the case of the Assessing Officer that the assessee being a loss making unit, is habitual in infusing money by way of share capital at higher premium. It is also stated in the affidavit-in-reply that during the course of assessment proceedings for assessment year 2009-10, the petitioner could not place on record any documentary evidence either with respect to future profitability of the unit or that the value of assets belonging to the company had appreciated substantially so as to justify collection of such a high premium and that the onus under section 68 of the Act squarely lies on the assessee. In the opinion of this court, insofar as the onus under section 68 of the Act is concerned, it is for the assessee to prove the identity, genuineness, creditworthiness of the parties and not to show its profitability or value of assets etc., as is sought to be contended in the affidavit-in-reply. Besides, all that is stated in the reasons recorded is that the assessee is not doing financially well, without stating any facts as regards the financial status of the assessee. Page 21 of 32 C/SCA/16575/2018 JUDGMENT 13. The learned counsel for the respondent has placed strong reliance upon the decision of this court in the case of Olwin Tiles (India) (P) Ltd. v. Deputy Commissioner of Income Tax (supra) wherein, the court had dismissed the petition challenging the reopening on the ground that the assessee company had issued its shares at a huge premium during the financial year 2010-11. In this regard, a perusal of the said decision reveals that in the facts of the said case, the Assessing Officer had made a detailed analysis of the data furnished by the assessee with its return, which showed that whereas the net worth of the shares issued is Rs.33, the same have been allotted for Rs.1,000/-, i.e. an excess of Rs.967/-. After such detailed analysis, the Assessing Officer came to the conclusion that the excess premium amount of Rs.967/- was unexplained cash credit in the hands of the assessee and therefore, he has reason to believe that income to the extent indicated in the reasons has escaped assessment. In the facts of the present case, the Assessing Officer has merely placed reliance upon the I & CI information and the assessment order passed in the previous year, without making any inquiry worth the name to form a belief that excess premium amount had been received by the petitioner. Moreover, in that case, the Assessing Officer had formed a belief that the excess premium was unexplained cash credit in the hands of the assessee, whereas in the facts of the present case, the Assessing Officer has formed the belief that income pertaining to the share premium received has given unentitled benefit to the assessee. As rightly submitted by Page 22 of 32 C/SCA/16575/2018 JUDGMENT the learned counsel for the petitioner, the amount received by way of share premium, would be in the nature of capital receipt and would not form the income of the petitioner. On the basis of the reasons recorded, the Assessing Officer has formed a belief that the assessee is given unentitled benefit; however, nothing is stated therein to indicate that such unentitled benefit is unexplained cash credit so as to enable the Assessing Officer to form the belief that the income chargeable to tax has escaped assessment.” 22. In Pushpak Bullion (P) Ltd. v. Deputy Commissioner of Income-tax, Circle 3(1), reported in (2016)71 taxmann.com 326 (Gujarat), this Court observed as under : “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. Page 23 of 32 C/SCA/16575/2018 JUDGMENT 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 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 Page 24 of 32 C/SCA/16575/2018 JUDGMENT 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 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.” 23. A Division Bench of the Bombay High Court, in the case of NuPower Renewables Pvt. Ltd. v. Asst. Commissioner of Income Tax 1-(2)(2) and others (Writ Petition No.3618 of 2018, decided on 7th March 2019), observed as under : Page 25 of 32 C/SCA/16575/2018 JUDGMENT “14. However, whether the Assessing Officer had any such information at his command and the manner in which, the Assessing Officer processed such additional information(s) to form a belief that, income chargeable to tax has escaped assessment, shall have to be gathered from reasons recorded by him for issuing the notice. In this context, we may peruse the reasons more minutely and analyze the contents thereof. The core of the reasons recorded by the Assessing Officer is found in paragraph 2 thereof. In paragraph 2, the Assessing Officer has recorded that, he has received information from the Investigation Wing under a letter dated 15th March, 2018, stating that, the assessee had received an amount of Rs.49.90 Crores from Firstland a Mauritius based company toward subscription for 4,99,048 compulsorily convertible cumulative preference shares. The Assessing Officer does not refer to any further information received from the Investigation Wing. In short, according to the Assessing Officer, the information received from the Investigation Wing, was confined to the fact that, the assessee had received share application money to the tune of Rs.49.99 Crores from Firstland . 15. This information is not something new to the Assessing Officer. The fact that the assessee had received such share application money from Firstland was part of the assessee's return. It is not as if the Assessing Officer did not notice this information Page 26 of 32 C/SCA/16575/2018 JUDGMENT during scrutiny assessment. As noted above through series of correspondence between the assessee and the Assessing Officer, this information was highlighted time and again. The channel of movement of the fund, the source of the fund, purpose of investment and the ultimate destination of the fund, were all part of the record during the assessment proceedings. There is nothing in the reasons recorded by the Assessing Officer to suggest that, such investment is bogus. 16. The rest of the reasons recorded merely refer to the Assessing Officer's observations in the context of the income chargeable to tax which had escaped assessment and the reasons why he believed that, re-opening of an assessment even beyond a period of four years, in the present case, was permissible. In the entire reasons, from paragraph 3 onwards, there is no reference to any additional information which was brought to the notice of the Assessing Officer in this respect. 17. To summarize, the reasons only refer to a simple piece of information supplied to the Assessing Officer by the Investigation Wing, stating that the assessee- company had received share application money of Rs.49.99 Crores from Firstland. To reiterate, this information is nothing which the Assessing Officer did not have at his command when the Assessment was framed. The reasons do not specify that the information supplied to the Assessing Officer by the Investigation Wing, suggested that such investment was non-genuine. In this context, Page 27 of 32 C/SCA/16575/2018 JUDGMENT Assessing Officer refers to the requirement of verifying the genuineness of investor and requirement of further investigation. These observations in para 3 of the reasons, would not further the case of the Revenue, these being no information with the Assessing Officer, prima facie, indicating that the investments were not genuine. The investigation into the source of genuineness and creditworthiness of the investor company would fall within the realm of fishing enquiries, which is wholly impermissible in law in the context of the re-opening of the assessment. For such reasons, impugned notice is set aside. ” 24. The ambit and scope of powers to be exercised under Section 147 of the Act, 1961, by the Assessing Officer, while reopening the assessment beyond the period of 4 years is discussed by this Court in the case of Gujarat Lease Financing Ltd. v. Dy. CIT [2013] 36 taxmann.com 359/219 Taxmann 70/360 ITR 496 (Guj.) wherein, it has been observed and held in para 16, 17 and 27 as under : “16. The Assessing Officer is authorized to make reassessment in the even of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per the first proviso to Section 147 of the Act, assessment can be reopened under Section 147 of the Act after expiry of 4 years only if [i] the assessee failed to make a return under Section 139 of the Act or in response to notice issued under section 142 [1], or under Section 148 of the Act, he failed to disclose truly and fully all material facts Page 28 of 32 C/SCA/16575/2018 JUDGMENT necessary for the assessment. Once all primary facts are before the assessing authority, no further assistance is required by way of disclosure. All inference of facts and legal inference need to be drawn by the Assessing Officer. It is not for anyone to guide the Assessing Officer in respect of inference \"factual or legal\" which requires to be drawn by him alone. 17. Once the case of the assessee is covered by the first proviso to Section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Limited [Supra], has held thus : “10. It can be clearly noted from the reasons recored that there is no mention at all of the assessee having not disclosed fully or truly material facts which were necessary for the purpose of computing the income of the assessee. Assuming that in the notice for reopening, such wordings are not specifically mentioned and they can be supplemented either while rejecting th objections or by way of affidavit of the Assessing Officer, then also, the revenue has failed to point out as to in what manner these has been non disclosure on the part of the assessee.” Page 29 of 32 C/SCA/16575/2018 JUDGMENT 27. From the ratio that can be culled out from all these decisions, it is amply clear that the Assessing Officer, who is authorized to issue notice under section 148 of the Act for reassessment, on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. However, no such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of such assessment. The onus is on the assessee to reveal the primary facts and to draw the inferential facts would be responsibility of the Assessing Officer. Once having revealed from the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error either on the part of the Assessing Officer himself or because he choose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him.” 25. Indisputably, the impugned notice issued by the Assessing Officer itself is beyond the period of four years from the end of the relevant assessment year and did not comply with the requirements of the proviso to Section 147 of the Act, 1961. The Page 30 of 32 C/SCA/16575/2018 JUDGMENT Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of the assessment under Section 143(3) of the Act, 1961, and therefore, on this short count alone, the impugned notice is liable to be quashed and set-aside. 26. In the overall view of the matter, we have reached to the conclusion that there is no basis to 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 the 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 reopened assessment. At any rate, the reopening of assessment which was framed after the scrutiny would not be permissible for a fishing or roving inquiry. 27. As observed by this Court in Pushpak Bullion (P.) Ltd. (supra), this is not to suggest that after the original assessment was completed, if the Assessing Officer has 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 reopening could not have been resorted to. In the case on hand, 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. Page 31 of 32 C/SCA/16575/2018 JUDGMENT 28. In the result, the impugned notice dated 14th August 2018 (Annexure-A) to this writ-application is hereby quashed and set- aside. The petition is, accordingly, allowed and disposed of. (J. B. PARDIWALA, J.) (A. C. RAO, J.) /MOINUDDIN Page 32 of 32 "