C/SCA/16575/2018 JUDGMENT IN 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 NO to see judgment ? 2 To be referred to Reporter or not ? NO 3 Whether their Lordships wish to see fair copy NO of judgment ? 4 Whether this case involves substantial question NO of law as to interpretation of Constitution of India or any order made thereunder ? HITACHI HI REL POWER ELECTORNICS PVT. LTD. Versus ASST. COMMISSIONER OF INCOME TAX CIRCLE 2 (1) (1) Appearance: MR B S SOPARKAR for Petitioner(s)No. 1 MRS MAUNA M BHATT for 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 Constitution of India, writ-applicant, private limited company, has prayed for following reliefs : Page 1 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT ...this Hon'ble Court be pleased to issue writ of mandamus or writ in nature of mandamus or writ of certiorari or writ in nature of certiorari or any other appropriate writ, direction or order and be pleased to : (a) quash and set aside impugned notice at Annexure-A to this Petition; (b) pending admission, hearing and final disposal of this petition, to stay implementation and operation of 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 interest of justice; 2. It appears from materials on record that writ- applicant seeks to challenge legality and validity of notice issued by respondent under Section 148 of Income Tax Act, 1961 (for short, 'the Act, 1961') dated 30th March 2018. 3. writ-applicant is engaged in business of manufacturing industrial automation solutions, rotating machine controls, power controllers, uninterrupted power supply and power conditioning products. writ-applicant filed its return of income for Assessment Year 2011-12 on 30th September 2011 declaring total loss of Rs.6,50,56,810=00 under normal provisions and claimed refund of Rs.64,59,979=00. case was selected for scrutiny and notice under Section 143(2) of Act, 1961, was issued to writ- Page 2 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT applicant. Assessing Officer, ultimately, passed order under Section 143(3) of Act, 1961, dated 31st October 2013 at Rs.6,58,26,003=00. impugned notice issued by respondent under Section 148 of Act, 1961, reads thus : 1. assessee had filed its return of income for A.Y. 2011-12 declaring total income of Rs.6,50,56,810/-. 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 assessee company had received share premium/share application money to tune of Rs.10,01,38,866/-. From records, it is seen that assessee company has issued certain shares at price which was over and above nominal value and received total share premium of Rs.10,11,94,866/- during AY 2011-12. As above information was received after completion of assessment u/s 143(3) of Act, 1961, source and reason for receiving of abnormal share premium of Rs.10,11,94,866/- could not be examined during assessment proceedings. assessee company has not given details of high premium received during course of assessment or in its return of income. 3. In view of matter, assessee company has hefty premium of Rs.10,11,94,866/- is totally unjustified if it is compared with book value of assessee company and it is clear that in garb of high share premium, assessee Page 3 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT has introduced its own undisclosed income & therefore, to extent of Rs.10,11,94,866/- has escaped income for assessment. Therefore, this is fit case for initiating proceedings u/s.147 of Act for A.Y. 2011-12. In view of above, 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 extent of Rs.10,11,94,866/- due to failure on part of assessee to disclose fully and truly all material facts necessary for his assessment as envisaged in provisions of section 147 of Act and accordingly notice u/s.148 is being issued. 4. On receipt of notice referred to above, writ- applicant raised various objections in writing. 5. respondent, vide its order dated 5th October 2018, overruled all objections raised by writ-applicant. 6. In such circumstances referred to above, writ-applicant is here before this Court with present writ-application. 7. Mr.B.S.Soparkar, learned counsel appearing for writ-applicant, vehemently submitted that impugned notice is not tenable in law as there was no failure at end of writ-applicant to disclose truly and fully all material facts. He submitted that merely having reason to believe that income had escaped assessment is not sufficient to reopen assessment beyond period of four years. escapement of income must also be occasioned by failure on part of Page 4 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT writ-applicant to disclose truly and fully all material facts. Mr.Soparkar would submit that in case on hand, there is no failure on part of writ-applicant to disclose truly and fully any material facts. Mr.Soparkar submits that grounds for reopening assessment are absolutely misconceived and baseless. He submits that all details relating to share premium were duly furnished to Assessing Officer, and after due scrutiny of all such details by respondent at time of original assessment, order was passed. Having scrutinized details, it is not permissible for respondent now to reopen assessment merely for purpose of re- computation taking different view on 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 formation of belief. He pointed out that share premium received by writ-applicant had been duly accounted for and disclosed in books. He would submit that share premium is capital receipt and is not liable to be taxed. He further submitted that attempt on part of respondent in treating share application as undisclosed income is erroneous as there is not whisper of any evidence to hold that writ-applicant had earned any undisclosed income or same had been routed back by form of share premium. 9. Mr.Soparkar, in support of his submissions, has placed strong reliance on following decisions : (1) Dhruv Dipakbhai Panchal v. Income Tax Officer - Ward, (2018)93 taxmann.com 61 (Gujarat); Page 5 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 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, same be allowed and impugned notice be quashed. 11. On other hand, this writ-application has been vehemently opposed by Mr.M.R.Bhatt, learned senior counsel appearing for respondents. Mr.Bhatt would submit that assessee Company had received share premium to tune of Rs.10,01,38,866=00. Upon verification of records, it was found that assessee had issued certain shares at price which was over and above nominal value and received share premium to tune of Rs.10,11,94,866=00 during Assessment Year 2011-12. According to Mr.Bhatt, it has been found that assessee Company had not furnished any details of such high premium received during course of original assessment. There was no opinion formed in relation to high premium received by assessee during original assessment. Page 6 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 12. Mr.Bhatt submits that upon verification, it was found that compared to book value of assessee Company, receipt of high premium by assessee was unjustified. He further pointed out that Assessing Officer has reason to believe that assessee, in garb of high share premium, had declared his own income just with view to evade tax. It is submitted that income to tune of Rs.10.11 crore escaped assessment, and for that, notice under Section 148 of Act, 1961, came to be issued. 13. According to Mr.Bhatt, crucial link between information made available to Assessing Officer and formation of belief, is present. reasons are self-evident and they speak for themselves. 14. In last, Mr.Bhatt submitted that merely because certain material, which is otherwise tangible and enables Assessing Officer to form belief that income chargeable to tax had escaped assessment, formed part of original assessment record per se would not bar Assessing Officer from reopening assessment on basis of such material. expression 'tangible material' does not mean material alien to original record. 15. He submitted that decision to reopen assessment on basis of report of investigation wing cannot always be condemned or dubbed as fishing or roving inquiry. 16. In such circumstances referred to above, Mr.Bhatt prays that there being no merit in present writ-application, same be rejected. Page 7 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 17. Having heard learned counsel appearing for parties and having gone through materials on record, only question that falls for our consideration is, whether impugned notice issued by respondent under Section 148 of Act, 1961, is tenable in law. 18. On 25th October 2018, coordinate bench of this Court passed following order : 1. petitioner has challenged notice of reopening of assessment for assessment year 2011-12 which has been issued beyond period of four years from end of relevant assessment year. Counsel for petitioner drew our attention to reasons recorded by Assessing Officer for issuing notice and contended that there was no failure on part of assessee to disclose truly and fully all material facts. There is no material with Assessing Officer outside of record in connection with share premium money received by assessee. Merely because company received share premium, there cannot be automatic assessment that such amount represents assessee's unaccounted income. 2. Notice returnable on 27.11.2018. respondent may proceed further with assessment in connection with impugned notice, final order thereon shall not be passed without leave of Court. 19. principles of law governing reopening of assessment under Section 147 of Act, 1961, may be summarised as under : Page 8 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT (i) Court should be guided by reasons recorded for reassessment and not by reasons or explanation given by Assessing Officer at later stage in respect of notice of reassessment. To put it in other words, having regard to entire scheme and purpose of Act, validity of assumption of jurisdiction under Section 147 can be tested only by reference to reasons recorded under Section 148(2) of Act and Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from records. Assessing Officer is confined to recorded reasons to support assumption of jurisdiction. He cannot record only some of reasons and keep others upto his sleeves to be disclosed before Court if his action is ever challenged in court of law. (ii) At time of commencement of reassessment proceedings, Assessing Officer has to see whether there is prima facie material, on basis of which, department would be justified in reopening case. sufficiency or correctness of material is not thing to be considered at that stage. (iii) validity of reopening of assessment shall have to be determined with reference to reasons recorded for reopening of assessment. (iv) basic requirement of law for reopening and assessment is application of mind by Assessing Officer, to materials produced prior to reopening of assessment, to conclude Page 9 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied - postmortem exercise of analysing materials produced subsequent to reopening will not make inherently defective reassessment order valid. (v) crucial link between information made available to Assessing Officer and formation of belief should be present. reasons must be self evident, they must speak for themselves. (vi) tangible material which forms basis for belief that income has escaped assessment must be evident from reading of reasons. entire material need not be set out. To put it in other words, something therein, which is critical to formation of belief must be referred to. Otherwise, link would go missing. (vii) reopening of assessment under Section 147 is potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. (viii) If original assessment is processed under Section 143(1) of Act and not Section 143(3) of Act, proviso to Section 147 will not apply. In other words, although reopening may be after expiry of four years from end of relevant assessment year, yet it would not be necessary for Assessing Officer to show that there was any failure to disclose fully or truly all material facts necessary for assessment. Page 10 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 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) Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment; (ii) Such escapement occurred by reason of failure on part of assessee either (a) to make return of income under section 139 or in response to notice issued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all material facts necessary for his assessment for that purpose. (x) Assessing Officer, being quasi judicial authority, is expected to arrive at subjective satisfaction independently on objective criteria. (xi) While report of Investigation Wing might constitute material, on basis of which, Assessing Officer forms reasons to believe, process of arriving at such satisfaction should not be mere repetition of report of investigation. reasons to believe must demonstrate some link between tangible material and formation of belief or reason to believe that income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables Assessing Officer to form belief that Page 11 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT income chargeable to tax has escaped assessment, formed part of original assessment record, per se would not bar Assessing Officer from reopening assessment on basis of such material. expression tangible material does not mean material alien to original record. (xiii) order, disposing of objections or any counter affidavit filed during writ proceedings before Court cannot be substituted for reasons to believe . (xiv) decision to reopen assessment on basis of report of Investigation Wing cannot always be condemned or dubbed as fishing or roving inquiry. expression reason to believe appearing in Section 147 suggests that if Income Tax Officer acts as reasonable and prudent man on basis of information secured by him that there is case for reopening, then Section 147 can well be pressed into service and assessments be reopened. As consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for Assessing Officer to take into consideration such facts which come to light either by discovery or by fuller probe into matter and reassess assessee in detail if circumstances require. (xv) test of jurisdiction under Section 143 of Act is not ultimate result of inquiry but test is whether income tax officer entertained bona fide belief upon definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. Page 12 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT (xvi) concept of change of opinion has been treated as built in test to check abuse. If there is tangible material showing escapement of income, same would be sufficient for reopening assessment. (xvii) It is not necessary that Income Tax Officer should hold quasi judicial inquiry before acting under Section 147. It is enough if he on information received believes in good faith that assesee's profits have escaped assessment or have been assessed at low rate. However, nothing would preclude Income Tax Officer from conducting any formal inquiry under Section 133(6) of Act before proceeding for reassessment under Section 147 of Act. (xviii) full and true disclosure of material facts would not include that material, which is to be used for testing veracity of particulars mentioned in return. All such facts would be expected to be elicited by Assessing Officer during course of assessment. disclosure required only reference to those material facts, which if not disclosed, would not allow Assessing Officer to make necessary inquiries. (xix) word information in Section 147 means instruction or knowledge derived from external source concerning facts or particulars or as to law relating to matter bearing on assessment. information anonymous is information from unknown authorship but nonetheless in given case, it may constitute information and not less information though anonymous. This is now recognized and accepted source for detection of large scale tax evasion. non-disclosure of Page 13 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT source of information, by itself, may not reduce credibility of information. There may be good and substantial reasons for such anonymous disclosure, but real thing to be looked into is nature of information disclosed, whether it is mere gossip, suspicion or rumour. If it is none of these, but discovery of fresh facts or of new and important matters not present at time of assessment, which appears to be credible to honest and rational mind leading to scrutiny of facts indicating incorrect allowance of expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) reasons recorded or material available on record must have nexus to subjective opinion formed by Assessing Officer regarding escapement of income but then, while recording reasons for belief formed, Assessing Officer is not required to finally ascertain factum of escapement of tax and it is sufficient that Assessing Officer had cause or justification to know or suppose that income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that sufficiency and adequacy of reasons which have led to formation of belief by Assessing Officer that income has escaped assessment cannot be examined by court. 20. In reply to impugned notice issued by respondent under Section 148 of Act, 1961, following was brought to notice of respondent as regards share premium of Rs.10,01,38,886=00. Page 14 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 2.1.2. Therefore, upon perusal of table above, your goodself would observe that such shares have been issued at premium to third party, non-resident Mauritius based company named Helix Investments Company. Your goodself would appreciate that it is India-focused private equity fund that provides growth capital to medium and small size companies in India. 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 same. Helix investments Company invested in HHPE in alignment with objectives of such investment company. 2.1.3. Further, investments in form of Foreign Direct investments ('FDI') have been received through banking channel. Certificate of Forward Inward Remittance ('FIRC') dated 8 September 2010 and 7 February 2011 are enclosed as Annexure 3 and Annexure 4. same substantiate that share premium has been received from issue of shares to 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 Regional Office of RBI when shares were issued to foreign investor namely Helix Investments Company. copies of Form FC-GPRs dated 20 September 2010 and 22 February 2011 which were filed for two trenches of shares issued to foreign investors are enclosed as Annexure 5 and Annexure 6 respectively. Page 15 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT Further, we are also enclosing as Annexure 7 and Annexure 8, copies of letter received from Regional Office of RBI acknowledging receipt of Form FC-GPR filed by our AD Category - I Bank. 2.1.5. HHPE also submits that share premium received on issue of equity shares to non-resident foreign investor is capital receipt for company during year under consideration. same did not form part of profit and loss account of company and same being of capital nature was disclosed in balance sheet of company. In view of same, 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 Press Information Bureau released by Government of India which accepted order of High Court of Bombay in case of Vodafone India Services Private Limited wherein it was held that amount received on issue of shares is capital account transaction not separately brought within definition of income. In view of same, relevant portion of press note is reproduced below. c) tax can be charged only on income and in absence of any income arising, issue of applying measure of Arm's Length Pricing to transactional value/consideration itself does not arise. Page 16 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT d) If its income which is chargeable to tax, under normal provisions of Act, then alone Chapter X of Act could be invoked. Sections 4 and 5 of Act brings/charges to tax total income of previous year. This would take us to meaning of word income under Act as defined in Section 2 (24) of Act. amount received on issue of shares is admittedly capital account transaction not separately brought within definition of Income, except in cases covered by Section 56(2)(viib) of Act. Thus such capital account cannot be brought to tax as already discussed herein above while considering challenge to grounds as mentioned in impugned order. e) issue of shares at premium is on Capital account and gives rise to no income. submission on behalf of revenue that shortfall in ALP as computed for purposes of Chapter X of Act is misplaced. ALP is meant to determine real value of transaction entered into between AEs. It is re-computation exercise to be carried out only when income arises in case of International transaction between AEs. It does not warrant re-computation of consideration received/given on capital account. Therefore, it is observed that Government of India vide above mentioned press-note has accepted that share premium received on shares is capital account transaction. In view of same, question of income escaping assessment does not arise as contended by your goodself. Page 17 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 2.1.7. Further, your goodself has mentioned that information of share premium of Rs.10,01,38,886 was received after completion of assessment proceedings under section 143(3) of Act and could not be examined during course of assessment proceedings, In this regard. it is submitted that: share premium received during year, formed part of 'Schedule 2 - Reserves and Surplus' as per audited financial statements. said disclosure also formed part of balance sheet in return of income filed by HHPE. Further, investment by Helix Investments Company was also disclosed in audited financial statements in 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 holding company for HHPE and therefore, such transaction was specifically disclosed in note on transactions with related parties as per AS-18 on related party disclosures and same was furnished before Learned AO during course of assessment proceedings under section 143(3) of Act. Further, cash flow statement forming part of audited financial statements also has disclosure under financing activities regarding proceeds from Page 18 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT issuance of Class equity shares including securities premium. 2.1.8. Further, during 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 said submission. Therefore, information of such non-resident shareholder was available on records before Learned AO during course of assessment proceedings. copy of said submission is attached as Annexure 9. Also, 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 same, contention of your goodself that share premium received could not be examined during course of assessment proceedings as 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 merits of case, it would be necessary to examine as to whether on reasons recorded, Assessing Officer could have formed belief that income chargeable to tax has escaped assessment. As noticed hereinabove, all that is stated in reasons recorded is that Assessing Officer has received information from I & CI that certain corporate entities have issued shares at premium. It appears that petitioners name was also included in such list. However, it Page 19 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT cannot be gainsaid that per se information that petitioner has issued shares at premium would by itself not constitute information for purpose of formation of belief that income chargeable to tax has escaped assessment. Assessing Officer has also placed reliance upon assessment order for assessment year 2009-10, since facts of said year and facts of present case are similar, for formation of belief that in light of order passed for assessment year 2009-10, income chargeable to tax has escaped assessment even in present year. On perusal of reasons recorded, it can be seen that it is nowhere stated by Assessing Officer that amount received by way of share premium is undisclosed income of petitioner or that same is in nature of undisclosed cash credit. According to Assessing Officer, payment of share premium on private placement from entities hitherto unknown for company which is not doing financially well, has given unentitled benefit to petitioner. However, on reading of reasons as whole, there is nothing to indicate that Assessing Officer, upon verification of facts, has found that very same entities who had invested in shares of petitioner company in assessment year 2009-10 had also invested in shares of company in assessment year 2010-11. In present case, it is specific case of petitioner that Assessing Officer has not made any inquiry pursuant to information received from I & CI and that Assessing Officer has merely gone by fact that shares were issued at premium in both assessment years. It may be noted that findings in Page 20 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT relation to previous assessment year on which Assessing Officer seeks to place reliance to reopen assessment and which have been reproduced in reasons recorded, do not indicate any specific material having been found to establish that transactions in question are not genuine. All that is stated is that, considered in light of human probabilities, instances of such transactions would be rarely available. case of respondent in 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 case of Assessing Officer that assessee being loss making unit, is habitual in infusing money by way of share capital at higher premium. It is also stated in affidavit-in-reply that during course of assessment proceedings for assessment year 2009-10, petitioner could not place on record any documentary evidence either with respect to future profitability of unit or that value of assets belonging to company had appreciated substantially so as to justify collection of such high premium and that onus under section 68 of Act squarely lies on assessee. In opinion of this court, insofar as onus under section 68 of Act is concerned, it is for assessee to prove identity, genuineness, creditworthiness of parties and not to show its profitability or value of assets etc., as is sought to be contended in affidavit-in-reply. Besides, all that is stated in reasons recorded is that assessee is not doing financially well, without stating any facts as regards financial status of assessee. Page 21 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 13. learned counsel for respondent has placed strong reliance upon decision of this court in case of Olwin Tiles (India) (P) Ltd. v. Deputy Commissioner of Income Tax (supra) wherein, court had dismissed petition challenging reopening on ground that assessee company had issued its shares at huge premium during financial year 2010-11. In this regard, perusal of said decision reveals that in facts of said case, Assessing Officer had made detailed analysis of data furnished by assessee with its return, which showed that whereas net worth of shares issued is Rs.33, same have been allotted for Rs.1,000/-, i.e. excess of Rs.967/-. After such detailed analysis, Assessing Officer came to conclusion that excess premium amount of Rs.967/- was unexplained cash credit in hands of assessee and therefore, he has reason to believe that income to extent indicated in reasons has escaped assessment. In facts of present case, Assessing Officer has merely placed reliance upon I & CI information and assessment order passed in previous year, without making any inquiry worth name to form belief that excess premium amount had been received by petitioner. Moreover, in that case, Assessing Officer had formed belief that excess premium was unexplained cash credit in hands of assessee, whereas in facts of present case, Assessing Officer has formed belief that income pertaining to share premium received has given unentitled benefit to assessee. As rightly submitted by Page 22 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT learned counsel for petitioner, amount received by way of share premium, would be in nature of capital receipt and would not form income of petitioner. On basis of reasons recorded, Assessing Officer has formed belief that assessee is given unentitled benefit; however, nothing is stated therein to indicate that such unentitled benefit is unexplained cash credit so as to enable Assessing Officer to form belief that 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 premium received, resultant increase in share premium were all placed before Assessing Officer for his verification of original assessment proceedings. He however, raised no further question and accepted stand of assessee. Any re-visit of such issue without there being additional or undisclosed information would be merely in nature of change of opinion. We are conscious that Courts have made distinction between 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 Assessing Officer has later on at his disposal, in given situation, it may be open for him to contend that re- opening of assessment would not be based on mere change of opinion. However, in present case, we do not find any such material pointed out to us. Page 23 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 10. In this context as also in context of basis for Assessing Officer to form 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 assessee company had allotted shares at high premium. Barring this statement, we notice no further reference to this information in reasons recorded. contents of such information thus are completely unknown. Further Assessing Officer then goes on to observe that on verification of balance-sheet of company, it was noticed that company had received share premium of Rs. 1.45 crores and there is increase in share premium during year under consideration. He therefore, recorded assessee has not explained nature of such credit and has failed to prove genuineness and justification of huge share premium received in its books of accounts. Hence, such receipts need detailed verification. approach of Assessing Officer cannot be approved. His entire focus is on share premium amount of Rs. 1.45 crores received by assessee company. Without there being anything on record, he proceeds on basis that shares were issued at high premium. He then refers to failure on part of assessee to explain nature of credits and to prove genuineness and justification of huge share premium received during year. He therefore, concludes that such receipts need detailed verification. In order to re-open assessment which was previously framed after scrutiny, least that Assessing Officer had to have at his command Page 24 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT was some tangible material to enable him to form belief that income chargeable to tax had escaped assessment. We find reference to no such material in reasons recorded. There is no basis even to prima facie proceed on premise that allocation of shares was at artificially high premium. Merely because sizeable sum was received in nature of share premium during year under consideration, would not automatically mean that same was artificially increased. duty on part of assessee to explain nature of credits and genuineness and justification of share premium would arise when called upon during assessment or validly re- opened assessment. At any rate, re-opening of assessment which was framed after scrutiny would not be permissible for fishing inquiry. 11. This is not to suggest that after original assessment was completed, if Assessing Officer had tangible material to form belief that allocation of shares at premium was mere device to route some unaccounted money of company or that genuineness and creditworthiness of investors was doubtful, re-opening could not have been resorted to. However, in present case, we find vital link missing from reasons recorded, such link being material at command of Assessing Officer to form such belief. 23. Division Bench of Bombay High Court, in 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 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 14. However, whether Assessing Officer had any such information at his command and manner in which, Assessing Officer processed such additional information(s) to form belief that, income chargeable to tax has escaped assessment, shall have to be gathered from reasons recorded by him for issuing notice. In this context, we may peruse reasons more minutely and analyze contents thereof. core of reasons recorded by Assessing Officer is found in paragraph 2 thereof. In paragraph 2, Assessing Officer has recorded that, he has received information from Investigation Wing under letter dated 15th March, 2018, stating that, assessee had received amount of Rs.49.90 Crores from Firstland Mauritius based company toward subscription for 4,99,048 compulsorily convertible cumulative preference shares. Assessing Officer does not refer to any further information received from Investigation Wing. In short, according to Assessing Officer, information received from Investigation Wing, was confined to fact that, assessee had received share application money to tune of Rs.49.99 Crores from Firstland . 15. This information is not something new to Assessing Officer. fact that assessee had received such share application money from Firstland was part of assessee's return. It is not as if Assessing Officer did not notice this information Page 26 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT during scrutiny assessment. As noted above through series of correspondence between assessee and Assessing Officer, this information was highlighted time and again. channel of movement of fund, source of fund, purpose of investment and ultimate destination of fund, were all part of record during assessment proceedings. There is nothing in reasons recorded by Assessing Officer to suggest that, such investment is bogus. 16. rest of reasons recorded merely refer to Assessing Officer's observations in context of income chargeable to tax which had escaped assessment and reasons why he believed that, re-opening of assessment even beyond period of four years, in present case, was permissible. In entire reasons, from paragraph 3 onwards, there is no reference to any additional information which was brought to notice of Assessing Officer in this respect. 17. To summarize, reasons only refer to simple piece of information supplied to Assessing Officer by Investigation Wing, stating that assessee- company had received share application money of Rs.49.99 Crores from Firstland. To reiterate, this information is nothing which Assessing Officer did not have at his command when Assessment was framed. reasons do not specify that information supplied to Assessing Officer by Investigation Wing, suggested that such investment was non-genuine. In this context, Page 27 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT Assessing Officer refers to requirement of verifying genuineness of investor and requirement of further investigation. These observations in para 3 of reasons, would not further case of Revenue, these being no information with Assessing Officer, prima facie, indicating that investments were not genuine. investigation into source of genuineness and creditworthiness of investor company would fall within realm of fishing enquiries, which is wholly impermissible in law in context of re-opening of assessment. For such reasons, impugned notice is set aside. 24. ambit and scope of powers to be exercised under Section 147 of Act, 1961, by Assessing Officer, while reopening assessment beyond period of 4 years is discussed by this Court in 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. Assessing Officer is authorized to make reassessment in even of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per first proviso to Section 147 of Act, assessment can be reopened under Section 147 of Act after expiry of 4 years only if [i] assessee failed to make return under Section 139 of Act or in response to notice issued under section 142 [1], or under Section 148 of Act, he failed to disclose truly and fully all material facts Page 28 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT necessary for assessment. Once all primary facts are before assessing authority, no further assistance is required by way of disclosure. All inference of facts and legal inference need to be drawn by Assessing Officer. It is not for anyone to guide Assessing Officer in respect of inference "factual or legal" which requires to be drawn by him alone. 17. Once case of assessee is covered by first proviso to Section 147 of Act, reassessment proceedings beyond period of 4 years from end of 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 part of assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on issue in case of Gujarat Lease Financing Limited [Supra], has held thus : 10. It can be clearly noted from reasons recored that there is no mention at all of assessee having not disclosed fully or truly material facts which were necessary for purpose of computing income of assessee. Assuming that in 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 Assessing Officer, then also, revenue has failed to point out as to in what manner these has been non disclosure on part of assessee. Page 29 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 27. From ratio that can be culled out from all these decisions, it is amply clear that Assessing Officer, who is authorized to issue notice under section 148 of Act for reassessment, on his having 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 assessment. However, no such action is permissible after lapse of 4 years from end of relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on part of assessee to disclose fully and truly all material facts necessary for purpose of such assessment. onus is on assessee to reveal primary facts and to draw inferential facts would be responsibility of Assessing Officer. Once having revealed from record that assessee disclosed full and complete facts and on scrutiny, at time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error either on part of Assessing Officer himself or because he choose not to opine on issue or even when he changes his mind and interprets material or law otherwise than what was done by him. 25. Indisputably, impugned notice issued by Assessing Officer itself is beyond period of four years from end of relevant assessment year and did not comply with requirements of proviso to Section 147 of Act, 1961. Page 30 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT Assessing Officer had no jurisdiction to reopen assessment proceedings which were concluded on basis of assessment under Section 143(3) of Act, 1961, and therefore, on this short count alone, impugned notice is liable to be quashed and set-aside. 26. In overall view of matter, we have reached to conclusion that there is no basis to proceed on premise that allocation of shares was at artificially high premium. Merely because sizeable sum was received in nature of share premium during year under consideration, would not automatically mean that same was artificially increased. duty on part of assessee to explain nature of credits and genuineness and justification of share premium would arise when called upon during assessment or validly reopened assessment. At any rate, reopening of assessment which was framed after scrutiny would not be permissible for fishing or roving inquiry. 27. As observed by this Court in Pushpak Bullion (P.) Ltd. (supra), this is not to suggest that after original assessment was completed, if Assessing Officer has tangible material to form belief that allocation of shares at premium was mere device to route some unaccounted money of company or that genuineness and creditworthiness of investors was doubtful, reopening could not have been resorted to. In case on hand, we find vital link missing from reasons recorded, such link being material at command of Assessing Officer to form such belief. Page 31 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 C/SCA/16575/2018 JUDGMENT 28. In result, impugned notice dated 14th August 2018 (Annexure-A) to this writ-application is hereby quashed and set- aside. petition is, accordingly, allowed and disposed of. (J. B. PARDIWALA, J.) (A. C. RAO, J.) /MOINUDDIN Page 32 of 32 Downloaded on : Sat Oct 26 11:51:56 IST 2019 Hitachi Hi Rel Power Electronics Pvt. Ltd. v. Asst. Commissioner of Income-tax Circle 2(1)(1)