The court established that there must be tangible material justifying the reopening of an assessment, and the assessing officer must have a reason to believe that income had escaped assessment.

JUDGMENT :

(Dhiraj Singh Thakur, J.)

1. Common questions of law and facts arise in these two Petitions, and, therefore, we propose to dispose of the same by way of a common judgment and Order.

WRIT PETITION NO.331 OF 2016

2. The present Petition has been fled challenging the notice dated 23 Marih 2015 for the relevant assessment years-2010-11 issued under Section 148 of the Income Tax Act, 1961 (“the Act”), whereby the assessing officer proposed to reassess the income for the assessment year 2010-11 on the ground that the income had escaped assessment within the meaning of Section 147 of the Act.

3. The reasons for reopening as communicated to the Respondents are as under :-

“In this case return of income for the assessment year 2010-11 was e-fled by assessee company on 1 September 2010 declaring NIL income. The return of income has been processed on 16 April 2011. It is found from the balance sheet of the e-return of income that the assessee has issued paid up capital of Rs.77,00,000/- and Charged Security Premium at Rs.6,79,32,00,000/- during the year under consideration. An analysis of the details and information of the Balance Sheet shows that Share Premium and value of the shares can not be justified on the basis of ‘intrinsic valuation of shares’ and ‘Net Asset Value Method’ i.e. Share Premium charged is found excessive as the worth of the company is not found in that extent.

In view of the above facts and finding of the case, does not justify issue of Shares at such a huge premium, as such the nature of the transaction of so called Shares Premium is not established.

In view of the above facts, I have a reason to believe that the income to the tune of Rs.6,79,32,00,000/- chargeable to tax has escaped assessment for assessment year 2010-11 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary in the return of income for his assessment, for that assessment year.

I am satisfied that this is the fit case to re-open u/s 147 of the Income Tax Act, 1961. Hence, a Notice u/s 148 of the I.T. Act is issued herewith for reassessment.”

4. Objections were fled by the Petitioner against the reopening of the assessment, which came to be rejected by virtue of Order dated 20 January 2016.

5. The basis for reopening as is seen from the reasons furnished to the Petitioner are that during the year under consideration, the Petitioner had issued shares and charged premium thereupon at Rs.6,79,32,00,000/- and that based upon analysis of the details and information of the Balance Sheet, the share premium charged was not justified on the basis of ‘intrinsic valuation of shares’ and ‘Net Asset Value Method’. It is stated that the worth of the company was not such as would justify the charging of such a huge premium and that the nature of the transaction of the so called share premium was not established.

WRIT PETITION NO.332 OF 2016

6. In this petition, the Petitioner primarily challenges the notice dated 23 March 2015 under Section 148 seeking to reopen the assessment for the Assessment Year 2011-12 on the basis of the reasons recorded as under :-

“In this case return of income for the assessment year 2010-11 was e-fled by assessee company on 28 September 2011 declaring income Rs.18,17,780/-. The return of income has been processed on 23 February 2013. It is found from Balance Sheet of the e-return of income that the assessee has issued paid up capital of Rs.1,45,00,000/- and Charge Security Premium at Rs.6,79,32,00,000/- during the year under consideration. An analysis of the details and information of the Balance Sheet shows that Share Premium and value of the shares can not be justified on the basis of ‘intrinsic valuation of shares’ and ‘Net Asset Value Method’ i.e. Share Premium charged is found excessive as the worth of the company is not found in that extent.

In view of the above facts and finding of the case, does not justify issue of Shares at such a huge premium, as such the nature