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IN THE HIGH COURT OF ALLAHABAD
Devendra Kumar Upadhyaya, Subhash Vidyarthi, JJ.
M/s Ambuj Foods Pvt. Ltd. Through Director – Petitioner
Versus
Principal Commissioner of Income Tax And Others – Respondents
Writ Tax No. - 48 of 2022
Decided On : 11-04-2022
Constitution of India,- Article 226- Income Tax Act, 1961- Section 148- Scope of power of judicial review - Assessment - Validity of a notice - Proposing to assess/reassess the petitioner’s income/loss- Rejections of objections- No bar in the Companies Act against issuance of shares at a high premium, and there was no such bar in the Income Tax Act. Para 29,30.
Finding of the Court:
Whether there is suppression of material facts by the assessee or not and the sufficiency or correctness of the material need not be considered at this stage - Notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts because of which income amounting to Rs. 95,00,000/- has escaped assessment.
Result: Writ petition dismissed
JUDGMENT :
Subhash Vidyarthi, J.
1. Heard Sri Pradeep Agarwal assisted by Sri. Amar Mani Tiwari, Advocate, the learned Counsel for the petitioner and Shri Manish Misra, learned Counsel for the respondents.
2. By means of this Writ Petition filed under Article 226 of the Constitution of India, the petitioner has challenged the validity of a notice dated 31.03.2021 issued by the DCIT Circle Faizabad under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') proposing to assess/reassess the petitioner’s income/loss for the assessment year 2013-14 and directing the petitioner to submit a return for the said assessment year. The petitioner has also challenged the order dated 03-03-2022 passed by the National Faceless Assessment Centre, rejecting the objections filed by the petitioner in response to the aforesaid notice.
3. The petitioner’s case is that, it had filed its return for the Assessment Year 2013-14 on 05-08-2013 declaring a total income of Rs.3,65,440/-, which was processed on 19-05-2014 under Section 143 (1) of the Act. The case was selected for scrutiny and notices under Section 143 (2) and Section 142 (1) were issued alongwith a questionnaire asking for certain details. The questionnaire inter alia demanded production of all the share capital details of the petitioner’s share-holders alongwith PAN and mode of payment for obtaining shares in his name or in the name of family members, and also the details of share premium receipts. The petitioner submitted a reply giving statement of income and complete address of sundry creditors alongwith the details of all investor companies to whom shares were allotted. The petitioner stated that shares were allotted at a premium to some companies. There is no bar in the Companies Act against issuance of shares at a high premium, and there was no such bar in the Income Tax Act.
4. The petitioner submitted that if the shares were issued at fair market value, there was no question of any addition and there was no contravention. The fair market value of the shares could be calculated as per formula given in Rule 110 A of the Act, as per which, the fair market value of the company’s share works out to be Rs.206.50. The shares were issued at the fair market value and, therefore, there was no contravention of law.
5. It has also been submitted by the petitioner that the matter of increase in share capital was examined during assessment proceedings under Section 143 (3) of the Act and by means of an order dated 10-11-2014, the petitioner was assessed for a total income of Rs.3,75,440/-. Nothing adverse came out from the information submitted in response to the questionnaire and an addition of Rs.10,000/-only was made to the petitioner’s income on account of internally vouched expenses debited in Profit & Loss account.
6. On 31-03-2021, the A.O. issued a notice under Section 148 of the Act for the Assessment Year 2013-14, stating that he had reason to believe that the petitioner’s income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act.
7. The reasons for re-opening of assessment states that on the basis of information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata, regarding routing of funds in the garb of share premium, the A.O. examined the returns of other assesses and found that the petitioner had received funds to the tune of Rs.95,00,000/-(Rs.4,75,000/-towards share capital and Rs.90,25,000/-towards share premium thereon) by way of routing funds materialized by M/s Radha Fincom Pvt. Ltd. & others in A.Y. 2013-14 As per the departmental database of bogus shell companies, accommodation entry providers and operators, the company was merely a paper concern having no existent and real business. Finally the cases of these assessees for A.Y.2012-13 were re-o
Point of Law : Assessment - Unless any income chargeable to tax has escaped assessment for such assessment year by reason o f the failure on the part of the assesse to disclose fully and truly all ma....
Intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such appli....
Point of Law : Court satisfied that there was prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148.
The function of the assessing authority at this stage is to administer the statute and what is required is a reason to believe and not to establish fact of escapement of income and therefore, looking....
The main legal point established in the judgment is that the re-opening of a concluded assessment cannot be based on a mere change of opinion by the Assessing Officer, and the duty of the assessee is....
Under section 147 of the Act the proceedings for the reassessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any....
The main legal point established in the judgment is the requirement for the belief to be based on reasonable grounds and the need for the assessee to disclose fully and truly all material facts neces....
The court reinforced that reassessment cannot occur without tangible evidence linking the belief of income escaping assessment to the material facts disclosed, emphasizing strict adherence to procedu....
Point of Law : Sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua non for a valid exercise of power.
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