Can’t reopen assessment merely on basis of change of opinion: HC

Observing that reopening of assessment merely on the basis of change of opinion of assessing officer “does not constitute a justification or a reason to believe that income chargeable to tax has escaped assessment”, the Bombay High Court has quashed a notice issued by the Income Tax (I-T) department to one Bhavani Gems Private Limited.

A division bench of jus- tices KR Shriram and NR Borkar quashed the notice dated March 30, 2021. The HC was hearing a petition filed by Bhavani Gems Private Limited seeking quashing of the I-T notice claiming that it was issued more than four years after the assessment was closed.

The assessment for the said AY 2014-15 was completed on December 23, 2016 assessing the total income Rs 35,81,93,760, accepting the returned income.

Counsels for the petitioners K Gopal, Neha Paranjpe, and Om Kandalkar contended that the reopening of the assessment is proposed after the expiry of four years from the end of relevant AY.

The I-T can issue notice for reopening of assessment beyond four years under section 147 of the I-T Act provided the tax authority shows that there has been “failure on the part of the petitioner to fully and truly disclose material facts during assessment”.

According to the notice, the petitioner had issued 6.25 lakh shares of Rs 10 each at a premium of Rs 230 per share and received total share premium of Rs 12,78,25,000 during the year under consideration. According to the assessing officer, the petitioner could have charged premium of only Rs 204.52 against Rs 230 charged and therefore, excess premium of Rs 25.48 per share has been charged. That would amount to Rs 1,59,25,000 which is required to be added to the petitioner’s income under section 56(2)(viib) of the Act.

After receiving the notice, the petitioner claimed that it provided relevant details.

Advocates for the I-T department Mamta Omle and Vipul Bajpayee argued that the assessing officer has calculated reasons as to how much premium petitioner could have been charged and has correctly arrived at a figure of Rs 25.48 as excess charged which is required to be added to petitioner’s income.

The court noted that the petitioner had disclosed all the relevant details in the documents filed along with return of income including balance sheet and answered all the queries raised. “… admittedly it cannot be stated that there was any failure on the part of the petitioner to truly and fully disclose any material facts.”