Bombay High Court
Bhavani Gems Private Limited vs Assistant Commissioner Of Income ... on 27 April, 2022
Bench: K.R. Sriram, N. R. Borkar
915-oswp-804-22.doc
Digitally IN THE HIGH COURT OF JUDICATURE AT BOMBAY
signed by
DINESH
DINESH
SADANAND ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 804 OF 2022
SADANAND SHERLA
SHERLA Date:
2022.04.29
18:46:24
+0500 Bhavani Gems Private Limited
DW 1370, G Block Bharat Diamond
Bourse, Bandra Kurla Complex,
Bandra East, Mumbai-51. ... Petitioner
V/s.
1. Assistant Commissioner of Income
Tax, Circle 5(1)(1) Room No. 568, 5th Floor,
Aayakar Bhavan, M.K. Road, Mumbai-20.
2. Principle Commissioner of Income
Tax-5, Aayakar Bhavan, M.K. Road, Mumabi-20 ... Respondents
----------------
Mr. K.Gopal a/w. Ms Neha Paranjpe and Mr. Om Kandalkar for the
Petitioner.
Ms Mamta Omle i/b Mr. Vipul Bajpayee for the Respondent - Revenue.
----------------
CORAM : K.R. SHRIRAM &
N.R. BORKAR, JJ.
DATE : APRIL 27, 2022.
ORAL JUDGMENT (Per K.R. Shriram, J.)
1] Petitioner is impugning a notice dated 30.03.2021 issued under
section 148 of the Income Tax Act, 1961 (the Act) for assessment year
(A.Y.) 2014-15 and the order on objections dated 15.12.2021.
2] The assessment proceedings for A.Y. 2014-15 was completed
under section 143(3) of the Act on 23.12.2016 assessing the total
income of petitioner at Rs.35,81,93,760, accepting the returned
income.
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3] Thereafter, petitioner received the impugned notice dated
30.03.2021. Therefore, reopening of assessment is proposed after
expiry of 4 years from the end of relevant assessment year. In view
thereof, the proviso to section 147 of the Act would apply and there is a
bar in reopening unless respondents discharge the onus of showing that
there has been failure on the part of petitioner to fully and truly
disclose material facts during assessment.
4] In the reasons recorded for reopening, there are two issues
raised. The first one is that petitioner had issued 625000 shares of
Rs.10 each at a premium of Rs.230 per share, i.e., for Rs.240/- and
received total share premium of Rs.12,78,25,000 during the year under
consideration. According to Assessing Officer, 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
petitioner's income under section 56(2)(viib) of the Act.
5] The second issue that respondent No.1 has included i.e. Goodwill
amount of Rs.26 Crores was not acquired by petitioner but was self-
generated Goodwill introduced in the books of account before
conversion of partnership firm into assessee company. Since the
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Goodwill was internally generated by erstwhile firm and not acquired
or purchased by paying any consideration, the cost of the same should
have been shown at 'Nil' and internally generated Goodwill should not
be recognised as an asset.
6] During the assessment proceedings, petitioner received a notice
under section 142(1) calling upon petitioner to provide details of large
share premium received during the year, the name, address and PAN of
the persons who have applied for shares along with copy of share
application and copy of bank statement reflecting such payments,
creditworthiness and identity of the investors and genuineness of
investment in share capital and details of expenses incurred for
increase share capital. By letter dated 17.11.2016, petitioner provided
all these details.
7] Thereafter, further details were called for and by a letter dated
08.12.20216 petitioner once again explained about the premium
charged as well as the Goodwill. Petitioner provided working of fair
value of equity shares as per Rule 11UA of Income Tax Rules, which
also shows a figure of a sum of Rs.26 crores towards Goodwill. After
considering these details, the assessment order dated 23.12.2016 came
to be passed.
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8] Ms Omle very strongly opposed the petition. Ms Omle submitted
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. Ms Omle also submitted that if Goodwill could
not have been introduced in the books of account because it was self-
generated Goodwill before conversion of partnership firm into assessee
company and the amount of Goodwill has been reduced from the book
value of asset in the balance-sheet to arrive at the figure what could
have been charged as premium. Ms Omle also submitted that these
issues have not been discussed in the assessment order and therefore,
could not be stated to have been under consideration during the
assessment proceedings.
9] In our view, the reason to reopen is purely on the basis of change
of opinion. Indisputably queries have been raised during the
assessment proceedings regarding large share premium received during
the year, the details of investors and petitioner has provided all details
sought for. While providing the workings, petitioner also explained that
the Goodwill of Rs.26 Crores has been factored while arriving at the
share premium. Even in the assessment order, the Assessing Officer has
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referred to notice issued under section 143(2) as well as 142(1) of the
Act and the Assessing Officer has also confirmed having received all
information.
10] As held by this Court time and again and particularly in Aroni
Commercials Ltd. Vs. Deputy Commissioner of Income Tax -2 (1) 1 that
once a query is raised during the assessment proceedings and the
assessee has replied to it, it follows that the query raised was a subject
of consideration of the Assessing Officer while completing the
assessment. It is not necessary that an assessment order should contain
reference and/or discussion to disclose its satisfaction in respect of the
query raised.
11] Having considered the reasons and documents annexed to the
petition and as no reply has been filed, there can be no doubt in the
present facts that very issue of share premium and Goodwill was a
subject matter of consideration by the Assessing Officer during the
original assessment proceedings. In our view, the reopening of
assessment by impugned notice dated 30.03.2021 is merely on the
basis of change of opinion of the Assessing Officer from that held
earlier during the course of assessment proceedings and this change of
1 (2014) 44 taxmann.com304 (Bombay)
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opinion does not constitute justification and/or reason to believe that
income chargeable to tax has escaped assessment.
12] Since all these details have been disclosed in the documents filed
along with return of income including balancesheet and answers to all
queries raised have been provided, admittedly it cannot be stated that
there was any failure on the part of petitioner to truly and fully disclose
any material facts. Statement in the reasons recorded that there was
failure to fully and truly disclose material facts, in our view, is only to
get over the restrictions provided in proviso to section 147 of the Act.
13] In the facts and circumstances, we allow the petition in terms of
prayer clause (a), which reads as under:
"a) That this Hon'ble Court may be pleased to issue under
Article 226 of the Constitution of India, an appropriate
direction, order or a writ including a writ in the nature of
'certioraris' calling for the records of the case and after
satisfying itself as the legality thereof quash the notice under
section 148 of the Act issued by the Respondent No.1 dated
30.03.2021 being Exhibit-'G' and the order dated 15.12.2021
being Exhibit-'K' as bad in law.
14] Petition accordingly, disposed.
(N.R. BORKAR, J.) (K.R. SHRIRAM, J.)
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