A division bench of the Bombay High Court has held that the change of opinion does not constitute “reason to believe” in order to initiate the re-assessment under section 147/148 of the Income Tax Act, 1961.
The department reopened the assessment after expiry of 4 years from the end of relevant assessment year on the ground that there has been failure on the part of petitioner to fully and truly disclose material facts during assessment. The Assessing Officer was of the view that the petitioner, Bhavani Gems Private Limited 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, 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.
A coram of Justices K.R. Shriram & N.R. Borkar has observed that 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,” the bench said.
Quashing the order, the bench held that “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 opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment.”
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