Hariom Ingots and Power Pvt. Ltd vs The Principal Commissioner of Income Tax, Raipur The Assessing Officer, National Faceless Assessment Centre, Income Tax Department, Ministry of Finance The Joint Commissioner of Income Tax, Range-1, Bhilai, The Assistant Commissioner of Income, Bhilai. WPT No. 56 of 2022
Petitioner is a private limited company that is engaged in the business of manufacturing and sales of M.S. Ingots and Re-Rolled Products. During Assessment Year 2014-15, the petitioner’s company issued 25,000 shares at a face value of Rs.100/- per share. The sale of shares has been disclosed in their return. After receiving notice under Section 142(1) of the I.T. Act, the petitioner has submitted details as required to be submitted by the petitioner under notice. Petitioner vide letter dated 22.12.2016 had very clearly mentioned that due to losses suffered by the Steel Industry and no buyers in the market, the company was facing a paucity of funds and therefore, shares have been allotted on its face value. After considering the reply to the notice, the final assessment order under Section 143(3) of the I.T. Act has been passed.
Honorable High Court, after hearing the arguments of both the parties, ruled that Section 56 mentions the income from other sources. Section 56(vii) talks about the income received by an individual or a Hindu undivided family in any previous year from any person or persons on or after the 1st day of October 2009. Here Petitioner is a company and in view of the specific provisions under Section 56(2) (vii) of the I.T. Act, relied by the Assessing Officer for issuance of notice will not be applicable to the petitioner who is a company.
Further, the Honourable High court said that for issuance of notice under Section 148 of the I.T. Act, there should be tangible material and mandatory compliance with Section 147 of the I.T. Act. Proceedings of reassessment have been initiated against the company after the lapse of 4 years of submission of return, which is not in dispute. As read under the first proviso to Section 147 of the I.T. Act, for starting the reassessment proceedings after the lapse of 4 years, the Assessing Officer has to record his conclusion that there was a failure on the part of the assessee, in not disclosing fully and truly all material facts necessary for assessment of that particular assessment year, which is not appearing from the reading of the Annexure i.e. reasons for issuance of notice.
Honorable Justice Sri Parth Prateem Sahu held that “Considering the aforementioned facts and circumstances of the case, the reason assigned for issuance of notice and provisions mentioned therein, in the opinion of this Court, there was no reason/ground available with Assessing Officer to issue the notice under Section 148 of the I.T. Act. Issuance of notice under Section 148 of the I.T. Act to petitioner is not in accordance with the first proviso to Section 147 of the I.T. Act, therefore, it is not sustainable, which is liable to be quashed and it is hereby quashed.”