Validity of the reopening of the assessment should be judged with reference to the reason recorded by AO under sec 148(2)

Court :
HIGH COURT OF DELHI

Brief :
The petitioner is a private limited company. In respect of the assessment year 2004-05 it filed a return of income on 27.10.2004 and the same was processed under Section 143(1) of the Act on 31.12.2004. Thereafter, on 28.3.2011 the respondent issued notice under Section 148 of the Act calling upon the petitioner to file a return of income on the ground that income chargeable to tax had escaped assessment. On receipt of the notice the petitioner wrote a letter to the Assessing Officer, who is the respondent herein, on 24.10.2011, after a period of nearly 7 months. In this letter it was requested that the return filed originally by the petitioner company may be treated as return filed in response to the notice under Section 148. The letter also contained detailed objections styled as “preliminary objections” to the reopening of the assessment. Under the head “objections on merits” raised without prejudice to the preliminary objections, the petitioner pointed out that there was no escapement of income to justify the reopening of the assessment, that the amount of Rs.3 lakhs received from a company by name M/s. Shivam Softech Ltd. was in the nature of share application money, that it was received through banking channels and that the share applicant company had sufficient creditworthiness to advance the monies to the petitioners for purchase of the shares and that in these circumstances there was no question of any income escaping assessment. In support of the objections on merits, the correspondence exchanged between the share applicant and the petitioner as well as the confirmation issued by the share applicant together with the balance sheet and return of income for the period ended 31.3.2002 were submitted to the respondent. The certificate of incorporation and the certificate of commencement of business of the share applicant company were also submitted. It was pleaded that the above documents would clearly show the genuineness of the transaction and establish the identity and creditworthiness of the share applicant company. Reliance was also placed on several authorities to contend that in these circumstances no addition can be made in respect of the amount received as share capital under Section 68 of the Act.

Citation :
RAJAT EXPORT IMPORT INDIA PVT.LTD. ..... Petitioner Through Mr. Kaanan Kapur, Adv.Versus INCOME TAX OFFICER ..... Respondent Through Mr. Sanjeev Rajpal, Adv.