Bombay HC quashes Notice issued u/s 148 Without jurisdiction against Lakshdeep Investments & Finance [Read Order]

In a significant case of Lakshdeep Investments & Finance Pvt. Ltd., the Bombay High Court (HC) has quashed the reassessment notice under section 148 of the Income Tax Act, 1961 which was issued without jurisdiction on the grounds that the only reason

The petitioner is engaged in the investment business and had an initial share capital of Rs.47,69,000/- being 47,690 shares at a face value of Rs.100/- each. To raise further share capital, the petitionerissued rights shares to its existing shareholders in the proportion of 10 shares to every share held at a face value of Rs.100/- each, which had an issue price of Rs.5,75,000/- per share. The petitioner received an aggregate share of Rs.2,74,16,98,100/-, which was duly reflected in its financial statement with necessary disclosures made in its Director’s Report contained in the Statutory Annual Report of the petitioner for the Financial Year 2014-2015.

The petitioner filed its return of income for the Financial Year 2015-2016 on 29/09/2015 declaring a total income of Rs.1,36,07,94,510/- and since the transaction of issuance of rights shares and the receipt of the share premium was on its capital account, there was no requirement of bringing the said amount to tax. After the due process, the Assessing Officer passed an assessment order dated 19/12/2017 under Section 143(3) of the Act accepting the income returned by the petitioner.

The petitioner received the impugned notice dated 30/03/2021 under Section 148 of the Act alleging therein that the reasons to be recorded, the petitioner’s income chargeable to tax for the assessment year 2015-2016 had escaped assessment and required the petitioner to deliver to the respondent No.2 an income return in the prescribed form

It was stated that the Assessing Officer would assume jurisdiction under Section 147 of the Act, only if he had reason to believe that the assessee’s income  chargeable to tax for the relevant year had escaped assessment, it is submitted that in the present case, the Assessment Officer had previously accepted the method of determining the Fair Market Value of the rights shares issued which was based upon the methods provided under the Act;

Further contended by the petitioner that the assessment order had been earlier passed on 19/12/2017 for the relevant year, and the assessment cannot be reopened after four years from the end of the relevant assessment year unless there was a failure on the part of the assessee to disclose fully and truly any material facts necessary for his assessment

The division bench of Justice Dheeraj Singh Thakur and Justice Valmiki SA Menezes has observed that the order rejecting the objections has not even once adverted to the valuation report submitted by the petitioner during the earlier assessment proceedings after scrutiny, nor does it refer to the method used by the petitioner for valuation. The Court quashes and sets aside the impugned notice dated 30/03/2021 issued under Section 148 of the Income Tax Act.

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