For the Assessment Year 2011-12, the Petitioner NuPower Renewables Pvt. Ltd filed the income return on 29th September 2011, declaring loss of Rs.5.97 Crores (rounded off). The Petitioner later submitted a revised return on 31st March 2012, declaring loss of Rs.6.45 Crores. AO took such return declaration into scrutiny and passed the order of assessment under section 143(3) of the IT Act, 1961 on 26th December 2013. Here are all the details of Case of NuPower Renewables Pvt. Ltd (Petitioner) vs. ACIT (Bombay High Court).
NuPower Renewables Pvt. Ltd (Petitioner) vs. ACIT (Bombay High Court)-
Reasons Recorded for thto do so:
- The company is involved in the business of production and sale of electricity through the windmill. Original income e-filed dated 29/09/2011 declaring current year loss at Rs.5,97,19,479. Later revised income e-filed dated 31/03/2012 declaring current year loss at Rs.6,45,41,300.This case was selected for scrutiny for A.Y. 2011-12. The assessment got completed on 26/12/2013 determining total loss at Rs.6,45,41,300.
- Later AO Received the information that NuPower Renewables Pvt. Ltd. in F. Y. 2010-11 has received an amount of Rs.49,90,48,000 from Mauritius based Firstland Holdings Ltd. being the subscription towards 0.000% Compulsory Convertible Cumulative Preference shares (4,99,048 nos.) from ADIT (INV.)UNIT4(2), MUMBAI vide letter dated 15th March 2018. The transparency and creditworthiness of the foreign company M/s. Firstland Holdings Limited, Mauritius remains unexplained, and it needs further investigation.
- AO found that the income to the extent of Rs. 49,90,48,000 has been under-assessed and involves potential tax effect of Rs.16,96,26,415.
- In the given case a return of income was filed for the year under consideration and regular assessment u/s. 143(3) was made on 26th December 2013. As four years from the end of the relevant year has expired in this case, the requirements to initiate proceeding u/s. 147 of the Act are the ground to assume that income for the year under consideration has disappeared from the assessment because of failure on the part of the assessee to disclose all the material facts fully and truly necessary for his assessment for the assessment year under consideration. Reopening of the assessment u/s.147 of the Act arises from the facts that the assessee had not honestly disclosed all material facts necessary for his assessment for the year under consideration.
In spite of producing all the necessary documents (books of accounts, annual report, audited P & L a/c and balance sheet) and other evidence by the assessee, the required material facts were embedded in such a manner that the AO could not discover material evidence. This could have been found by AO with due diligence, accordingly, attracting provisions of Explanation 1 of section 147of the IT Act.
It is evident from above that the AO never examined the matter under consideration during regular assessment/ reassessment. The AO is satisfied from the above facts that the income of Rs.49, 90, 48,000 or above has escaped the assessment for the A.Y. 2011-12 within the meaning of section 147 of the Act.
As more than four years have elapsed from the end of assessment year under consideration, necessary sanction has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151of the Act to issue notice u/s. 148.
- Assessee objected to the notice of reopening of an assessment under communication dated 5th October 2018. The Assessing Officer rejected such objections by an order dated 22nd November 2018, upon which, this Petition has been filed.
- Learned Counsel Shri Pardiwalla, Sr. Counsel (For petitioner), raised following contentions:
(i) The Assesse has declared fully and honestly all the material facts. There was no failure on his part. Moreover, the impugned notice has been issued beyond a period of four years from the end of the relevant Assessment Year.
(ii) The Assessing Officer already examined the ground on which the AO wishes to rely upon during scrutiny assessment. Without there being any new or additional material, reopening of assessment on the basis of the said ground is not permissible;
- The learned Counsel Shri Walve for the Department opposes the Petition, on the ground that, the AO has recorded elaborate reasons for issuing the impugned notice. The transparency of the investments made in the Assessee Company by The Mauritius based Company was never an issue before the Assessing Officer during the original scrutiny assessment. A piece of additional information received by AO through the investigation wing of the Department after passing the order of assessment, on the basis of which, impugned notice of reopening of assessment has been issued. The petition may, therefore, be dismissed.
- We may examine the material which was brought during the original scrutiny assessment. On 2nd August 2013, AO issued a notice asking for some details from the assessee, which included the following:
Copy of Balance sheet and profit & loss account along with all annexure. Whether the company has issued any new share during the year or raised any amount by way of debenture/FD etc. If so, how the issue expenses have been dealt with in the accounts(Under Section 142(1) of the Act)
- Assessee replied such notice under a letter dated 8th August 2013 which contained various annexures. One of them is the Balance Sheet of the assessee as on 31st March 2011.
- On 30th October 2013, the AO issued another notice, asking Petitioner to supply further details on one of them which says:
Share capital increased from Rs.500000 to Rs.499548000, explain the source of fund utilized.
- On 12th November 2013, the AO further asked the assessee to give the details of the source of the funds utilized, and the share capital increased. In response to such further notices, assessee provided various details under communication dated 12th November 2013. It states:
Information relating to the increase in share capital by Rs.49,90,48,000. The amount has been received towards compulsorily convertible cumulative preference shares from Firstland Holdings Limited, Mauritius. The copy of FCGPR filed with RBI for inward remittance is attached. The copy of Certificate of foreign inward remittance and the extract of Bank statement is also annexed.
Along with its letter, the Petitioner also provided the foreign collaborator details.
Details of the foreign collaborator
Name-FIRSTLAND HOLDINGS LTD
Address- LES CASCADES EDITY CAVELL STREET PORT LOUIS
Constitution (specify whether Foreign National or foreign Company or FVCI/FII/NRI/PIO/ others)- FOREIGN COMPANY.
- The Petitioner supplied all the relevant documents which include: Certificate of Foreign Inward Remittance( to the tune of Rs.49.90 Crores equivalent to10,600,000.00 US$), the bank statement in which the said amount was reflected, tax residence certificate of Firstland, ledger account which contain shares application amount being credited on 7th July 2010.
- It is not that AO did not notice the information that the assessee had received share application money from Firstland (Mauritius based company) was part of the assessee’s return during scrutiny assessment. As noted above through a series of correspondence between the assessee and the Assessing Officer, the information was highlighted time and again. The AO does not refer to any further information received from the Investigation Wing. In short, according to the AO, the information obtained from the investigation Wing was limited to the fact that the NuPower Renewables Pvt. Ltd had received share application money to the tune of Rs.49.99 Crores from Firstland.
- There is nothing in the points recorded by the AO to suggest that the investment is bogus. The channel of fund movement, the source of fund, the motive of the investment and the final destination of the fund, were all part of the record during the assessment proceedings.
- The investigation into the source of transparency and creditworthiness of the investor company would fall within the realm of fishing inquiries, which is wholly forbidden in law in the backdrop of the re-opening of the assessment. Hence, impugned notice is set aside.
- The petition is allowed by the bench of M.S.SANKLECHA, J. and AKIL KURESHI, J.