Krishna Murthy Vs DCIT (ITAT Hyderabad)
ITAT Hyderabad held that re-assessment under section 148 merely based on borrowed satisfaction, without any independent verification and application of mind, is invalid and liable to be quashed. Accordingly, notice u/s. 148 and consequent order quashed.
Facts- The assessee is an individual and chairman & M.D of M/s. Bharat Biotech International Ltd. The assessment of the assessee was subsequently reopened u/s 147 of the I.T. Act, 1961, for the reasons recorded as per which, income chargeable to tax has been escaped the assessment. According to AO, M/s. Mind Tree Trading Company Ltd has sold its investment in shares of M/s. Bharat Biotech International Ltd @ Rs.1 per share to Mr. Krishna Murthy Ella during the F.Y. 2013-14. AO further noted that as per the financial statement of M/s. Bharat Biotech International Ltd for the year ending 31.3.2014, the number of shares held by Shri Krishna Murthy Ella increased from 41,77,560 to 45,95,095. On verification, it is noticed that the assessee has purchased 4,17,535 shares from M/s. Mind Tree Trading Co. Pvt Ltd @ Rs.1 per share, whereas the book value or fair market value was at Rs.124.92 per share.
Since the appellant has received shares for a consideration which is less than the fair market value/book value, the same needs to be treated as income in terms of section 56(2)(vii)(c) of the I.T. Act, 1961. Therefore, opined that the income chargeable to tax had been escaped the assessment to the tune of Rs.5,17,40,937/- and thus, issued notice u/s 148 of the I.T. Act, 1961.
