GAUTAM DOSHI, MUMBAI V. ASST CIT 16(2), MUMBAI

CO 134/MUM/2017

• Counselvise Citation: [2017] 112 COUNSELVISE.COM (IT) 4535 (ITAT-MUMBAI)
• Duration Of Justice: 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 19-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Business income; Audit objection; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 142(1); 143(1); 201; 143(2); 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D.T.GARASIA , JM AND SHRI RAJESH KUMAR, AM I.T.A. NO. 5592 /MUM/20 1 5 ( / ASSESSMENT YEAR : 20 0 6 - 07 ) ASSTT. COMMISSIONER OF INCOME TAX 16(2), ROOM NO.440, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. SHRI GAUTAM DOSHI, A/15, NOOTAN NAGAR, TURNER ROAD, BANDRA (W), MUMBAI - 400051 CROSS - OBJECTION NO.134/MUM/2017 ARISING OUT OF I.T.A. NO. 5592 /MUM/20 15 ( / ASSESSMEN T YEAR : 2006 - 07 ) SHRI GAUTAM DOSHI, A/15, NOOTAN NAGAR, TURNER ROAD, BANDRA (W), MUMBAI - 400051 / VS. ASSTT. COMMISSIONER OF INCOME TAX 16(2), ROOM NO.440, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ./ PAN : AELPD0540F ( / APP ELLANT) : ( / RESPONDENT ) / REVENUE BY : SHRI T A KHAN / ASSESSEE BY : SHRI YOGESH THAR / DATE OF HEARING : 4.9.2017 / DATE OF PRONOUNCEMENT : 27. 10 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED IS A PPEAL BY THE REVENUE PERTAINING TO ASSESSMENT YEAR 200 6 - 07 AND IT IS DIRECTED AGAINST THE ORDER DATED 10.9.2015 PASSED BY THE LD. 2 I.T.A. NO. 5592/MUM/2015 AND CO - 134/M/17 CIT(A) - 5, MUMBAI, THE ASSESSEE ALSO FILED CROSS - OBJECTION TO THE APPEAL OF T HE REVENUE. 2. ONLY ISSUE RAISED BY T HE REVENUE IN VARIOUS GROUNDS OF APPEAL IS AGAINST T H E HOLDING OF RE - ASSESSMENT PROCEEDINGS AS NULL AND VOID BY THE LD.CIT(A) ON THE GROUND OF CHANGE O F OPINION . 3 . FACTS OF THE CASE ARE THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2006 DECLARING TOTAL INCOME OF RS.3,27,94,461/ - ALONGWITH AUDIT REPORT U/S 44AB OF THE INCOME TAX ACT, 1961 IN FORM NO. 3CB AND 3CD. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 4.8.2007 . THEREAFTER, THE CASE OF THE ASSESSEE WAS S ELECTED FOR SCRUTINY AND STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE.. THE ASSESSMENT WAS FRAMED ON 15.2.2008 PASSED UNDER SECTION 143(3) OF THE ACT ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,28,57,930/ - . SUB SEQUENTLY, THE CASE OF THE ASSESSEE REOPENED ISSU ING NOTICE U/S 147 R.W.S.148 OF THE ACT AFTER RECORD ING THE REASONS FOR RE - OPENING OF THE ASSESSMENT WHICH READS AS UNDER : 'IN THIS CASE, ON VERIFICATION OF THE RECORD, IT IS SEEN THAT THE ASSESSEE HAD SHOWN STCG OF RS. 76,72,290/ - . ASSESSEE HAD ENTERED INTO NUMBER OF SHARE TRANSACTIONS FOR THE SAME. IT APPEARS THAT THE ASSESSEE WAS ENGAGED IN THE SYSTEMATIC ACTIVITY OF PURCHASE AND SALE OF SHARES. FROM THE DETAILS OF DIVIDENDS RECEIVED IT IS SEEN T HAT THE ASSESSEE HAS RECEIVED DIVIDENDS ONLY IN SOME SHARES. THE ASSESSEE HAD PURCHASED THESE SHARES ARID KEPT WATCH ON DAY TO 3 I.T.A. NO. 5592/MUM/2015 AND CO - 134/M/17 DAY FUNCTION IN THE VALUATION OF SHARES AND WHEN THE VALUE OF SHARES WAS ON THE PEAK, HE HAD SOLD THE SHARES SOMETIMES EVEN AFT ER HOLDING THESE SHARES FOR FEW DAYS. THUS THE ASSE S SEE IS CLEARLY ENGAGED IN THE BU SINESS. AS PER CIRCULAR 4 ISSUED BY THE CBDT THE AO CAN, LOOKING INTO THE NATURE AND REGULARITY AND SUBSTANTIAL AMOUNT O F TRANSACTIONS INVOLVED , TAX THE TRANSACTIONS UND ER THE HEAD INCOME FROM BUSINESS IRRESPECTIVE OF WHETHER THE ASSESSEE HAS SHOWN IT AS INVESTMENT IN THE BALANCE SHEET. THE AO HAS NOT DEALT WITH THIS ISSUE AND HAS ACCEPTED THE STAND OF THE ASSESSEE. THE AO SHOULD HAVE TREATED THIS PROFIT FROM SALE OF S HARES UNDER THE HEAD OF INCOME FROM BUSINESS INSTEAD OF STCG AND CHARGED THE TAX AT MAXI MUM MARGINAL RATES INSTEAD OF CONFESSIONAL RATE OF 10% WHICH IS APPLICABLE TO STCG. ASSESSEE HAS ALSO FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS SINCE DESP ITE HAVING HUGE AND REPEATED TRANSACTIONS IN SHARES, ASSESSEE HAS SHOWN IT AS INVESTMENT. SO I AM SATISFIED THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, IT IS REQUESTED THAT APPROVAL FOR REOPENING U/S 147 BE GRANTED. 4. THUS, IT IS CLEAR FROM THE RE ASONS RECORDED THAT THE MAIN REASON FOR REOPENING OF THE ASSESSMENT WAS FAILURE ON THE PART OF THE ASSESSING OFFICER AT THE TIME OF FRAMING ORIGINAL ASSESSMENT ORDER TREATING THE SHORT TERM CAPITAL GAIN (STCG) OF RS.76,72,290/ - AS INCOME FROM BUSINESS I NSTEAD OF STCG KEEPING IN VIEW THE NATURE , REGULARITY AND VOLUME OF TRANSACTION S IN THE SHARES/SECURITIES, . THUS, RE - ASSESSMENT WAS REOPENED ON 11.3.2013 A PPARENTLY AFTER EXPIRY OF FOUR YEARS FROM THE END OF ASSESSMENT YEAR . THE AO OBSERVED THAT THE ASSESSEE IS A CHARTERED ACCOUNTANT BY PROFESSION AND IS ALSO DOING PURCHASE AND SALE OF SHARES AND CERTAIN SHARES HAVE BEEN POSSESSED FOR VERY SHORT PERIOD. THUS, THE ASSESSEES INTENTION WAS NOT TO 4 I.T.A. NO. 5592/MUM/2015 AND CO - 134/M/17 INVEST THE MONEY AS IN THE INVESTMENT PORTFOLIO ON DAY T O DAY BUT TRAD ING . FINALLY, THE AO TREATED THE GAIN ON TRANSACTION S OF SHARES AS BUSINESS INCOME WHERE HOLDING PERIOD WAS LESS THAN 6 MONTHS AND CONSEQUENTLY TREATED THE AMOUNT OF RS.41 , 21 , 045/ - AS INCOME FROM BUSINESS BY PASSING THE ORDER U/S 143(3) R.W.S.147 OF THE ACT DATED 12.3.2014 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,28,57,930/ - . 5. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING T HE CONTENTIONS AND SUBMISSION BY OBSERVING AS UNDER : 5. I HAD CONSIDERED THE APPELLANTS SUBMISSION. IN THIS CA S E, THE APPELLANTS ORIGINAL ASSESSMENT WAS COMPLETED ON 15.7.2008 AND LATER THE CASE WAS REOPENED U/S 147 ON 11.3.2013 BY ISSUE OF NOTICE U/S 148. HERE THE APPELLANTS CASE WAS REOPENED AFTER THE FO U R YEARS OF THE AS S E SS MENT. HENCE, T H E AO HAS TO SATISFY TWO CONDITION IN SUCH AS CA S E AS PER SECTION 147 AND 148. ONE CONDITION IS THAT THE AO HAS TO SHO W THAT THERE IS TANGIBLE MATERIAL WHICH SHOWS THAT THERE IS ESCAPEMENT OF INCOME AND SECOND C ONDITION IS THAT THIS MATERIAL WHICH IS TANGIBLE IN NATURE THERE SHOULD BE FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THIS ASSESSMENT. IN THIS CASE OF THE APPELLANT, THE APPELLANT HAD OFFERED ITS INC OME FROM T HE SHA R E TRANSACTIONS AS SHORT TERM CAPITAL GAIN WHICH WAS ASSESSED AS SHORT TERM CAPITAL GAIN IN THE ORIGINAL AS S E SS MENT. LA T ER THE AO REVISED HIS POTION AND IT IS IN THE NATURE OF THE CHANGE OF OPINION WHERE HE TRIED TO TREAT THE INCOME FROM SH ARE TRANSACTIONS AS BUSINESS INCOME. HERE AO IN HIS REASONS HAS NOT POINTED OUT THAT HERE WAS ANY TANGIBLE MATERIAL AVAILABLE BEFORE HIM TO SHOW THERE IS ANY ESCAPEMENT OF INCOME. THIS SHOWS THAT THE AO HAD REOPENED THIS ASSESSMENT MERELY ON CHANGE OF OP INION. FURTHER, AO COULD NOT MENTION IN HIS REASONS THAT THERE IS FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS . ON SIMILAR ISSUE IN THE CASE OF ICICI BAN V/S K G RAO IN 136 TAXMAN 669 WHERE BOMBAY HIGH COURT HE LD THAT I THERE IS NO FAILURE ON THE PART OF THE APPELLANT FOR T HE CA S E TO REOPEN AFTER FOUR YEARS AND IF IT WAS NOT CLEARLY STA T ED IN THE 5 I.T.A. NO. 5592/MUM/2015 AND CO - 134/M/17 REASONS THEN THE REOPENING IS VOID AND THE REOPENING CANNOT BE UPHELD. IN THE CASE OF THE A PPELLANT WHERE IT WAS FOUN D TH A T THERE IS NO FAILURE ON THE PART OF THE APPELLANT, HENCE, REOPENING ITSELF IS NOT CORRECT IN LAW. HENCE, THE REOPENING OF THE ASSESSMENT IS VOID. THIS REOPENING OF THE ASSE SS MENT MADE BY THE AO IS TR EATED AS VOID IN NATURE . 6 . WE HAVE CAREFULL Y CONSIDERED THE RIVAL CONTENTION AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS FRAMED FOR THE RELEVANT ASSESSMENT YEAR O N 15.2.2008 U/S 143(3), WHICH WAS REOPENED U/S 147 ON 11.3.2011 BY ISSUING NOTICE U/S 148 OF THE ACT ON THE GROUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES OR PURCHASES AND SALE OF SHARES WHICH WAS WRONGLY TREATED AS STCG INSTEAD OF BUSINESS INCOME. THUS, THE NOTICE FOR RE ASSESSMENT WAS ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR . THE RE - OPENING BEYOND FOURS CAN ONLY BE DONE IF THE CONDITION S AS ENVISAGED IN FIRST PROVISO TO SECTION 147 OF THE ACT ARE COMPLIED WITH I.E THERE IS ESCAPEMENT OF INC OME FROM ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE FACT S TRULY AND FULLY . IN ORDER TO UNDERSTAND THE GROUND ON WHICH THE ASSESSMENT WAS RE - OPENED WE HAVE ALREADY REPRODUCED THE REASONS RECORDED HEREINABOVE IN PARA 2 OF THIS O RDER. THE PERUSAL OF THE REASONS RECORDED BY THE AO REVEALS THAT THE ASSESSMENT WAS REOPENED ONLY FOR THE REASONS THAT THE STCG OF RS.76,72,290/ - HAD WRONGLY ACCEPTED AS SUCH, WHEREAS THE 6 I.T.A. NO. 5592/MUM/2015 AND CO - 134/M/17 SAME SHOULD HAVE BEEN TREATED AS INCOME FROM BUSINESS AND CONSE QUENTLY CHARGED TO TAX AT THE RA T E OF 10% . WE HAVE ALSO NOTED THAT THERE WA S AN AUDIT OBJECTION BY DCIT(SAP) - 1/AUDIT - I/37/08 - 09, WHEREIN THE SAME OBJECTION HAS BEEN RAISED VIDE LETTER DATED 26.2.2009 WHEREAS THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 11.3.2013. A FTER CONSIDERING THE FACTS IN TOTALITY, WE FIND THAT THE ASSESSEE HAS FULLY AND TRULY DISCLOSED ALL THE MATERIAL FACTS REGARDING STCG AND W ERE CONSIDERED BY THE AO IN THE ASSESSMENT PROCEEDING WHICH FINALLY CULMINATE D INTO F R AMING OF ASS ESSMENT U/S 143(3) OF THE ACT. IN OUR OPINION THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY INFORMATION OR MATERIAL FACTS WHICH RESULTED IN THE ESCAPEMENT OF INCOME BUT THE AO HAS MERELY REOPENED THE CASE ON THE BASIS OF IRREGULARITY BY DCIT AUDIT . UNDER THESE CIRCUMSTANCES , THE RE - OPENING OF ASSESSMENT IS ONLY BASED UPON THE CHANGE OF OPINION AS BEING NO TANGIBLE MATERIAL IN THE P OSSESSION OF T HE AO TO FORM A BELIEF FOR RECORDING REASONS WHICH IS NOT PERMISSIBLE UNDER THE ACT. I T IS A SETTLED LEGAL POSITION OF LAW THAT NO ASSESSMENT CAN BE REOPENED ON THE BASIS OF CHANGE OF OPINION AS HAS BEEN HELD IN THE CASE OF CIT VS. KELVINATOR OF INDIA [2010] 320 ITR 561 (SC). WE, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIAN(SUPRA) ARE INCLINED TO QUASH THE RE - ASSESSMENT PROCEEDINGS AND ALSO THE CONSEQUENT ORDER. THEREFORE WE 7 I.T.A. NO. 5592/MUM/2015 AND CO - 134/M/17 DO NOT FIND ANY INFIRMITY IN THE ORDER OF T HE LD.CIT(A) AND UPHOLD THE SAME BY DISMISS ING T HE APPEAL OF THE REVENUE . CO NO.134/MUM/2017 7. SINCE WE HAVE DECIDED THE MAIN ISSUE OF RE - OPENING OF ASSESSMENT AGAINST THE REVENUE, THE CO FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND HENCE DISMISSED. 8 . IN THE RESULT, APPEAL OF THE REVENUE AND CROSS - OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH OCT , 2017 . SD SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : . 27 . 10 .2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CI T(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI