A.M. Udyog Ltd., Kolkata V. ITO, Ward - 4(3), Kolkata, Kolkata

CO 176/KOL/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8785 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-07-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 12-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 22-11-2010
• Court: TRIBUNAL
• Department Lawyers: L K S DEHIYA
• Keywords: Reopening of assessment; Business income; Depreciation; Search and seizure; Tangible material; Speculation loss; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . , !' /AND #! $'# , ) [BEFORE SHRI K. K. GUPTA, AM & SHRI MAHAVIR SINGH, JM] '% '% '% '% / I.T.A NO. 1947/KOL/2010 $&' !() $&' !() $&' !() $&' !()/ // / ASSESSMENT YEAR: 200 1- 0 2 INCOME-TAX OFFICER, WD-4(3), KOLKATA. VS. M/S. A. M. UDYOG LTD. (PAN: AACCA9714C) (+, /APPELLANT ) (-.+,/ RESPONDENT ) & C.O. NO.176/KOL/2010 IN '% '% '% '% / I.T.A NO. 1947/KOL/2010 $&' !() $&' !() $&' !() $&' !()/ // / ASSESSMENT YEAR: 200 1- 0 2 M/S. A. M. UDYOG LTD. VS. INCOME-TAX OFFICER, WD -4(3), KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 16.05.2013 DATE OF PRONOUNCEMENT: 15.07.2013 FOR THE REVENUE: SHRI L. K. S. DEHIYA, CIT(D R) FOR THE ASSESSEE/CROSS OBJECTOR : SHRI S. K. TULSIYAN, ADVOCATE / / ORDER PER MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A) - IV, KOLKATA IN APPEAL NO. 227/CIT(A)-IV/08 -09 DATED 23.11.2009. ASSESSMENT WAS FRAMED BY ITO, WARD-4(3), KOLKATA U/S. 148/143(3)/1 44A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2001-02 VIDE HIS ORDER DATED 30.11.2006. 2. AT THE OUTSET, IT IS NOTICED THAT THIS APPEAL BY REVENUE IS TIME BARRED BY 9 DAYS AND REVENUE HAS FILED CONDONATION PETITION SUPPORTED BY AFFIDAVIT. WHEN THIS PETITION WAS CONFRONTED TO LD. COUNSEL FOR THE ASSESSEE, HE FAIR LY CONCEDED THAT THE ASSESSEE IS NOT INTEREST IN AGITATING CONDONATION PETITION. SINCE THE LD. COUN SEL FOR THE ASSESSEE CONCEDED THE POSITION, WE ADMIT THE APPEAL OF REVENUE AND ADJUDICATE THE I SSUE. 2 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN CANCELLING THE ASSESSMENT ASSUMED BY AO BY ISSUING NOTICE U/S. 147 READ WITH SECTION 148 OF THE ACT I.E. THE JURISDICTION ISSUE. FOR THIS, REVENUE HAS RAISED F OLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A)-IV, KOLKATA HAS ERRED IN CANCELLING THE ASSESSMENT, COMPLETED U/S. 147/143(3 ) OF THE I. T. ACT, 1961. 4. BRIEFLY STATED FACTS ARE THAT IN THIS CASE RETUR N OF INCOME WAS FILED U/S. 139(1) OF THE ACT ON 22.10.2001 FOR THE RELEVANT AY 2001-02 ALONG WIT H AUDITED ACCOUNTS. THE AO PROCESSED THIS RETURN OF INCOME AND SENT INTIMATION U/S. 143( 1) OF THE ACT. NO NOTICE U/S. 143(2) OF THE ACT WAS EVER ISSUED. THEREAFTER, THE AO ISSUED NOT ICE U/S. 148 OF THE ACT DATED 31.03.2005, WHICH WAS SERVED ON THE ASSESSEE ON 07.04.2005. TH E ASSESSEE ON RECEIPT OF THIS NOTICE FURNISHED AN APPLICATION STATING THAT THE ORIGINAL RETURN FILED MAY BE TREATED AS RETURN IN RESPONSE TO THIS NOTICE U/S. 148 OF THE ACT AND ALS O REQUIRED THE COPIES OF REASONS RECORDED FOR ISSUANCE OF NOTICE U/S. 148 OF THE ACT. THE AO FURN ISHED COPY OF REASONS RECORDED. THE RELEVANT REASONS RECORDED AS ENCLOSED IN ASSESSEES PAPER BOOK I AT PAGE 22, READS AS UNDER: A SUMMARY OF THE PROFIT AND LOSS ACCOUNT OF THE AS SESSEE FOR THE RELEVANT ASSESSMENT IS AS FOLLOWS: SHARE TRADING (+) RS.1,06,74,050/- DIVIDEND (+) RS. 21,564/- INTEREST (+) RS. 27,808/- LIABILITY WRITTEN BACK (-) RS.1,29,56,883/- SUNDRY EXPENSES (-) RS. 2,54,293/- TOTAL (+) RS. 20,77,912/- IT IS SEEN THAT THE ASSESSEE HAS SET OFF LOSS FROM PURCHASE AND SALE OF SHARES OF RS.1,06,74,050/- AGAINST OTHER ITEMS OF INCOME IN T HE PROFIT AND LOSS ACCOUNT. IT IS ALSO SEEN THAT THE ASSESSEE HAS OFFERED AN AMOUNT OF RS. 1,29,56,883/- FOR TAXATION UNDER THE HEAD LIABILITIES WRITTEN BACK. IN COURSE OF REAS SESSMENT PROCEEDINGS FOR AYRS. 1992- 93, 1994-95 AND 1996-97, IT WAS NOTICED THAT THIS I TEM OF WRITE BACK PERTAINS TO INTEREST CLAIMS OF EARLIER YEARS IN RESPECT OF CASH CREDIT F ACILITIES AVAILED BY THE ASSESSEE WITH BANK OF INDIA. BANK OF INDIA HAD FILED A SUIT FOR RECOVERY OF PRINCIPLE AMOUNT AND ACCRUED INTEREST AND THE MATTER WAS FINALLY DECIDED BY WAY OF AN OUT OF COURT SETTLEMENT. IT WAS IN CONSEQUENCE OF THIS OUT OF C OURT SETTLEMENT THAT THE EXCESS LIABILITY PROVIDED IN THE BOOKS OF ACCOUNTS ON ACCOUNT OF INT EREST IN EARLIER YEARS HAVE BEEN WRITTEN BACK IN THE ACCOUNTS FOR THE ACCOUNTING YEA R ENDED MARCH, 2001. IT IS NOTICED THAT THE GROSS TOTAL INCOME OF THE AS SESSEE FOR THE RELEVANT YEAR DOES NOT CONSIST MAINLY OF INCOME CHARGEABLE UNDER THE HEADS INCOME FROM HOUSE PROPERTY, CAPITAL GAINS, INTEREST ON SECURITIES AND INCO ME FROM OTHER SOURCES. THE ASSESSEE IS NOT A BANKING COMPANY OR A COMPANY ENGA GED IN THE BUSINESS OF GRANTING OF LOANS AND ADVANCES. IN VIEW OF EXPLANATION TO S EC. 73 OF THE I. T. ACT THE ASSESSEE CANNOT SET OFF THE SHARE TRADING LOSS OF RS.1,06,74 ,050/- AGAINST THE AMOUNT WRITTEN BACK U/S. 41(1) OR AGAINST ANY OTHER ITEM OF INCOME OF THE ASSESSEE. IN THE ABOVE PERSPECTIVE, I HAVE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2001-02. IS SUE NOTICE U/S. 148 OF THE I. T. ACT. 3 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 AO I.E. ITO, WARD-4(3), KOLKATA COMPLETED ASSESSMEN T U/S. 143(3)/148/144A OF THE ACT VIDE HIS ORDER DATED 30.11.2006. THE ASSESSEE F ILED APPEAL BEFORE CIT(A) AND HE DISPOSED OF THE SAME VIDE HIS ORDER DATED 24.10.200 7. AGAINST THE ABOVE-STATED ORDER OF CIT(A) ASSESSEE PREFERRED SECOND APPEAL BEFORE T RIBUNAL AND TRIBUNAL IN ITA NO.2433/K/2007 VIDE ORDER DATED 26.09.2008 SET ASID E THE MATTER FOR CONSIDERATION OF JURISDICTIONAL ISSUE REGARDING REOPENING U/S. 147 O F THE ACT. THE TRIBUNAL VIDE PARA 12 AND 13 SET ASIDE THE ISSUE AS UNDER: 12. IN VIEW OF THE AFORESAID ORDER OF THE HONBLE MADHYA PRADESH HIGH COURT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MA TTER TO THE CIT(A) FOR DECIDING THE APPEAL AFRESH INCLUDING THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE FOR THE FIRST TIME BEFORE US, WHICH HAS BEEN ADMITTED. 13. HENCE, THE ORDER OF THE LD. CIT(A) IS SET ASIDE BY RESTORING THE APPEAL TO HIS FILE FOR DECIDING IT AFRESH ALONG WITH ADDITIONAL GROUND TAK EN BY THE ASSESSEE. 5. THE AO IN HIS ASSESSMENT ORDER DATED 30.11.2006 COMPUTED THE TOTAL INCOME OF THE ASSESSEE BY DISALLOWING THE LOSS FROM SHARE TRADING AT RS.1,06,74,050/- BY STATING THE REASON THAT THIS IS SPECULATIVE LOSS AND BY VIRTUE OF EXPL ANATION TO SEC. 73 OF THE ACT THIS IS TO BE DISALLOWED. AGGRIEVED, ASSESSEE PREFERRED APPEAL B EFORE CIT(A), WHO (IN SECOND ROUND) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE QUASHED THE REASSESSMENT PROCEEDINGS VIDE PARA 7 OF HIS ORDER AS UNDER: 7. I HAVE CONSIDERED THE SUBMISSIONS MADE BY SRI S ARAF, THE A.R. I HAVE GONE THROUGH THE PAPER BOOK AND CONSIDERED VARIOUS CASE LAWS CIT ED BY THE A.R. BESIDES THE ABOVE CASE LAWS, HE HAS REFERRED TO OTHER CASES ALSO AS M ENTIONED IN THE WRITTEN SUBMISSIONS. I HAVE ALSO CONSIDERED THE COMMENTS OF A.O. SUPPORT ING ACTION U/S. 147. THE PRESENT APPEAL IS AGAINST ASSESSMENT MADE U/S.147. THEREFOR E, REASONS RECORDED BY THE A.O. DATED 31.3.05 FOR HOLDNG BELIEF THAT INCOME HAS ES CAPED ASSESSMENT BECOME IMPORTANT. IN THE SAID REASONS RECORDED (PB-22) THE A.O. START S WITH THE WORDS A SUMMARY OF PROFIT & LOSS A/C OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR IS AS FOLLOWS. HE THEN MENTIONS THE FIGURE OF LOSS OF RS.1,06,74,050/ -AS SHARE TRADING LOSS FOLLOWED BY FIGURES OF INCOME UNDER OTHER ACCOUNTS. THE PARAGR APH 2 OF REASONS RECORDED AGAIN STARTS WITH THE WORDS IT IS SEEN THAT THE ASSESSEE HAS SET OFF LOSS FROM PURCHASE AND SALE OF SHARES OF RS.1,06,74,050/- AGAINST OTHER IT EMS OF INCOME IN THE PROFIT & LOSS ACCOUNT. THEREFORE IT IS CLEAR THAT THE APPELLANT HAD DISCLOSED THE LOSS IN SHARE TRADING IN THE RETURN FLED AND THE A.O. WAS AWARE OF THE SAME. THE A.O. THEN NARRATED THE FACTS RELATING TO INCOME OF RS.1,29,56,883/- AG AINST LIABILITIES WRITTEN BACK WHICH HAS NO RELATION TO RE-OPENING OF ASSESSMENT AS THE SAME DOES NOT RELATE TO SHARE TRADING LOSS. IN THE THIRD PARAGRAPH THE A.O. GIVES HIS VIEW THAT SHARE TRADING LOSS CANNOT BE SET OFF AGAINST OTHER INCOME AND IN THE L AST PARAGRAPH, HE COMES TO THE CONCLUSION THAT IN THE ABOVE PERSPECTIVE, HE HAS RE ASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, IN THE REASONS RECOR DED, THERE IS NO MENTION OF ANY NEW FACTS WHATSOEVER COMING TO THE NOTICE OF A.O. AFTER ISSUE OF INTIMATION U/S.143(1). THE A.O. HAD THE OPTION TO LOOK INTO THE POINT NOW RAIS ED IN REASONS RECORDED BY WAY OF ISSUE OF NOTICE U/S. 143(2) EARLIER. BUT THAT HAS N OT BEEN DONE BY THE A.O. IT IS TO BE NOTED THAT WHEN NOTICE U/S.148 WAS ISSUED ON 31.3.0 5, THE NOTICE PERIOD FOR ISSUE OF NOTICE U/S.143(2) HAD EXPIRED. THE A.O. COULD HAVE MADE PARTICULAR ASSESSMENT BY ISSUE OF NOTICE U/S. 143(2) WITHIN THE PERIOD ALLOW ED UNDER LAW ON RECEIPT OF RETURN. THEREFORE, THE A.O. NOW CANNOT PROCEED IN THE GUISE OF SECTION 147. THIS SECTION CANNOT 4 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 BE USED AS A SUBSTITUTE FOR SECTION 143(2). THIS VI EW HAS BEEN TAKEN IN THE CASE OF ACIT VS- MUTHOOT LEASING & FINANCE LTD. (2008) 21 SOT 28 1 (COCHIN). IN THE CASE OF BAPALAL & CO(EXPORTS) (2007) 289 ITR 37 (MAD), IT H AS BEEN HELD BY MADRAS HIGH COURT THAT IN ABSENCE OF NEW MATERIAL, THE A.O. IS NOT EMPOWERED TO RE-OPEN ASSESSMENT U/S. 147 EVEN THOUGH THE ASSESSMENT HAS BEEN MADE U/S.143(1). IT HAS BEEN FURTHER HELD BY THE HIGH COURT IN THAT CASE IF NO N EW FACTS WERE FOUND, RE-OPENING WAS NOT POSSIBLE U/S. 147 AND SECTION 147 DOES NOT AUTH ORIZE THE A.O. TO RE-OPEN ASSESSMENT MERELY ON A CHANGE OF OPINION. IN THIS CASE, ADMITT EDLY NO NEW FACTS WERE AVAILABLE WITH THE A.O. FOR REOPENING OF ASSESSMENT AND HE HA S RELIED ONLY ON FACTS DISCLOSED BY THE APPELLANT IN THE RETURN FLED. AGAIN, IN THE CA SE OF VIPIN KHANNA VS- CIT (2002) 255 ITR 220 (P & H), IT HAS BEEN HELD BY P & H HIGH COURT THAT IF THE A.O. HAD ALLOWED TIME FOR INITIATION OF REGULAR ASSESSMENT B Y ISSUE OF NOTICE U/S.143(2) TO LAPSE, IT WAS ENTIRELY HIS DOING AND HE CANNOT DO INDIRECT LY WHAT HE IS NOT PERMITTED TO DO DIRECTLY. IN THE CASE OF CIT VS- M.CHELLAPPAN (2005 ) 198 CTR (MAD) 490 IT WAS HELD BY MADRAS HIGH COURT THAT WHERE NO NOTICE U/S.143(2 ) WAS ISSUED WITHIN 12 MONTHS AND THEREFORE PROCEEDINGS U/S.143 CAME TO AN END AN D THE MATTER BECAME FINAL, IN THAT EVENT, NO RE-OPENING WAS PERMISSIBLE. IN THE CASE O F AIPITA MARKETING (P) LTD. VS- ITO (2008) 21 SOT 302 (MUM), IT HAS BEEN HELD THAT IN A BSENCE OF NEW MATERIAL, THE A.O. IS NOT EMPOWERED TO RE-OPEN ASSESSMENT U/S.147 EVEN TH OUGH THE ASSESSMENT HAD BEEN MADE U/S.143(1) AND SECTION 147 DOES NOT AUTHORIZE THE A.O. TO RE-OPEN ASSESSMENT MERELY ON A CHANGE OF OPINION. IN THE CASES OF ASTE RIOIDS TRADING & INVESTMENTS (P) LTD. VS- DY. CIT (2009) 308 ITR 190 (BOM) AND IN TH E CASE OF ASIAN PAINTS LTD. VS DY. CIT (2009) 308 ITR 195 (BOM) IT HAS BEEN HELD BY BO MBAY HIGH COURT THAT REASSESSMENT PROCEEDINGS WITHOUT NEW MATERIAL BUT S OLELY ON CHANGE OF OPINION WOULD NOT BE VALID. AGAIN, IN THE CASE OF MADDI SREERAMUL A & SONS. (HUF) VS- STAT OF ORISSA (2007) 212 CTR (ORI) 265, IT HAS BEEN HELD BY ORISS A HIGH COURT THAT AT THE TIME OF PASSING ORDER U/S.143(1), THE AO HAD INFORMATION OF EARLIER SEARCH AND SEIZURE AND THEREFORE THE SAME COULD NOT BE MADE THE BASIS FOR PROCEEDINGS U/S.148. IN THE PRESENT CASE ALSO, FACTS ABOUT CLAIM OF LOSS IN SHARE TRADI NG AVAILABLE WITH THE A.O. AS ADMITTED BY HIM IN THE REASONS RECORDED AT THE TIME OF PASSI NG ORDER U/S.143(1), THEREFORE PROCEEDINGS INITIATED BY THE A.O. U/S.148 ARE ILLEG AL ON THE BASIS OF THE JUDGEMENT ALSO. IN THE CASE OF ACIT VS- O. P.CHAWLA (2008) 306 ITR (AT) 328 (DELHI) (T) , IT HAS BEEN HELD THAT EVEN WHERE ASSESSMENT HAD BEEN MADE U/S.1 43(1) RE-OPENING WAS NOT VALID TN ABSENCE OF NEW MATERIAL. ADMITTEDLY, IN THE PRESENT CASE ALSO NO NEW FACTS WERE RECEIVED BY THE A.O. AFTER ASSESSMENT HAD BEEN MADE U/S.143(1) AND THEREFORE THIS CASE ALSO SUPPORT THE CASE OF THE APPELLANT. 7. IN VIEW OF THE FACTS OF THE CASE INCLUDING REASO NS RECORDED BY THE A.O. AND ON CONSIDERATION, OF THE CASE LAWS RELIED UPON BY THE A.R, AS MENTIONED IN THE WRITTEN SUBMISSIONS SOME OF WHICH HAVE BEEN DISCUSSED BY ME IN EARLIER PARAGRAPH, I HOLD THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE A.O. U/S. 147 BY ISSUE OF NOTICE DATED 31.3.05 ARE ILLEGAL AND WITHOUT JURISDICTION AND TH EREFORE THE ASSESSMENT MADE CONSEQUENT TO SUCH REASSESSMENT PROCEEDINGS IS CANC ELLED. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US LD. CIT(DR) SHRI L. K. S. DEHIYA ARGUE D ON BEHALF OF REVENUE. HE ALSO FILED WRITTEN SUBMISSION CONSISTING OF PAGES 1 TO 36. LD . CIT (DR), FIRST OF ALL, STATED THAT THE BUSINESS OF ASSESSEE IS TRADING AND IN ITS RETURN O F INCOME ASSESSEE HAS DECLARED FOLLOWING P&L ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2001: 5 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 OPENING STOCK 16214584 SALE PROCEEDS OF SHARES 1 829950 PURCHASE OF SHARES 600000 DIVIDEND 21564.40 RATES& TAXES 3660 INTEREST RECEIVED 278 07.83 WELFARE EXPENSES 455 CLOSING STOCK 43 105.84 MISCELLANEOUS EXPENSES 33627 LIABILITIES NO LONGER REQUIRED WRITTEN BACK 129568.83 AUDIT FES 4200 DEPRECIATION 212348 BALANCE CARRIED DOWN 2077912.33 TOTAL 19146789.23 TOTAL 19146789.23 HE ARGUED THAT THE AO HAS NOTED IN THE REASONS THAT THE ASSESSEE HAS SHARE TRADING LOSS OF RS.1,06,74,050/- AND ALSO EXAMINED REASSESSMENT HIS TORY OF THE ASSESSEE FOR AY 1992-93, 1994-95 AND 1996-97 AND FOUND THAT IN THOSE YEARS T HE ASSESSEE HAS MADE CLAIM IN RESPECT OF INTEREST OF CASH CREDIT FACILITY AVAILED FROM BANK OF INDIA. THE BANK OF INDIA HAS FILED A SUIT FOR RECOVERY FOR ITS DUES AND THAT MATTER WAS SETTL ED OUT OF COURT AND AS A RESULT ASSESSEE DID NOT HAVE TO PAY DUES TO THE TUNE OF RS.1,29,56,883/ - AND ASSESSEE, THEREFORE, WROTE THOSE LIABILITIES BACK IN ITS BOOKS OF ACCOUNT AND OFFERE D THE SAME AS INCOME. ACCORDING TO LD. CIT, DR, THE AO ASCERTAINED THAT THE LIABILITIES WRITTEN BACK WERE BUSINESS LIABILITIES AND ITS CHARACTER WAS PRESCRIBED U/S. 41(1) OF THE ACT. TH E AO, THEREFORE, HAS REASON TO BELIEVE THAT EXPLANATION TO SEC. 73 OF THE ACT WAS APPLICABLE IN THE CASE OF THE ASSESSEE. THE CIT, DR NARRATED THE FOLLOWING REASONS FOR THOSE REASONS TH E AO WAS SATISFIED: 1. THE GTI OF THE COMPANY CONSISTED LARGELY OF INC OME FROM BUSINESS & PROFESSION (RS.2028540). THE INCOME FROM OTHER SOURCES WAS ON LY RS.49,372/- (21564 + 27808). THERE WAS NO INCOME FROM CAPITAL GAINS, HOUSE PROP ERTY OR INTEREST ON SECURITIES. 2.THE PRINCIPAL BUSINESS OF THE ASSESSEE WAS NO THA T OF BANKING OR GRANTING OF LOANS AND ADVANCES. 3. A PART (OR THE WHOLE) OF THE BUSINESS OF THE ASS ESSEE CONSISTED OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES. THEN HE NARRATED THAT IF MORE DETAILED REASONING IS REQUIRED THEN HE SUBMITTED THE FOLLOWING IN HIS WRITTEN SUBMISSIONS: IT CAN ALSO BE SEEN THAT EVEN IF MORE DETAILED REA SONING IS REQUIRED IT IS APPARENT THAT EVEN WITH BUSINESS LOSS BROUGHT FORWARD OF RS.61,07 ,862/- AND UNABSORBED DEPRECIATION OF RS. 11,26,614/= THE GTI OF THE ASSE SSEE MAINLY REMAINS THAT FROM BUSINESS & PROFESSION. THIS IS SO BECAUSE AS PER SE CTION 72(3) OF THE I.T. ACT, THE BROUGHT FORWARD BUSINESS LOSS IS TO BE FIRST ADJUST ED FROM THE CURRENT YEARS BUSINESS INCOMES AND THE BALANCE IS TO BE CARRIED FORWARD FU RTHER. THEREFORE EVEN IF THE WHOLE OF THE INCOME OF THE ASSESSEE IS ADJUSTED BY B/F LOSS, THE ASSESSEE STILL HAS A BUSINESS LOSS TO BE CARRIED FORWARD OF RS. 40,79,322/- (RS.20,28,540 -61,07,862/-). THIS MEANS THAT THE NEGATIVE INCOME IS STILL LARGER THAN THE POSITIVE I NCOME FROM OTHER SOURCES. FURTHER AS PER SECTION 32(2) AND SECTION 72(3) THE UNABSORBED DEPRECIATION BECOMES PART OF THE 6 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 CURRENT DEPRECIATION AND GETS TO BE CARRIED FORWARD FURTHER. THUS THE A.O. WAS PERFECTLY WITHIN HIS RIGHTS TO REOPEN THE ASSESSMENT U/S 147 AND ALL THE CONDITIONS OF SECTION 147 WERE DULY MET. IN VIEW OF THE ABOVE FACTS LD. CIT, DR STATED THAT THE ASSESSEE FILED RETURN OF INCOME ON 22.10.2007 WHICH WAS SIMPLY PROCESSED U/S. 143(1) O F THE ACT ON 25.02.2003 AND THE SCOPE OF PROCESSING U/S. 143(1) IS WELL SETTLED THAT THE AO CAN MERELY CORRECT ARITHMETICAL ERRORS IN COMPUTATION AND NOTHING BEYOND THAT. HE REFERRED T O THE DECISION OF HONBLE SUPREME COURT IN THIS PROPOSITION IN THE CASE OF CIT VS. GUJARAT ELE CTRICITY BOARD (2003) 260 ITR 84 (SC). THEN HE GOES ON TO EXPLAIN LAW RELATING TO REOPENING IN THE CASE OF PROCESSING MADE U/S. 143(1) OF THE ACT. ACCORDING TO HIM, LAW ON THIS ISSUE IS VE RY CLEAR THAT U/S. 143(1) OF THE ACT ONLY PROCESSING IS DONE AND NOT ASSESSMENT. THE WORDING OF SECTION 143(1) OF THE ACT MAKES IT AMPLY CLEAR THAT THE WORD USED IS PROCESSING AND NO T ASSESSING OR THE ASSESSMENT AS MENTIONED IN SECTION 143(3) OF THE ACT. 7. LD. CIT-DR ARGUED THAT THE PROCESSING U/S. 143(1) O F THE ACT IS NOT AN ASSESSMENT PROCEEDINGS AND PROCESSING IS SPECIFICALLY DEEMED A S A CASE OF INCOME ESCAPING ASSESSMENT IN EXPLNATION-2(B) OF SECTION 147 OF THE ACT AND TH IS ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACI V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. (2007) 291 ITR 500 (SC). HE ALSO ARGUED THAT THERE IS NO CHANGE OF OPINION AS ACTION IS TAKEN U/S. 147 OF THE ACT AFTER PROCES SING OF RETURN U/S. 143(1) OF THE ACT. FOR THIS PROPOSITION, HE RELIED ON THE FULL BENCH DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. USHA INTERNATIONAL LTD., (2012) 253 CTR 113 (DEL)(FB). HE NARRATED THAT HON BLE DELHI HIGH COURT IN THE CASE OF USHA INTERNATIONAL LTD. (SUPRA) HAS THREADBARE ANALYSED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) AND HELD THAT THE OBSERVATION OF HONBLE SUPRE ME COURT WERE MADE IN ITS CONTEXT AND FOR EXPLAINING THE PRINCIPLE OF CHANGE OF OPINION. AC CORDING TO HIM, IT IS ALSO HELD THAT THE PRESUMPTION THAT THE ASSESSING OFFICER HAS APPLIED ITS MIND TO EVERYTHING BEFORE PASSING AN ORDER US. 143(3) OF THE ACT IS A REBUTTABLE PRESUMP TION AND IT CAN BE SHOWN THAT THERE IS NO APPLICATION OF MIND AND ACTION U/S. 147 OF THE ACT CAN BE TAKEN. HONBLE DELHI HIGH COURT IN THE CASE OF KOHINOOR FOODS LTD. V. CIT (2012) 18 TAXMANN.COM 12 HAS SPECIFICALLY HELD THA T NO NEW MATERIAL IS NEEDED TO EXTRANEOUS TO THE RECORDS AND THE TOUCH STONE IS NOT WHERE THE MATERIAL IS TO BE FOUND I.E., WITHIN THE EXISTING R ECORDS OR OUTSIDE. ACCORDING TO HIM, WHAT IS IMPORTANT IS WHETHER SUCH MATERIAL WAS CONSIDERED B Y THE ASSESSING OFFICER OR NOT. BUT ACCORDING TO HIM, WHEN THE ISSUE WAS NOT CONSIDERED ON MERITS, RE-OPENING IS VALID. LD. CIT- DR ALSO REFERRED TO VARIOUS CASE LAWS, WHICH ARE AL READY DISCUSSED IN THE FULL BENCH DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF USHA INT ERNATIONAL LTD. (SUPRA). 7 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 8. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE FIELD WRITTEN SUBMISSION CONSISTING OF PAGES 1 TO 6 AND RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ORIENT CRAFT LIMITED (2013) 29 TAXMAN 392 (DEL). HE ONLY DREW OUR ATTEN TION TO THE VERY FIRST LINE OF REASONS RECORDED, WHICH READS AS UNDER:- A SUMMARY OF THE PROFIT & LOSS ACCOUNT OF THE ASSE SSEE FOR THE RELEVANT ASSESSMENT IS AS FOLLOWS:- AND NARRATED THE FACTS QUA THE REASONS RECORDED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THIS CASE IS NOT COVERED BY THE PROVISO TO SECTION 147 OF THE ACT. THE ASSESSING OFFICER ONLY CARRIED OUT PROCESSING US. 1 43(1) OF THE ACT AND NO REGULAR ASSESSMENT WAS FRAMED AS ADMITTED BY BOTH THE SIDES. WE FIND T HAT THERE IS NO ISSUE OF CHANGE OF OPINION, IN THE GIVEN FACTS OF THE CASE. THE FACTS OF THE CA SE ARE THAT IN THE RETURN OF INCOME FILED BY THE ASSESSEE THAT THERE IS LOSS IN SHARE TRADING AMOUNT ING TO RS.1,06,74,050/- WAS ADJUSTED AGAINST OTHER INCOME MAINLY BEING LIABILITY WRITTEN BACK AT RS.1,29,56,833/-. WE FIND THAT ASSESSING OFFICER PROCESSED THE RETURN U/S. 143(1) OF THE ACT AND AFTER THAT ISSUED NOTICE U/S. 148 OF THE ACT AND FOR THAT REASON RECORDED ARE REPRODUCED IN PARA-4 PAGE-2 OF THIS ORDER. WE FIND THAT ASSESSEES INCOME FROM OTHER SOURCE LIKE DIVIDEND, INTEREST EXCEED THE GROSS BUSINESS INCOME BY TAKING INTO CONSIDERATION LOSS IN SHARE TRADING AND THE INCOME BY WAY OF LIABILITIES WRITTEN BACK AND DEDUCTING THEIR SUNDRY EXPENSES OF RS.2,54 ,293/- AND IN THAT CASE ASSESSEE WOULD COME UNDER THE EXCEPTION CLAUSE OF EXPLANATION TO SECTION 73 OF THE ACT AND IT WOULD AVOID THE MISCHIEF OF THE EXPLANATION. THE ASSESSING OFFI CER TREATED THE LOSS IN SHARE TRADING AS SPECULATIVE LOSS AND QUA THAT REASONS WERE RECORDED. WE FIND FROM THE REASO NS RECORDED BY THE AO, WHEREIN IT IS CLEARING MENTIONED THAT, SUMMARY OF THE PROFIT AND LOSS ACCOUNT OF THE APPELLANT FOR THE RELEVANT AY WAS AS FOLLOWS: THE FIGURE OF LOSS OF RS.1,06,74,050/- BY WAY OF SHARE TRADING LOSS WAS IN THE PROFIT AND LOSS ACCOU NT AND WAS ALSO FILED WITH THE RETURN OF INCOME. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, THE REASON TO BELIEF DOES NOT STAND TO RE- OPENING IN THE GIVEN FACTS OF THE CASE. WE HAVE GON E THROUGH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF USHA INTERNATIONAL LTD. (SUPRA) BUT WE FIND THAT CASE LAW IS REGARDING CHANGE OF OPINION AND NOT ON REASON TO BELIEVE. WE FURTHER FIND THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AS CLEARLY BROUGHT OUT THE CONCEPT OF REASON TO BELIEF BY HOLDING AS UND ER:- 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE LD A.R . THERE IS NO DISPUTE THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCE EDING UNDER SECTION 143(3) THE 8 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 DETAILS OF THE INTEREST PAID TO M/S BINANI CEMENT L TD WAS DULY FURNISHED BY THE ASSESSEE VIDE LETTER DATED 15.10.2006. FURTHER IT IS EVIDENT FROM THE ASSESSMENT ORDER DATED 23.03.2007 PASSED UNDER SECTION 143(3) OF THE ACT , THAT BOOKS OF ACCOUNTS , BANK STATEMENT AND REQUISITIONED DETAIL WERE EXAMINED BY THE A.O WITH REFERENCE TO THE DETAILS OF ACCOUNT FILED ALONG WITH THE RETURN. HEN CE IT IS EVIDENT THAT THE DISCLOSURE OF THE INTEREST PAID TO M/S. BINANI CEMENT LTD WAS VER Y MUCH ON RECORD AND THE SAME WAS DULY CONSIDERED BY THE A.O WHILE PASSING THE ASSESS MENT ORDER UNDER SECTION 143(3) OF THE ACT. THERE IS NO NEW MATERIAL IN THE POSSESSION OF THE A.O AS EVIDENT FROM THE REASON RECORDED, WHICH COULD LEAD TO THE CONCLUSION THAT THE INCOME HAS ESCAPED ASSESSMENT. NOW IT IS A SETTLE LAW THAT AO DEEMED T O HAVE APPLIED HIS MIND IF FACTS ARE ON RECORD AND REOPENING U/S 147 ON CHANGE OF OPINIO N IS NOT PERMISSIBLE EVEN WITHIN 4 YEARS. THE HONBLE SUPREME COURT C.I.T. VS. KELVINA TOR (I) LTD. - 320 ITR 651- HAS CONFIRMED THE FINDING OF THE FULL BENCH DECISION OF THE HONBLE DELHI HIGH COURT THAT ON THE BASIS OF SAME FACTS AND MATERIALS (AND NO MO RE) DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT MADE UNDER SECTION 143(3) OF THE I. T. A CT, BY MERE CHANGE OF OPINION, THE ASSESSMENT CANNOT BE RE-OPENED U/S.147 OF THE I. T. ACT, 1961. 3.2. IN CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1 THE FULL BENCH OF THE DELHI HIGH COURT WAS CONSIDERING A CASE OF REOPENING U/S 147 W ITHIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR. THE COURT HELD THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF SECTION 143 (3) OF THE ACT, A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLCATION OF MIND. IT WAS HELD THA T IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN T HE PROCEEDNG WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING PREMIUM T O AN AUTHORITY EXERCISING QUASI- JUDCIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. IT WAS HELD THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASS ESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPIN ION. ON APPEAL BY THE DEPARTMENT TO THE SUPREME COURT HELD DISMISSING THE APPEAL: THOUGH THE POWER TO REOPEN UNDER THE AMENDED S. 147 IS MUCH WIDER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO B ELIEVE FAILING WHICH S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO RE- OPEN ASSESSM ENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON TO RE-OPEN. ONE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO RE-ASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE-ASSESS. BUT RE- ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND IF THE CON CEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1.4.1989, THE AO HAS POWER TO RE-OPEN, PROVIDED THERE IS TANGIBLE MA TERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. THIS IS SUPPORTED BY C IRCULAR NO.549 DATED 31.10.1989 WHICH CLARIFIED THAT THE WORDS REASON TO BELIEVE DI D NOT MEAN A CHANGE OF OPINION. 3.3. CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE FACT OF THE CASE AS DISCUSSED ABOVE, IT IS HELD THAT THAT THE CASE WAS REOPENED BY THE A.O ON MERE CHANGE OF OPINION THAT T.D.S PROVISION WILL BE APPLICABLE ON THE AMOUNT REIMBURSED TO BINANI CEMENT LTD. AGAINST THE INTEREST PAID TO THE BANK. IT IS A SETTLE ISSUE THAT THE REOPENING OF THE PROCEEDING, BEING MERELY BASED ON CHANGE OF OPINION SHOULD BE CONSIDERED AS INVALID AND ILLEGAL AND SHOULD BE CANCELLED. ACCOR DINGLY THE NOTICE ISSUED UNDER SECTION 148 OF THE INCOME TAX ACT IS QUASHED AND AC CORDINGLY THE ORDER PASSED UNDER SECTION 147/143(3) IS ANNULLED. 10. FURTHER, THE DIRECT DECISION ON THE ISSUE IS TH AT OF HONBLE DELHI HIGH COURT IN THE CASE OF ORIENT CRAFT LIMITED (SUPRA) WHEREIN IT IS HELD AS UNDER:- 9 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 IN THE PRESENT CASE THE REASONS DISCLOSE THAT THE A SSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER P ROCEEDINGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER, BOTH STRONGLY DEPRECATED BY THE SUPREME COURT IN CIT VS. KELVINATOR (SUPRA). THE REASONS RECORDED BY THE ASS ESSING OFFICER IN THE PRESENT CASE DO CONFIRM OUR APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASON TO BELIEVE VIS--VIS AN INTIMATION ISSUED UNDER SECTION 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPER IN THE REASONS RECO RDED, OF ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF THE ASSESSING OFFICER SUB SEQUENT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY EXERCISE OF THE POWER CONFERR ED UNDER SECTION 147. EVEN THE LD. CIT, DR HAS ARGUED THAT EVEN IF MORE D ETAILED REASONING IS REQUIRED FOR REOPENING OF THE ASSESSMENT, HE CAN SUPPORT NOW BY ARGUMENTS AND EVIDENCE. THIS ASPECT CLEARLY SHOWS THAT THE REASONS RECORDED DO NOT HAVE MATERIAL BEAR ING ON THE QUESTION OF ESCAPEMENT OF INCOME. ACCORDING TO OUR BELIEF, THE REASON TO BEL IEVE MUST HAVE BEARING ON THE QUESTION ON ESCAPEMENT OF INCOME. IT DOES NOT MEAN A PURE SUBJ ECTIVE SATISFACTION OF THE ASSESSING AUTHORITY. THE REASON TO BELIEVE MUST HAVE A RATIO NAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION M EANS THERE MUST BE DIRECT NEXUS OR LIKE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE AO AND THE FORMATION OF BELIEF OF ESCAPEMENT OF INCOME. IN VIEW OF THE ABOVE LEGAL POSITION, TH E REASONS CLEARLY SPELL OUT THAT THERE IS NO REASONABLE BELIEF FORMED BY AO AND HENCE, CIT(A) HA S RIGHTLY QUASHED THE REASSESSMENT PROCEEDINGS. WE CONFIRM THE SAME. 11. SINCE WE HAVE QUASHED THE REASSESSMENT PROCEEDI NGS THE CO FILED BY ASSESSEE NEED NOT TO BE ADJUDICATED. 12. IN THE RESULT, BOTH THE APPEAL OF REVENUE AND C ROSS OBJECTION OF ASSESSEE ARE DISMISSED. 13. ORDER IS PRONOUNCED IN OPEN COURT ON 15 TH JULY, 2013 SD/- SD/- . . . . . . . . , #! $'# #! $'# #! $'# #! $'# , (K. K. GUPTA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 0 0 0 0) )) ) DATED: 15TH JULY, 2013 !12 $&34 $5! JD.(SR.P.S.) 10 ITA NO.1947/K/2010 & C.O.176/K/ 2010 M/S. A. M. UDYOG LTD. 2001-02 / 6 -$$7 87(9- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT ITO, WARD-4(3), KOLKATA. 2 -.+, / RESPONDENT M/S. A. M. UDYOG LTD., 16A, BRABOURN E ROAD (9 TH FLOOR), KOLKATA-700 001. 3 . $/& ( )/ THE CIT(A), KOLKATA 4. 5. $/& / CIT KOLKATA 7!>$ -$& / DR, KOLKATA BENCHES, KOLKATA .7 -$/ TRUE COPY, /&?/ BY ORDER, # '4 /ASSTT. REGISTRAR .