DCIT, Circle - 12, Kolkata, Kolkata V. M/s. ISG Traders Ltd, Kolkata

ITA 100/KOL/2012

• Counselvise Citation: 10023514 RSA 2012
• Duration Of Justice: 3 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-03-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 17-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S UBHRAJYOTI BHATTACHARJEE
• Assessee Lawyers: D S DAMLE
• Keywords: Tangible material; Difference of opinion; Assessment record; Change of opinion; Reassessment proceedings
• Section: 147; 148; 143(3); 142(1)

Judgement Text

I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO. 100 / KOL / 20 1 2 ASSESSMENT YEAR : 200 4 - 20 0 5 DEPUTY COMMISSIONER OF INCOME TAX, .... ........ . APPELLANT CIRCLE - 12 , KOLKATA, P - 7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 7 TH FLOOR, KOLKATA - 700 069 - VS. - M/S. ISG TRADERS LTD., . .. ............................... ... . RESPONDE NT 31, NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA - 700 001 [PAN : AA BCI 135 5 C ] APPEARANCES BY: SHRI S UBHRAJYOTI BHATTACHARJEE , JCIT, SR. D.R., FOR THE DEPARTMENT SHRI D.S. DAMLE, FC A , FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : AUGUST 0 7 , 2 01 5 DATE OF PRONOUNCING THE ORDER : AUGUST 12 , 201 5 O R D E R PER S.V. MEHROTR A : THIS A PPEAL HA S BEEN FILED BY THE REVENU E AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - XI I , KOLKATA D ATED 1 0 . 10 .20 1 1 FOR THE ASSESSMENT YEAR 200 4 - 0 5 BY TAKING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL: - 1. WHETHER O N THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(AI IS CORRECT IN LAW IN HOLDING THAT THE PROCEEDINGS U/S. 147 WERE BAD IN LAW WITHOUT SPECIFYING ANY COGENT REASON THEREOF. 2. WHETHER O N THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(AI IS CORRECT IN AL LOWING LONG TERM CAPITAL LOSS OF RS.3,25,52,531/ - . I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 2 OF 7 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESESE - COMPANY FILED ITS RETURN OF INCOME SHOWING A TOTAL LOSS OF RS.4,85,00,762/ - . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) DETERMINING TOTAL INCOME OF RS.5,80,973/ - VIDE ORDER DATED 30.11.2006. SUBSEQUENTLY THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 ON 22.06.2007 FOR THE FOLLOWING REASONS: - (1) SERVICE CHARGES RECEIVED OF RS.16,46,910/ - HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PR OPERTY WHEN THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES THEREBY EXCESS DEDUCTION @ 30% U/S 24 HAS BEEN ALLOWED TO THE ASSESSEE. (2) RENT PAID OF RS.51,000/ - HAS BEEN WRONGLY ALLOWED AS DEDUCTION FROM INCOME UNDER THE HEAD INCOME FR OM HOUSE PROPERTY WHEN NO SUCH DEDUCTION CAN BE ALLOWED U/S. 24. (3) FROM THE DETAILS OF COMPUTATION OF LONG TERM CAPITAL GAIN, IT IS SEEN THAT THE ASSESSEE HAS TRADED IN ITS OWN SHARES AND IN THE PROCESS HAS BOOKED A LONG TERM CAPITAL LOSS OF RS.3,25,52 ,531/ - . FROM THE ASSESSMENT RECORDS OF AY 2003 - 04, IT IS ALSO SEEN THAT THE COMPANIES WHICH WERE HOLDING LONG TERM CAPITAL LOSS OF RS.3,25,52,531/ - . FROM THE ASSESSMENT RECORDS OF AY 2003 - 04, IT IS ALSO SEEN THAT THE COMPANIES WHICH WERE HOLDING THESE SHAR ES HAD ALREADY AMALGAMATED WITH THE ASSESSEE COMPANY PRIOR TO THE FINANCIAL YEAR RELEVANT TO AY 2004 - 05. HENCE, THE TRANSACTIONS BY THE ASSESSEE COMPANY IN ITS OWN SHARES ARE NOT PERMISSIBLE AND THE RESULTANT LONG TERM CAPITAL LOSS IS LIABLE TO BE DISALLOW ED. IN VIEW OF THE ABOVE REASONS, PROCEEDING UNDER SECTION 147 WAS INITIATED AND NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE ON 22.06.2007. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE COMPANY FILED RETURN OF INCOME DATED 26.07.2007. THEREAFTER NO TICE UNDER SECTION 143(2) & 142(1) WERE ISSUED TO THE ASSESSEE ON 25.08.2008 & 02.09.2008 RESPECTIVELY . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 AT A TOTAL INCOME OF RS.5,80,973/ - . HOWEVER, THE ASSESSING OFFICER I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 3 OF 7 DISALLOWED THE ASSESSEE S CLAIM FOR CARRY FORWARD LOSS OF LONG TERM CAPITAL GAIN IN ASSESSEE S HAND. 3. LD. CIT(APPEALS) CANCELLED THE RE - ASSESSMENT PROCEEDINGS FOR THE FOLLOWING REASONS: - (I) IN THE COURSE OF REGULAR ASSESSMENT UNDER SECTION 143(3), SUFFICIENT MATE RIAL WAS AVAILABLE WITH THE ASSESSING OFFICER AND HE DID NOT DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. SUFFICIENT INFORMATION AND DOCUMENTS WERE AVAILABLE ON ASSESSING OFFICER S RECORD AT THE TIME OF REGULAR ASSESSMENT WHICH SHOWED THAT THE LOSS ON SALE OF SHARES OF ISG TRADERS LIMITED , WHICH WE RE OWNED AND HELD BY M/S. U.I. TRADING CO. LIMITED AND K.V. TRADING CO. LIMITED , WHICH HAD AMALGAMATED WITH THE ASSESSEE - COMPANY EFFECTIVE FROM 01.03.2003 AND , THEREBY , INCOME/LOSS OF THE AMALGAMATING COMPANIE S WAS ASSESSED IN THE ASSESSEE S HAND. THUS THE REASSESSMENT PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER ON RE - APPRAISAL OF THE FACTS ALREADY ON RECORD AT THE TIME OF PASSING OF THE ORDER UNDER SECTION 143(3). (II) THE RE - OPENING OF ASSESSMENT COU LD NOT BE DONE ON THE BASIS OF MERE CHANGE OF OPINION WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LIMITED REPORTED IN 320 ITR 561(SC) AS WELL AS THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF AMRIT FEEDS LIMITED VS. - ACIT, CIRCLE - 2, KOLKATA REPORTED IN 239 CTR 82. HE OBSERVED THAT SUBSEQUENT TO COMPLETION OF THE ASSESSMENT, N O FRESH MATERIAL OR EVIDENCE CAME IN ASSESSING OFFICER S POSS ESSION ON THE BASIS OF WHICH HE FORMED REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 4. LD. D.R. FOR THE REVENUE SUBMITTED THAT THE ASSESSING OFFICER NEVER FORMED HIS OPINION ON THE ISSUE IN REGARD TO EFFECT OF AMALGAMATION ON I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 4 OF 7 T RANSFER OF SHARES. HE NEVER ENQUIRED AS TO WHETHER THE CAPITAL LOSS COULD BE CARRIED FORWARD BY ASSESSEE ON SALE OF ITS OWN SHARES BY TRANSFEREE COMPANIES , WHICH WERE TRANSFERRED JUST PRIOR TO THE APPOINTED DATE. HE REFERRED TO PAGES 26 TO 28 OF THE PAPER BOOK WHEREIN THE QUESTIONNAIRE DATED 19.10.2006 IS CONTAINED AND POINTED OUT THAT THE ASSESSING OFFICER ONLY REQUIRED THE ASSESSEE TO FURNISH CONTRACT NOTES IN RESPECT OF THE SALE OF SHARES. HE, THEREFORE, SUBMITTED THAT THE LD. CIT(APPEALS) ERRED IN HOLDI NG THAT IT WAS A CASE OF CHANGE OF OPINION. 5. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGES 25 TO 28 OF THE PAPER BOOK AND POINTED OUT THAT THE ASSESSING OFFICER HAD ISSUED NOTICE UNDER SECTION 142 ALONG WITH THE QUESTIONNAIRE IN WHICH HE SPECIFICALLY R EQUIRED THE ASSESSEE TO FURNISH CONTRACT NOTES IN RESPECT OF THE SALE OF SHARES. HE POINTED OUT THAT THESE QUERIES WERE MADE WITH REFERENCE TO THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESESE CONTAINED AT PAGES 21 TO 24 OF THE PAPER BOOK AND POINTED O UT THAT AT PAGE 23 (BACK SIDE), THE ASSESESE HAD FURNISHED THE DETAILS OF LONG TERM CAPITAL LOSS AMOUNTING TO RS.4,90,81,735/ - , WHICH , INTER ALIA, INCLUDED THE LOSS IN RESPECT OF SHARES OF ISG TRADERS LIMITED AMOUNTING TO RS.3,25,52,531/ - . LD. COUNSEL FURT HER REFERRED TO PAGES 82 & 8 3 OF THE PAPER BOOK, WHEREIN THE BILLS FOR SALE OF SHARES DATED 09.05.2003 ARE CONTAINED. LD. COUNSEL FURTHER POINTED OUT THAT THE ASSESSING O FFICER HAS RECORDED REASONS IN RESPECT OF THREE ITEMS , AS NOTED EARLIER, BUT IT WAS ON LY WITH REFERENCE TO THE THIRD REASON THAT THE ASSESSING OFFICER MADE DISALLOWANCE OF CARRY FORWARD OF CAPITAL LOSS. 5.1. LD. COUNSEL FURTHER REFERRED TO PAGES 30 TO 32 OF THE PAPER BOOK, WHEREIN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IS CONTAIN ED AND POINTED OUT THAT THE ASSESSING OFFICER HAS, INTER ALIA, OBSERVED AS UNDER: - 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT A SUM OF RS.38,41,393/ - BEING LONG TERM CAPITAL LOSS IN RESPECT OF SALE OF 3,50,000 EQUITY SHARES OF D UNCANS INDUSTRIES LIMITED WAS INADVERTENTLY NOT I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 5 OF 7 CONSIDERED AT THE TIME OF FILING OF RETURN OF INCOME. THE ASSESSEE HAS SUBMITTED THE DETAILS OF THIS AMOUNT ALONG WITH COPIES OF CONTRACT NOTES AND BILLS. IN VIEW OF THE DETAILS SUBMITTED BY THE ASSESSEE, THE LONG TERM CAPITAL LOSS OF RS.38,41,393/ - IS ALLOWED TO BE CARRIED FORWARD . 5.2. LD. COUNSEL SUBMITTED THAT THIS SHOWS THAT HE HAD CONSIDERED THE LONG TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE IN RESPECT OF AMALGAMATING COMPANIES. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. ADMITTEDLY IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAD SPECIFICALLY CLAIM ED THE LONG TERM CAPITAL LOSS IN RESPECT OF SHARES OF ISG TRADERS LIMITED. THERE CANNOT BE ANY Q UARREL WITH THE PROPOSITION THAT A COMPANY CANNOT CLAIM LOSS IN RESPECT OF ITS OWN SHARES. THEREFORE, WHEN ASSESSEE CLAIMED THIS LOSS IN ITS COMPUTATION OF INCOME THEN A N ORMA L QUERY FROM THE ASSESSING OFFICER HAD TO BE ON THIS COUNT. THE ASSESSING OFFICE R IN HIS NOTICE UNDER SECTION 142(1) SPECIFICALLY REQUIRED THE ASSESSEE TO FURNISH CONTRACT NOTES IN RESPECT OF SALE OF SHARES AND, THEREFORE, IT IS CLEAR THAT HE HAD DULY APPLIED HIS MIND TO THE FACTS ON RECORD. IT IS TRUE THAT T HERE IS NO SPECIFIC MENTIO N OF THE SHARES OF ASSESSEE - COMPANY HELD BY AMALGAMATING COMPANY ON WHICH LOSS WAS CLAIMED BY THE ASSESESE AFTER AMALGAMATION. BUT ONCE ASSESSING OFFICER HAD CONSIDERED THE COMPUTATION AND RAISED QUERIES IN REGARD TO SALE OF SHARES AND FURTHER WHILE PASSIN G THE ASSESSMENT ORDER ACCEPT ED THE SAME AND ALSO CONSIDERED THE FURTHER LOSS CLAIMED BY THE ASSESSEE , WHICH WAS IN RESPECT OF EQUITY SHARES OF DUNCANS INDUSTRIES LIMITED , WAS INADVERTENTLY NOT CONSIDERED AT THE TIME OF FILING OF RETURN OF INCOME , T HEN IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND TO THE FACTS OF THE CASE ON RECORD. 6.1. BEFORE THE LD. CIT(APPEALS), THE ASSESSEE HAD SPECIFICALLY POINTED OUT THAT AT THE TIME OF ORIGINAL ASSESSMENT THE ASSESSING OFFICER WAS IN POSSES SION OF ASSESSEE S AUDITED FINANCIAL ACCOUNTS FOR YEARS ENDED ON I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 6 OF 7 31.03.2003 AND 31.03.2004. IN TH E SE ACCOUNTS, THE ASSESSEE HAD MADE DISCLOSURES ABOUT AMALGAMATION OF THREE COMPANIES IN TERMS OF THE ORDER OF THE HON BLE CALCUTTA HIGH COURT PASSED IN MAY , 2003 BY WHICH THREE COMPANIES WERE AMALGAMATED RETROSPECTIVELY FROM 01.03.2003 COPIES OF THE CONTRACT NOTES AND BILLS IN SUPPORT OF SALE OF SHARES OF ISG TRADERS LIMITED WERE FILED BEFORE THE ASSESSING OFFICER IN THE COURSE OF ORIGINAL ASSESSMENT. THESE PA PERS CLEARLY ESTABLISHED THAT TWO OF THE AMALGAMATING COMPANIES, VIZ. U.I. TRADING CO. LIMITED AND K.V. TRADING CO. HAD SOLD 7,08,420 AND 76,71,208 EQUITY SHARES OF ISG TRADERS LIMITED TO M/S. JULEX COMMERCIAL CO. LIMITED ON 09.05.2003. ON SALE OF THESE SH ARES, THE AMALGAMATING COMPANIES SUFFERED LOSS. THE LOSS SUFFERED ON SHARES SOLD ON 09.05.2003 WAS ASSESSED IN THE ASSESSEE S HANDS IN THE ORIGINAL ASSESSMENT BECAUSE THE AMALGAMATION OF THE TWO COMPANIES WAS MADE EFFECTIVE FROM 01.03.2003. IN THE ASSESSME NT ORDER PASSED UNDER SECTION 147/143(3), IT IS STATED THAT THE TRANSACTION FOR SALE OF SHARES OF THE ASSESSEE - COMPANY HELD BY THE TRANSFEREE COMPANY WERE EFFECTED ON 09.05.2003 AS ON 28.02.2003 (I.E. BEFORE 01.03.2003 - APPOINTED DATE OF AMALGAMATION). THU S , IT IS EVIDENT THAT THE REASSESSMENT PROCEEDING WAS INITIATED FOR RE - APPRAISAL OF THE FACTS ALREADY ON RECORD AND THIS WAS CLEARLY A CASE OF MERE CHANGE OF OPINION. NO FRESH TANGIBLE MATERIAL CAME TO ASSESSING OFFICER S POSSESSION TO JUSTIFY THE INITIATI ON OF REASSESSMENT PROCEEDINGS AND THE DETAILS REGARDING AMALGAMATION WERE ALREADY ON RECORD AND THE QUANTIFICATION OF LONG TERM CAPITAL GAINS HAD DULY BEEN CONSIDERED BY HIM IN THE ORIGINAL ASSESSMENT. FURTHER, IT IS WELL SETTLED LAW THAT THERE SHOULD BE LIVE NEXUS BETWEEN REASONS RECORDED AND FORMATION OF BELIEF. IN THE PRESENT CASE THE ASSESSING OFFICER FORMED THE BELIEF REGARDING ESCAPEMENT OF INCOME ON THE GROUND THAT ASSESSEE HAD CLAIMED LOSS BY TRADING IN ITS OWN SHARES WHICH WAS FACTUALLY INCORRECT. THEREFORE, IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LIMITED REPORTED IN 320 ITR 561, THE REASSESSMENT PROCEEDINGS WERE BAD IN LAW , WHICH RIGHTLY CANCELLED BY THE LD. CIT(APPEALS). WE ACCORDINGLY CONFIRM THE O RDER OF LD. CIT(APPEALS) ON THESE OBSERVATIONS. I.T.A. NO . 100 / KOL ./20 1 2 ASSESSMENT YEAR: 200 4 - 20 0 5 PAGE 7 OF 7 7. AS WE HAVE ALREADY CONFIRMED THE ORDER OF LD. CIT(APPEALS) CANCELLING THE REASSESSMENT PROCEEDINGS, G ROUND NO. 2 HAS BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED . 8 . IN THE RESULT, THE APPEAL FILED BY T HE REVENU E IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST , 201 5 . SD/ - SD/ - MAHAVIR SINGH S.V. MEHROTRA ( JUDICIAL MEMBER) ( ACCOUNTANT MEMBER) KOLKATA, THE 12 TH D AY OF AUGUST , 201 5 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 12, KOLKATA, P - 7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 7 TH FLOOR, KOLKATA - 700 069 (2) M/S. ISG TRADERS LTD., 31, NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA - 700 001 (3) COMMISSIONER OF INCOME - TAX (AP PEALS) - XI I , KOLKATA (4) COMMISSIONER OF INCOME TAX - , KOLKATA ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA B ENCHES, KOLKATA LAHA/SR. P.S .