Income Tax Officer, Hyderabad V. M/s.Gajmukh Investments Pvt Ltd., Hyderabad

ITA 1292/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77971 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 26-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P MURALI MOHAN RAO
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 2

Judgement Text

1 ITA NO. 1292/H/2013 M/S GAJMUKH INVESTMENTS PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1292/HYD/2013 ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER, WARD 2(2), HYDERABAD. VS. M/S GAJMUKH INVESTMENTS PVT. LTD., HYDERABAD PAN AABCG0952B (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. K. HARITHA REVENUE BY : SHRI P. MURALI MOHAN RAO DATE OF HEARING 15-05-2014 DATE OF PRONOUNCEMENT 27-06-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16/07/2013 OF CIT(A)-III, HYDERABAD FOR THE ASSESSM ENT YEAR 2005-06 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUND S: 1. THE CIT(A) ERRED IN LAW IN HOLDING THAT THE ASSE SSMENT U/S 147 IS NOT VALID. 2. THE CIT(A) ERRED IN LAW IN STATING THAT THE ASSE SSEE HAS DISCLOSED ALL THE MATERIAL FACTS THOUGH AS PER EXPL ANATION 1 TO SECTION 147 PRODUCTION BEFORE THE AO OF ACCOUNT BOO KS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE. 2. BRIEFLY THE FACTS ARE, ASSESSEE IS A COMPANY DER IVING INCOME FROM INVESTMENT AND DEALING IN SECURITIES. ASSESSEE FILE D THE RETURN OF INCOME ON 30/10/2005 FOR THE YEAR UNDER CONSIDERATION DECL ARING LOSS OF RS. 2,30,08,266/-, WHICH WAS DULY PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSEES CASE WAS SELECTED FOR SCRU TINY AND AN ORDER U/S 2 ITA NO. 1292/H/2013 M/S GAJMUKH INVESTMENTS PVT. LTD. 143(3) WAS PASSED ON 20/12/2007 DETERMINING THE INC OME AT NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSSES OF RS. 1,54,8 8,864/- AND LONG TERM CAPITAL LOSS OF RS. 2,30,08,266/-. SUBSEQUENTLY, AS PER REASONS RECORDED BY THE AO, ON VERIFICATION HE NOTICED THAT ASSESSEE DERIVED SHORT TERM CAPITAL GAINS OF RS. 68,94,886/- FROM SALE OF SHARE S WHICH WAS SET OFF AGAINST LONG TERM CAPITAL LOSS OF RS. 2,99,03,153/- AND NET LONG TERM CAPITAL LOSS OF RS. 2,30,08,266 WAS CARRIED FORWARD . THE AO WAS OF THE VIEW THAT LONG TERM CAPITAL LOSS CANNOT BE SET OFF AGAINST THE SHORT TERM CAPITAL GAIN AS PER SECTION 74(I)(B). FURTHER, ASSE SSEE HAS SET OFF THE INCOME OF RS. 1,13,83,250/- FROM SALE OF PROPERTY A GAINST BROUGHT FORWARD BUSINESS LOSS THOUGH ACCORDING TO AO IT SHOULD HAVE BEEN ASSESSED AS SHORT TERM CAPITAL GAIN. ON THE AFORESAID REASON TO BELIEVE AO REOPENED THE ASSESSMENT U/S 147 BY ISSUING NOTICE U/S 148 ON 26/03/2012. IN RESPONSE, THE ASSESSEE FILED A LETTER DATED 20/11/2 012 REQUESTING TO TREAT THE RETURN FILED ON 30/10/2005 AS IN RESPONSE TO NO TICE U/S 148. DURING THE ASSESSMENT PROCEEDING THOUGH THE ASSESSEE VEHEM ENTLY OBJECTED TO THE INITIATION OF PROCEEDING U/S 147 AFTER EXPIRY O F FOUR YEARS FROM THE END OF ASSESSMENT YEAR AND ON THE BASIS OF MATERIALS FU RNISHED BY THE ASSESSEE WITH RETURN OF INCOME, BUT, THE AO REJECTI NG THE OBJECTIONS OF THE ASSESSEE COMPLETED THE ASSESSMENT U/S 143(3) R. W.S. 147 OF THE ACT BY BRINGING TO TAX THE PROFIT DERIVED FROM SALE OF SHARES AND SALE OF PROPERTY BY TREATING IT AS SHORT TERM CAPITAL GAIN WHICH CANNOT BE SET OFF AGAINST LONG TERM CAPITAL LOSS AND BROUGHT FORWARD BUSINESS LOSS. BEING AGGRIEVED OF THE ASSESSMENT ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A). 3. AS REGARDS REOPENING OF ASSESSMENT, THE ASSESSEE CONTENDED THAT REOPENING HAVING BEEN MADE MERELY ON A CHANGE OF OP INION CANNOT BE SUSTAINED. . IT WAS CONTENDED THAT NO NEW INFORMATI ON WAS COLLECTED BY THE AO. HAVING EXAMINED THE ISSUE OF SET OFF OF LOS S IN COURSE OF THE EARLIER PROCEEDINGS U/.S 143(3), THE AO COULD NOT R EOPEN THE CASE ON RECONSIDERATION OF VERY SAME FACTS AND MATERIALS. 3 ITA NO. 1292/H/2013 M/S GAJMUKH INVESTMENTS PVT. LTD. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND REFERRING TO SECTION 147 OF THE ACT AS WELL AS ANALYZING AND EXA MINING THE ISSUE IN THE LIGHT OF VARIOUS CASE LAWS, LEARNED CIT(A) HELD TH AT THE REOPENING OF THE ASSESSMENT BY THE AO IS BAD IN LAW. THE RELEVANT FI NDINGS OF LEARNED CIT(A) ARE AS UNDER: 20. THERE IS NO NEW INFORMATION ON RECORD AND THE A O HAS NOT BROUGHT OUT ANY DETAILS SHOWING HOW INCOME HAD ESCA PED ASSESSMENT AND WHAT WAS DEFAULT COMMITTED BY THE AP PELLANT AND WHAT INACCURATE INFORMATION HAD BEEN PROVIDED BY TH E APPELLANT. THE RECORD DOES NOT SHOW ANY DEFAULT COMMITTED BY T HE APPELLANT IN THIS REGARD. 21. FROM THE ABOVE IT IS CLEAR THAT THE AO HAD TAKE N A CONSCIOUS DECISION REGARDING THE ISSUE AT HAND AND AFTER 6 YE ARS REOPENING OF THE ASSESSMENT GIVEN THE SAME INFORMATION IS NOTHIN G BUT A CHANGE IN OPINION. AS ALREADY DISCUSSED IN DETAIL SUPRA, U NDER THE CIRCUMSTANCES THE ASSESSMENT COULD NOT BE REOPENED. THEREFORE, I HOLD THAT THE REOPENING OF THE ASSESSMENT BY THE AO IS BAD IN LAW. 22. SINCE THE REOPENING OF THE ASSESSMENT ITSELF IS BAD IN LAW, THEREFORE, THE REOPENED PROCEEDINGS ARE HELD AB INI TIO VOID. THE REASSESSMENT IS LEGALLY INVALID. THE OTHER GROUND A RE THEREFORE NOT BEING ADJUDICATED UPON. 5. AGAINST THE AFORESAID DECISION OF THE CIT(A), R EVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. UNDISPUTEDLY IN THE PRESENT CASE NOTICE U/S 148 WAS ISSUED ON 26/03/201 2. THEREFORE, REOPENING OF ASSESSMENT IS NOT ONLY AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE IMPUGNED ASSESSMENT YEAR BUT ALMOST AT T HE FAG END OF SIX YEARS FROM THE RELEVANT ASSESSMENT YEAR. THE AO IS EMPOWERED U/S 147 OF THE ACT TO REOPEN AN ASSESSMENT IF HE HAS REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME OR UNDERASSESSMENT OF INCOM E. HOWEVER, PROVISO TO SECTION 147 MANDATES THAT IN CASE OF AN ASSESSMENT COMPLETED U/S 143(3) OR SECTION 147 OF THE ACT REOPENING CANN OT BE MADE AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR UNLESS 4 ITA NO. 1292/H/2013 M/S GAJMUKH INVESTMENTS PVT. LTD. SUCH ESCAPEMENT OF INCOME IS ATTRIBUTABLE TO FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR COMPLETION OF HIS ASSESSMENT. IN THE LIGHT OF AFORE SAID STATUTORY PROVISION IT IS TO BE DECIDED WHETHER INITIATION OF PROCEEDIN G U/S 147 OF THE ACT ON THE PRESENT CASE IS JUSTIFIED. ON A PERUSAL OF THE REASONS RECORDED BY THE AO FOR FORMING BELIEF THAT INCOME HAS ESCAPED ASSES SMENT WHICH IS ALSO MENTIONED IN PARA 2.1 AND 2.2 OF THE IMPUGNED ASSES SMENT ORDER, IT IS CLEAR THAT ON REEXAMINATION OF THE COMPUTATION OF I NCOME AND OTHER STATEMENTS FILED BY THE ASSESSEE ALONG WITH THE RET URN, AO FORMED AN OPINION THAT SET OFF OF SHORT TERM CAPITAL GAIN OF RS. 68,94,886/-, DERIVED FROM SALE OF SHARES AGAINST LONG TERM CAPITAL LOSS OF RS. 2,99,03,153/- IS NOT PERMISSIBLE AS PER SECTION 74(I)(B) OF THE ACT. FURTHER, GAIN DERIVED FROM SALE OF HOUSE PROPERTY HAS TO BE ASSESSED AS S TCG AND CANNOT BE SET OFF AGAINST BROUGHT FORWARD BUSINESS LOSSES AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING WITH SECURITIES. 7. AS CAN BE SEEN FROM THE REASONS RECORDED THE FOR MATION BELIEF FOR REOPENING OF ASSESSMENT IS ENTIRELY ON THE BASIS OF COMPUTATION OF INCOME AND OTHER STATEMENTS FILED BY THE ASSESSEE I TSELF AND NOT ON ANY OTHER MATERIAL WHICH HAS COME TO THE POSSESSION OF THE AO AS A RESULT OF ANY ENQUIRY OR OTHERWISE SUBSEQUENT TO COMPLETION O F ASSESSMENT U/S 143(3) OF THE ACT. MOREOVER, NEITHER IN THE REASONS RECORDED NOR ANYWHERE IN THE ASSESSMENT ORDER THERE IS ANY ALLEG ATION BY THE AO THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR COMPLETING THE A SSESSMENT. THUS, CONDITION PRECEDENT FOR REOPENING ASSESSMENT BEYOND FOUR YEARS FROM THE END OF ASSESSMENT YEAR IN THE PRESENT CASE IS NOT S ATISFIED. FURTHER, THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS F URNISHED FULL DETAILS REGARDING THE GAIN DERIVED FROM SALE OF SHARES AND SALE OF PROPERTY AND COMPUTATION OF LOSS IN THE COMPUTATION OF INCOME AN D STATEMENTS FURNISHED ALONG WITH THE RETURN OF INCOME. THE AO A FTER EXAMINING ALL THESE FACTS AND MATERIALS BROUGHT ON RECORD HAS ALL OWED SET OFF OF LOSS 5 ITA NO. 1292/H/2013 M/S GAJMUKH INVESTMENTS PVT. LTD. WHILE COMPLETING ASSESSMENT U/S 143(3) OF THE ACT. AS CAN BE SEEN THE AO ON RE APPRECIATION OF VERY SAME MATERIAL CONSIDE RED IN THE ORIGINAL ASSESSMENT IS OF THE OPINION THAT SET OFF OF LOSS F ROM SALE OF SHARES IS NOT ALLOWABLE AGAINST LONG TERM CAPITAL GAIN AND GAIN D ERIVED FROM SALE OF PROPERTY CANNOT BE SET OFF AGAINST CARRIED FORWARD BUSINESS LOSS. IN OUR VIEW, REOPENING OF ASSESSMENT IN THE INSTANT CASE I S NOT ONLY ON A MERE CHANGE OF OPINION BUT ALSO AMOUNTS TO REVIEW OF THE ASSESSMENT ORDER PASSED EARLIER U/S 143(3) OF THE ACT. THAT PART, T HERE BEING NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING TRULY AND FU LLY ALL MATERIAL FACTS REOPENING OF ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IS CLEARLY AGAINST THE STATUTORY MA NDATE, HENCE, IS WITHOUT JURISIDICTION. IN CASE OF PARASHURAM POTTERY WORKS CO. LTD. V/S. ITO, CIRCLE-I, WARD A, RAJKOT (106 ITR PAGE 1) THE HONBLE SUPREME COURT HELD THAT THE DUTY OF THE ASSESSEE IN ANY CA SE DOES NOT EXTEND BEYOND MAKING A TRUE AND FULL DISCLOSURE OF PRIMARY FACTS. ONCE HE HAS DONE THAT HIS DUTY ENDS. IT IS FOR THE ITO TO DRAW THE CORRECT INFERENCE FROM THE PRIMARY FACTS. IT IS NO RESPONS IBILITY OF THE ASSESSEE TO ADVISE THE ITO WITH REGARD TO THE INFER ENCE WHICH HE SHOULD DRAW FROM THE PRIMARY FACTS. IF AN ITO DRAW S AN INFERENCE WHICH APPEARS SUBSEQUENTLY TO BE ERRONEOUS, MERE CH ANGE OF OPINION WITH REGARD TO THAT INFERENCE WOULD NOT JUSTIFY INI TIATION OF ACTION FOR REOPENING THE ASSESSMENT. IN CASE OF CIT VS. KELVI NATOR OF INDIA, 320 ITR 561, THE HONBLE SUPREME COURT HELD THAT REOPEN ING OF ASSESSMENT IN ABSENCE OF FRESH TANGIBLE MATERIAL AN D ON CONSIDERATION OF VERY SAME MATERIAL CONSIDERED IN THE ORIGINAL AS SESSMENT WILL BE ON A MERE CHANGE OF OPINION. THEREFORE, CONSIDERING TH E FACTS OF THE PRESENT CASE VIS--VIS THE RELEVANT STATUTORY PROVI SION AS WELL AS IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE SUPREME COURT REFERRED TO ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN CANCELLING THE IMPUGNED ASSESSMENT ORDER. ACCORD INGLY, WE UPHOLD THE SAME BY DISMISSING THE GROUNDS RAISED BY THE DE PARTMENT. 6 ITA NO. 1292/H/2013 M/S GAJMUKH INVESTMENTS PVT. LTD. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 27/06/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 27 TH JUNE, 2014 KV COPY TO:- 1) ITO, WARD 2(2), ROOM NO. 836, C-BLOCK, 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S GAJMUKH INVESTMENTS PVT. LTD., 8-2-268/2/B/1 , ROAD NO.1, BANJARA HILLS, HYDERABAD 500 034. 3)CIT(A)-III, HYDERABAD. 4) THE CIT-II, , HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.