DCIT, C.C. VI, Kolkata, Kolkata V. M/s. Juggilal Kamlapat Udyog Ltd., Kolkata

ITA 1415/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48083 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 07-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C JAIN
• Assessee Lawyers: S K LAHIRI
• Keywords: Reopening of assessment; Source of fund; Speculation loss; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () , , , !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I AKBER BASHA, AM] # # # # / I.T.A NOS. 1415 & 1416/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEARS : 2002-03 TO 2003-04 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. JUGGIL AL KAMLAPAT UDYOG LTD. C.C. VI, KOLKATA. (PAN-AAACJ 6719 L) ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI S. C. JAIN FOR THE RESPONDENT: SHRI S. K. LAHIRI ! / ORDER PER SHRI MAHAVIR SINGH/ : BOTH THESE APPEALS BY REVENUE ARE ARISING OUT OF TH E ORDERS OF CIT(A)-CENTRAL-1, KOLKATA IN APPEAL NOS. 71&72/CIT(A), C-1/CC-VI/09-1 0 DATED 12.04.2010. THE ASSESSMENTS WERE FRAMED BY ACIT, CC-VI, KOLKATA, U/S. 147/143(3 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEARS 2002-03 AND 2003-04 VIDE HIS ORDER DATED 30.09.2009. 2. THE ONLY ISSUE IN THESE APPEALS OF THE REVENUE I S AS REGARDS TO THE ORDER OF CIT(A) ANNULLING THE ASSESSMENT COMPLETED U/S. 147 R.W.S. 143(3) OF THE ACT. FOR THIS, REVENUE HAS RAISED COMMON GROUNDS AND THE GROUNDS AS RAISED IN ITA NO.1415/K/2010 FOR ASSESSMENT YEAR 2002-03 READ AS UNDER: 1. THAT THE LD. CIT(A),C-1, KOL HAS ERRED IN ANNUL LING THE ASSESSMENT COMPLETED BY THE A.O. U/S. 147/143(3) OF THE I. T. ACT, 1961. 2. THAT, THE LD. CIT(A) HAS ERRED IN HOLDING THAT R E-OPENING OF THE ASSESSMENT SUFFERED FROM CHANGE OF OPINION IN ABSENCE OF FRESH MATERIALS. 3. THAT, THE HONBLE SUPREME COURT IN THE CASE OF B HANJI LAVJI 79 ITR 582 HAS OTHERWISE HELD THAT IF THE A.O. RAISE CORRECT LEGAL REFERENCE HE WILL BE COMPETENT TO COMMENCE RE-ASSESSMENT. 4. THAT, THE HONBLE DELHI HIGH COURT IN THE CASE O F NAWABGANJ SUGAR MILLS CO. LTD., 123 ITR 287 HAS HELD THAT IF INITIALLY NO OPI NION WAS FOUND, THE QUESTION OF CHANGE THEREIN COULD NOT BE SAID TO TAKE PLACE. 2 ITA 1415 &1 416/K/201 0 JUGGILAL KAMLAPAT UDYOG LTD. A.Y.02-03 & 03-04 3. WE WILL TAKE THE FACTS FROM ASSESSMENT YEAR 2002 -03 AND DECIDE THE ISSUE, REASON BEING THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENT ICAL. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INC OME FOR RELEVANT ASSESSMENT YEAR 2002-03 ON 29.10.2002 DISCLOSING TOTAL LOSS OF RS.23,09,263/- . THE ASSESSEES SOURCES OF INCOME WERE TRADING IN SHARES AND SECURITIES, DEALING IN ORCHAR D PRODUCE, FINANCING AND SERVICE CHARGES. ASSESSING OFFICER ISSUED NOTICE U/S. 143(2) OF THE ACT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND ASSESSMENT WAS FRAMED U/S. 143(3) V IDE ASSESSMENT ORDER DATED 28.3.2005 ORIGINALLY. SUBSEQUENTLY, THE ASSESSING OFFICER IS SUED NOTICE U/S. 148 OF THE ACT DATED 19.3.2009 BY RECORDING THE FOLLOWING REASONS: IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE CO MPANY FILED THE RETURN FOR THE A.Y. 2002- 03 ON 29.10.2002 SHOWING LOSS OF RS.23,09,263/-. T HE LOSS CLAIMED IS UNDER THE HEAD BUSINESS AND NO INCOME/LOSS HAS BEEN SHOWN UNDER TH E OTHER HEADS OF INCOME. THE ASSESSMENT U/S. 143(3) HAS BEEN MADE ON 28.3.2005 O N THE RETURNED BUSINESS LOSS. IT IS HOWEVER, SEEN FROM THE ACCOUNTS AND THE DETAI LS ON RECORD THAT THE ASSESSEE COMPANY INCURRED DIRECT LOSS OF RS.51,85,073/- IN T HE BUSINESS OF PURCHASE AND SALE OF SHARES & SECURITIES (MAINLY IN SHARES), THE COMPUTA TION IS AS UNDER: SALE (EXCLUDING ORCHARD SALE) RS. 60,20,88 7/- LESS: PURCHASE RS.80,70,160/- DECREASE IN STOCK RS.30,29,466/- RS.1,10,99,626/- LOSS : RS. 50,78,739/- FROM THE DETAILS, IT IS SEEN THAT THERE WAS PROFIT OF RS.1,06,344/- IN PURCHASE AND SALE OF MUTUAL FUNDS. THEREFORE, THE LOSS IN THE BUSINESS OF PURCHASE AND SALE OF SHARES IS RS.50,78,739/- PLUS RS.1,06,334/- = RS.51,85,073/-. THE EXCEPTIONS PROVIDED IN THE EXPLANATION BELOW SECTION 73 ARE NOT AVAILABLE TO T HE ASSESSEE COMPANY SINCE THE INCOMES ARE NOT MAINLY UNDER THE HEADS EXCLUDING TH E HEAD OF BUSINESS AND SINCE THE PRINCIPAL BUSINESS IS NOT GRANTING LOANS AND ADVANC ES (THE AVERAGE OF OPENING & CLOSING LOANS AND ADVANCES WAS RS.42 LAKH WHEREAS THE AVERA GE OF OPENING AND CLOSING TRADING STOCK OF SHARES WAS ABOUT RS.10 CRORE). THEREFORE, AS PER THE EXPLANATION, THE LOSS IN THE BUSINESS OF PURCHASE AND SALE OF SHARES IS DEEMED S PECULATION LOSS. SHARE SPECULATION PROFIT INCLUDED IN OTHER INCOME IS RS.12,20,200/-. AS SUCH, THE DEEMED SPECULATION LOSS IS RS.39,64,873/-. THIS SPECULATION LOSS IS NOT ELIGIB LE FOR SET OFF AGAINST THE OTHER INCOMES. BUT THE LOSS HAS GOT SET OFF AS PER THE CONSOLIDATE D A/CS. AND HAS GOT ALLOWED IN THE ASSESSMENT. THUS, I HAVE REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX TO THE EXTENT OF THE DEEMED SPECULATION LOSS OF 39,64,873/- HAS ESCAPED ASSESSM ENT WITHIN THE MEANING OF SECTION 147, FOR FAILURE ON THE PART OF THE ASSESSEE TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT IN VIEW OF EXPLANATION-1 O F SECTION 147. 4. THE ASSESSING OFFICER WHILE COMPLETING REASSESSM ENT U/S. 147 R.W.S. 143(3) OF THE ACT MADE ADDITION ON LOSS ON TRADING BUSINESS CONSIDERE D AS SPECULATION LOSS AT RS.51,85,073/- BY HOLDING THAT THE ASSESSEE HAS CARRIED OUT THIS BUSI NESS IN SHARES AND LOSS IS SPECULATIVE LOSS. ACCORDINGLY, HE FRAMED REASSESSMENT. AGGRIEVED, AS SESSEE PREFERRED APPEAL BEFORE CIT(A). 3 ITA 1415 &1 416/K/201 0 JUGGILAL KAMLAPAT UDYOG LTD. A.Y.02-03 & 03-04 BEFORE CIT(A), THE ASSESSEE OBJECTED TO REOPENING A ND CIT(A) QUASHED THE REASSESSMENT NOTICE BY HOLDING AS UNDER: 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. A.R. NOW THE LAW IS WELL SETTLED THAT THE REOPENING OF AN ASSESSMENT BEYOND THE FOUR YEAR TIME LIMIT IS NOT POSSIBLE WHERE THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS ALONG WITH THE RETURN FILED. IN THE CASE UNDER CONSIDERATION REASSESSMENT NOTICE HAS B EEN ISSUED AFTER FOUR YEARS TO DISALLOW THE SPECULATION LOSS NOT ELIGIBLE FOR SET OFF AGAINST THE OTHER INCOMES. IN THE CASE UNDER CONSIDERATION ORIGINAL ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT AND DETAILS OF PURCHASE AND SALE WAS DULY FILED BY THE ASSESSEE. HENCE IT CANNOT BE SAID THAT THE MATERIAL FACTS WERE NOT FULLY AND TRULY DISCLO SED BY THE ASSESSEE. 3.2. FURTHER THERE IS NO WHISPER IN THE REASONS SUP PLIED TO ASSESSEE THAT INCOME ESCAPED ASSESSMENT BY REASON OF ASSESSEES FAILURE TO MAKE A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HENCE TH E ISSUE REGARDING APPLICABILITY OF EXPLANATION NOT CONSIDERED IN THE ORIGINAL ASSESSME NT AND REOPENING OF ASSESSMENT ON THE VERY SAME ISSUE SUFFERED FROM CHANGE OF OPINION IN THE ABSENCE OF ANY FRESH MATERIAL. HENCE CONSIDERING THE FACT OF THE CASE SUBMISSION OF THE LD. A.R AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AS HOKA BUILDERS (P) LTD. 311 ITR 386 (DELHI) CITED BY THE APPELLANT, IT IS HELD THAT THE ASSESSEE HAVING MADE FULL DISCLOSURE OF MATERIAL FACTS IN THE RETURN WHICH WAS ACCOMPANIED BY SEVERAL ENCLOSURES, ASSESSMENT COULD NOT BE REOPENED BEYOND FOUR YEARS FROM THE EN D OF THE RELEVANT ASST. YEAR FOR THE REASON THAT CERTAIN INCOME/LOSS HAS BEEN WRONGLY AS SESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION INSTEAD OF SPECU LATION LOSS. ACCORDINGLY IT IS HELD THAT THE PRECONDITION FOR INVOKING THE PROVISO TO S. 147 WAS NOT SATISFIED AND THEREFORE A.O ACTED WHOLLY WITHOUT JURISDICTION IN ISSUING NOTIC E U/S. 148 BEYOND FOUR YEARS PERIOD MENTIONED IN S. 147. HENCE THE ORDER OF ASSESSMENT PASSED UNDER SECTION 147/143(3) IS ANNULLED. AGGRIEVED AGAINST THE ACTION OF THE CIT(A), THE REV ENUE IS IN APPEALS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ARGUMENTS OF BOTH THE SIDES AS WEL L AS THE REASONS RECORDED, WHICH DO NOT INDICATE THAT THERE WAS ANY VIOLATION ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE ASSESSEE MADE U/S. 143(3) OF THE ACT. WE FIND THAT THE ASSESSING OFFICER WHILE FRAMING ORIGI NAL ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DATED 28.3.2005 DEFINITELY CONSIDERED THE FA CTS AND CIRCUMSTANCES AS WELL AS THE ISSUE OF APPLICABILITY OF EXPLANATION TO SECTION 73 OF THE A CT. FROM THE DETAILS OF SHARE TRADING BUSINESS AS CONTAINED IN THE ACCOUNTS WERE FILED ALONG WITH THE RETURN OF INCOME AND FURTHER DETAILS OF PURCHASES OF SHARES WERE FILED BY THE ASSESSEE TO A SSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS VIDE LETTER DATED 1 .2.2005. THE CLAIM OF THE ASSESSEE IS THAT IT WAS DOING SHARE TRADING BUSINESS SINCE 1964 AND VAL UED THE CLOSING STOCK OF SHARES AT COST OR MARKET VALUE WHICHEVER IS LOWER IN THE PRESENT ASSE SSMENT YEAR DUE TO FALL IN MARKET VALUE OF SHARES BELOW COST, SUCH SHARES WERE VALUED AT LOWER OF MARKET PRICE WHICH RESULTED INTO LOSS. THE ASSESSEE CONTENDED FACTS THAT DURING THIS ASSES SMENT YEAR, IT HAD MADE A PROFIT OF 4 ITA 1415 &1 416/K/201 0 JUGGILAL KAMLAPAT UDYOG LTD. A.Y.02-03 & 03-04 RS.3,79,371/- ON ACCOUNT OF PURCHASE AND SALE OF SH ARES AND LOSSES ENTIRELY ATTRIBUTABLE TO THE LOWER MARKET VALUE OF SALE OF SHARES ON VALUATION A ND ACCORDINGLY, EXPLANATION TO SECTION 73 OF THE ACT IS NOT AT ALL APPLICABLE TO THE PRESENT CAS E. HOWEVER, IT IS TO BE CLARIFIED THAT ASSESSEES ASSESSMENTS WERE FRAMED U/S. 143(3) ORIGINALLY AND THE COMPLETE DETAILS WERE BEFORE THE ASSESSING OFFICER AND HE HAS APPLIED HIS MIND TO TH E FACTS OF THE CASE. THE PROVISO TO SECTION 147 OF THE ACT CLEARLY PROVIDES THAT IN A CASE WHER E ORIGINAL ASSESSMENT IS MADE U/S. 143(3) OF THE ACT, THE ASSESSMENT CANNOT BE REOPENED AFTER TH E EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THERE IS ANY FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. IN THE PRESENT CASE THIS IS EXACTLY THE SITUATION. SINCE THERE IS NO FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, CIT(A) HAS RIGHTLY HELD THAT REOPENING IS VOID. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE I N FULL AGREEMENT WITH THE FINDINGS OF CIT(A) AND UPHOLD THE SAME. SINCE THE FACTS ARE EX ACTLY IDENTICAL IN ASSESSMENT YEAR 2003-04, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , !' , (AKBER. BASHA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( -' -' -' -') )) ) DATED 25TH APRIL, 2011 ./ $01 2 JD.(SR.P.S.) ! 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT DCIT, CC-VI, KOLKATA. 2 +,)* / RESPONDENT M/S. JUGGILAL KAMLAPAT UDYOG LTD., , 7,COUNCIL HOUSE STREET, KOLKATA-700 001. 3 . $ ( )/ THE CIT(A), KOLKATA 4. 5. $ / CIT KOLKATA 4<= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, ! $>/ BY ORDER, 1 /ASSTT. REGISTRAR .