S. K. Dudhoria Holdings Pvt. Ltd., Kolkata V. ITO, WD-1(3), KOLKATA, Kolkata

ITA 1536/KOL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4757 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2015
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUPTA
• Assessee Lawyers: D K KOTHARI
• Keywords: Reopening of assessment; Business income; Tangible material; Speculation loss; Difference of opinion; Validity of assessment; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

I.T.A. NO. 1536/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1536/KOL/ 2015 ASSESSMENT YEAR: 2006-2007 S.K. DUDHORIA HOLDINGS (P) LIMITED,................ ................APPELLANT ROOM NO. 5A, 5 TH FLOOR, CRESCENT TOWERS, 229, A.J.C. BOSE ROAD, KOLKATA-700 020 [PAN : AADCS 7341 A -VS.- INCOME TAX OFFICER,................................ .........................RESPONDENT WARD-1(3), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI D.K. KOTHARI, A.R., FOR THE ASSESSEE SHRI SUDIPTA GUPTA, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : MAY 02, 2016 DATE OF PRONOUNCING THE ORDER : JUNE 03, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-5, KOLKATA DATED 07.10.2015 FOR THE ASSESSMENT YEAR 2006-07 AND THE SOLITARY IS SUE RAISED THEREIN RELATES TO THE VALIDITY OF ASSESSMENT MADE BY THE A SSESSING OFFICER UNDER SECTION 143(3) READ WITH 147 OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE RETURN OF IN COME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 16.11.2006 DISCLOS ING TOTAL INCOME OF RS.61,161/-. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 05.08.2008, THE TOTAL INCOME OF THE ASSESSEE AS DECLARED IN THE RETURN OF INCOME WAS ACCEPTED BY TH E ASSESSING OFFICER AFTER SCRUTINY. SUBSEQUENTLY THE ASSESSING OFFICER FOUND FROM THE AUDITED ACCOUNTS FILED BY THE ASSESSEE ALONG WITH THE RETUR N OF INCOME THAT THE I.T.A. NO. 1536/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 2 OF 5 SPECULATION LOSS OF RS.9,09,389/- WAS ADJUSTED BY T HE ASSESSEE AGAINST THE BUSINESS INCOME. ACCORDING TO HIM, SUCH ADJUSTMENT WAS PROHIBITED AS PER THE PROVISION OF SECTION 73 AND THERE WAS THUS ESCAPEMENT OF INCOME OF THE ASSESSEE FROM THE ASSESSMENT. HE, THEREFORE, REOPENED THE ASSESSMENT AFTER RECORDING THE REASONS AND ISSUED A NOTICE UNDER SECTION 148 AND IN RESPONSE TO WHICH A LETTER DATED 16.03.2 011 WAS FILED BY THE ASSESESE REQUESTING THAT THE RETURN ORIGINALLY FILE D ON 16.11.2006 BE TREATED AS THE RETURN FILED IN COMPLIANCE TO THE NO TICE UNDER SECTION 148. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE VALIDITY OF THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMEN T WAS CHALLENGED BY THE ASSESSEE ON THE GROUND THAT IN THE ABSENCE OF A NY NEW TANGIBLE MATERIAL OR INFORMATION COMING TO THE POSSESSION OF THE ASSESSING OFFICER, THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICE R WAS BASED ON A MERE CHANGE OF OPINION. THE ASSESSING OFFICER DID NOT FI ND MERIT IN THIS CONTENTION OF THE ASSESSEE AND BY RELYING ON CLAUSE (C) BELOW EXPLANATION 2 TO SECTION 147, HE PROCEEDED TO COMPL ETE THE ASSESSMENT UNDER SECTION 143(3)/147 VIDE ORDER DATED 05.12.201 1, WHEREIN THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF SPECULATION LOSS AGAINST BUSINESS INCOME WAS DISALLOWED BY HIM. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 147, AN APPEAL WAS PREFERR ED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) CHALLENGING, INTER ALIA , THE VALIDITY OF ASSESSMENT MADE BY THE ASSESSING OFFICER ON THE GRO UND THAT THE REOPENING OF ASSESSMENT ITSELF WAS BAD IN LAW AS TH E SAME WAS BASED ON A MERE CHANGE OF OPINION. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LD. CIT(APPEALS). ACCORDING TO HI M, THE ASSESSING OFFICER HAVING NOT EXPRESSED ANY OPINION ON THE ISS UE RELATING TO THE ASSESSEES CLAIM FOR ADJUSTMENT OF SPECULATION LOSS AGAINST BUSINESS INCOME IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3), IT WAS NOT A CASE OF REOPENING BASED ON MERE CHANGE OF OPINION. HE, THEREFORE, UPHELD THE VALIDITY OF THE ASSESSMENT CO MPLETED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SE CTION 147 AND ALSO I.T.A. NO. 1536/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 3 OF 5 CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R THEREIN BY DISALLOWING THE ASSESSEES CLAIM FOR ADJUSTMENT OF SPECULATION LOSS AGAINST BUSINESS INCOME. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE T RIBUNAL. 4. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, INVITED OUR ATTENTION TO THE COPY OF REASONS RECORDED BY THE ASSESSING OF FICER PLACED AT PAGE NO. 19 OF THE PAPER BOOK AND POINTED OUT THAT THE A SSESSMENT ORIGINALLY COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 14 3(3) WAS REOPENED BY HIM ON THE BASIS OF THE SAME RECORDS AS WAS AVAILAB LE BEFORE HIM WHILE COMPLETING THE ORIGINAL ASSESSMENT UNDER SECTION 14 3(3). HE CONTENDED THAT NO NEW FACT OR NEW MATERIAL HAD COME TO THE PO SSESSION OF THE ASSESSING OFFICER AFTER COMPLETING THE ASSESSMENT O RIGINALLY UNDER SECTION 143(3) WHICH FORMS THE BASIS OF REOPENING A ND THUS THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER WAS CLEARLY BASED ON MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW AS RIGH TLY HELD, INTER ALIA, BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS.- KELVINATOR OF INDIA LIMITED REPORTED IN 320 ITR 561. 5. THE LD. D.R., ON THE OTHER HAND, STRONGLY SUPPOR TED THE IMPUGNED ORDER OF LD. CIT(APPEALS) ON THIS ISSUE. HE CONTEND ED THAT THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR ADJUSTMENT OF SPECULATIVE LOSS AGAINST BUSINESS INCOME, WHICH HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER S ECTION 143(3) AND THERE BEING NO EXPRESSION OF OPINION BY THE ASSESSI NG OFFICER ON THIS ISSUE, IT WAS NOT A CASE OF REOPENING BASED ON MERE CHANGE OF OPINION AS RIGHTLY HELD BY THE LD. CIT(APPEALS) IN HIS IMPUGNE D ORDER. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN ORDER TO APPRECIAT E THE STAND TAKEN BY BOTH THE SIDES ON THE ISSUE UNDER CONSIDERATION REL ATING TO THE VALIDITY OF REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER, I T WAS RELEVANT TO REFER I.T.A. NO. 1536/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 4 OF 5 TO THE REASONS RECORDED BY THE ASSESSING OFFICER, W HICH ARE EXTRACTED BELOW:- IN THE INSTANT CASE, RETURN OF INCOME WAS FILED ON 16.11.2006 DISCLOSING TOTAL INCOME OF RS.61,161/-. THE RETURN WAS ASSESSED UNDER SECTION 143(3) AT A TOTAL INCOME OF RS.61,161/- ON 05.08.2008. IN THE ORDER UNDER SECTI ON 143(3), THE ENTIRE AMOUNT WAS CONSIDERED AS SHORT T ERM CAPITAL GAIN. SUBSEQUENTLY EXAMINATION OF AUDITED ACCOUNTS, IT SH OWS THAT THE OTHER INCOME IS A NEGATIVE FIGURE OF RS.3,96, 564/-. THE DETAILS ARE GIVEN IN SCH. 10 OF THE AUDITED ACCOUNT S. ACCORDING TO THAT SCHEDULE, SPECULATION LOSS IS RS. 9,09,389/- WHICH HAVE BEEN ADJUSTED WITH DIVIDEND INCOME AND I NTEREST INCOME. AS PER PROVISIONS OF SEC. 73, SPECULATION LOSS CAN ONLY BE SET OFF WITH SPECULATION PROFIT. THEREFORE, IN AUDITED ACCOUNTS, ADJUSTMENT OF SPECULATION LOSS WITH INTEREST AND DI VIDEND INCOME LEADS TO UNDER ASSESSMENT OF INCOME OF RS.9, 09,389/-. ACCORDINGLY, I HAVE REASON TO BELIEVE THAT ASSESSEE S INCOME ESCAPED ASSESSMENT OF RS.9,09,389/- AND PROCEEDING S U/S 147 HAVE BEEN INITIATED AGAINST THE ASSESSEE. AS TH E ASSESSMENT WAS COMPLETED U/S 143(3) PRIOR APPROVAL FROM CIT, KOL-1, KOLKATA HAD BEEN OBTAINED VIDE LETTER N O. CIT/KOL-1/APPROVAL/2010-11/3477 DT. 29.10.2010. HENCE, ISSUE NOTICE U/S 148 OF THE I.T. ACT, 1961 T O THE ASSESSEE COMPANY FOR THE A.Y. 2006-07. 7. IT IS MANIFEST FROM THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT THAT THE ASSESSMENT OR IGINALLY COMPLETED UNDER SECTION 143(3) WAS REOPENED BY THE ASSESSING OFFICER ON THE BASIS OF THE SAME RECORDS AS WAS AVAILABLE BEFORE HIM WHI LE COMPLETING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) AND THERE WAS NO NEW MATERIAL THAT HAD COME TO HIS POSSESSION ON THE BASIS OF WHI CH ASSESSMENT WAS REOPENED. AT THE TIME OF HEARING BEFORE ME, THE LD. D.R. HAS NOT DISPUTED THIS POSITION. HE, HOWEVER, HAS CONTENDED THAT THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER WAS BASED ON AL TOGETHER NEW ISSUES, WHICH HAD NOT BEEN EXAMINED BY THE ASSESSING OFFICE R DURING THE COURSE OF ORIGINAL PROCEEDINGS UNDER SECTION 143(3). HOWEV ER, AS DEMONSTRATED BY THE LD COUNSEL FOR THE ASSESSEE AT THE TIME OF H EARING BEFORE ME ON THE BASIS OF RELEVANT MATERIAL PLACED ON RECORD AT PAGE NOS. 46 AND 50-52 OF I.T.A. NO. 1536/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 5 OF 5 THE PAPER BOOK, THE ISSUE RELATING TO THE ASSESSEE S CLAIM FOR SPECULATION LOSS OF RS.9,09,389/- AS APPEARING IN SCHEDULE 10 O F THE PROFIT & LOSS ACCOUNT WAS DULY EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) AND THE SAME WAS ACCEPTED IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) ON DUE EXAMINATION. THE REOPENING OF ASSESSMENT ON THE SAID ISSUE WITHO UT THERE BEING ANY TANGIBLE NEW MATERIAL COMING TO THE POSSESSION OF T HE ASSESSING OFFICER THUS WAS CLEARLY BASED ON CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW AS HELD, INTER ALIA, BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LIMITED (SUPRA). I AM, THEREFORE, OF THE VIEW THAT THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER IT SELF WAS BAD IN LAW AND THE ASSESSMENT COMPLETED UNDER SECTION 143(3) R EAD WITH SECTION 147 IN PURSUANCE THEREOF IS LIABLE TO BE CANCELLED BEING INVALID. I ORDER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 03, 2016 . SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 3 RD DAY OF JUNE, 2016 COPIES TO : (1) M/S. S.K. DUDHORIA HOLDINGS (P) LIMITED, ROOM NO. 5A, 5 TH FLOOR, CRESCENT TOWERS, 229, A.J.C. BOSE ROAD, KOLKATA-700 020 (2) INCOME TAX OFFICER, WARD-1(3), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-5, KOLKAT A (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.