Mukesh Commotrade Limited, RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Surendranagar Circle, Surendranagar

ITA 155/RJT/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3469 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Keywords: Reopening of assessment; Business income; Wrong claim; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 155/RJT/2015 ASSESSMENT YEAR : 2005-06 M/S. MUKESH COMMOTRADE LTD, C/O. KALPESH S. DOSHI & CO., CHARTERED ACCOUNTATNTS, 411, COSMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT 360 001 PAN : AADCA 8408 J VS THE ADDITIONAL COMMISSIONER OF INCOME-TAX, SURENDRANAGAR CIRCLE, SURENDRANAGAR / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI KALPESH DOSHI, AR REVENUE BY : SHRI AMIT PRATAP SINGH, SR DR / DATE OF HEARING : 28/11/2019 / DATE OF PRONOUNCEMENT: 28/11/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER :- 1. THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE O F THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-7, AHMEDABAD DATED 23.0 2.2015 PASSED FOR ASSESSMENT YEAR 2005-06. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE REOPENING OF ASSE SSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME OF RS.5 4,32,292/-, WHICH INCLUDES BUSINESS INCOME OF RS.5,48,836/- AND SHORT TERM CAP ITAL GAIN FROM STT PAID SHARE TRANSACTION AT RS.48,83,456/-. THE CASE OF T HE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SECTION 143( 2) OF THE ACT WAS ISSUED ITA NO. 155/RJT/2015 MUKESH COMMOTRADE LTD VS. ACIT AYS : 2005-06 2 AND SERVED. THE LEARNED ASSESSING OFFICER HAS PAS SED THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT ON 28.12.2006 . THE ASSESSING OFFICER, THEREAFTER, REOPENED THE ASSESSMENT ON 21.03.2012 B Y RECORDING THE FOLLOWING REASONS:- AT THE TIME OF VERIFICATION OF THE STATEMENT OF T OTAL INCOME, IT IS NOTICED THAT THE ASSESSEE HAS ENTERED INTO 664 SHARE TRANSACTION S INCLUDING SHORT TERM, LONG TERM AND INTRADAY AND FUTURE & OPTION. THE ASSESSEE HAS DECLARED SHORT TERM, LONG TERM AND INTRADAY AND FUTURE & OPTION. THE ASS ESSEE HAS SHOWN THE INCOME OF RS. 48,83,456/- UNDER THE HEAD 'SHORT TEAM CAPIT AL GAIN' IN ITS STATEMENT OF TOTAL INCOME. THE MAGNITUDE AND FREQUENCY AND THE R ATIO OF SALES TO PURCHASE AND TOTAL HOLDINGS COULD CONCLUDE WHETHER THE ACTIV ITIES OF THE ASSESSEE IS BUSINESS OR INVESTMENT. THE SCRUTINY OF THE RECORDS REVEALED THAT THE ASSESSEE HAS ENTERED INTO 664 TRANSACTIONS AND IN THE CASE O F SHORT TERM GAIN TRANSACTION; THE HOLDING PERIOD WAS LESS THAN ONE M ONTH AND BETWEEN ONE MONTH AND THREE MONTHS. MORE THE FREQUENCY OF TRANSACTION , GREATER IS THE PRESUMPTION THAT IT AMOUNTS OF BUSINESS. LONGER PERIOD OF THE S HARES, MORE ARE THE CHANCES THAT IT WILL BE TREATED AS INVESTMENT. WHATEVER ACT IVITIES CARRIED OUT WERE PURELY AND EXCLUSIVELY BY THE ASSESSEE ITSELF. THE INTENTI ON OF THE ASSESSEE CANNOT BE READ FROM HIS MIND BUT IT REFLECTS IN HIS CONDUCT A ND THE WAY IT TREATS THE TRANSACTION. CONSIDERING THE TOTALITY OF THE FACTS, THE TRANSACTION OF SALE AND PURCHASE OF SHARES CANNOT BE TREATED TO BE SHORT TE RM CAPITAL GAIN AS SHOWN BY THE ASSESSEE IN HIS STATEMENT OF TOTAL INCOME INSTE AD OF TRADING IN SHARES OR AS AN ADVENTURE IN THE TRADE AND IS ASSESSABLE AS BUSINES S INCOME. FROM THE RETURN OF INCOME AND LOOKING TO THE WRONG CLAIM ON ACCOUNT OF 'SHORT TERM CAPITAL GAIN' OF RS. 48,83,456/- INSTEAD OF BU SINESS INCOME, I HAVE REASON TO BELIEVE THAT THE ASSESSEE FAILED TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS FOR ASSESSMENT OF ITS CASE FOR A.Y. 2005-06. ACCORDINGLY, I AM SATISFIED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND HENCE, IT IS A FIT CASE FOR RE-OPENING OF ASSESSMENT WITHIN THE MEANING OF SECT ION 147OF THE ACT. IN VIEW OF ABOVE, I HAVE REASON TO BELIEVE THAT THE WRONG CLAIM ON ACCOUNT OF 'SHORT TERM CAPITAL GAIN' INSTEAD OF BUSINESS INCOM E TO THE EXTENT OF RS.48,83,456/- HAS ESCAPED ASSESSMENT WITHIN THE ME ANING OF SECTION 147 OF THE I. T. ACT. NOTICE U/S. 148 IS THEREFORE ISSUED TO T AX THE ESCAPED INCOME. 4. THE ASSESSING OFFICER, THEREAFTER, COMPLETED THE ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME-TAX ACT ON 19.03.2013. 5. APPEAL TO THE LEARNED CIT(A) AGAINST THE REOPENI NG OF ASSESSMENT DID NOT BRING ANY RELIEF TO THE ASSESSEE. ITA NO. 155/RJT/2015 MUKESH COMMOTRADE LTD VS. ACIT AYS : 2005-06 3 6. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VER Y OUTSET, SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED AFTER FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE PROVISO APPENDED TO SECTION 1 47 OF THE INCOME-TAX ACT CONTEMPLATES THAT IF AN ASSESSMENT ORDER HAS BEEN F RAMED UNDER SECTION 143(3) OF THE ACT AND FOUR YEARS HAVE EXPIRED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEN REOPENING CAN BE MADE IF INCOME HAS ESCA PED ASSESSMENT ON ACCOUNT OF FAILURE OF ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS FULLY AND TRULY. IN THIS CASE, A PERUSAL OF THE REASONS RECORDED BY THE ASSE SSING OFFICER WOULD INDICATE THAT THE ASSESSING OFFICER HAS NOWHERE OBSERVED THA T INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF ASSESSEE TO DIS CLOSE ALL THE MATERIAL FACTS FULLY AND TRULY AND, THEREFORE, THE REOPENING IS NO T SUSTAINABLE. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON FOLLOWING JUDG MENTS OF THE HONBLE JURISDICTIONAL HIGH COURT IN SUPPORT OF HIS CONTENT IONS:- I) ANIL HASSANAND GAJWANI VS. ITO, [2014] 49 TAXMANN.C OM 212 (GUJ.) II) ASHWIN KHIMCHAND JHAKARIA VS. DCIT, [2014] 49 TAXMA NN.COM 105 (GUJ) III) SPUNPIPE AND CONSTRUCTION CO VS. ACIT, [2014] 44 TA XMANN.COM 409 (GUJ) IV) MANISHKUMAR TULSIDAS KANERIYA VS. DCIT, [2016] 73 TAXMANN.COM 11 (GUJ) 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESE NTATIVE RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 8. ON DUE CONSIDERATION OF ABOVE FACTS AND CIRCUMST ANCES, WE ARE OF THE VIEW THAT PROVISO APPENDED TO SECTION 147 PUTS AN E MBARGO UPON THE POWERS OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT WH ERE THE ORIGINAL ASSESSMENT WAS FRAMED UNDER SECTION 143(3) AND FOUR YEARS HAVE EXPIRED FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH CASE, ASSESS MENT CAN BE REOPENED IF INCOME ESCAPED FROM TAXATION ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY. IN THE PRESENT CASE, THE ORIGINAL ASSESSMENT ORDER WAS FRAMED ON 28.12.2006 UNDER SECTION 143(3) OF THE ACT. A PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER WOULD INDICATE THAT THE ITA NO. 155/RJT/2015 MUKESH COMMOTRADE LTD VS. ACIT AYS : 2005-06 4 ASSESSING OFFICER HAS NOWHERE MADE OUT THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE A LL PARTICULARS OF INCOME FULLY AND TRULY. IN OTHER WORDS, THERE IS NO ALLEGATION AGAINST THE ASSESSEE THAT HE HAS WITHHELD THE INFORMATION REGARDING THE ALLEGED ESCA PEMENT OF INCOME. THEREFORE, WE ARE OF THE VIEW THAT REOPENING OF THE ASSESSMENT IS NOT IN ACCORDANCE WITH LAW AND DESERVES TO BE QUASHED. WE ACCORDINGLY QUASH THE REASSESSMENT ORDER AND THE APPEAL OF THE ASSESSEE I S THUS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 28 TH NOVEMBER, 2019 AT AHMEDABAD. SD/- SD/- ( WASEEM AHMED ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED 28/11/2019 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. , / DR, ITAT, RAJKOT 6. & / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) ' #, / ITAT, RAJKOT 1. DATE OF DICTATION- 28.11.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.11.2019 OTHER MEMBER 28.11.2019. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 28.11.2019 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 28.11.2019.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK28. 11.2019 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER 8. DATE OF DESPATCH OF THE ORDER