The DCIT(OSD).,Range-1, Ahmedabad V. Digvijay Finlease Ltd., West Bengal

ITA 2402/AHD/2011

• Counselvise Citation: 240220514 RSA 2011
• Duration Of Justice: 4 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 22-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILEEP KUMAR
• Assessee Lawyers: PF JAIN
• Keywords: Reopening of assessment; Business income; Wrong claim; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 148; 143(3)

Judgement Text

I.T.A. NO. 2402 /AHD/ 201 1 ASSESSMENT YEAR: 200 5 - 06 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. 2402 /AHD/201 1 A SSESSMENT Y EAR : 20 0 5 - 06 DY. COMMISSIONER OF INCOME TAX (OSD) .APPELLANT RANGE - 1, AHME D ABAD. VS. DIGVIJAY FINLEASE LIMITED . RESPONDENT 21, S T RAND ROAD, KOLKAT T A, WEST BENGAL . [P AN: AA ACD 6998 D ] APPEARANCES BY: DILEEP KUMAR , FOR THE A PPELLANT P.F. JAIN , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING: SEPTEMBER 10 , 2 01 5 DATE OF PRONOUNCING THE ORDER : DECEMBER 9 TH , 2015 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 4 TH JULY, 2011 PASSED BY THE LEARNED CIT(A), IN THE MAT TER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER), FOR THE ASSESSMENT YEAR 2005 - 06, ON THE FOLLOWING GROUND S : - THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT WHENEVER THE ASSESSEE HAS HELD S HA RES FOR MORE THAN 30 DAYS, IT SHOULD BE TREATED AS INVESTMENT RESULTING IN CAPITAL G A IN AND WHEREVER SHARES ARE HELD UPTO 30 DAYS, T HE INCOME AR I SING THEREFROM BE TREATED AS BUSINESS INCOME OF THE APPELLANT , THEREBY TR EA TING THE INCOME OF RS.42,61,060/ - A S CAPITAL GAINS INSTEAD OF BUSINESS INCOME. I.T.A. NO. 2402 /AHD/ 201 1 ASSESSMENT YEAR: 200 5 - 06 PAGE 2 OF 6 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER TO THE EXTENT MENTIONED ABOVE, SINCE THE ASSESSEE HAS FAILED TO DISCLOSE HIS TRUE INCOME. 2. VIDE APPLICATION DATED 3 RD SEPTEMBER 2015, THE ASSESSEE APPLICANT HAS ALSO CHALLENGED THE IMPUGNED ORDER UNDER RULE 27 OF THE APPELLATE TRIBUNAL RULES 1962, ON THE GROUND THAT, THE ORDER PASSED BY THE AO UNDER SECTION 143(3) R.W.S. 147 OUGHT TO HAVE BEEN HELD AS BAD IN LAW AND VOID AB INITIO, WITHOUT JURISDICTION AS THE CONDITIONS OF REASSESSMENT WERE NOT EXISTENT . 3. AS THE ISSUE RAISED BY THE ASSESSEE GOES TO THE ROOT OF THE MATTER AND IN THE EVENT OF THIS GRIEVANCE BEING ACCEPTED, THE RE VENUE S GRIEVANCE WILL BE RENDERED ACADEMIC, WE WILL TAKE UP THE ASSESSEE S GRIEVANCE FIRST. 4. SO FAR AS THE ADJUDICATION ON CORRECTNESS OF REASSESSMENT PROCEEDINGS ARE CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IT IS A CASE IN WHICH ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT WERE COMPLETED ON 30.11.2007 BUT THE REASSESSMENT WAS REOPENED, ON 29.01.2010, ON THE FOLLOWING GROUND : - REASONS RECORODED FOR THE NOTICE U/S.148 OF THE I.T. ACT THE ASSESSEE COMPANY FILED I T S RER UN OF INCOME ON 30.10.2005 DECLARING TO T AL INCOME OF RS.12,77,650/ - . THE INCOME INCLUDED SHORT TERM CAPITAL GAIN OF RS.42,61,060/ - . THE CA S E WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS FINALISED U/S. 143(3) OF THE ACT O N 30.11.2007 DETERMINING THE T AXABLE INCOME AT RS.13,27,630/ - ON WHICH TAX WAS COMPUTED AT RS.1,38, 803/ - I.E. AT THE RATE OF TAX APPLICABLE TO SHORT TE R M CAPITAL GAIN . AS PER SUPREME COURT DECISION IN THE CASE OF N.R.M. PLANTATIONS PVT. LTD. VS. C IT (2000) 250 ITR 521, EVEN THE SUR PLUS ON SALE OF AN ASSET BY AN INVESTMENT COMPANY IS I.T.A. NO. 2402 /AHD/ 201 1 ASSESSMENT YEAR: 200 5 - 06 PAGE 3 OF 6 LIABLE TO BE TREATED A S NORMAL BUSINESS INCOME , SINCE THE COMPANY IS ENGAGED IN FINANCE AND INVESTMENT . IT HAS ALSO BEEN JUDICIALLY HELD BY VARIOUS COURTS THAT INCOME ARISING FROM FREQUENT AND VOLUMIN OUS PURCHASE AND SALE OF SHAR E S WITH A MOTIVE OF PROFIT IS LIABLE TO BE TREATED A S AN INCOME UNDER THE HE A D PROFITS AND GAINS OF BUSINESS OR PROFESSION . THE CERTIF ICATE OF THE AUDITORS IN FORM 3 CD REVEALED THAT THE ASSESSEE IS A FINANCE & INVESTMENT C OMPANY. THERETOFORE , THE INCOME DERIVED BY IT FROM PURCHASE AND S ALES OF EQUITY SHARE/ MUTUAL FUND ETC. WAS IN THE NATURE OF PROFITS AND GAINS OF BUSINESS OF PROFESSION AND CANNOT BE TR EATED AS CAPITAL GAIN IN VIEW OF THE DECISION QUOTED ABOVE . THUS , INCOME WHICH IS TAXED UNDER THE HEAD CAPITAL GAIN IS TO BE TAXED UNDER THE HEAD BUSINESS INCOME IN VIEW OF THE ABOVE DISCUSSION. THEREFORE, THE UNDERSIGNED HAS REASONS TO BELIEVE THAT T HE INCOME CHARGEABLE TO TAX FOR THE YE A R UNDER CONSIDERATION HAS E SCAPED ASSESSMENT (UNDER CORRECT HEAD OF INCOME) AS PER THE PROVISIONS OF SECTION 147 OF THE I.T. CT. THEREFORE , A NOTICE U/S. 148 OF THE I.T. ACT IS BEING ISSUED FOR RE - ASSESSMENT U/S. 147 OF THE I.T. ACT. 5. FOR THE SAKE OF COMPLETENESS, IT MAY BE ME NTIONED THAT THIS IS SECOND REOPENING OF ASSESSMENT, INASMUCH AS A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED, EARLIER ON 25.05.2009, ON THE GROUND THAT A WRONG CLAIM UNDER SECTION 35D, FOR RS.51,942/ - , WAS ALLOWED IN THE ORIGINAL ASSESSMENT PROCEEDING S. IN THE COURSE OF REASSESSMENT PROCEEDINGS THAT IS BEFORE US, ASSESSEE DID OBJECT BUT WITHOUT ANY SUCCESS. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) BUT THAT DID NOT YIELD ANY RESULTS EITHER. LEARNED CIT(A) REJECTED THIS GRIEVANCE BY OBSE RVING AS FOLLOWS : - I HAVE CONSIDERED THE FACTS OF THE C A SE; ASSESSMENT OR DER AND APPELLANT S SUBMISSION. IT IS NOT IN DISPUT E T HAT ASSESSMENT WAS REOPENED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR AND THEREFORE THERE WAS NO REQUIREMENT OF NONDIS CLOSURE OF MATERIAL FACT RESULTING IN ESCAPEMENT OF INCOME. APPELLANT ALSO TOOK ARGUMENT THAT IN THE SCRUTINY ASSESSMENT COMPLETED , RELEVANT DETAILS WERE FURNISHED AND THEREFORE REOPENING IS CHANGE OF OPINION. THE ISSUE WAS DISCUSSED IN DETAIL WITH THE A PPELLANT S COUNSEL AND IN THE ORDER SHEET NOTING DATED 28.06.2011, IT IS CLEARLY MENTIONED T HAT THE ISSUE WHETH ER GAIN IS TA XA BLE AS BUSINESS INCOME OR CAPITAL GAIN WAS NOT DISCUSSED IN ORIGINAL ASSESSMENT PROCEEDINGS AND HENCE ASSESSING OFFICE HAD NO OCCA SION TO HAVE HIS OPINION ON THIS ISSUE. SINCE THIS ISSUE WAS NOT AT ALL EXAMINED IN THE ORIGINAL I.T.A. NO. 2402 /AHD/ 201 1 ASSESSMENT YEAR: 200 5 - 06 PAGE 4 OF 6 ASSESSMENT PROCEEDINGS, THERE WAS NO OCCASION FOR THE AO TO FORM HIS OPINION WHICH CAN BE CHANGED LATER BY ANOTHER A . O. SINCE JUST BY SUBMITTING TH E DETAILS, ONE CANNOT CONCLUDE THAT ALL RELEVANT ASPECTS HAVE BEEN EXAMINED. ACCORDINGLY IT IS CLEAR THAT THE INCOME HAS ESCAPED ASSESSMENT AND ALL THE CONDITIONS FOR REOPENING THE ASSESSMENT ARE FULF ILLED AND ACCORDINGLY THE REOPE NING IS JUSTIFIED. THIS GROUND IS ACCORDINGLY DISMISSED . 6. THE ASSESSEE IS NOT SATISFIED AND HAS RAISED THIS ISSUE BY WAY OF PETITION U/R. 27 OF THE APPELLATE TRIBUNAL RULES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE I N THE LIGHT OF APPLICABLE LEGAL POSITION. 8. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECORDED FOR REOPENING THE REASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDED TO THE REASONS SO RECORDED, NOR ANYTHING CAN BE DELETED FROM T HE REASONS SO RECORDED. HON BLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LIMITED VS. R.B. WADKAR [(2004) 268 ITR 332], HAS, INTER ALIA, OBSERVED THAT . ......... . IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE R ECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT RECORDED. IT IS FOR THE A.O. TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS. THEIR LORDSHIPS ADDED THAT THE REASONS RECORDED SHOULD BE SELF - EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE ......... ... .. . THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARILY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO I.T.A. NO. 2402 /AHD/ 201 1 ASSESSMENT YEAR: 200 5 - 06 PAGE 5 OF 6 AN INCOME ESCAPING ASSESSMENT AND NOT MERELY NEED OF AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSAR Y IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME HAS ESCAPED THE ASSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE SOMETHING WHICH INDICATES , EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ASSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSMENT. MERELY BECAUSE SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED OUT, WHIC H, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPING ASSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT. 9. IN THIS LIGHT, LET US REVERT TO THE REASONS RECORDED FOR REOPENING ASSESSMENT. THE RELIANCE PLACED O N HON BLE SUPREME COURT S JUDGEMENT IN THE CASE OF NRM PLANTATIONS PVT. LTD. VS. CIT [(2000) 250 ITR 521 (SC)], IS WHOLLY MISPLACED IN THE CONTEXT OF WHAT CONSTITUTES BUSINESS INCOME, IN CONTRADISTINCTION TO CAPITAL GAINS, BECAUSE THIS JUDICIAL PRECEDENT D EALS WITH THE QUESTION AS TO WHAT CONSTITUTES UNDISTRIBUTED INCOME UND E R SECTION 104 , AS IT THEN EXISTED, OF THE INCOME TAX ACT , 1961 . THIS SECTION IS NOT EVEN REMOTELY CONNECTED WITH WHAT CONSTITUTES BUSINESS INCOME VIS - - VIS CAPITAL GAINS, AND IS NO L ONGER ON STATUTE. BY NO STRETCH OF LOGIC, THIS DECISION CAN BE SEEN IN SUPPORT OF THE PROPOSITION THAT GAINS ON SALE OF SHARES CONSTITUTES BUSINESS INCOME AND NOT CAPITAL GAINS. AS FOR THE REFERENCE TO THE INCOME FROM FREQUENT SALE OF SHARES BEING HELD T O BE IN THE NATURE, AS THERE IS NOT EVEN A WHISPER TO SUGGEST THAT THERE ARE FREQUENT SALE AND PURCHASE OF SHARES IN THIS CASE, IT DOES NOT ALSO LEAD TO THE SUGGESTION THAT INCOME HAS ESCAPED I.T.A. NO. 2402 /AHD/ 201 1 ASSESSMENT YEAR: 200 5 - 06 PAGE 6 OF 6 ASSESSMENT. UNLIKE A CASE OF REVISION IN WHICH LACK OF ENQUIRY CAN BE A REASON ENOUGH IN SOME CASES TO INVOKE THE REVISION POWERS, AN ASSESSMENT CAN BE REOPENED ONLY WHEN THERE IS A SUGGESTION, AT LEAST PRIMA FACIE, THAT INCOME HAS ESCAPED ASSESSMENT. THAT IS NOT THE CASE HERE. IN THE LIGHT OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE HOLD THAT THE REASSESSMENT PROCEEDINGS WERE INDEED VITIATED IN LAW. WE, THEREFORE, QUASH THE REASSESSMENT ITSELF. 10. AS THE REASSESSMENT ITSELF STANDS QUASHED, THE GRIEVANCE RAISED BY THE ASSESSING OFFICER, WHICH IS ON MERITS, IS RENDERED ACADEMIC AND INFRUCTUOUS. 11. IN THE RESULT, THE APPEAL IS DISMISSED IN THE ABOVE TERMS . P RONOUNCED IN THE OPEN COURT TODAY ON 9 TH DECEMBER, 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 9 TH DAY OF DECEMBER , 201 5 . PBN/ * COPIES TO : (1) THE APPE LLANT (2) THE RESPO NDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD