Income Tax Officer-Ward-7(1), Kolkata, Kolkata V. M/s Aska Investments Pvt. Ltd., Kolkata

ITA 2682/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4399 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 14-07-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 29-11-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR KUREEL JCIT LD
• Keywords: Business income; Wrong claim; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 147; 148

Judgement Text

ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL,A BENCH, KOLKATA BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2682/KOL/2013 A.Y: 2004-05 INCOME-TAX OFFICER VS. M/S. ASKA INVESTMENTS PVT. LTD. PAN:AACCA 1005C (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI RAJAT KR. KUREEL, JCIT, LD.SR.DR FOR THE REVENUE SHRI MANISH TIWARI, FCA, LD.AR OF TH E ASSESSEE DATE OF HEARING : 14-07- 2016 DATE OF PRONOUNCEMENT : 04 -10-2016 O R D E R SHRI S.S. VISWANETHRA RAVI, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 02-09-2013 OF THE COMMISSIONER OF INCOME TAX(APPEALS),XXXII, KOLKATA FOR THE ASSESSMENT YEA R 2004-05. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING EFFECTIVE GROUND:- (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-XXXII, KOLKATA HAS ERRED IN CANCELLI NG THE ASSESSMENT ORDER U/S. 147/143(3)/147(3) DATED 15/12 /2009 PASSED BY THE AO WITHOUT CONSIDERING THE ISSUE THAT REOPENING U/S. 147 IS VALID WHEN FAILURE TO DISCLOSE FULLY A ND TRULY MATERIAL FACTS WHICH COULD HAVE BEEN FOUND BY THE A O BY FURTHER PROBING AS DECIDED IN THE CASE OF INDO-ADEN SALT MFG. & TRG. CO P.LTD V. CIT (SC) 159 ITR 624 AS WELL AS IN R.B BANSILAL ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 2 ABIRCHAND FIRM V. CIT (SC) 70 ITR 74, THEREBY, MAKI NG THE DELETION OF PERVERSE, UNLAWFUL AND UNJUSTIFIED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS COMPANY AND DEALING IN THE BUSINESS OF FINANCE, SHARE AND R EAL ESTATE. THE ORIGINAL ASSESSMENT WAS COMPLETED ON 27. 11. 20 06 U/S 143(3) OF THE ACT AND THEREAFTER, THE ASSESSMENT WA S REOPENED U/S.147 ON THE FOLLOWING GROUNDS : 'ON SCRUTINY OF RECORDS, IT APPEARS FROM THE PROFI T & LOSS ACCOUNT THAT THE ASSESSEE DEBITED A SUM OF RS.56,11,539.85 AS 'LOSS ON SALE OF SHARE' AND THE SAME WAS ALLOWED IN THE ASSESSMENT. IT WAS ALSO NOTICED FROM THE TAX AUDIT REPORT OF THE ASSESSEE COMPANY WAS ENGAGED IN FINANCING AND NOT DEALING IN TRADING OF SHARE SHOWN AS OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK OF SHARES IN THE ASSESSEE FOR THE FINANCIAL YEAR 2003-2004. IT W AS ALSO SEEN FROM THE ASSESSMENT RECORD THAT ASSESSEE WAS A FREQUENT PURCHASER AND SELLER OF SHARES WHICH WAS N OT AT ALL A PART OF ITS BUSINESS. ONLY THE TOTAL LOSS ON SALE O F SHARE WAS SHOWN IN THE PROFIT & LOSS ON SALE OF SHARE AS CL AIMED BY THE ASSESSEE WAS ALLOWED AT THE TIME OF ASSESSMENT. I HAVE REASON TO BELIEVE THAT THE WRONG CLAIM OF LO SS ON SALE OF SHARES, CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT WITHIN THE MEANING OF SECTION 147 OF THE 1. T. ACT, 1961.' 4. IN RESPONSE TO THE NOTICE U/S.148 OF THE ACT, TH E ASSESSEE FILED A LETTER ON 12.03.2009 STATING THAT THE ORIGI NAL RETURN AS FILED ON 25.10.2004 MAY BE TREATED AS THE RETURN AS FILED IN SECTION 148 OF THE ACT PROCEEDINGS. THEREAFTER, NOT ICES U/S.143(2) & 142(1) WERE ISSUED AND IN RESPONSE TO WHICH THE ASSESSEE COMPANY APPEARED AND SUBMITTED THE DETAILS . 5. THE AO WAS OF THE VIEW THAT THE ASSESEE TREATED LOSS ON SHARES SEPARATELY IN ALL THE SUBSEQUENT YEAR A.YS 2005-06, 2006-07 AND 2007-08 AND SHOWN AS LONG TERM CAPITAL LOSS IN THE COMPUTATION OF INCOME AND SOUGHT NO SET OFF AGA INST BUSINESS INCOME IN SUCH A.YS. THE CLAIM OF LOSS OF ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 3 RS.56,11,539.85 WAS DISALLOWED. THE RELEVANT PORTIO N OF WHICH IS REPRODUCED HEREIN BELOW: THE ASSESSEE MAINTAINED THAT THE SAID LOSS OF RS.56,11,539.85 WHICH WAS ADJUSTED AGAINST THE BUSI NESS INCOME WAS A BUSINESS LOSS AND NOT LOSS ON SHORT TE RM TRANSACTIONS IN SHARES BECAUSE THEY TREAT THE SAID ACTIVITY AS THEIR BUSINESS. HOWEVER, IN ORDER TO DETERMINE THE TRUE NATURE OF ASSESSEE'S BUSINESS IN SHARES, IT IS PERTINENT T O TAKE A LOOK AT THE TREATMENT, IT HAS MADE TO GAINS/LOSSES IN SH ARES IN OTHER YEARS. FROM THE PERUSAL OF RECORDS AVAILABLE WITH THIS OFFICE, IT IS FOUND THAT IN ALL THE SUBSEQUENT YEAR S, THAT IS, ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08, THE LOSS ON SHARES HAVE BEEN SHOWN SEPARATELY IN THE COMPUTATIO N OF INCOME AS LONG TERM CAPITAL LOSS AND HAVE NOT BEEN SET OFF AGAINST BUSINESS INCOME. THE ASSESSEE HAS NOT EVEN BEEN MAINTAINING DIFFERENT PORTFOLIOS FOR INVESTMENT AND TRADING. IN THE LIGHT OF THESE FACTS, IT CAN NOT BE HELD THAT A SSESSEE HAS BEEN TREATING THE SAME AS ABSOLUTELY BUSINESS TRANS ACTIONS. THUS THE LOSS OF RS.56,11,539.85 CAN NOT BE ADJUSTE D AGAINST THE BUSINESS INCOME OF THE ASSESSEE, AND ARE DISALL OWED. 6. THE ASSESSEE HAS CHALLENGED SUCH DISALLOWANCE BE FORE THE CIT-A AND CONTENDED BY WAY OF WRITTEN SUBMISSION DA TED 29.03.2011 IS AS UNDER:- 'THE COMPANY WAS SURPRISED TO RECEIVE ANOTHER NOTIC E U/S. 148 DT.02/12/2008 FOR ALLEGED ESCAPEMENT OF INCOME RESU LTING FROM LOSS ON SALE OF SHARES TO THE EXTENT OF RS.56,11,54 0/- WHICH WAS DEBITED IN THE P&L A/C AND ALLOWED EARLIER. THE APPELLANT CONTESTED THE INITIATION OF REASSESSMENT PROCEEDING THROUGH WRITTEN REPLY DATED 09/12/2008 AND REQUESTED TO TRE AT THE EARLIER RETURN AS A RETURN U/S.147. IN RESPONSE TO STATUTORY NOTICES VIS 143(2) & 142(1 ), THE COMPANY REITERATED ITS STAND REGARDING INVALID ASSU MPTION OF JURISDICTION U/S. 147 AND SUBMITTED WRITTEN EXPLANA TION POINTING OUT THE FACTUAL AS WELL AS LEGAL POSITION WITH SUPP ORTING DOCUMENTS. IN THE BACKGROUND OF ABOVE FACTS ON RECO RD, WE MAKE DETAILED SUBMISSIONS ON VARIOUS GROUNDS. GROUND NO. 1 (A) TO 1 (C) ALL THESE GROUNDS HAVE BEEN PREFERRED TO CONTEST TH E INVALID ASSUMPTION OF JURISDICTION U/S. 147 OF THE ACT. THE RE- ASSESSMENT PROCEEDING INITIATED THROUGH ISSUE OF NO TICE ULS.148 DT. 011212008 IS AB-INITO VOID AND WITHOUT VALID AS SUMPTION OF JURISDICTION FOR REASONS EXPLAINED BELOW: . (1) THE POWER CONFERRED BY SECTION 147 AND 148 IS N OT UNBRIDLED ONE. IT IS HEDGED WITH SEVERAL SAFE GUARD S CONCEIVED ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 4 IN THE INTEREST OF ELIMINATING ROOM FOR ABUSE OF TH IS POWER BY THE ASSESSING OFFICER. RELIANCE IS PLACED TO THE DE CISION IN SRI KRISHNA (P) LTD -VS- CIT,221 ITR 538 (SC). (2) THE POWERS OF THE ASSESSING OFFICER TO REOPEN A SSESSMENT THOUGH WIDE ARE NOT PLENARY. THE WORDS OF THE STATU TE ARE 'REASON TO BELIEVE' AND NOT 'REASON TO SUSPECT '. T HE BELIEF ENTERTAINED BY ASSESSING OFFICER MUST NOT BE ARBITR ARY OR IRRATIONAL. IT MUST BE BASED ON REASONS WHICH ARE R ELEVANT AND MATERIAL. (3) THE EXPRESSION 'REASON TO BELIEVE' MUST BE IN G OOD FAITH; IT CANNOT MERELY BE Q PRETENCE AS OPINED IN THE CASE O F S. NARAYANAPPA -VS-CIT,63 ITR 219 (SC). (4) THE WORDS 'REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UP ON REASONABLE GROUNDS BUT NOT ON MERE SUSPICION, GOSSI P OR RUMOR. (5) WITHOUT PREJUDICE TO THE ABOVE, WE LIKE TO ADD THAT LD. A.O. HAS EXCEEDED HIS JURISDICTIONAL LIMIT TO INITIATE P ROCEEDING U/S. 147 FOR THE SECOND TIME ON 02/12/2008 BY MERE CHANG E OF OPINION. THIS IS NOT PERMITTED IN LAW. IN THIS CONT EXT, WE INVITE YOUR ATTENTION TO THE DECISION OF APEX COURT IN THE CASE OF CIT- VS-BHANJI LAVJI REPORTED AT 79ITR 582 (SC). SO FAR AS FACTUAL POSITION TO SUGGEST THAT RE-ASSES SMENT PROCEEDING WAS INITIATED ON MERE CHANGE OF OPINION, WE LIKE TO DRAW YOUR ATTENTION TO LETTER NO. 41 DATED 16105120 06 (COPY ENCLOSED) ISSUED BY THE PREVIOUS OFFICER IN COURSE OF EARLIER RE- ASSESSMENT PROCEEDING. IN THE SAID LETTER NO. 41 DT D. 16/05/2006, ASSESSING OFFICER ASKED FOR SPECIFIC PA RTICULARS AND THE QUERY REMAINED AS UNDER: 5. DETAIL OF LOSS ON SALE OF SHARES VIZ DATE OF ACQ UISITION, COST PRICE, DATE OF SALE, SALE PRICE, LOSS/PROFIT THEREO N ALONG WITH COPY OF CONTRACT NOTES, COPY OF BILLS. FROM THE SHA RE INVESTMENT A/C, IT IS SEEN THAT DURING THE YEAR SHARE OF RS.LL ,59,207/- WHEREAS NO PURCHASE AND SALE ACTIVITY WAS SHOWN IN P & L. SUBMIT EXPLANATION. THE ABOVE QUERY WAS COMPLIED BY THE APPELLANT COMP ANY VIDE LETTER DATED 08/-8/2006 ( COPY ENCLOSED). THE THEN AO WAS SATISFIED WITH THE DETAILS AND DOCUMENTS AND ALLOWE D SUCH LOSS WHILE MAKING RE-ASSESSMENT U/S.143(3)/147 ON 27/11/ 2006 EXCEPT LOSS OF RS.7,617/- WHICH WAS HELD AS LONG TE RM LOSS. IN VIEW OF THE FACTUAL AND LEGAL POSITION EXPLAINE D ABOVE, WE SINCERELY BELIEVE THAT YOUR HONOUR MAY NOT HESIT ATE THAT THE RE-ASSESSMENT PROCEEDING INITIATED FOR THE SECOND T IME ON 02/12/2008 IS VOID AND NOT MAINTAINABLE IN LAW. ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 5 7. CONSIDERING THE ABOVE SUBMISSIONS, THE CIT-A OPI NED THAT THE AO ALREADY RAISED THE ISSUE IN FIRST REASSESSMENT A ND FOUND THE ORDER UNDER MADE UNDER 2 ND REASSESSMENT PROCEEDINGS WAS A CHANGE OF OPINION WHICH IS REPRODUCED AS UNDER AS U NDER: AS THE FACTS OF THE PRESENT CASE LEAVE NO DOUBT THA T THE AO. HAD SPECIFICALLY RAISED THE ISSUE OF LOSS ON SA LE OF SHARES IN THE FIRST REASSESSMENT ORDER, THE SECOND REASSES SMENT ORDER IS NOTHING BUT A CHANGE OF OPINION AS EXPLAIN ED IN THE VARIOUS DECISIONS ABOVE. THEREFORE THE ASSESSEE'S G ROUND OF APPEAL NO I (A), L(B) & L(C) ARE ALLOWED AND THE SE COND REASSESSMENT ORDER IS HELD TO BE INVALID AND IS CAN CELLED. 8. AGGRIEVED BY THE ORDER OF CIT-A, THE REVENUE BEF ORE US BY RAISING AFOREMENTIONED GROUNDS OF APPEAL. THE LD.DR RELIED ON THE ORDER OF AO AND LD.AR SUPPORTED THE ORDER OF CIT-A. 9. HEARD RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ORIGINAL ASSESSMENT ORDER WAS COMPLETED U/SEC 147 R/W 143(3) OF THE ACT. IN SUCH PROCEEDING S THE AO FOUND FROM PROFIT & LOSS ACCOUNT AND RAISED A DOUB T HOW THE ASSESSEE SUFFERED LOSS WHEN IT SOLD SHARES VALUING OF RS.11,59,207/- AND WHEN NO PURCHASE AND SALE ACTIV ITY DISCLOSED IN THE PROFIT & LOSS ACCOUNT. ACCORDINGLY THE AO, T HE ACIT, CIRCLE-7 HAD ISSUED A QUESTIONNAIRE U/S 142(1) VIDE LETTER F .NO. ACIT/CIR- 7/KOL/AACCA1005C/2006-07/41 DATED 16-5-06. THE ASSE SSEE REPLIED VIDE LETTER DATED12.05.06 MENTIONING THAT I T ALSO DEALS IN SHARE AND SECURITIES AND DOES SALES & PURCHASE IN C APITAL MARKET AND SUBMITTED THE DETAILS OF SHARES SALE, PURCHASE & LOSS. THE AO EXAMINED AND VERIFIED SUCH DETAILS OF SHARE TRANSAC TIONS GIVING QUANTITY AND RATES OF OPENING STOCK, INWARD & OUTWA RD TRANSACTIONS AND PROFIT/LOSS. THE AO ALSO CONDUCTED INQUIRES FROM THE SHARE BROKERS SHRI N. M. LOHIA & SMT RENU PODDA R U/S 133(6) ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 6 OF THE ACT AND ACCEPTED THE CONTENTIONS OF ASSESSE E AND HELD THAT A LOSS OF RS. 7,617/- AS LONG TERM CAPITAL LO SS ON SALE OF SHARES AND PASSED REASSESSMENT ORDER U/S 147/143(3 ) TO THAT EFFECT ON 27.11.06. THESE ARE THE FACTS ARE ADMITTE D AND UNDISPUTED BY THE PARTIES. IT IS ALSO NOTICED FROM THE RECORD THAT, IN SPITE OF, OBJECTIONS RAISED BY THE ASSESSEE, THE AO DID NOT REFER TO THE SAME IN 2 ND REASSESSMENT PROCEEDINGS AND MADE AN ADDITION OF RS.56,11,539/- WITHOUT ANY BASIS, IN OUR OPINION , IS A CHANGE OF OPINION WHEN ALL THE DETAILS WERE PROVIDED UNDER 14 2(1) OF THE ACT IN THE 1 ST REASSESSMENT PROCEEDINGS. IN THIS REGARD WE MAY RE FER TO THE DECISION OF HONBLE HIGH COURT IN THE CASE O F TUPPERWARE INDIA P.LTD (SUPRA) IS SQUARELY APPLICABLE. THE RELEVANT FINDING OF WHICH IS REPRODUCED HEREIN BELOW FOR BETTER UNDERSTANDING:- 12. AT THE OUTSET IT REQUIRES TO BE FACTUALLY NOTI CED THAT THE REOPENING ORDER OF THE AO ONLY REFERS TO THE REPORT OF STATUTORY AUDITOR UNDER SECTION 44AB OF THE ACT WHICH REPORT WAS ALREADY ENCLOSED WITH THE RETURN FILED BY THE ASSESSEE. THE REFORE, FACTUALLY, THERE WAS NO NEW MATERIAL THAT THE AO CAME ACROSS S O AS TO HAVE REASONS TO BELIEVE THAT THE INCOME HAD ESCAPED ASS ESSMENT. 10. IN THE PRESENT CASE, THE MATERIAL EVIDENCE RELA TING TO ADDITIONS SAID TO HAVE BEEN PROVIDED IN 1 ST REASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT, IN OUR OPINION, THE AO RELIED ONLY ON THE EXISTING FACTS TO REOPEN THE ASSESSMENT AGAIN, SINCE THERE WAS NO NEW MATERIAL BROUGHT ON RECORD BY THE AO TO RE-OPEN THE 1 ST REASSESSMENT AGAIN U/S. 147 OF THE ACT, THEREFORE, THE 2 ND REASSESSMENT, IS NOT JUSTIFIED. WE FIND THAT THE FACTS OF THE CASE OF TUPPERWARE (I) PVT. LTD (SUPRA) OF THE HON BLE DELHI HIGH COURT ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A ) IN ANNULLING THE 2 ND RE-ASSESSMENT MADE U/S. 147. ACCORDINGLY GROUNDS RA ISED BY REVENUE ARE LIABLE TO BE DISMISSED. ITA NO. 2682/KOL/13 M/S. ASKA INVESTMENTS PVT.LTD 7 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2016. SD/- SD/- P.M.JAGTAP S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04 /10/2016 1. THE APPELLANT/ ASSESSEE: INCOME TAX OFFICER, WARD 7(1), KOLKATA P - 7 CHOWRINGHEE SQUARE, R.NO. 21, 5 TH FLOOR, KOL-69. 2 . THE RESPONDENT/ ASSESSEE: M/S. ASKA INVESTMENTS PVT. LTD 1 ROWDON STREET, 2 ND FLOOR, KOLKATA-700017. 3. CIT 4. CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGIS TRAR ** PRADIP SPS INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA COPY OF THE ORDER FORWARDED TO : -