Commissioner of Income Tax -II, Guwahati V. M/s. Arihant International Limited , Guwahati

ITA 275/GTY/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0288 (ITAT-GUWAHATI)
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 11-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Principle of natural justice; Transactions in derivatives; Retrospective amendment; Question of law; Tangible material; Speculation loss; Wrong claim; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction; Speculative transactions; Set aside
• Section: 147; 148; 28; 143(3); 142(1); 43(5); 143(1); 250; 143(2); 191; 264; 139(1); 43; 73(1); 73; 13; 22

Judgement Text

आयकर अपीलीय अधिकरण ग ु वाहाटी 'डीबी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI ‘DB’ BENCH AT KOLKATA [वर् ु ु अल कोट ु ] [Virtual Court] डॉ. मनीष बोरड, ल े खा सदस्य एवं श्री संजय शमा ु , न्याधयक सदस्य क े समक्ष Before DR. MANISH BORAD, ACCOUNTANT MEMBER & SRI SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 ACIT, Circle-3, Guwahati.........................................Appellant Vs. M/s. Arihant International Limited.......................Respondent [PAN: AAECA 5555 B] Appearances by: Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue. Sh. Akkal Dudhwewala, Adv., appeared on behalf of the Assessee. Date of concluding the hearing : July 27 th , 2022 Date of pronouncing the order : October 19 th , 2022 आद े श ORDER Per Manish Borad, Accountant Member: This appeal filed by the Revenue pertaining to the Assessment Year (in short “AY”) 2009-10 is directed against the I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 2 of 23 order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Guwahati-2, Guwahati [in short ld. “CIT(A)”] dated 12.07.2018 arising out of the assessment order framed u/s 143(3) of the Act dated 18.11.2021. 2. Brief facts of the case as culled out from the records are that the assessee is a limited company engaged in the business of trading in cement, steel, investment and finance activities. Income of Rs. 1,57,14,240/- declared in the return of income for AY 2009- 10 dated 30.09.2009. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Assessment was completed on 18.11.2011 assessing income at Rs. 1,76,63,830/- after making ad-hoc addition of Rs. 19,49,589/- towards 25% of the contract expenses incurred during the year. This addition was challenged by the assessee before ld. CIT(A) and partly succeeded. 2.1. Subsequently, ld. AO on examination of the assessment records, issued show cause notice u/s 148 of the Act on 11.12.2014 which was undisputedly after four years from the end of relevant assessment year. The sole reasons stated in the said notice for reopening was regarding loss from future trading under Future & Options (Derivatives) [in short “F & O (Derivatives)”] claimed as an expenditure at Rs. 4,08,99,275/-. In the reasons recorded, ld. AO asked the assessee as to why the loss from F & O (Derivatives) trading should not be treated as speculation loss and why explanation to Section 73 of the Act should not be made applicable in case of the assessee. Accordingly, re-assessment proceedings were carried out in absence of any submissions made I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 3 of 23 by the assessee. The best judgment assessment was framed u/s 147 r.w.s. 143(3), r.w.s. 144 of the Act and loss from trading of F & O (Derivatives) of Rs. 4,08,99,275/- was disallowed and income assessed at Rs. 5,71,17,516/- in the re-assessment order dated 23.11.2015. 3. Aggrieved, the assessee preferred appeal before ld. CIT(A) raising legal grounds as well as grounds on merit and finally succeeded. Ld. CIT(A) firstly held that the impugned assessment order dated 23.11.2015 is conspicuously marred by clear denial of opportunity of hearing, violation of principles of natural justice, colourable exercise of power, lack of fair play in action and perversity of procedure in law and accordingly quashed the impugned assessment order dated 23.11.2015. Ld. CIT(A) further, held that the alleged sum of loss from trading in F & O (Derivatives) is not a speculative transaction, in view of the provisions of Clause ‘d’ to the first proviso to Section 43(5) of the Act and also held that the “Mischief of explanation to Section 73 of the Act cannot be made applicable to include sale and purchase of derivatives into the ambit of explanation to Section 73 of the Act.” Further, ld. CIT(A) held that the re-assessment order framed for AY 2009-10 is merely on the basis of change of opinion and the said proceedings were carried out by completely relying on the previous assessment orders for other assessment years i.e. AY 20010-11 & 2011-12 which had been set aside by the respective Pr. CIT and hence, it is a clear example of re-assessment made by reproduction of reasons and facts elucidated in other assessment orders for other assessment years. I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 4 of 23 4. Aggrieved, the Revenue is now in appeal before this Tribunal raising the following grounds of appeal: “(i) For that on the facts and in the circumstances of the case and in law, Ld. CIT(A) is not justified in quashing the assessment proceedings merely for want of principles of natural justices, without appreciating that sufficient opportunity were permitted to the assessee company. (ii) For that on the facts and in the circumstances of the case and in law, Ld. CIT(A) is not justified in quashing the order for the reason that reopening assessment u/s 148 of the Act was based on a change of opinion. (iii) For that on the facts and in the circumstances of the case and in law, Ld. CIT(A) is not justified in deleting the addition of Rs. 4,08,99,275/-on account of bogus business loss, claimed to have been incurred by the assessee, from trading in Future & option. (iv) The appellant craves leave to add, alter or amend any or all of the grounds of appeal before or during the course of appeal.” 5. Ld. D/R vehemently argued supporting the order of ld. AO stating that ld. CIT(A) erred in quashing the assessment proceedings dated 23.11.2015 and also erred in holding that loss on trading in F & O (Derivatives) is not a speculative transaction. 6. On the other hand, Ld. Counsel for the assessee contended on three aspects, firstly, stating that in absence of any failure on the assessee’s part to truly and fully disclose all material facts in the original assessment. The action of ld. AO of reopening the completed assessment is bad in law. For this contention, reliance was placed on the judgment on Hon'ble Supreme Court of India in the case of ACIT vs. ICICI Securities Primary Dealership Ltd. reported in [2012] 24 taxmann.com 310 (SC) and in the case of New Delhi Television Ltd. vs. DCIT reported in [2020] 116 taxmann.com 151 (SC) and in the case of ACIT vs. Rajesh Jhaveri Stock Brokers I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 5 of 23 (P.) Ltd. reported in [2007] 291 ITR 500 (SC) and in the case of CIT vs. Foramer France reported in [2003] 264 ITR 566 (SC). Reliance was also placed on the judgment of full Bench of the Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. reported in [2002] 256 ITR 1 (Delhi) which was subsequently upheld by Hon'ble Supreme Court of India in CIT vs. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC). 6.1. Secondly, it was contended that conditions precedent in first proviso to Section 147 of the Act were not fulfilled and thus, reopening was bad in law as the reopening was carried after the completion of four years from the end of relevant assessment year and the reasons recorded by ld. AO fail to point out that what was the material fact which the assessee failed to disclose fully and truly necessary for assessment. In this regard reliance was placed on the judgment of Hon'ble Supreme Court of India in the case of Calcutta Discount Co. Ltd. vs. ITO reported in [1961] 41 ITR 191 (SC) and the judgment of Hon'ble Jurisdictional High Court of Gauhati in the case of Assam Co. Ltd. vs. Union of India reported in [2006] 150 Taxman 571 (Gauhati). 6.2. Thirdly, ld. Counsel for the assessee stated that losses incurred in derivatives cannot be treated as speculative in nature and the same is now a settle law as held by the Hon'ble Supreme Court of India in the case of Snowtex Investment Ltd. vs. PCIT reported in [2019] 265 Taxman 3 (SC) which has been subsequently followed by Hon'ble Bombay High Court in the case of Souvenir Developers (I) (P.) Ltd. vs. Union of India reported in [2022] 287 Taxman 338 (Bombay). I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 6 of 23 7. We have heard rival contentions and perused the records placed before us. Revenue is in appeal before this Tribunal challenging the order of ld. CIT(A) quashing the assessment order framed u/s 147 of the Act holding that the same has been reopened based on the change of opinion. Revenue has also challenged the finding of ld. CIT(A) holding that the loss claimed on trading in F & O (Derivatives) is not a speculation loss. 8. We observe that the assessee filed its regular return of income u/s 139(1) of the Act on 30.09.2009. Case was selected for scrutiny and the assessee filed all necessary documents including tax audit report, computation of total income, audited profit & loss account, balance sheet and income tax returns in respect of AY 2009-10 and other details as called for by ld. AO and assessment u/s 143(3) of the Act was completed on 18.11.2011 after making certain additions to the income of the assessee. Subsequently after a lapse of four years from the end of relevant assessment year, assessee was served a notice u/s 148 of the Act for the sole reason that why not the loss on sale and purchase of F & O (Derivatives) at Rs. 4,08,99,275/- should be treated as a speculation loss. This information was gathered by ld. AO on the basis of assessment proceedings carried out in the case of the assessee for AY 2010-11 and 2011-12. Accordingly, re-assessment proceedings were completed on 23.11.2015 disallowing the loss from future trading under F & O (Derivatives) and holding it to be a speculation loss. 9. Firstly, on perusal of the records we find that the alleged transactions of claiming loss incurred in trading of F & O (Derivatives) was properly disclosed in the audited profit & loss I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 7 of 23 account and the balance sheet which was placed before ld. AO at the time of regular assessment proceedings carried out u/s 143(3) of the Act dated 18.11.2011. All other relevant details akin to the said transaction of loss from F & O (Derivatives) were placed before ld. AO for necessary examination. It is not a case that the assessee failed to disclose any material fact with regard to the alleged transaction mentioned in the reasons recorded and supplied to the assessee with the notice issued u/s 148 of the Act. It is an undisputed fact that the notice u/s 148 of the Act has been issued after the lapse of four years from the relevant assessment year i.e. AY 2009-10 and under such circumstances and as per the provision of Section 147 of the Act, the re-assessment proceedings could have been carried out by ld. AO only if ld. AO had demonstrated that the assessee failed to disclose fully and truly all material facts necessary for the assessment for AY 2009-10. It is submitted before us by ld. Counsel for the assessee that the issue regarding loss incurred in derivatives was examined by the Department at the time of original assessment by Ld. AO’s predecessor after due application of mind had allowed the claim of derivative losses. It is therefore not a case where complete details and particulars was not furnished by the assessee. Instead from the jurisdictional facts it is apparent that the issue on which the assessment for AY 2009-10 has been reopened u/s 148 of the Act has already been dealt with at the time of original assessment and full details & particulars had been filed by the assessee. The reopening of assessment is thus based on re-appraisal & re- examination of assessment records and ld. AO has sought to review the original assessment in the garb of reopening without I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 8 of 23 bringing any tangible material on record to show that income had escaped assessment. 9.1. Reference in this regard is made to the first proviso to Section 147 of the Act which states that where an assessee has filed a return and thereafter the assessment is completed either u/s 143(3) or 147 of the Act then in such case no notice u/s 147 of the Act shall be issued beyond four years from expiry of relevant assessment year unless the assessee has failed to disclose truly and fully all material facts necessary for assessment for that year. In the circumstances in all such cases where assessments were completed u/s 143(3) or 147 of the Act, it is not only necessary for ld. AO to show that income had escaped assessment as envisaged in Section 147 but additionally he has to show that such escapement has occurred as a result or consequence of assessee’s failure to disclose truly and fully all facts necessary for assessment. In the circumstances where ld. AO initiates the reassessment proceedings beyond four years from the end of the relevant assessment year then before issue of notice ld. AO should also demonstrate from the recorded reasons that income had escaped assessment as a consequence of assessee’s failure to disclose truly and fully all facts necessary for his assessment. 9.2. In the facts of the present case, we find that no new tangible material or information was gathered or came in ld. AO’s possession so to justify the formation of belief. It is a case where ld. AO took a view contrary to that of his predecessor without bringing on record any new material to suggest that the assessee failed to disclose the relevant facts at the time of original I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 9 of 23 assessment. It is for this reason that in the reasons recorded ld. AO has not even whispered that the assessee had failed to disclose true and correct facts during the course of original assessment. In fact bare perusal of the recorded reasons clearly suggests that it is case of borrowed satisfaction based on suspicion and not failure to disclose true facts. 9.3. Attention in this regard is invited to large number of judicial decisions rendered in the recent past where it has been consistently been held that where in an assessee’s case, original assessment is made u/s 143(3) of the Act and in the recorded reasons ld. AO does not state that escapement of income is on account of assessee’s failure to disclose fully and truly all facts, then in such a case reassessment is not permissible after expiry of 4 years from the end of the relevant assessment year. 9.4. In the judgment rendered by Hon’ble Supreme Court in the case of ACIT Vs ICICI Securities Primary Dealership Ltd (24 taxmann.com 310). Facts were the assessee was originally assessed u/s 143(3) of the Act. The case of the assessee was subsequently reopened on the ground that the loss incurred in trading of shares ought to be treated as speculative in nature and therefore there was income escaping assessment. On appeal the Hon’ble Bombay High Court held that, there was nothing new or tangible which came to the notice of the Revenue. The assessee had furnished the accounts in the course of original assessment and ld. AO has sought to reopen the assessment on mere re-look of the accounts which was held to impermissible under the proviso to section 147 of the Act. The Hon’ble Bombay High Court accordingly quashed I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 10 of 23 the reassessment. On appeal by the Revenue, the Hon’ble Supreme Court upheld the order of the Hon’ble High Court by observing that, it was a case of mere change of opinion and therefore the reopening of assessment was not maintainable. 9.5. Similarly, in the case of New Delhi Television Ltd Vs ACIT (116 taxmann.com 151) facts before the Hon'ble Apex Court were that the assessee who operated a news channel had invested in several foreign subsidiaries. In the course of original assessment ld. AO had made enquiries by way of issue of notice u/s 142(1) of the Act into the investments made by the assessee in UK subsidiary. The original assessment u/s 143(3) of the Act was completed wherein no adverse inference was drawn in respect of investments held in foreign subsidiary. The case of the assessee was reopened after expiry of four years. In the reasons recorded for reopening the assessment, ld. AO observed that the amounts introduced by the assessee into its subsidiaries had come back to its coffers by way of round tripping and that the investment of Rs. 405 crores made in the step down UK subsidiary actually belonged to the assessee. The assessee objected to the validity of the reopening of assessment u/s 147 of the Act. On appeal the Hon’ble Supreme Court observed that although subsequent facts which come to the knowledge of the Assessing Officer from external agencies/parties can be taken into account to decide whether the assessment proceedings should be reopened or not, but in terms of the proviso to Section 147 of the Act, ld. AO is legally bound to show that all material facts in relation thereto were not disclosed in original assessment. In the decided case the Hon'ble Apex Court observed that the assessee had disclosed all the primary facts relating to the I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 11 of 23 investment in its foreign subsidiary as was necessary for assessment and therefore there was no non-disclosure of true and material facts by the assessee. The Hon'ble Court thus quashed the reassessment holding that the Revenue was unable to satisfy the conditions precedent in first proviso to Section 147 of the Act. 9.6. Further, in the case of Rajesh Jhaveri Stock Broking Pvt. Ltd Vs. CIT (291 ITR 500) Hon’ble Supreme Court held that an assessment originally completed u/s 143(1) can be reopened by an AO at any time within the period of 6 years if for any reason he is satisfied that income chargeable to tax for that assessment year has escaped assessment. However, in a case where the original assessment was completed u/s 143(3) of the Act then a concluded assessment cannot be re-opened after the expiry of 4 years unless both the conditions prescribed in the first proviso to Section 147 of the Act are satisfied. Meaning thereby ld. AO must also be satisfied at the time of reopening of the assessment that the income had escaped assessment as a result of assessee’s failure to disclose all material facts necessary for the assessment. 9.7. Hon'ble Supreme Court in the case of CIT Vs. Foramers France (264 ITR 566) similarly held that even after the amendment to Section 147 of the Act effective from 01.04.1989, an assessment completed u/s 143(3) of the Act cannot be reopened merely upon change of opinion with reference to facts already available with ld. AO at the time of regular assessment. In the opinion of the Apex Court even after 01.04.1989; a regular assessment u/s 143(3) of the Act could not be reopened after expiry of 4 years from end of I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 12 of 23 assessment year unless escapement was resulted from assessee’s failure to disclose all material facts necessary for its assessment. 9.8. The Full Bench of the Delhi High Court in the case of Kelvinators of India Ltd (256 ITR 1) had similarly held that even after the amendment in Section 147 of the Act w.e.f. 01.04.1989 an assessment completed u/s 143(3) of the Act cannot be reopened upon mere change of opinion by the succeeding ld. AO because to interpret Section 147 of the Act, permitting ld. AO to reopen an assessment on change of opinion would amount to granting power of review to the Assessing Officer and this is not permissible by the statue. On appeal before the Supreme Court at the instance of I T department the decision of the full bench of the Delhi High court was upheld and this is reported in (320 ITR 561). 9.9. Hon'ble Bombay High Court in the case of Titanor Components Limited vs ACIT (60 DTR 273) held that it is necessary for ld. AO to first state that there is a failure to disclose fully and truly all material facts and if he does not record such a failure he would not be entitled to proceed u/s 147 of the Act. The High Court held that although the claim made by the assessee may have been wrong but unless the Assessing Officer proves that there was failure to disclose the facts on the part of the assessee the reopening beyond four years shall be invalid. The Court pointed out that there is a well-known difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts and it is only in the latter situation that the assessment could be reopened after four years. I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 13 of 23 10. Our view that reopening in the instant case is invalid and bad in law is further, supported by the following judgments wherein the Hon’ble Courts have quashed the proceedings initiated u/s 147 of the Act after the expiry of four years, where the assessment is sought to be reopened based on change of opinion on an interpretation of a provision made in the subsequent assessment years. A) In the case before the Hon’ble Bombay High Court in the case of Siemens Information System Ltd Vs ACIT (168 Taxman 209), in AY 2001-02 ld. AO has originally allowed the deduction u/s 10A of the Act in respect of profits derived by eligible units and separately permitted the assessee to carry forward losses incurred in other non-eligible units. In the subsequent assessment framed for AY 2003-04, ld. AO’s successor had disallowed the claim of deduction u/s 10A of the Act by first setting off the losses of non-eligible units with the profits of the eligible units. Referring to the conclusions drawn in AY 2003-04, ld. AO sought to reopen the assessment for AY 2001-02 to deny the deduction claimed u/s 10A of the Act. Aggrieved by the act of reopening of assessment, the assessee had preferred writ petition before the Hon’ble Bombay High Court which quashed the notices holding it to be based on mere change of opinion. The relevant findings are as under: “It is possible in the absence of finality to a question of law, that an Assessing Officer on the same set of facts could take a different view. The accounting system was the same. The returns had been filed in the manner prescribed by the form. Therefore, merely because the second Assessing Officer differed with the opinion of the earlier Assessing Officer on the interpretation of the provision without any other additional material, he was not entitled to assume jurisdiction to issue a notice u/s 148. Such a belief would amount to a mere I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 14 of 23 change of opinion. The remedy in such a case would be to invoke or resort to the other applicable provisions of the Act. If the Assessing Officer does not possess the power of review, he cannot achieve that object by initiating a proceeding for reassessment or by way of rectification of mistake. A mere change of opinion, on an interpretation of a provision by itself without anything more, cannot give rise to 'reason to believe'. The power of reopening an assessment has been conferred by the Legislature not with the object of enabling the Assessing Officer to reopen the full declaration made against the revenue in respect of questions raised that arose directly for consideration in the earlier proceedings. If that were not the legal position, it would result in placing unrestricted powers of review in the hands of the assessing authorities depending on their changing moods. Therefore, both the reasons cited by the Assessing Officer to issue notice, either based on the opinion of the Tribunal in Navin Bharat Industries Ltd.'s case (supra) or on his interpretation of the provisions, were non-exiting and/or merely a change of opinion and same could not constitute 'reasons to believe.” B) Following the ratio laid down in above judgment (supra), another Division Bench of the Hon’ble Bombay High Court in the case of Direct Information Pvt Ltd vs ITO (15 taxmann.com 63) quashed the reopening of assessment wherein the reasons recorded to reopen the concluded assessment was based on the adverse findings/observations made on the same issue in the assessment orders of subsequent years. The relevant findings are as under: “19. For these reasons, we are of the view that the Assessing Officer has sought to reopen the assessment for Assessment Years 2006-07 and 2007-08 purely on the basis of a change of opinion. There is justification in the grievance of the Assessee that by relying on the assessment order for Assessment Year 2008-09 the Revenue has put into place a contrived attempt to reopen the assessment for Assessment Year 2008-09. The issue as to whether the Assessee was entitled to a deduction u/s 10A did not fall for determination at all the Assessee not having made a claim for deduction u/s 10A in the first I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 15 of 23 place during Assessment Year 2008-09. The Assessing Officer, proceeded to hold that if the assessee were to claim a deduction during that year, then such a deduction would have been unsustainable. These observations in the order for Assessment Year 2008-09 have now been pressed into service to sustain the reopening of assessment for Assessment Years 2006-07 and 2007-08. That clearly is impermissible in the facts of this case which are clearly indicative of a mere change of opinion without the existence of any tangible material to reopen the assessment.” C) Hon'ble jurisdictional Gauhati High Court in the case of Assam Co. Ltd Vs Union of India (150 Taxman 571) held as under: “43. As noticed hereinabove, except in W.P. (C) No. 1163 and W.P. (C) No. 1258 of 2003, the impugned notices had been issued before the expiry of four years from the end of the relevant assessment year. The attempt made on the part of the respondents to contend that the omission on the part of the assessees to mention in their return that the cess on green tea leaves was paid under the 1990 Act amounts to failure to make full and true disclosure of all material facts necessary for assessments has to be mentioned only to be rejected. There is no dispute that at the time of assessment, the assessees were permitted deduction on the above count and the composite income under rule 8(1) was accordingly computed. At no point of time was any reservation expressed by the respondent authorities as to the nature of the payment or the entitlement of the assessees to be extended the benefit of deduction thereof on the basis of the disclosure made in the returns. The respondent authorities thus have to be firmly held only to the reasons and/ or the grounds narrated in the impugned notices. Not only is this stand absent in the impugned notices, the same do not indicate as well as to what material facts had not been fully and truly disclosed by the assessees. 44. The Apex Court while dwelling on the scope of the requirement to disclose fully and truly all material facts as comprehended in the proviso to section 147 held in Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC), that the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts and it is not its responsibility to advise the Assessing Officer with regard to the inference which he should draw therefrom. If such officer draws any inference which appears to be subsequently erroneous, a mere change of opinion would not justify initiation of action for reopening the assessment, it held. I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 16 of 23 45. The same view was expressed in Associated Stone Industries (Kotah) Ltd. v. CIT [1997] 224 ITR 5601 (SC). The Bombay High Court on the same issue in Hindustan Lever Ltd. v. R.B. Wadkar, Asstt. CIT (No. 1) [2004] 268 ITR 3322, held that the reasons in support of the proposed action under section 147 of the Act must necessarily reveal all facts or materials that had not been disclosed by the assessee fully and truly necessary for assessment so as to establish the link between the reasons and evidence. It was further held that the reasons so recorded cannot be supplemented by any affidavit or oral submissions as otherwise the reasons which were lacking in the material particulars would receive supplementation by the time those are subjected to Court's scrutiny. 46. The notices admittedly do not exhibit as to what material facts were not truly and fully disclosed by the assessees necessary for assessment for the assessment years in question. The returns admittedly mention about the cess on green leaves paid Und deductions as permissible were allowed. In view of the exposition of law on the point mentioned hereinabove, the inescapable conclusion is that the impugned notices in W.P. (C) No. 1163 of 2003 and W.P. (C) No. 1258 of 2003 are also not sustainable being barred by time.” 11. Examining the facts of the instant case in light of the ratios laid down by Hon'ble Courts referred herein above, we find that in the instant case, it has been demonstrated that complete details and particulars in relation to the losses incurred in derivatives was furnished before ld. AOs in the course of original assessment u/s 143(3) of the Act and therefore, it is not a case that the facts pertaining to the impugned loss was not examined by ld. AO or that the facts were not fully disclosed at the time of original assessment. Ld. AO has sought to reopen the concluded assessment for AY 2009-10 based on a different opinion expressed in the subsequent AYs 2010-11 & 2011-12 which is clearly contrary to the law down by the Hon’ble Apex Court in the case of Snowtex Investment Ltd. Vs CIT (infra). Thus, in light of the settled I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 17 of 23 judicial precedence and the ratios laid down by Hon’ble Courts and under the given facts and circumstances of the case, we hold that the entire assessment proceedings were without jurisdiction as the conditions provided in first proviso to Section 147 of the Act were not fulfilled as the assessment was opened merely on change of opinion without bringing any new tangible material to support the same nor bringing on record any evidence to show that the assessee failed to disclose truly the material facts relevant to the transaction of loss from sale and purchase of derivatives in the return of income as well as during the assessment proceedings carried our u/s 143(3) of the Act. We, thus, fail to find any infirmity in the finding of ld. CIT(A) quashing the impugned assessment order u/s 147 r.w.s. 143(3) r.w.s. 144 of the Act dated 23.11.2015. Accordingly, ground nos. 1 & 2 raised by the Revenue are dismissed. 12. As regards ground no. 3 raised by the Revenue is concerned stating that ld. CIT(A) erred in deleting the addition of disallowance made by ld. AO disallowing loss on trading of F & O (Derivatives) at Rs. 4,08,99,275/- assessing it as a speculation loss. We find that Hon'ble Apex Court in the case of Snowtex Investment Ltd (supra) has settled the issue holding that trading in derivatives by a deeming fiction not regarded as a speculative transaction when it is carried out on a recognized stock exchange. The relevant extract of the judgment of the Hon’ble Court is reproduced below: “14. The provisions of Section 43(5) were amended by the Finance Act, 2005. Prior to the amendment, Section 43(5) defined a 'speculative transaction1 to mean a transaction in which a contract for the purchase or the sale of any commodity including stocks and shares is settled otherwise than by the actual delivery or transfer of I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 18 of 23 the commodity or scrips. The impact of the amendment by the Finance Act, 2005 was that an eligible transaction on a recognised stock exchange in respect of trading in derivatives was deemed not to be a speculative transaction. With effect from 1 April 2006, trading in derivatives was by a deeming fiction not regarded as a speculative transaction when it was carried out on a recognized stock exchange. 15. The circular of the CBDT dated 27 February 2006 indicated that this amendment was occasioned by the changes which were introduced by SEBI both at the legal and technological level for bringing in greater transparency in the market for derivatives. Explaining the reason for the amendment, the Circular states: "3.10 Excluding 'trading in derivatives' on recognised stock exchanges from the ambit of 'speculative transactions' Existing provisions of clause (5) of section 43 define 'speculative transaction' to mean a transaction in which a contract for the purchase or sale of any commodity including stocks and shares is settled otherwise than by the actual delivery or transfer of the commodity or scrips. The proviso to section 43(5) lists out certain transactions which are not deemed to be speculative transactions. Systemic and technological changes introduced by SEBI have resulted in sufficient transparency in the stock markets and have to a large extent curbed the scope for generating fictitious losses through artificial transactions or shifting of incidence of loss from one person to another. The screen based computerized trading provides for audit trail. In the wake of these developments, the present distinction between speculative and non-speculative transactions, in respect of trading in derivatives of securities is losing relevance. The Finance Act, 2005 has, accordingly, amended section 43(5) to provide that an eligible transaction in respect of trading in derivatives of securities carried out on a recognised stock exchange shall not be deemed as speculative transaction. The notification prescribing the rules and the conditions to be fulfilled by a stock exchange to be recognized by the Central Government for the purposes of section 43(5) [i.e., Rules 6DDA and 6DDB of the Income-tax Rules, 1962] has been published in the Official Gazette on 1 st July, 2005 vide S. O. No. 932(E). Applicability: From A.Y. 2006-07 onwards." 16. Section 73 deals with losses from speculation business. Under subsection (1) of Section 73, a loss computed in relation to speculation business carried on by an assessee can only be set off against the I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 19 of 23 profits and gains of another speculation business. The Explanation to Section 73 contains a deeming fiction where certain businesses shall, for the purposes of the section, be deemed to be speculation businesses. The Explanation also carves out an exception in respect of certain specified businesses which shall lie outside the fold of the deeming fiction. Prior to the amendment of the Explanation by the Finance (No. 2) Act 2014 with effect from 1 April 2015, the business of trading in shares carried on by a company was not excluded from its purview. 17. While on the one hand, Parliament amended Section 43(5) with effect from 1 April 2006 as a result of which trading in derivatives on recognised stock exchanges fell outside the purview of the business of speculation, a corresponding amendment to the Explanation to Section 73 in respect of trading in shares was brought in only with effect from 1 April 2015 24. While amending the provisions of Section 43(5), the Parliament indeed was cognizant of the provisions which were contained in Section 73(4). The above memorandum indicates that the provisions of Section 73(4) were proposed to be amended so as to reduce the period of carry forward of speculation losses from eight assessment years to four assessment years. Having introduced an amendment to Section 73(4), the Parliament would have, if it intended to bring about a parity with the provisions of Section 43(5) introduced a specific amendment. Parliament, however, did not do so by the Finance Act 2005. It was only with effect from 1 April 2015 that an amendment was brought about to exclude trading in shares from the deeming provision contained in the Explanation to Section 73. Parliament may have had reasons to allow the situation to continue until the amendment was brought into force, including its view in regard to the stability of the stock market. Insofar as this Court is concerned, It would be difficult to hold that the provisions which were contained in the Finance Act (No. 2) 2014 insofar as they amended the Explanation to Section 73 were clarificatory or that notwithstanding the provision by which the amendment was brought into force with effect from 1 April 2015, that it should be given retrospective effect. We reject the second submission. 30. In conclusion, we therefore, hold that the amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No. 2) Act, 2014 was with effect from 1 April, 2015. In its legislative wisdom, the Parliament amended Section 43(5) with effect from 1 April, 2006 in relation to the business of trading in derivatives, I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 20 of 23 Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April, 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect. 31. The consequence is that in A.Y. 2008-2009, the loss which occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) was not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business.” 12.1. Following the above judgment of the Hon’ble Supreme Court, the Hon’ble Bombay High Court in the case of Souvenier Developers Pvt. Ltd. Vs UOI (287 Taxman 338) has categorically held that the provisions of Section 73(1) of the Act as well as Explanation thereto, would not apply to loss having arisen in trading in derivatives being not speculative transaction which is excluded from definition of "speculation transaction" described under section 43(5) of the Act. The relevant findings of the Hon’ble Court is as follows: “36. In our view, section 73 (1) as well as the explanation inserted by Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1977 thus would not apply to the loss having arisen in the trading in derivatives being not speculative transaction which is excluded from the definition of "speculation transaction" described under section 43 (5) of the Income Tax Act. In the facts of this case, the appellant has claimed set off in respect of the loss suffered by the appellant in the transaction in derivatives against the income arising of infrastructure business under the head of income from business or profession under section 28 of the Income-tax Act, 1961. 37. The Division Bench of this Court in case of Shri Bharat R. Ruia (HUF) (supra) has considered the substantial question of law i.e. "whether the transactions in exchange traded financial derivatives are speculative transactions" as defined in section 43 (5) of the Income I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 21 of 23 Tax Act, 1961. In the facts of that case, proceedings arising out of the assessment year 2003-2004 were in question. In paragraph No. 23 of the said judgment, this Court held that plain reading of clause (d) of section 43 (5) makes it clear that with effect from 1-4-2006 only those eligible transaction in derivatives referred to under section 2 (ac) of 1956 Act which were carried out in a recognized stock exchange shall not be deemed to be a speculative transaction. It is only because, the transactions in derivatives referred to under section 2 (ac) of the Act carried out in a recognized stock exchange were covered under section 43 (5) of the Act, the legislature could exclude those transactions from the purview of section 43 (5) with effect from 1-4-2006. 38. This Court in the said judgment also considered the "Handbook on Derivatives Trading" published by the National Stock Exchange of India. This Court clearly held that the legislature by Finance Act, 1995 has specifically provided that clause (d) to the proviso to section 43 (5) shall come into operation prospectively with effect from 1-4-2006. After insertion of clause (d), all transactions in derivatives are not taken outside the purview of section 43 (5). It is only those derivative transactions which are covered under clause (d) are taken outside the purview of section 43 (5) and the rest of the transactions in derivatives would continue to be covered under section 43 (5) of the Income-tax Act. This Court rejected the submission made by the revenue that clause (d) was inserted to proviso to section 43 (5) had retrospective effect. This Court accordingly held that the exchange traded derivative transaction carried on by the assessee during the assessment year 2003-2004 (i.e. prior to insertion of clause (d) to the proviso to section 43 (5) of the Finance Act, 2005) were speculative transactions covered under section 43 (5) of the Act and the loss incurred in those transactions were liable to be treated as speculative loss and not business loss. 39. In the facts of this case, admittedly the assessment year in question is 2009-2010 and financial year is 2008-2009 i.e. after insertion of the said clause (d) to the proviso to section 43 (5) of the Income Tax Act, 1961. The principles laid down by this Court in the said judgment in case of Shri Bharat R. Ruia (HUF) interpreting clause (d) inserted in the proviso to section 43 (5) by Finance Act, 2005 with effect from 1-4-2006 apply to the facts of this case. Transactions in derivatives carried out by the assessee after 1-4-2006 thus would not be speculative transactions.” I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 22 of 23 13. We, therefore, respectfully following the ratio laid down by Hon'ble Supreme Court of India in the case of Snowtex Investment Ltd. (supra) and Souvenier Developers Pvt. Ltd. (supra) hold that in the instant case the loss claimed by the assessee from trading in F & O (Derivatives) through the recognized stock exchange cannot be treated as a speculation loss and are thus, allowable as a regular business loss. Thus, no interference is called for in the finding of ld. CIT(A) on this issue. Hence, ground no. 3 raised by the Revenue is dismissed. 14. Ground no. 4 is general in nature which needs no adjudication. 15. In the result, the appeal filed by the Revenue is dismissed. Kolkata, the 19 th October, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 19.10.2022 Bidhan (P.S.) I.T.A. No.: 275/Gau/2018 Assessment Year: 2009-10 M/s. Arihant International Limited. Page 23 of 23 Copy of the order forwarded to: 1. ACIT, Circle-3, Guwahati. 2. M/s. Arihant International Limited, 216, Shreemanta Market, AT Road, Near Athgaon Flyover, Guwahati-781 001. 3. CIT(A)- Guwahati-2, Guwahati. 4. CIT- 5. CIT(DR), Guwahati Bench, Guwahati. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata