Smt. Sunita M. Rathod, Pune V. DCIT, Circle-5, Pune

ITA 429/PUN/2013

• Counselvise Citation: 42924514 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C SARANGI
• Keywords: Reopening of assessment; Business income; Depreciation; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 69C; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.429/PN/2013 (ASSESSMENT YEAR : 2005-06) SMT. SUNITA M. RATHOD, 1166, SHUKRAWAR PETH, PUNE 411 002. PAN : AAZPR9208G . APPELLANT VS. DY. COMMISSIONER INCOME TAX, CIRCLE- 5, PUNE. . RESPONDENT ASSESSEE BY : MR. NIKHIL PATHAK & MR. SUHAS P. BORA DEPARTMENT BY : MR. S. C. SARANGI DATE OF HEARING : 09-07-2014 DATE OF PRONOUNCEMENT : 26-08-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 30.09.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 15.12.2010 PASSED BY THE ASSESSING OFFICER U/S 147 R.W.S. 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL :- 1. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LA W AND ON FACTS IN CONFIRMING THE ADDITION MADE BY THE AO. 2. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN CON FIRMING THE ACTION OF THE AO BY HOLDING THAT THE REOPENING OF A SSESSMENT IS AS PER THE MAIN PROVISIONS OF SEC. 147 AND THE AO HAS SATISFIE D THE PROVISIONS FOR REOPENING OF THE ASSESSMENT WITHOUT CONSIDERING TH E FOLLOWING FACTS: I. THAT THE ASSESSMENT ORDER U/SEC. 143(3) R.W.S. 147 IS WITHOUT JURISDICTION AND BAD IN LAW. II. THE ASSESSMENT U/SEC. 143(3) R.W.S. 147 IS NU LL AND VOID AS THE SAME IS BASED UPON THE CHANGE IN THE OPINION OF THE A.O. ITA NO.429/PN/2013 A.Y. : 2005-06 III. THE LEARNED A.O. ERRED IN ASSESSING THE TOTA L INCOME OF THE APPELLANT AT RS.32,10,750/- U/SEC. 143(3) R.W.S . 147 OF THE INCOME TAX ACT, 1961. 3. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF THE AO OF TREATING SH ORT TERM CAPITAL GAIN OF RS.24,56,773/- ON SHARES AS BUSINESS INCOME. 4. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE APPELLA NT IS AN INVESTOR AND NOT A TRADER. 5. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE DECISION OF HON'BLE MUMBA I HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT IS NOT APPLICABLE TO THE C ASE OF THE APPELLANT. 6. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FOLLOWING IMPORTANT F ACTORS: A. APPELLANT HAS TREATED THE TRANSACTION IN THE SHA RES AS INVESTMENT AND DULY DISCLOSED THE SAME IN THE BOOKS OF ACCOUNTS. B. APPELLANT HAS USED HIS OWN FUNDS FOR PURCHASING SHARES. C. APPELLANT HAS CONSISTENTLY TREATED THE SHARES AS INVESTMENT. D. APPELLANT HAS BEEN REGULARLY EARNING DIVIDEND IN COME. E. PERIOD OF HOLDING OF THE SHARES IS FROM 30 DAYS TO 118 DAYS. F. APPELLANT HAS VALUED THE SHARES AT COST AND NEVE R AT MARKET PRICE OR REALIZABLE VALUE. 7. THE APPELLANT MAY KINDLY BE PERMITTED TO ADD TO OR ALTER ANY OF GROUNDS OF APPEAL, IF DEEMED NECESSARY. 3. THE FIRST AND THE FOREMOST PLEA OF THE ASSESSEE IS THAT THE ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION BY ISSUANCE OF NOTICE U/S 148 OF THE ACT IN ORDER TO MAKE THE IMPUGNED ASSESSMENT. IN BRIEF , THE FACTS RELEVANT TO ADJUDICATE THE AFORESAID PRELIMINARY PLEA OF THE AS SESSEE CAN BE UNDERSTOOD AS FOLLOWS. THE APPELLANT IS AN INDIVIDUAL WHO FIL ED A RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 31.10.2005 DECLARING TOT AL INCOME OF RS.30,87,130/-. THE RETURN OF INCOME FILED CONTAIN ED INCOMES DERIVED FROM CAPITAL GAIN LONG TERMS AS WELL AS SHORT TERM, IN COME BY WAY OF DIVIDEND AND INTEREST, ETC.. THE RETURN OF INCOME SO FILED WAS SUBJECT TO A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 26.12.2007 WHER EBY THE TOTAL INCOME WAS DETERMINED AT RS.32,08,210/-, WHICH WAS LATER RECTI FIED TO 32,10,750/-. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED A NOTICE U/S 148 OF THE ACT DATED 15.10.2009 ON THE GROUND THAT CERTAIN INCOME CHARGE ABLE TO TAX HAD ESCAPED ITA NO.429/PN/2013 A.Y. : 2005-06 ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSING OFFICER RECORDED THE FOLLOWING REASONS IN ORDER TO ISSUE NOTICE U/S 148 OF THE ACT :- REASONS FOR REOPENING THE ASSESSMENTS IN THE CASE OF MRS. SUNITA MANOJ RATHOD FOR THE A.Y. 2005-06. IN THIS CASE, THE ASSESSEE HAS FILED RETURN OF INCO ME DECLARING INCOME FROM INTEREST AND SHARE DEALING. THE MAJOR S OURCE OF INCOME IS FROM SHORT TERM-GAIN BY SELLING OF SHARES. ON GOING THROUGH THE RECORDS AND DETAILS REGARDING SALE OF SHARES, IT IS OBSERVE D THAT THE ASSESSEE FREQUENTLY ENGAGED IN PURCHASE AND SALE OF SHARES. IT IS EVIDENT FROM THE ABOVE THAT THE SHARE TRADING IS THE MAIN ACTIVITY O F THE ASSESSEE. HOWEVER, THE ASSESSEE HAS SHOWN THE INCOME UNDER THE HEAD OF SHORT TERM CAPITAL GAIN AND PAID TAXES AT THE RATE OF 10% INSTEAD OF N ORMAL RATE OF TAX. IN VIEW OF THIS, I AM SATISFIED THAT IT IS A FIT CASE FOR I SSUE OF NOTICE U/S 148. 4. AS PER THE ASSESSING OFFICER, THE ASSESSEE WAS C ARRYING OUT THE ACTIVITY IN SALE AND PURCHASE OF SHARES AS MAIN ACTIVITY AND A MAJOR SOURCE OF INCOME. ACCORDING TO HIM, INCOME DERIVED BY THE ASSESSEE FR OM THE ABOVE ACTIVITY NEEDED TO BE TAXED AS BUSINESS INCOME AS AGAINST CA PITAL GAINS SHOWN BY THE ASSESSEE. IN THE SUBSEQUENT ASSESSMENT FINALIZED O N 15.12.2010 U/S 147 R.W.S. 143(3) OF THE ACT, THE INCOME FROM SUCH ACTI VITY HAS BEEN ASSESSED AS BUSINESS INCOME WHEREBY THE TOTAL INCOME HAS BEEN A SSESSED AT RS.32,10,750/-. ALTHOUGH SUCH ASSESSED INCOME CORR ESPONDED TO THE INCOME ORIGINALLY ASSESSED, SO HOWEVER, THE INCOME FROM TH E AFORESAID ACTIVITY WAS TAXED AT NORMAL RATE OF TAX AS AGAINST THE 10% RATE OF TAX PAID BY THE ASSESSEE EARLIER ON THE SHORT TERM CAPITAL GAIN. 5. IN APPEAL BEFORE THE CIT(A), ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BOTH IN LAW AND ON FACTS. FIRSTL Y, ASSESSEE ASSAILED THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE U/S 147/148 OF THE ACT AND SECONDLY, ASSESSEE ALSO ASSA ILED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SHORT TERM CAPITA L GAIN ON SALE OF SHARES AMOUNTING TO RS.24,56,773/- AS INCOME FROM BUSINESS . ON BOTH THE ASPECTS, THE CIT(A) HAS DISAGREED WITH THE ASSESSEE AND UPHE LD THE STAND OF THE ASSESSING OFFICER. HENCE, THE PRESENT APPEAL OF TH E ASSESSEE BEFORE US. ITA NO.429/PN/2013 A.Y. : 2005-06 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE INITIATION OF PROCEEDINGS BY I SSUANCE OF NOTICE U/S 147/148 OF THE ACT IN THE PRESENT CASE SUFFERS FROM LEGAL I NFIRMITY INASMUCH AS THERE IS NO NEW TANGIBLE MATERIAL WHICH HAD COME TO THE NOTI CE OF THE ASSESSING OFFICER IN ORDER TO INITIATE REASSESSMENT PROCEEDIN GS U/S 148 OF THE ACT; AND, SECONDLY THAT THE ENTIRE REASSESSMENT IS BASED ON T HE SAME SET OF FACTS AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT AND IS THEREFORE A MERE CHANGE OF OPINION. ACCORDING TO THE LEARNED COUNSEL ON BOTH THE ASPECTS, THE REASSESSMENT PROCEEDINGS U/S 147/148 OF THE ACT ARE INVALID, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS C ONTEXT, RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., (2010) 320 ITR 561 (SC) A S WELL AS AN UNREPORTED JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. AMITABH BACHCHAN VIDE INCOME TAX APPEAL NO.4646 OF 2010 DAT ED 05.07.2012, COPY OF WHICH HAS BEEN PLACED ON RECORD. 7. ELABORATING ON HIS PLEA THAT AVAILABILITY OF A F RESH TANGIBLE MATERIAL WAS A CONDITION PRECEDENT TO INITIATE REASSESSMENT PROC EEDINGS U/S 147 OF THE ACT, THE LEARNED COUNSEL ALSO REFERRED TO THE DECISION O F THE THIRD MEMBER DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF TELCO DADAJEE DHACKJEE LIMITED VS. DCIT VIDE ITA NO.4613/MUM/2005 DATED 12 .05.2010 FOR THE PROPOSITION THAT PROCEEDINGS INITIATED U/S 147 OF T HE ACT ARE LIABLE TO BE QUASHED WHERE THERE WAS NO FRESH MATERIAL WITH THE ASSESSING OFFICER EVEN IN A CASE WHERE AN ASSESSMENT HAS BEEN COMPLETED ORIGI NALLY U/S 143(1) OF THE ACT. THE LEARNED COUNSEL POINTED OUT THAT ACCORDIN G TO THE THIRD MEMBER DECISION IN THE CASE OF TELCO DADAJEE DHACKJEE LIMI TED (SUPRA) EVEN IN CASE OF AN ASSESSMENT ORIGINALLY COMPLETED U/S 143(1) OF THE ACT, AVAILABILITY OF FRESH MATERIAL WAS FOUND TO BE A NECESSITY TO JUSTI FY REASSESSMENT PROCEEDINGS WHEREAS IN THE PRESENT CASE, THE SAID P ROPOSITION IS APPLICABLE ITA NO.429/PN/2013 A.Y. : 2005-06 WITH EVEN MORE FORCE INASMUCH AS IN THE INSTANT CAS E THE ORIGINAL ASSESSMENT HAS BEEN FRAMED U/S 143(3) OF THE ACT. 8. IN THE BACKGROUND OF THE AFORESAID PROPOSITION, LEARNED COUNSEL HAS REFERRED TO THE MATERIAL PLACED IN THE PAPER BOOK T O POINT OUT THAT EVEN DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS CARRI ED OUT U/S 143(3) OF THE ACT THE ASSESSING OFFICER WAS NOT ONLY AWARE OF THE ACTIVITY OF PURCHASE AND SALE OF SHARES UNDERTAKEN BY THE ASSESSEE BUT HAS F ULLY APPLIED HIS MIND ON SUCH INCOME, AS IS EVIDENT BY THE DISCUSSION IN PAR A 3 OF THE ASSESSMENT ORDER DATED 26.12.2007 (SUPRA). IN THIS VIEW OF TH E MATTER, IT IS SOUGHT TO BE POINTED OUT THAT THE PROCEEDINGS INITIATED BY THE A SSESSING OFFICER BY ISSUANCE OF NOTICE U/S 147/148 OF THE ACT ARE NOT IN ACCORDA NCE WITH LAW AND THEREFORE THE IMPUGNED ASSESSMENT IS LIABLE TO BE QUASHED. 9. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS REFERRED TO THE ORDER OF THE CI T(A) IN ORDER TO ASSAIL THE ARGUMENTS OF THE ASSESSEE. ACCORDING TO THE LEARNE D DEPARTMENTAL REPRESENTATIVE, IN THIS CASE, THE ASSESSING OFFICER HAD OVERLOOKED SOMETHING AT THE FIRST ASSESSMENT AND THEREFORE IT CANNOT BE CONSIDERED AS A CASE INVOLVING CHANGE OF OPINION. THE LEARNED DEPARTMEN TAL REPRESENTATIVE POINTED OUT THAT IT WAS FOUND THAT THE ASSESSING OF FICER HAD NOT SOUGHT ANY CLARIFICATION REGARDING THE TAXABILITY OF PROFITS O N PURCHASE AND SALE OF SHARES AS SHORT TERM CAPITAL GAIN OR BUSINESS PROFITS AT T HE TIME OF ORIGINAL ASSESSMENT AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND OR TAKEN A CONSCIOUS DECISION ON THE SUBJECT AT THE TIME OF ORIGINAL ASSESSMENT. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN SO FAR AS THE PROPOSITION THAT EVEN UNDER NEW SECTION 147 OF THE ACT, AS AMENDED WITH EFFECT FROM 01.04.1989, THE ASSESSING OFFICER CANNO T ASSUME JURISDICTION ON A ITA NO.429/PN/2013 A.Y. : 2005-06 MERE CHANGE OF OPINION, THERE IS NO DISPUTE BETWEEN THE PARTIES. IN-FACT, THE AFORESAID PROPOSITION IS IN LINE WITH THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. FORAMER FRANCE 264 ITR 566 (SC) WHEREIN THE JUDGEMENT OF THE HONBLE ALLAHABAD HIGH COURT IN TH E SAME CASE REPORTED IN (2001) 119 TAXMANN.COM 61 (ALL) HAS BEEN AFFIRMED. 11. IN ANY CASE, THE OTHER PROPOSITION WHICH HAS BE EN RELIED UPON BY THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS FORMED A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BAS IS OF THE MATERIAL EXISTING ON RECORD WITHOUT THERE BEING ANY NEW TANG IBLE MATERIAL AND THEREFORE THE REOPENING IN SUCH A CASE IS NOT VALID. IN THIS CONTEXT, RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHRI AMITABH BACHCHAN (SUPRA). IN THE CASE BEFORE THE H ONBLE HIGH COURT, ASSESSEE FILED A RETURN OF INCOME ORIGINALLY FOR AS SESSMENT YEAR 2002-03 DECLARING INCOME OF RS.14.99 CRORES, THEREAFTER HE FURNISHED A REVISED RETURN OF INCOME DETERMINING HIS INCOME AT RS.8.11 CRORES WHEREIN HE CLAIMED EXPENSES AT 30% ON AD-HOC BASIS AMOUNTING TO RS.6.3 1 CRORES. HOWEVER, BEFORE COMPLETION OF ASSESSMENT, THE ASSESSEE WITHD REW THE REVISED RETURN ALONG WITH THE CLAIM OF DEDUCTION @ 30% FROM THE TO TAL INCOME. THEREAFTER THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DETE RMINING THE TOTAL INCOME AT RS.56.41 CRORES. SUBSEQUENTLY, A NOTICE U/S 148 OF THE ACT WAS ISSUED SEEKING TO REOPEN THE ASSESSMENT PROCEEDINGS AND TH EREAFTER IN THE CONSEQUENT ASSESSMENT FINALIZED U/S 147/143(3) OF T HE ACT, THE TOTAL INCOME WAS ASSESSED AT RS.20.05 CRORES WHICH, INTER-ALIA, INCLUDED AN AMOUNT OF RS.6.31 CRORES AS UNEXPLAINED EXPENSES U/S 69C OF T HE ACT. IN-FACT, THE NOTICE U/S 148 OF THE ACT WAS ISSUED IN CONNECTION WITH TH E AFORESAID ADDITION. IN THIS BACKGROUND, THE CIT(A) AS WELL AS THE TRIBUNAL CAME TO CONCLUDE THAT THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT WAS IN VALID BECAUSE THE MATERIAL ON THE BASIS OF WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED WAS ALWAYS AVAILABLE DURING THE TIME OF ORIGINAL PROCEEDINGS L EADING TO THE ASSESSMENT ITA NO.429/PN/2013 A.Y. : 2005-06 FINALIZED U/S 143(3) OF THE ACT. THE AFORESAID CON CURRENT FINDING RECORDED BY THE CIT(A) AS WELL AS THE TRIBUNAL WAS SOUGHT TO BE ASSAILED BEFORE THE HONBLE HIGH COURT. THE HONBLE HIGH COURT UPHELD THE AFORESAID STAND OF THE TRIBUNAL BY MAKING THE FOLLOWING DISCUSSION :- 8) BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE TRIBUNAL HAVE CORRECTLY COME TO THE CONCLUSION THAT THERE WAS NO FRESH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER TO R EACH A REASONABLE BELIEF THAT THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMEN T. THE ORDER PASSED ORIGINALLY ON 29 TH MARCH 2005 UNDER SECTION 143(3) OF THE SAID ACT WA S PASSED AFTER THE RESPONDENT HAD MADE ADHOC CLAIM FO R EXPENDITURE AT 30% OF THE PROFESSIONAL RECEIPTS IN THE REVISED RETURN OF INCOME WHICH WAS LATER WITHDRAWN. IN FACT THE REASONS FOR REOPENING THE AS SESSMENT FOR THE YEAR 2002-03 ITSELF RECORDS THAT THE CLAIM OF 30% ADHOC EXPENSES WAS WITHDRAWN WHEN THE RESPONDENT ASSESSEE WAS ASKED TO SUBSTANTIATE THE CLAIM. THEREFORE, THE SAME MATERIAL WAS A SUBJECT M ATTER OF CONSIDERATION DURING THE PROCEEDINGS FOR ASSESSMENT LEADING TO OR DER DATED 29 TH MARCH, 2005. IN THE CIRCUMSTANCES THERE COULD BE NO BASIS FOR THE ASSESSING OFFICERS TO FORM A BELIEF THAT INCOME HAS ESCAPED A SSESSMENT. IT IS A SETTLED POSITION OF LAW THAT REVIEW UNDER THE GARB OF REASSESSMENT IS NOT PERMISSIBLE. IN THE CIRCUMSTANCES, WE UPHOLD THE OR DER OF THE TRIBUNAL DATED 19 TH MARCH, 2010. 12. FROM THE AFORESAID, IT IS QUITE CLEAR THAT EXIS TENCE OF NEW TANGIBLE MATERIAL WITH THE ASSESSING OFFICER IS A CONDITION PRECEDENT TO FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN THIS CON TEXT, THE THIRD MEMBER DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF TELCO DADAJEE DHACKJEE LIMITED (SUPRA) IS ALSO RELEVANT. NOTABLY , IN THE CASE BEFORE THE MUMBAI BENCH, ORIGINALLY THE RETURN WAS MERELY PROC ESSED U/S 143(1) OF THE ACT AND NO ASSESSMENT WAS MADE U/S 143(3) OF THE AC T. IN THIS BACKGROUND, THE STAND OF THE REVENUE WAS THAT THERE WAS NO NEED FOR ANY FRESH MATERIAL TO JUSTIFY REOPENING OF ASSESSMENT U/S 147 OF THE ACT BECAUSE THE RETURN FILED BY THE ASSESSEE WAS ONLY PROCESSED U/S 143(1) OF THE A CT AND THERE WAS NO ASSESSMENT MADE U/S 143(3) OF THE ACT. THE REVENUE FURTHER SUPPORTED ITS PROPOSITION BY RELYING ON THE JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) L TD., 291 ITR 500 (SC). ON THE OTHER HAND, THE ASSESSEE HAD ARGUED THAT FOL LOWING THE JUDGEMENT OF ITA NO.429/PN/2013 A.Y. : 2005-06 THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) EVEN IN A CASE WHERE THE RETURN WAS FIRST PROCESSED U/S 143(1) OF THE ACT, IN THE ABSENCE OF ANY FRESH TANGIBLE MATERIAL THE ASSESSIN G OFFICER COULD NOT FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE THIRD MEMBER HAS UPHELD THE STAND OF THE ASSESSEE AFTER CONSIDER ING THE RIVAL JUDGEMENTS CITED BEFORE HIM. THE TRIBUNAL EXPLICITLY REFERRED TO AND EXPLAINED THAT THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA), WHILE EXPOUNDING THE WORDS REASON TO BELIEVE , HELD THAT THERE SHOULD BE TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT CERTAIN INC OME HAS ESCAPED ASSESSMENT. IN THIS BACKGROUND, THE THIRD MEMBER C AME TO CONCLUDE THAT EVEN IN A CASE WHERE THE RETURN WAS EARLIER PROCESS ED U/S 143(1) OF THE ACT, ABSENCE OF A TANGIBLE MATERIAL BARS THE ASSESSING O FFICER FROM ENTERTAINING EVEN A PRIMA-FACIE BELIEF THAT CERTAIN INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE FOLLOWING DISCUSSION IN THE ORDER OF THE THIRD MEMBER DATED 1 2.05.2010 (SUPRA) IS RELEVANT :- 9. AFTER CAREFUL CONSIDERATION OF THE MATTER I AM INCLINED, WITH RESPECT, TO AGREE WITH THE VIEW TAKEN BY THE LEARNE D JUDICIAL MEMBER. IN MY HUMBLE OPINION, THE RECENT JUDGMENT OF THE SUPRE ME COURT IN THE CASE OF CIT VS. (1) KELVINATOR OF INDIA LTD. AND (2) EIC HER LTD. [2010] 320 ITR 561 (SC) COVERS THE PRESENT CASE. THE CONTENTION OF THE DEPARTMENT THAT THIS JUDGMENT ONLY COVERS CASES WHERE THE FIRST ASS ESSMENT WAS MADE UNDER SECTION 143(3) AND THAT IT DOES NOT APPLY TO CASES WHERE THE RETURN WAS FIRST PROCESSED UNDER SECTION 143(1) IS, WITH R ESPECT, NOT ACCEPTABLE BECAUSE THE SUPREME COURT WAS EXPOUNDING TO THE PRO VISIONS OF SECTION 147 AND THE WORDS 'REASON TO BELIEVE' APPEARING THE REIN. IT WAS HELD THAT A SCHEMATIC INTERPRETATION HAS TO BE GIVEN TO THESE W ORDS, FAILING WHICH SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSE SSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF A MERE CHANGE OF OPINIO N. IT WAS FURTHER HELD THAT THERE IS A CONCEPTUAL DIFFERENCE BETWEEN THE P OWER TO REVIEW AND THE POWER TO REASSESS AND SECTION 147 CANNOT BE INTERPR ETED IN SUCH A MANNER TO GIVE A POWER OF REVIEW. THE CONTENTION OF THE DE PARTMENT BEFORE ME IS THAT WHERE NO VIEW HAS BEEN TAKEN AS TO THE CORRECT NESS OF THE RETURN IN THE FIRST INSTANCE, THE ASSESSING OFFICER CANNOT BE SAID TO EXERCISE A POWER OF REVIEW WHEN HE REOPENS THE ASSESSMENT WHICH HAS BEEN EARLIER PASSED UNDER 143(1). THIS ARGUMENT IS SIMILAR TO THE ARGUM ENT THAT IF NO OPINION CAN BE SAID TO HAVE BEEN FORMED BY THE ASSESSING OF FICER WHEN THE RETURN WAS MERELY PROCESSED UNDER SECTION 143(1), BY ISSUI NG NOTICE UNDER SECTION 148 HE CANNOT BE SAID TO HAVE CHANGED HIS O PINION. SO FAR SO ITA NO.429/PN/2013 A.Y. : 2005-06 GOOD. BUT IT NEEDS TO BE REMEMBERED THAT SECTION 14 7 APPLIES BOTH TO SECTION 143(1) AS WELL AS SECTION 143(3) AND, THERE FORE, EXCEPT TO THE EXTENT THAT THE REASSESSMENT NOTICE ISSUED UNDER SE CTION 148 IN A CASE WHERE THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTIO N 143(1) CANNOT BE CHALLENGED ON THE GROUND OF A MERE CHANGE OF OPINIO N, STILL IT IS OPEN TO AN ASSESSEE TO CHALLENGE THE NOTICE ON THE GROUND THAT THERE IS NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. THE REASON TO BELIEVE MUST HAVE A LIVE LINK WITH THE FO RMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WHE N THE RETURN WAS PROCESSED AND ACCEPTED UNDER SECTION 143(1). TO HOL D THAT IN EVERY CASE WHERE A RETURN WAS PROCESSED AND ACCEPTED UNDER SEC TION 143(1) THE ASSESSING OFFICER WILL BE FREE TO REOPEN THE SAME U NDER SECTION 148 EVEN IN THE ABSENCE OF A LIVE LINK BETWEEN THE REASONS R ECORDED AND THE FORMATION OF THE BELIEF WOULD BE TO MAKE THE CONDIT IONS OF SECTION 147 AND SECTION 148 OTIOSE AS REGARDS NOTICES OF REOPENING ISSUED IN CASES WHERE THE RETURN WAS ORIGINALLY PROCESSED UNDER SECTION 1 43(1). THERE IS NO EXCLUSION IN SECTION 147 TO THE EFFECT THAT WHERE T HE RETURN WAS EARLIER PROCESSED UNDER SECTION 143(1) IT IS NOT NECESSARY FOR THE ASSESSING OFFICER TO HOLD OR ENTERTAIN A BELIEF THAT INCOME C HARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THE REASONS RECORDED BY HIM. THEREFORE, THE CONDITION THAT THE ASSESSING OFFICER MUST HAVE REAS ON TO BELIEVE AND THE FURTHER CONDITION THAT THOSE REASONS MUST HAVE A LI VE LINK WITH THE FORMATION OF THE BELIEF IS APPLICABLE EQUALLY TO CASES WHERE THE RETURN WAS PROCESSED UNDER SECTION 143(1) AS ALSO TO CASES WHERE THE RET URN WAS EXAMINED AND AN ASSESSMENT WAS MADE BY A SPEAKING ORDER UNDER SE CTION 143(3). THE ONLY DISTINCTION RECOGNIZED IN SECTION 147 BETWEEN THE TWO IS WHERE IT IS PROVIDED BY THE PROVISO THAT WHERE THE EARLIER ASSE SSMENT WAS MADE UNDER SECTION 143(3), NO ACTION FOR REOPENING THE ASSESSM ENT CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT BECAUSE OF THE FAILURE ON THE PART OF THE ASSESSEE TO FILE A R ETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. SUCH AN EXCEPTION HAS NOT BEEN PROVIDED FOR IN A CASE WHERE THE RETURN HAS BEEN PROCESSED UNDER SECTION 143(1) IN WHICH CASE THE PR OVISO WILL HAVE NO APPLICATION. IF IT IS CORRECT THAT AN INTIMATION U NDER SECTION 143(1) AS WELL AS AN ASSESSMENT ORDER UNDER SECTION 143(3) ARE BOT H AMENABLE TO SECTION 147, IT SHOULD ALSO BE CONCEDED THAT EVEN IN A CASE WHERE THE ORIGINAL RETURN WAS MERELY PROCESSED UNDER SECTION 143(1) TH E ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS ALSO TO RECORD REASONS UNDER SECTION 148(2) FOR REOPENING THE EARLIER ASSESSMENT MADE UNDER SEC TION 143(1) ALL THAT HAS BEEN EXCLUDED IS THAT THE ASSESSEE, IN WHOSE CA SE THE RETURN WAS FIRST PROCESSED UNDER SECTION 143(1), CANNOT CHALLENGE TH E NOTICE OF REOPENING ON THE GROUND THAT IT IS PROMPTED BY A MERE CHANGE OF OPINION. ONLY TO THIS LIMITED EXTENT THERE IS A DISABILITY OR THE PART OF THE ASSESSEE TO CHALLENGE THE NOTICE OF REOPENING IN A CASE WHERE HIS RETURN WAS EARLIER PROCESSED UNDER SECTION 143(1) OF THE ACT. 10. THE RELIANCE PLACED BY THE LEARNED SENIOR DR ON THE JUDGMENT OF THE SUPREME COURT IN ACIT VS. RAJESH JH AVERI STOCK BROKERS (P) LTD. (SUPRA) WOULD BE APPOSITE IN ALL CASES WHE RE THE RETURN WAS PROCESSED UNDER SECTION 143(1) BUT LATER NOTICE WAS ISSUED UNDER SECTION 148 AND THE ASSESSEE CHALLENGES THE NOTICE ON THE G ROUND THAT IT IS PROMPTED BY A MERE CHANGE OF OPINION. IN THIS JUD GMENT IT WAS HELD THAT THERE WAS NO ASSESSMENT UNDER SECTION 143(1) IN THE SENSE THAT THE RETURN IS SCRUTINIZED AND AN OPINION IS FORMED ABOUT THE A SSESSEE'S CLAIMS AND CONTENTIONS AND, THEREFORE, IT IS NOT POSSIBLE TO S AY THAT WHEN THE ITA NO.429/PN/2013 A.Y. : 2005-06 ASSESSING OFFICER REOPENS THE ASSESSMENT UNDER SECT ION 148, IT WAS PROMPTED BY A MERE CHANGE OF OPINION (PLEASE SEE OB SERVATIONS AT PAGE 510 TOP). EXCEPT TO THIS LIMITED EXTENT, THE NOTIC E OF REOPENING ISSUED IN A CASE WHERE THE RETURN WAS FIRST PROCESSED UNDER SEC TION 143(1) IS OPEN TO CHALLENGE ON ALL GROUNDS AVAILABLE TO THE ASSESSEE, INCLUDING THE GROUND THAT THERE WAS NO REASON TO BELIEVE THAT INCOME CHA RGEABLE TO TAX HAD ESCAPED ASSESSMENT OR THAT THE MATERIALS BEFORE THE ASSESSING OFFICER HAD NO LIVE LINK OR NEXUS WITH THE FORMATION OF SUCH BE LIEF OR THAT THE REASONS ARE BASED ON GOSSIP OR RUMOUR OR WERE A MERE PRET ENCE, THIS IS MADE CLEAR BY THE OBSERVATIONS OF THE COURT AT PAGE 512 OF THE REPORT WHERE IT WAS HELD THAT 'SO LONG AS THE INGREDIENTS OF SECTI ON 147 ARE FULFILLED' THE ASSESSING OFFICER CAN REOPEN THE PROCEEDINGS EVEN W HERE INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. THUS FULFILLMENT O F THE CONDITIONS OF SECTION 147, INCLUDING THE ONE THAT THERE SHOULD BE 'REASON TO BELIEVE', IS ESSENTIAL FOR THE VALIDITY OF THE NOTICE UNDER SECT ION 148. IT IS WHILE EXPOUNDING THE WORDS 'REASON TO BELIEVE' THAT THE S UPREME COURT IN THE LATER JUDGMENT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HELD THAT THERE SHOULD BE 'TANGIBLE MATERIAL' TO COME TO THE CONCLU SION THAT INCOME HAD ESCAPED ASSESSMENT THUS, IN MY HUMBLE UNDERSTANDING OF BOTH THE JUDGMENTS, WHILE RESORTING TO SECTION 147 EVEN IN A CASE WHERE ONLY AN INTIMATION HAD BEEN ISSUED UNDER SECTION 143(1)(A) IT IS ESSENTIAL THAT THE ASSESSING OFFICER SHOULD HAVE BEFORE HIM TANGIBLE M ATERIAL JUSTIFYING HIS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T, 11. WHAT THE ASSESSEE CONTENDED BEFORE ME AND WHICH CONTENTION HAD FOUND FAVOUR WITH THE LEARNED JUDICI AL MEMBER IS THAT THERE WAS NO SUCH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FROM WHICH HE CAN ENTERTAIN THE BELIEF THAT THE ALLOWANCE OF THE NON COMPETE FEES AND THE DEPRECIATION RESULTED IN ESCAPEMENT OF INCOME CHARG EABLE TO TAX. IN THE REASSESSMENT ORDER THE ASSESSING OFFICER HAS STATED IN PARAGRAPH 3.2.3 THAT AFTER THE RETURN WAS PROCESSED, IT WAS NOTICED THAT THE ASSESSEE HAS UNDERSTATED ITS INCOME BY CLAIMING THE AFORESAID TW O ITEMS OF EXPENDITURE, HE HAS NOT REFERRED TO ANY TANGIBLE MATERIAL BEFORE HIM, IN TERMS OF THE JUDGMENT OF THE SUPREME COURT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA), ON THE BASIS OF WHICH HE ENTERTAINED THE PRIME FACI E BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THOUGH IT IS NOT POSSIBLE TO CHALLENGE THE ACTION OF THE ASSESSING OFFICER ON TH E GROUND OF A CHANGE OF OPINION BECAUSE IN THE PRESENT CASE THE RETURN WAS EARLIER MERELY PROCESSED UNDER SECTION 143(1), HIS ACTION CAN BE C HALLENGED ON THE BASIS OF THE TAW DECLARED BY THE SUPREME COURT IN THE AFO RESAID JUDGMENT. THE LEARNED JUDICIAL MEMBER HAS HELD IN PARAGRAPH 13 TH AT THERE WAS NO MATERIAL BEFORE THE ASSESSING OFFICER FOR SUCH A BE LIEF. THE LEARNED ACCOUNTANT MEMBER HAS NOT DISPUTED THAT THERE WAS N O TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER ON THE BASIS OF WHICH HE CAN REOPEN THE ASSESSMENT. HE HAS, HOWEVER, HELD THAT IT IS NOT NE CESSARY FOR THE ASSESSING OFFICER TO HAVE SOME TANGIBLE MATERIAL BE FORE HIM TO ISSUE NOTICE UNDER SECTION 148 IN A CASE WHERE THE RETURN WAS ORIGINALLY PROCESSED UNDER SECTION 143(1). WITH RESPECT, I AM UNABLE TO SUBSCRIBE TO THIS VIEW FOR THE REASONS STATED IN THE EARLIER PARAGRAPHS. IN MY HUMBLE OPINION, ON A PROPER UNDERSTANDING OF THE JUDGMENTS OF THE SUPREME COURT BOTH IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK B ROKERS (P) LTD. (SUPRA) AND CIT VS. KELVINATOR OF INDIA LTD, (SUPRA), IT IS STILL OPEN TO AN ASSESSEE TO CHALLENGE THE NOTICE UNDER SECTION 148, IN A CASE W HERE THE RETURN WAS EARLIER PROCESSED UNDER SECTION 143(1), ON THE GROU ND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER TO E NABLE HIM TO ENTERTAIN A PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO LAX HA S ESCAPED ASSESSMENT. I MAY ALSO ADD THAT NEITHER BEFORE THE LEARNED MEMB ERS WHO HEARD THE ITA NO.429/PN/2013 A.Y. : 2005-06 APPEAL ORIGINALLY NOR BEFORE ME DID THE DEPARTMENT PRODUCE ANY TANGIBLE MATERIAL ON THE BASIS OF WHICH THE REASONS WERE REC ORDED TO DEMONSTRATE THAT THERE WAS A LIVE LINK OR NEXUS BETWEEN THEM AN D THE REQUISITE BELIEF. 12. IN THE VIEW I HAVE TAKEN, I DO NOT CONSIDER IT NECESSARY TO REFER TO THE VARIOUS AUTHORITIES CITED BY BOTH THE SIDES. I ACCORDINGLY ANSWER THE POINT OF DIFFERENCE NO.1) BY HOLDING THAT THE P ROCEEDINGS INITIATED BY THE ASSESSING OFFICER UNDER SECTION 147 ARE LIABLE TO B E QUASHED ON THE GROUND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE T HE ASSESSING OFFICER, EVEN THOUGH THE ASSESSMENT WAS COMPLETED ORIGINALLY UNDER SECTION 143(1). 13. ON THE BASIS OF THE AFORESAID DISCUSSION, IT IS TO BE APPRECIATED THAT ABSENCE OF FRESH TANGIBLE MATERIAL WOULD NOT ENABLE THE ASSESSING OFFICER TO ENTERTAIN A BELIEF THAT CERTAIN INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IF THE ASSESSING OFFICER FORMS A BELIEF THAT INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT ON THE BASIS OF THE MATERIAL ALREADY AVAILABLE AT T HE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS, IT WOULD OBVIOUSLY NOT BE A VALID REOPENING OF ASSESSMENT OF SECTION 147 OF THE ACT. 14. IN THIS BACKGROUND, WE MAY NOW EXAMINE THE FACT S OF THE PRESENT CASE. THE REASONS RECORDED BY THE ASSESSING OFFICER TO IN ITIATE PROCEEDINGS U/S 147 OF THE ACT HAVE ALREADY BEEN EXTRACTED BY US IN THE EARLIER PART OF THIS ORDER. THE SAID REASONS SHOW THAT THE ASSESSING OFFICER NO TED THAT THE MAJOR SOURCE OF INCOME OF THE ASSESSEE IS FROM SHORT TERM GAIN B Y SELLING OF SHARES. SECONDLY, THE ASSESSING OFFICER AFTER GOING THROUGH THE RECORDS AND DETAILS REGARDING THE SALE OF SHARES OBSERVED THAT THE ASSE SSEE FREQUENTLY ENGAGED IN PURCHASE AND SALE OF SHARES. THIRDLY, THE ASSES SING OFFICER NOTICES THAT THE SAID TRADING IS THE MAIN ACTIVITY OF THE ASSESSEE. THE ASSESSING OFFICER THEREAFTER CONCLUDES THAT ASSESSEE HAS SHOWN THE IN COME UNDER THE HEAD SHORT TERM CAPITAL GAIN AND PAID TAXES @ 10% INSTEA D NORMAL TAX RATE WHICH ACCORDING TO HIM MAKES IT A FIT CASE FOR ISSUE OF N OTICE U/S 148 OF THE ACT. IMPLIEDLY, AS PER THE ASSESSING OFFICER, THE INCOME DECLARED BY THE ASSESSEE FROM SALE AND PURCHASE OF SHARES HAS BEEN TAXED AT A LOWER RATE @ 10% ITA NO.429/PN/2013 A.Y. : 2005-06 COMMENSURATING TO INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN WHEREAS IT SHOULD HAVE BEEN TAXED AT NORMAL RATE CONSIDERING I T TO BE A BUSINESS INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE HAD REFERRED T O VARIOUS MATERIAL PLACED IN THE PAPER BOOK TO POINT OUT THAT NOT ONLY WAS TH E ASSESSING OFFICER AWARE OF THE ASSESSEE HAVING EARNED SHORT TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHARES BUT THE SAME WAS ALSO DULY EXAMINED BY HIM. IT IS ONLY AFTER HIS DUE EXAMINATION THAT THE INCOME HAS BEEN ASSESSED AS SH ORT TERM CAPITAL GAIN. IN THIS BACKGROUND, WE MAY REFER TO THE COMPUTATION OF TOTAL INCOME ANNEXED WITH THE RETURN OF INCOME, COPY OF WHICH HAS BEEN P LACED IN THE PAPER BOOK AT PAGES 8 TO 12. THE COMPUTATION OF INCOME SHOWS SHO RT TERM CAPITAL GAIN OF RS.24,56,773/- AND THE DETAILS HAVE ALSO BEEN ANNEX ED THERETO. SECONDLY, EVEN IN THE BALANCE-SHEET ENCLOSED WITH THE RETURN OF INCOME, ASSESSEE HAS REFLECTED THE SHARES OF RS.32,97,332/- AS INVESTMEN TS. FURTHER, AT PAGE 14 OF THE PAPER BOOK, ASSESSEE HAS PLACED A COPY OF QUEST IONNAIRE ISSUED BY THE ASSESSING OFFICER AND OUR ATTENTION HAS BEEN DRAWN TO QUESTION NOS.3 AND 4 THEREOF, WHICH READ AS UNDER :- Q. 3- PL PROVIDE THE PROOF OF SHORT TERM CAPITAL G AIN AS TO THE CONTRACT NOTES, PROOF OF PURCHASE, EXTRACT OF DEMAT ACCOUNT. Q. 4- PL STATE WHETHER ANY INVESTMENTS (ALONGWITH P ROOFS) HAS BEEN MADE BY YOU IN THE YEAR I.E. 2004-05. THE REPLY OF THE ASSESSEE TO THE SAID QUESTIONNAIRE HAS ALSO BEEN PLACED AT PAGES 15 TO 20 OF THE PAPER BOOK. OSTENS IBLY, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVIDE PROOF OF SHORT TER M CAPITAL GAINS AS TO THE CONTRACT NOTES, PROOF OF PURCHASE, EXTRACT OF DEMAT ACCOUNT AND ALSO THE PROOF OF HAVING MADE ANY INVESTMENT DURING THE YEAR UNDER CONSIDERATION. IN THE REPLY TO THE SAID QUESTIONNAIRE, IT IS EVIDENT THAT SCRIP-WISE DETAIL OF THE GAIN/LOSS HAS BEEN ENUMERATED. THE INVESTMENTS MAD E DURING THE YEAR UNDER CONSIDERATION HAVE ALSO BEEN ENUMERATED. IN-FACT, WE FIND THAT HAVING REGARD TO SUCH DETAILS, SPECIFICALLY IN RELATION TO THE LO SS DECLARED BY THE ASSESSEE ON SALE AND PURCHASE OF SHARES OF TCS, THE ASSESSING O FFICER HAS MADE AN ITA NO.429/PN/2013 A.Y. : 2005-06 ADDITION ALSO. THE ASSESSING OFFICER HAS ALSO DISC USSED IN PARA 3 OF THE ASSESSMENT ORDER THE SHORT TERM CAPITAL LOSS OF RS. 72,777/- DECLARED BY THE ASSESSEE ON SALE OF RELIANCE MUTUAL FUND, WHICH HAS ALSO BEEN RE-DETERMINED BY HIM. THE ENTIRE DISCUSSION IN PARA 3 OF THE ASS ESSMENT ORDER IS IN RELATION TO THE INCOME/LOSS DECLARED BY THE ASSESSEE UNDER T HE HEAD SHORT TERM CAPITAL GAIN. THE AFORESAID FACTUAL POSITION, WHICH IS EME RGING FROM RECORD, CLEARLY ESTABLISHES THAT THE ASSESSING OFFICER EXAMINED THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES ON THE BASIS OF THE MATERIAL AND EVIDENCE ON RECORD AND ONLY THEREAFTER HE HAS ACCEPTED THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAINS. IN CONTRAST, TH E REASONS RECORDED THEREAFTER TO INVOKE SECTION 147 OF THE ACT DO NOT SHOW ANY FR ESH MATERIAL WHICH CAME TO NOTICE OF THE ASSESSING OFFICER SO AS TO ENABLE HIM TO FORMULATE A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE GROUND THAT THE INCOME FROM PURCHASE AND SALE OF SHARES WAS TO BE A SSESSED AS BUSINESS INCOME. IN-FACT, THE REASONS RECORDED CLEARLY POIN T OUT THAT THE BELIEF IS FORMED ONLY ON THE BASIS OF A RE-APPRAISAL OF DETAILS ALRE ADY AVAILABLE ON RECORD. THEREFORE, FACTUAL SPEAKING, THERE CANNOT BE AN ESC APE FROM INFERRING THAT THE ASSESSING OFFICER HAS FORMED THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ONLY ON THE BASIS OF MATERIAL AL READY AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THEREFORE , FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF SHRI AMITABH BACHCHAN (SUPRA) SUCH INITIATION OF REASSESSMENT PR OCEEDINGS U/S 147 OF THE ACT IS INVALID IN THE EYES OF LAW. 15. THE REVENUE HAS SUBMITTED THAT THE ASSESSING OF FICER HAS NOT CONSIDERED THE ISSUE IN DISPUTE AT THE TIME OF ORIG INAL ASSESSMENT PROCEEDING AND THEREFORE IT COULD NOT BE CONSIDERED THAT HE AP PLIED HIS MIND ON THE ISSUE IN DISPUTE AND THEREFORE THE REASSESSMENT CANNOT BE SAID TO BE BASED ON A CHANGE OF AN EARLIER OPINION. IT IS ALSO SUBMITTED THAT THE PRINCIPLE OF CHANGE OF OPINION WILL HAVE NO APPLICATION WHERE THERE IS NO FORMULATION OF OPINION BY ITA NO.429/PN/2013 A.Y. : 2005-06 THE ASSESSING OFFICER ON CERTAIN ISSUE AT THE TIME OF FIRST ASSESSMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO ARGUED THA T MERELY BECAUSE THE ENTIRE CLAIM OF THE ASSESSEE WAS ACCEPTED IN THE OR IGINAL ASSESSMENT PROCEEDINGS WOULD NOT PRECLUDE THE ASSESSING OFFICE R TO EXAMINE AND DECIDE THE ISSUE AFRESH WHEN IT IS NOTICED BY THE ASSESSIN G OFFICER SUBSEQUENT TO THE ORIGINAL ASSESSMENT. IN THIS CONTEXT, A REFERENCE HAS ALSO BEEN MADE TO PARA 5.6 OF THE ORDER OF THE CIT(A) WHEREIN RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF DR. AMINS PATHOLOGY LABORATORY VS. JCIT, 252 ITR 673. THE RE LEVANT EXTRACT FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF DR. AMINS PATHOLOGY LABORATORY (SUPRA) HAS ALSO BEEN EXTRACTE D, WHICH READ AS UNDER :- . AFTER THE AMENDMENT, THE ONLY RESTRICTION PUT I N THE SECTION IS REASON TO BELIEVE. THAT REASON HAS TO BE A RE ASON OF A PRUDENT PERSON. THAT REASON SHOULD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCLOSE FULLY OR PARTIALLY SOME MATERIAL FACTS RELEVANT FOR ASSESSMENT. THAT, IF ANY ITEM HAS ESCAPED FROM ASSESSMENT WHICH WAS O THERWISE INCLUDIBLE WITHIN THE ASSESSMENT AND THE ASSESSING OFFICER NOT ICES IT SUBSEQUENTLY BY HIS OWN INVESTIGATION OR BY REASON OF SOME INFORMAT ION RECEIVED BY HIM, ONE CANNOT SAY THAT IT CONSTITUTES CHANGE OF OPINION. 16. IN OUR CONSIDERED OPINION, THE AFORESAID SUBMIS SIONS OF THE REVENUE ARE RELEVANT WHEN ONE IS TO EXAMINE THE PRINCIPLE O F CHANGE OF OPINION. HOWEVER, IN SO FAR AS THE PROPOSITION THAT THE ASSE SSING OFFICER IS PRECLUDED FROM FORMING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT MERELY ON THE BASIS OF THE MATERIAL ALREADY AVAILAB LE ON RECORD IS CONCERNED, THERE IS NO DISPUTE. NEVERTHELESS, EVEN AS PER THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DR. AMINS PATHOLO GY LABORATORY (SUPRA), RECEIPT OF SOME FRESH INFORMATION BY THE ASSESSING OFFICER IS A MUST IN ORDER TO INITIATE PROCEEDINGS U/S 147 OF THE ACT. FACTUALLY SPEAKING, IN THE PRESENT CASE THERE IS NO ARGUMENT PUT-FORTH FROM THE SIDE OF THE REVENUE TO SAY THAT ANY NEW TANGIBLE MATERIAL CAME TO THE NOTICE OF THE ASS ESSING OFFICER IN ORDER TO INITIATE PROCEEDINGS U/S 147 OF THE ACT. THEREFORE , IN OUR CONSIDERED OPINION, THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IN THE PRESENT CASE SUFFERED ITA NO.429/PN/2013 A.Y. : 2005-06 FROM A LEGAL INFIRMITY, WHICH IS IN CONSONANCE WITH THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHRI AMITA BH BACHCHAN (SUPRA). AS A RESULT, THE CONSEQUENT ASSESSMENT FINALIZED ON 15 .12.2010 U/S 143(3) R.W.S. 147 OF THE ACT IS HEREBY QUASHED. 17. SINCE THE ASSESSEE HAS SUCCEEDED ON THE PRELIMI NARY ISSUE, THE OTHER GROUND OF APPEAL RELATING TO THE MERITS OF THE ACTI ON OF THE ASSESSING OFFICER IN TREATING SHORT TERM CAPITAL GAIN OF RS.24,56,773/- ON SALE OF SHARES AS BUSINESS INCOME IS RENDERED ACADEMIC AND IS NOT BEI NG ADJUDICATED. HENCE, THE REMAINING GROUNDS OF APPEAL ARE DISMISSED AS IN FRUCTUOUS. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 26 TH AUGUST, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE