Sharp Designers and Engineers India Pvt. Ltd., (Formerly Khinvasara Investments Pvt. Ltd.), Pune V. ACIT, Circle-9, Pune

ITA 525/PUN/2013

• Counselvise Citation: 52524514 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Reopening of assessment; Business income; Depreciation; Additional depreciation; Earning of tax free income; Source of fund; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 69C; 143(3); 14A; 115JB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.525/PN/2013 (ASSESSMENT YEAR : 2006-07) SHARP DESIGNERS AND ENGINEERS INDIA PVT. LTD. (FORMERLY KHINVASARA INVESTMENTS PVT. LTD.) , C/O SHARP ENGINEERS, 301/2, NANEKARWADI, CHAKAN, PUNE 410 501. PAN : AAACK7637E . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-9, PUNE. . RESPONDENT ITA NO.681/PN/2013 (ASSESSMENT YEAR : 2006-07) DY. COMMISSIONER OF INCOME TAX, CIRCLE- 9, PUNE. . APPELLANT VS. KHINVASARA INVESTMENTS PVT. LTD., 301/2, NANEKARWADI, CHAKAN, TQ. KHED, DIST. PUNE 410 501. PAN : AAACK7637E . RESPONDENT ASSESSEE BY : MR. KISHOR PHADKE DEPARTMENT BY : MR. P. S. NAIK ORDER PER G. S. PANNU, AM THE CAPTIONED CROSS-APPEALS, EACH BY THE ASSESSEE A ND THE REVENUE, PERTAINING TO THE ASSESSMENT YEAR 2006-07, WERE HEA RD TOGETHER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED CROSS-APPEALS ARE DIREC TED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 13.12.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 28.12.2011 PAS SED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT). ITA NO.525/PN/2013 ITA NO.681/PN/2013 2. FIRST, WE MAY TAKE-UP THE APPEAL OF THE ASSESSEE WHEREIN THE FIRST AND FOREMOST ISSUE RELATES TO THE VALIDITY OF THE IMPUG NED REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER BY I SSUANCE OF NOTICE U/S 148 OF THE ACT. THE FACTS RELEVANT TO ADJUDICATE THE AFOR ESAID CONTROVERSY ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY INCORPORATED UN DER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND FOR THE ASSESSMENT YEAR 200 6-07 IT FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,49,80,092/-, WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 27.11. 2008, WHEREBY THE TOTAL INCOME WAS DETERMINED AT RS.1,51,88,442/- AFTER MAK ING DISALLOWANCES OUT OF TRAVELLING & CONVEYANCE EXPENSES, OFFICE EXPENSES A ND U/S 14A OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RECORDED REASON S FORMULATING A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESS MENT AND ISSUED NOTICE U/S 148 OF THE ACT IN ORDER TO REOPEN THE ASSESSMEN T FINALIZED ON 27.11.2008. A COPY OF THE REASONS RECORDED BY THE ASSESSING OFF ICER DATED 29.03.2011 HAS BEEN PLACED AT PAGE 66 OF THE PAPER BOOK, WHICH READS AS UNDER :- REASONS FOR RE-OPENING OF ASSESSMENT KHINVASAR INVESTMENTS PVT. LTD. A.Y. 2006-07 ASSESSEE COMPANY IS A MANUFACTURER OF ENGINEERING G OODS AND FABRICATION AND GENERATION OF ELECTRICITY. FOR A.Y. 2006-07 THE SCRUTINY ASSESSMENT WAS COMPLETED ASSESSING TOTAL INCOME AT RS.1,51,88,442/- UNDER NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS.4,06,12,785/- U/S 115JB OF THE ACT. THE TAX WAS PAID ON BOOK PROFIT U /S 115JB OF THE ACT. ON PERUSAL OF THE DETAILS OF SHORT TERM CAPITAL GAINS FOR THIS YEAR, IT HAS COME TO MY NOTICE THAT THE ASSESSEE COMPANY DEALT IN MAN Y TRANSACTION OF BUYING AND SELLING OF SHARES OF HUGE AMOUNT ON VARI OUS DATES. THE RATIO BETWEEN PURCHASE AND SALES WORKS OUT TO 1:1.27. THE ASSESSEE COMPANY HELD SHARES OF RS.81,43,449/- AS INVESTMENT AS ON 3 1.03.2006. THEREFORE, THE HOLDING RATIO TO PURCHASE AND SALES WORKS OUT T O MERELY 0.102 AND 0.08. THE ASSESSEE COMPANY EARNED DIVIDEND OF RS.33 .10 LACS AS AGAINST PROFIT OF RS.101.76 LACS WHICH SHOWS THAT THE MOTIV E WAS TO EARN PROFIT. THEREFORE, THE PROFIT OF RS.83,14,790/- DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN SHOULD HAVE BEEN TREATED AS BUSIN ESS INCOME. ON FURTHER EXAMINATION, OF RECORDS, IT HAS ALSO COM E TO MY NOTICE THAT THE ASSESSEE COMPANY HAS CLAIMED AND SUBSEQUEN TLY ALLOWED DEPRECIATION OF RS.54,80,000/- ON WINDMILL INSTALLE D AT COIMBATORE (ADDITION MADE ON 30.03.2006). WINDMILL NOT BEING RELATED TO BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING D OES NOT QUALIFY FOR ITA NO.525/PN/2013 ITA NO.681/PN/2013 ADDITIONAL DEPRECIATION. THEREFORE, IT RESULTED IN UNDER ASSESSMENT OF INCOME OF RS.54,80,000/- IN VIEW OF THIS ALLOWING PROFIT OF THE ASSESSEE COM PANY AS SHORT TERM CAPITAL GAIN OF RS.83,14,790/- INSTEAD OF TREA TING IT AS BUSINESS INCOME AND ALLOWING ADDITIONAL DEPRECIATION ON WIND MILL NEEDS TO BE REASSESSED. THEREFORE, I HAVE THE REASONS TO BELIEVE THAT INCOM E OF RS.1,54,11,180/- HAVE ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. THEREFORE, IT IS A FIT C ASE FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT. ISSUE NOTICE U/S 148 OF THE ACT, 1961. SD/- (MAHESH G. JIWADE) PUNE ASST. COMMISSIONER OF INCOME TAX DATE: 29.03.2011 CIRCLE-9, PUNE. 3. BEFORE THE LOWER AUTHORITIES, CHALLENGE OF THE A SSESSEE TO THE VALIDITY OF THE INITIATION OF PROCEEDINGS U/S 147/148 OF THE AC T WAS TWO-FOLD. FIRSTLY, AS PER THE ASSESSEE, NO NEW MATERIAL OR FACTS CAME TO THE NOTICE OF THE ASSESSING OFFICER, AND THEREFORE REOPENING OF ASSES SMENT WAS ON THE BASIS OF A CHANGE OF OPINION, WHICH IS IMPERMISSIBLE. SECON DLY, AS PER THE ASSESSEE, REOPENING OF ASSESSMENT WAS BASED UPON AN AUDIT OBJ ECTION RAISED BY THE AUDIT PARTY, WHICH WAS NOT ACCEPTED AS VALID BY THE PREDECESSOR ASSESSING OFFICER. THE ASSESSEE CONTENDED THAT IN VIEW OF TH E JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CADILA HEALTHCARE LTD. VS. ACIT, (2012) 65 DTR 385 (GUJ) MERE OPINION OF THE AUDIT PARTY COULD NOT BE THE BASIS FOR THE ASSESSING OFFICER TO REOPEN A COMPLETED ASSESSMENT. BOTH THE OBJECTIONS OF THE ASSESSEE HAVE BEEN DISMISSED BY THE ASSESSING O FFICER AND ALSO BY THE CIT(A) AND ACCORDINGLY, ASSESSEE IS IN APPEAL BEFOR E US. 4. IN THIS BACKGROUND, RIVAL SUBMISSIONS HAVE BEEN MADE. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE MATERIAL PLACED IN THE PAPER BOOK, AS WELL AS THE REASONS RECORDED TO SHOW THAT NO FRESH MATERIAL HAD COME TO THE NOTICE OF THE ASSESSING OFFICER IN ORDER TO INITIATE THE RE- ASSESSMENT PROCEEDINGS U/S 148 OF THE ACT. AS PER THE LD. REPRESENTATIVE ITA NO.525/PN/2013 ITA NO.681/PN/2013 THE ENTIRE RE-ASSESSMENT IS BASED ON SAME MATERIAL AND FACTS WHICH WERE AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT AND TH EREFORE THE REASON TO BELIEVE FOR ESCAPEMENT OF INCOME IS A MERE CHANGE O F OPINION. IN THE COURSE OF HEARING, RELIANCE HAS BEEN PLACED ON THE FOLLOWI NG DECISIONS :- (I) ACIT VS. ROLTA INDIA LTD., 13 TAXMANN.COM 91 (MUM); (II) M/S GMR HOLDINGS PVT. LTD. VS. DCIT (ITA NO.1006/BANG/2010 DATED 31.10.2011); (III) CIT VS. USHA INTERNATIONAL LTD., 251 CTR 28 (DEL); AND, (IV) CADILA HEALTHCARE LTD. VS. ACIT, 355 ITR 393 (GUJ). 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE APPEARING FOR THE REVENUE HAS REFERRED TO THE ORDER OF THE CIT(A) IN ORDER TO ASSAIL THE ARGUMENT OF THE ASSESSEE. ACCORDING TO THE LD. DEP ARTMENTAL REPRESENTATIVE, IN THE PRESENT CASE, THE ASSESSING OFFICER HAD OVER LOOKED SOME ISSUES AT THE TIME OF ORIGINAL ASSESSMENT AND THEREFORE IT COULD NOT BE SAID THAT THERE WAS A CHANGE OF OPINION. IN-PARTICULAR, IT WAS POINTED O UT THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD N OT EXAMINED AS TO WHETHER THE GAIN ON PURCHASE AND SALE OF SHARES WAS TO BE ASSESSED AS CAPITAL GAIN OR AS BUSINESS INCOME. THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND ON THE SUBJE CT AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THE PRESENT CASE, THE BASIC GRIEVANCE OF THE ASSESSEE IS THAT T HE INITIATION OF RE- ASSESSMENT PROCEEDINGS BY ISSUANCE OF NOTICE U/S 14 7/148 OF THE ACT IS INVALID BECAUSE THERE WAS NO NEW TANGIBLE MATERIAL WHICH HA D COME TO THE NOTICE OF THE ASSESSING OFFICER IN ORDER TO INITIATE THE RE-A SSESSMENT PROCEEDINGS. IN OTHER WORDS, AS PER THE APPELLANT COMPANY, THE ASSE SSING OFFICER HAS FORMED A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE ITA NO.525/PN/2013 ITA NO.681/PN/2013 BASIS OF MATERIAL ALREADY EXISTING ON RECORD, AND T HERE BEING NO NEW TANGIBLE MATERIAL COMING TO HIS NOTICE AND THEREFORE THE RE- OPENING OF ASSESSMENT UNDER SUCH CIRCUMSTANCES IS NOT VALID. IN-PRINCIPL E, THERE CANNOT BE ANY DISPUTE TO THE AFORESAID PROPOSITION BEING CANVASSE D BY THE ASSESSEE. IN-FACT, IN A RECENT DECISION IN THE CASE OF SMT. SUNITA M. RATHOD VS. DCIT VIDE ITA NO.429/PN/2013 DATED 26.08.2014, THE PUNE BENCH OF THE TRIBUNAL HAS CONSIDERED AN IDENTICAL PROPOSITION OF LAW. THE RE LEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS AS UNDER :- 11. IN ANY CASE, THE OTHER PROPOSITION WHICH HAS B EEN RELIED UPON BY THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS F ORMED A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BASIS OF THE MATERIAL EXISTING ON RECORD WITHOUT THERE BEING ANY NEW TANGIBLE 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 BOM BAY HIGH COURT IN THE CASE OF SHRI AMITABH BACHCHAN (SUPRA). IN THE CASE BEFORE THE HONBLE HIGH COURT, ASSESSEE FILED A RETURN OF INCOME ORIGINALLY FOR ASSESSMENT 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 THE AFORESAID ADDITION. IN THIS BACKGROUND, THE CIT(A) AS WELL AS THE TRIBU NAL CAME TO CONCLUDE THAT THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT WA S INVALID BECAUSE THE MATERIAL ON THE BASIS OF WHICH THE ASSESSMENT WAS S OUGHT TO BE REOPENED WAS ALWAYS AVAILABLE DURING THE TIME OF ORIGINAL PR OCEEDINGS LEADING TO THE ASSESSMENT FINALIZED U/S 143(3) OF THE ACT. THE AF ORESAID CONCURRENT FINDING RECORDED BY THE CIT(A) AS WELL AS THE TRIBUNAL WAS SOUGHT TO BE ASSAILED BEFORE THE HONBLE HIGH COURT. THE HONBLE HIGH CO URT UPHELD THE AFORESAID STAND OF THE TRIBUNAL BY MAKING THE FOLLOWING DISCU SSION :- 8) BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AN D THE TRIBUNAL HAVE CORRECTLY COME TO THE CONCLUSION THAT THERE WAS NO FRESH TANGIBLE MATERIAL BEFORE THE ASSESSING OFF ICER TO REACH A REASONABLE BELIEF THAT THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT. THE ORDER PASSED ORIGINALLY ON 29 TH MARCH 2005 UNDER SECTION 143(3) OF THE SAID ACT WAS PASSED AFTER THE RESPONDENT HAD MADE ADHOC CLAIM FOR EXPENDITURE AT 30% OF THE PROF ESSIONAL RECEIPTS IN THE REVISED RETURN OF INCOME WHICH WAS LATER WITHDRAWN. IN FACT THE REASONS FOR REOPENING THE ASSESSMENT FO R THE YEAR 2002- 03 ITSELF RECORDS THAT THE CLAIM OF 30% ADHOC EXPEN SES WAS ITA NO.525/PN/2013 ITA NO.681/PN/2013 WITHDRAWN WHEN THE RESPONDENT ASSESSEE WAS ASKED TO SUBSTANTIATE THE CLAIM. THEREFORE, THE SAME MATERIA L WAS A SUBJECT MATTER OF CONSIDERATION DURING THE PROCEEDINGS FOR ASSESSMENT LEADING TO ORDER DATED 29 TH MARCH, 2005. IN THE CIRCUMSTANCES THERE COULD BE NO BASIS FOR THE ASSESSING OFFICERS TO FOR M A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IT IS A SETTLED POSI TION OF LAW THAT REVIEW UNDER THE GARB OF REASSESSMENT IS NOT PERMIS SIBLE. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER 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 C ONDITION PRECEDENT TO FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN THIS CONTEXT, THE THIRD MEMBER DECISION OF MUMBAI BENCH OF THE TRIBUN AL IN THE CASE OF TELCO DADAJEE DHACKJEE LIMITED (SUPRA) IS ALSO RELEVANT. NOTABLY, IN THE CASE BEFORE THE MUMBAI BENCH, ORIGINALLY THE RETURN WAS MERELY PROCESSED U/S 143(1) OF THE ACT AND NO ASSESSMENT WAS MADE U/S 14 3(3) OF THE ACT. 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 ACT AND THERE WAS NO ASSESSMENT MADE U/S 143(3) OF THE ACT. THE REVENUE FURTHER SUPPORTED ITS PROPOSITION BY RELYING ON THE JUDGEME NT OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD., 291 ITR 500 (SC). ON THE OTHER HAND, THE ASSESSEE HAD ARGU ED THAT FOLLOWING THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) EVEN IN A CASE WHERE THE RETURN WAS FIRST P ROCESSED U/S 143(1) OF THE ACT, IN THE ABSENCE OF ANY FRESH TANGIBLE MATERIAL THE ASSESSING OFFICER COULD NOT FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEAB LE TO 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 L EARNED JUDICIAL MEMBER. IN MY HUMBLE OPINION, THE RECENT JUDGMENT O F THE SUPREME COURT IN THE CASE OF CIT VS. (1) KELVINATOR OF INDI A LTD. AND (2) EICHER LTD. [2010] 320 ITR 561 (SC) COVERS THE PRES ENT CASE. THE CONTENTION OF THE DEPARTMENT THAT THIS JUDGMENT ONL Y COVERS CASES WHERE THE FIRST ASSESSMENT WAS MADE UNDER SECTION 1 43(3) AND THAT IT DOES NOT APPLY TO CASES WHERE THE RETURN WAS FIR ST PROCESSED UNDER SECTION 143(1) IS, WITH RESPECT, NOT ACCEPTAB LE BECAUSE THE SUPREME COURT WAS EXPOUNDING TO THE PROVISIONS OF S ECTION 147 AND THE WORDS 'REASON TO BELIEVE' APPEARING THEREIN . IT WAS HELD THAT A SCHEMATIC INTERPRETATION HAS TO BE GIVEN TO THESE WORDS, FAILING WHICH SECTION 147 WOULD GIVE ARBITRARY POWE RS TO THE ITA NO.525/PN/2013 ITA NO.681/PN/2013 ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASI S OF A MERE CHANGE OF OPINION. IT WAS FURTHER HELD THAT THERE I S A CONCEPTUAL DIFFERENCE BETWEEN THE POWER TO REVIEW AND THE POWE R TO REASSESS AND SECTION 147 CANNOT BE INTERPRETED IN SUCH A MAN NER TO GIVE A POWER OF REVIEW. THE CONTENTION OF THE DEPARTMENT B EFORE ME IS THAT WHERE NO VIEW HAS BEEN TAKEN AS TO THE CORRECTNESS OF THE RETURN IN THE FIRST INSTANCE, THE ASSESSING OFFICER CANNOT BE SAID TO EXERCISE A POWER OF REVIEW WHEN HE REOPENS THE ASSESSMENT WHIC H HAS BEEN EARLIER PASSED UNDER 143(1). THIS ARGUMENT IS SIMIL AR TO THE ARGUMENT THAT IF NO OPINION CAN BE SAID TO HAVE BEE N FORMED BY THE ASSESSING OFFICER WHEN THE RETURN WAS MERELY PROCES SED UNDER SECTION 143(1), BY ISSUING NOTICE UNDER SECTION 148 HE CANNOT BE SAID TO HAVE CHANGED HIS OPINION. SO FAR SO GOOD. B UT IT NEEDS TO BE REMEMBERED THAT SECTION 147 APPLIES BOTH TO SECTION 143(1) AS WELL AS SECTION 143(3) AND, THEREFORE, EXCEPT TO THE EXT ENT THAT THE REASSESSMENT NOTICE ISSUED UNDER SECTION 148 IN A C ASE WHERE THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143(1) C ANNOT 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 CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT. THE REASON TO BELIEVE MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF THAT INCOME CHARGE ABLE TO TAX HAD ESCAPED ASSESSMENT WHEN THE RETURN WAS PROCESSED AN D ACCEPTED UNDER SECTION 143(1). TO HOLD THAT IN EVERY CASE WH ERE A RETURN WAS PROCESSED AND ACCEPTED UNDER SECTION 143(1) THE ASS ESSING OFFICER WILL BE FREE TO REOPEN THE SAME UNDER SECTION 148 E VEN IN THE ABSENCE OF A LIVE LINK BETWEEN THE REASONS RECORDED AND THE FORMATION OF THE BELIEF WOULD BE TO MAKE THE CONDIT IONS OF SECTION 147 AND SECTION 148 OTIOSE AS REGARDS NOTICES OF RE OPENING ISSUED IN CASES WHERE THE RETURN WAS ORIGINALLY PROCESSED UNDER SECTION 143(1). THERE IS NO EXCLUSION IN SECTION 147 TO THE EFFECT THAT WHERE THE RETURN WAS EARLIER PROCESSED UNDER SECTION 143( 1) IT IS NOT NECESSARY FOR THE ASSESSING OFFICER TO HOLD OR ENTE RTAIN A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THE REASONS RECORDED BY HIM. THEREFORE, THE CONDITION THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE AND THE FURTHER CONDITI ON THAT THOSE REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF IS APPLICABLE EQUALLY TO CASES WHERE THE RETURN WAS PR OCESSED UNDER SECTION 143(1) AS ALSO TO CASES WHERE THE RETURN WA S 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 WHE RE THE EARLIER ASSESSMENT WAS MADE UNDER SECTION 143(3), NO ACTION FOR REOPENING THE ASSESSMENT CAN BE TAKEN AFTER THE EXP IRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BECAUSE OF THE FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. SUCH AN EXCEPTION HAS NOT BEEN PROVIDED FOR IN A CASE WHERE THE RETURN HAS BEEN PROCESSED UNDER SECTION 143(1) IN WHICH CASE T HE PROVISO WILL HAVE NO APPLICATION. IF IT IS CORRECT THAT AN INTI MATION UNDER SECTION 143(1) AS WELL AS AN ASSESSMENT ORDER UNDER SECTION 143(3) ARE BOTH AMENABLE TO SECTION 147, IT SHOULD ALSO BE CON CEDED THAT EVEN IN A CASE WHERE THE ORIGINAL RETURN WAS MERELY PROC ESSED UNDER SECTION 143(1) THE ASSESSING OFFICER MUST HAVE REAS ON TO BELIEVE ITA NO.525/PN/2013 ITA NO.681/PN/2013 THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT. HE HAS ALSO TO RECORD REASONS UNDER SECTION 148(2) FOR REO PENING THE EARLIER ASSESSMENT MADE UNDER SECTION 143(1) ALL THAT HAS BEEN EXCLUDED IS THAT THE ASSESSEE, IN WHOSE CASE THE RE TURN WAS FIRST PROCESSED UNDER SECTION 143(1), CANNOT CHALLENGE TH E NOTICE OF REOPENING ON THE GROUND THAT IT IS PROMPTED BY A ME RE CHANGE OF OPINION. ONLY TO THIS LIMITED EXTENT THERE IS A DI SABILITY OR THE PART OF THE ASSESSEE TO CHALLENGE THE NOTICE OF REOPENING I N 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 C ASES WHERE THE RETURN WAS PROCESSED UNDER SECTION 143(1) BUT LATER NOTICE WAS ISSUED UNDER SECTION 148 AND THE ASSESSEE CHALLENGE S THE NOTICE ON THE GROUND THAT IT IS PROMPTED BY A MERE CHANGE OF OPINION. IN THIS JUDGMENT IT WAS HELD THAT THERE WAS NO ASSESSM ENT UNDER SECTION 143(1) IN THE SENSE THAT THE RETURN IS SCRU TINIZED AND AN OPINION IS FORMED ABOUT THE ASSESSEE'S CLAIMS AND C ONTENTIONS AND, THEREFORE, IT IS NOT POSSIBLE TO SAY THAT WHEN THE ASSESSING OFFICER REOPENS THE ASSESSMENT UNDER SECTION 148, IT WAS PR OMPTED BY A MERE CHANGE OF OPINION (PLEASE SEE OBSERVATIONS AT PAGE 510 TOP). EXCEPT TO THIS LIMITED EXTENT, THE NOTICE OF REOPEN ING 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 A SSESSEE, INCLUDING THE GROUND THAT THERE WAS NO REASON TO BE LIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT OR THAT THE MATERIALS BEFORE THE ASSESSING OFFICER HAD NO LIVE LINK OR NEXUS WITH THE FORMATION OF SUCH BELIEF OR THAT THE REASONS AR E BASED ON GOSSIP OR RUMOUR OR WERE A MERE PRETENCE, 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 SECTION 1 47 ARE FULFILLED' THE ASSESSING OFFICER CAN REOPEN THE PROCEEDINGS EVEN W HERE INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. THUS FULFILLMENT OF THE CONDITIONS OF SECTION 147, INCLUDING THE ONE THAT THERE SHOULD BE 'REASON TO BELIEVE', IS ESSENTIAL FOR THE VALIDI TY OF THE NOTICE UNDER SECTION 148. IT IS WHILE EXPOUNDING THE WORD S 'REASON TO BELIEVE' THAT THE SUPREME COURT IN THE LATER JUDGME NT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HELD THAT THERE SH OULD BE 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION 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 T ANGIBLE MATERIAL JUSTIFYING HIS REASON TO BELIEVE THAT INCOME HAD ES CAPED ASSESSMENT, 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 CHARGEABLE TO TAX. IN THE REASSESSMENT OR DER THE ASSESSING OFFICER HAS STATED IN PARAGRAPH 3.2.3 THA T AFTER THE RETURN WAS PROCESSED, IT WAS NOTICED THAT THE ASSESSEE HAS UNDERSTATED ITS INCOME BY CLAIMING THE AFORESAID TWO ITEMS OF EXPEN DITURE, HE HAS ITA NO.525/PN/2013 ITA NO.681/PN/2013 NOT REFERRED TO ANY TANGIBLE MATERIAL BEFORE HIM, I N TERMS OF THE JUDGMENT OF THE SUPREME COURT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA), ON THE BASIS OF WHICH HE ENTERTAINED THE P RIME FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. THOUGH IT IS NOT POSSIBLE TO CHALLENGE THE ACTION OF THE ASSE SSING OFFICER ON THE GROUND OF A CHANGE OF OPINION BECAUSE IN THE PR ESENT CASE THE RETURN WAS EARLIER MERELY PROCESSED UNDER SECTION 1 43(1), HIS ACTION CAN BE CHALLENGED ON THE BASIS OF THE TAW DECLARED BY THE SUPREME COURT IN THE AFORESAID JUDGMENT. THE LEARNED JUDICI AL MEMBER HAS HELD IN PARAGRAPH 13 THAT THERE WAS NO MATERIAL BEF ORE THE ASSESSING OFFICER FOR SUCH A BELIEF. THE LEARNED AC COUNTANT MEMBER HAS NOT DISPUTED THAT THERE WAS NO 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 R ESPECT, I AM UNABLE TO SUBSCRIBE TO THIS VIEW FOR THE REASONS ST ATED IN THE EARLIER PARAGRAPHS. IN MY HUMBLE OPINION, ON A PROPER UNDER STANDING OF THE JUDGMENTS OF THE SUPREME COURT BOTH IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) AND C IT 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 GROUND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER TO ENABLE HIM TO ENTERTAIN A PRIMA FACIE BELIEF THAT I NCOME CHARGEABLE TO LAX HAS ESCAPED ASSESSMENT. I MAY ALSO ADD THA T NEITHER BEFORE THE LEARNED MEMBERS WHO HEARD THE APPEAL ORIGINALLY NOR BEFORE ME DID THE DEPARTMENT PRODUCE ANY TANGIBLE MATERIAL ON THE BASIS OF WHICH THE REASONS WERE RECORDED TO DEMONSTRATE THAT THERE WAS A LIVE LINK OR NEXUS BETWEEN THEM AND THE REQUISITE B ELIEF. 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 PROCEEDINGS INITIATED BY THE ASSESSING OFFICER UNDER SECTION 147 ARE LIABLE TO BE QUASHED ON THE GROUND THAT THERE W AS NO TANGIBLE MATERIAL BEFORE THE 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 E NABLE THE ASSESSING OFFICER TO ENTERTAIN A BELIEF THAT CERTAIN INCOME CHARGEABL E TO 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. 7. AS THE AFORESAID DISCUSSION WOULD SHOW, THE TRIB UNAL RELIED ON THE 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 TO HOLD ITA NO.525/PN/2013 ITA NO.681/PN/2013 THAT EXISTENCE OF NEW TANGIBLE MATERIAL WITH THE AS SESSING OFFICER IS A PRE- CONDITION TO FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE ACT. FURTHERMORE, THE TRIBUNAL ALSO REFERRED TO A THIRD MEMBER DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF TELCO D ADAJEE DHACKJEE LIMITED VS. DCIT VIDE ITA NO.4613/MUM/2005 DATED 12.05.2010 . IN THE SAID DECISION, THE THIRD MEMBER UPHELD THE STAND OF THE ASSESSEE T O THE EFFECT THAT IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. KELVINATOR OF INDIA LTD., (2010) 320 ITR 561 (SC) EVEN IN A CA SE WHERE THE RETURN WAS PROCESSED U/S 143(1) ONLY, IN THE ABSENCE OF ANY FR ESH TANGIBLE MATERIAL THE ASSESSING OFFICER COULD NOT FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN VIEW OF THE AFORESAID DECISIONS, IT IS TO BE APP RECIATED THAT ABSENCE OF FRESH TANGIBLE MATERIAL WOULD NOT ENABLE THE ASSESSING OF FICER TO ENTERTAIN A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IF THE ASSESSIN G OFFICER FORMS A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT ON THE BASIS OF THE MATERIAL ALREADY AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS, THE SAME WOULD NOT BE A VALID REOPENING OF ASSESSMENT U /S 147/148 OF THE ACT. 8. IN THIS BACKGROUND, WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE. THE REASONS RECORDED BY THE ASSESSING OFFICER IN OR DER TO INITIATE PROCEEDINGS U/S 147 OF THE ACT HAVE BEEN REPRODUCED BY US IN TH E EARLIER PART OF THIS ORDER. A PERUSAL OF THE SAID REASONS REVEAL THAT AS PER TH E ASSESSING OFFICER, INCOME HAS ESCAPED ASSESSMENT ON TWO ISSUES. FIRSTLY, IN RELATION TO THE ASSESSMENT OF SHORT TERM CAPITAL GAIN OF RS.83,14,790/-, WHICH ACCORDING TO HIM IS TO BE TREATED AS A BUSINESS INCOME; AND SECONDLY, ADDIT IONAL DEPRECIATION OF RS.54,80,000/- ALLOWED ON WINDMILLS, WHICH ACCORDIN G TO HIM IS NOT ALLOWABLE TO ASSESSEE. ITA NO.525/PN/2013 ITA NO.681/PN/2013 9. QUA THE FIRST ISSUE, IT IS NOTED BY THE ASSESSIN G OFFICER THAT ON PERUSAL OF THE DETAILS OF SHORT TERM CAPITAL GAIN IT CAME T O HIS NOTICE THAT THE ASSESSEE COMPANY DEALT IN MANY TRANSACTION OF BUYING AND SEL LING OF SHARES OF HUGE AMOUNT ON VARIOUS DATES; THAT THE RATIO BETWEEN THE PURCHASE AND SALES WORKED OUT TO 1:1.27; THAT ASSESSEE COMPANY HELD SH ARES OF RS.81,43,449/- AS INVESTMENT AS ON 31.03.2006; THAT THE HOLDING R ATIO TO PURCHASE AND SALES WORK OUT TO OF 0.102 AND 0.08; AND, THAT ASSESSEE H AS EARNED DIVIDEND OF RS.33.10 LACS AS AGAINST PROFIT OF RS.101.76 LACS W HICH SHOWS THAT THE MOTIVE WAS TO EARN PROFIT. ON THIS BASIS, HE HAS FORMED A BELIEF THAT THE SHORT TERM CAPITAL GAIN OF RS.83,14,790/- DECLARED BY THE ASSE SSEE SHOULD HAVE BEEN TREATED AS A BUSINESS INCOME. 10. IN THIS CONTEXT, OUR ATTENTION HAS BEEN DRAWN T O THE ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3)(II ) OF THE ACT DATED 27.11.2008. NOTABLY, THERE IS NO DISPUTE TO THE PO SITION THAT IN THE RETURN OF INCOME FILED, ASSESSEE HAD DECLARED SHORT TERM AS W ELL AS LONG TERM CAPITAL GAIN ON SALE OF SHARES & SECURITIES. IN PARA 6.3 O F THE ORIGINAL ASSESSMENT ORDER, IT IS NOTED THAT ASSESSEE HAS EARNED RS.33,1 0,604/- AS DIVIDEND ON SHARES HELD AS INVESTMENT WHICH IS EXEMPT U/S 10(33 ) OF THE ACT. IT HAS ALSO BEEN NOTED THAT INCOME FROM LONG TERM CAPITAL GAIN WAS RS.18,61,212/-, WHICH WAS EXEMPT U/S 10(38) OF THE ACT. THE AFORESAID OB SERVATIONS OF THE ASSESSING OFFICER ARE IN THE CONTEXT OF THE APPLICA BILITY OF SECTION 14A OF THE ACT RELATING TO THE NON-DEDUCTIBILITY OF EXPENDITUR E INCURRED IN RELATION TO EXEMPT INCOMES. SO HOWEVER, IT CANNOT ESCAPE INFER ENCE THAT THE ASSESSING OFFICER WAS CONSCIOUS OF THE FACT THAT ASSESSEE HAS EARNED INCOME ON SALE AND PURCHASE OF SHARES AS WELL AS DIVIDENDS EARNED ON SUCH SHARE-HOLDING, AND, WHICH HAS BEEN REFLECTED AS INVESTMENTS. FURT HER, THE ASSESSING OFFICER HAS REPRODUCED THE SUBMISSIONS OF THE ASSESSEE, WHI CH SHOW THAT ASSESSEE DULY EXPLAINED THE REASONS FOR MAKING INVESTMENT IN SHARES AND SECURITIES. ITA NO.525/PN/2013 ITA NO.681/PN/2013 THE PLEA OF THE ASSESSEE WAS THAT THE INVESTMENT IN SHARES AND SECURITIES WERE MADE TO ENSURE THAT ASSESSEE WOULD HAVE ENOUGH FUNDS IN FUTURE YEARS WHEN IT WAS TO REPAY THE SALES-TAX DEFERMENT LOANS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE INVESTMENT IN SHARES WAS YIELDING TAX FREE INCOME ALSO IN THE SHAPE OF DIVIDENDS. THE ASSESSEE COMPANY ALSO EXPLAINED THE SOURCE OF FUND FOR MAKING SUCH INVESTMENT AND IT WAS ASSERTED THAT NO INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING INVESTMENT IN SHARES AND SECURITIES. IT WAS CLARIFIED THAT THE INVESTMENTS WERE MADE OUT OF THE RESERVES AND SURPLUS AVAILABLE WITH THE COMPANY. THE SUBMISSION MADE BY THE ASSESSEE ALSO REVEALED THE MANNER IN WHICH THE DECISIONS RELATING TO THE INVESTMENTS WERE BEING MADE. IN THE SAID SUBMISSIONS, IT HAS ALSO B EEN POINTED OUT THAT THE SALE OF THE SHARES HAVE RESULTED IN LONG TERM OR SH ORT TERM CAPITAL GAINS AND IN THIS CONTEXT IT WAS POINTED OUT THAT SHORT TERM CAP ITAL GAIN ARISING IN THE YEAR UNDER CONSIDERATION WERE SUBJECTED TO A TAX LIABILI TY OF RS.8,31,479/-. THE OTHER SUBMISSIONS OF THE ASSESSEE ON THIS ISSUE REL ATED TO ITS STAND ON THE AMOUNT DISALLOWABLE WITH REFERENCE TO SECTION 14A O F THE ACT. BE THAT AS IT MAY, WE ARE ENUMERATING THE AFORESAID ONLY TO POINT OUT THAT THE FACTUM OF THE ASSESSEE HAVING EARNED INCOME BY WAY OF LONG TERM A ND SHORT TERM CAPITAL GAIN ON SALE OF SHARES AND SECURITIES, WHICH WERE H ELD AS INVESTMENTS, WAS VERY MUCH BEFORE THE ASSESSING OFFICER. IT IS ALSO CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER WAS MADE AWARE OF THE INTENTION AND PURPOSE FOR WHICH THE ASSESSEE WAS MAKING INVESTMENT IN SHA RES AND SECURITIES. ALL THIS DISCUSSION IN THE ASSESSMENT ORDER GOES TO SHO W THAT THE EXISTENCE OF THE TRANSACTIONS OF LONG TERM AND SHORT TERM CAPITAL GA IN AND DIVIDEND EARNINGS WAS NOTED BY THE ASSESSING OFFICER. IN CONTRAST, T HE REASONS RECORDED THEREOF TO INVOKE SECTION 147 OF THE ACT DO NOT SHOW ANY FR ESH MATERIAL WHICH CAME TO THE NOTICE OF THE ASSESSING OFFICER SO AS TO ENABLE HIM TO FORMULATE A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T ON THE GROUND THAT INCOME FROM SHORT TERM CAPITAL GAIN WAS TO BE ASSES SED AS BUSINESS INCOME. ITA NO.525/PN/2013 ITA NO.681/PN/2013 IN-FACT, THE REASONS RECORDED CLEARLY POINT OUT THA T THE BELIEF OF THE ASSESSING OFFICER IS FOUNDED ONLY ON THE BASIS OF A RE-APPRAI SAL OF MATERIAL AND EVIDENCE ALREADY ON RECORD BEFORE HIM AT THE TIME OF ORIGINA L ASSESSMENT. PERTINENTLY, EVEN SUCH A RE-APPRAISAL IS WITH REFERENCE TO THE S AME SET OF MATERIAL, AVAILABLE WITH HIM IN THE ORIGINAL ASSESSMENT PROCE EDINGS AND NO NEW TANGIBLE MATERIAL COME TO THE NOTICE OF THE ASSESSING OFFICE R AT THE TIME OF RECORDING OF REASONS MANDATED BY SECTION 147 OF THE ACT. MOREOV ER, ASSESSEE-COMPANY HAD EARNED LONG TERM AS WELL AS SHORT TERM CAPITAL GAIN ON SALE AND PURCHASE OF SHARES AND SECURITIES; IT IS ONLY IN RELATION TO THE TRANSACTIONS OF SHORT TERM CAPITAL GAIN, THE ASSESSING OFFICER HAS FORMED A BE LIEF THAT IT IS TO BE ASSESSED AS BUSINESS INCOME, WHILE RETAINING THE LONG TERM C APITAL GAIN AS THE SAME. THERE IS NOTHING TO JUSTIFY THE ABOVE DICHOTOMY IN THE APPROACH OF THE ASSESSING OFFICER, THOUGH THE GENRE OF THE TRANSACT IONS OF LONG TERM AND SHORT TERM CAPITAL GAIN REMAIN THE SAME. THEREFORE, ON T HE ISSUE OF TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME IS CONCE RNED, WE FIND THAT THE INITIATION OF PROCEEDINGS BY THE ASSESSING OFFICER U/S 147 OF THE ACT IS BASED ON MATERIAL ALREADY AVAILABLE AT THE TIME OF ORIGIN AL ASSESSMENT PROCEEDINGS AND NO NEW TANGIBLE MATERIAL COME TO HIS NOTICE; TH EREFORE, FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF SHRI AMITABH BACHCHAN (SUPRA), SUCH AN INITIATION OF RE- ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT IS INVALID IN THE EYES OF LAW. WE HOLD SO. 11. ON THIS ASPECT, A PLEA WAS RAISED BY THE LD. DE PARTMENTAL REPRESENTATIVE THAT THE SAID ISSUE WAS NOT RAISED A T THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE IT COULD NOT B E SAID THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND ON SUCH ISSUE AND THER EFORE THE RE-ASSESSMENT CANNOT BE SAID TO BE BASED ON A CHANGE OF AN OPINIO N. IN OUR CONSIDERED OPINION, THE AFORESAID SUBMISSION OF THE LD. DEPART MENTAL REPRESENTATIVE IS NOT RELEVANT BECAUSE WE ARE NOT EXAMINING THE PRINC IPLES OF CHANGE OF ITA NO.525/PN/2013 ITA NO.681/PN/2013 OPINION IN THE CONTEXT OF SECTION 147/148 OF THE A CT. THE PROPOSITION UNDER CONSIDERATION IS THAT THE ASSESSING OFFICER IS PREC LUDED FROM THE FORMING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT MERELY ON THE BASIS OF A REVIEW OF THE MATERIAL ALREADY AVAILABLE ON RECORD, WHICH IS SUPPORTED BY THE JUDGEMENT OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF SHRI AMITABH BACHCHAN (SUPRA). THUS, THE PLEA OF T HE LD. DEPARTMENTAL REPRESENTATIVE IS NOT RELEVANT IN THE PRESENT CONTE XT. 12. THE SECOND ASPECT ON WHICH THE ASSESSING OFFICE R HAS FORMULATED A BELIEF ABOUT ESCAPEMENT OF INCOME IS THE ALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.54,80,000/- ON WINDMILL INSTALLED AT COIMBATO RE. IN THIS CONTEXT, THE ASSERTIONS OF THE ASSESSING OFFICER ARE QUITE BALD AND ARE NOT SUPPORTED BY ANY STATUTORY PROVISIONS. ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT IS CLEARLY ALLOWABLE AS HAS BEEN CONTENDED BY THE LD. AUTHORIZED REPRESENTED BEFORE US. THE ASSESSEE IS A COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING OF ENGINEERING GOODS AND FABRICATION AS WELL AS GENERATION OF ELECTRICITY BY WINDMILL. AS FAR AS THE APPLICATION OF SECTION 32(1)(IIA) OF THE ACT RELATING TO ADDITIONAL DEPRECIATION IS CONCERNED, W HAT IS REQUIRED TO BE SATISFIED IS ACQUISITION AND INSTALLATION OF A NEW MACHINERY OR PLANT AFTER THE 31 ST DAY OF MARCH, 2005 BY AN ASSESSEE WHO IS ALREADY ENGAGED I N THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. AS PER THE ASSESSING OFFICER, INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT O F ALLOWANCE OF ADDITIONAL DEPRECIATION ON WINDMILL BECAUSE WINDMIL L IS NOT RELATED TO BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THIN G . A BARE PERUSAL OF THE SAID PROVISION REVEALS THAT IT DOES NOT STATE THAT SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE ANY OPERATIONAL CONNECTIVITY T O THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. TH EREFORE, THE CONTENTION OF THE ASSESSING OFFICER THAT THE BUSINESS OF GENER ATION OF WINDMILL IS NOT RELATED TO THE BUSINESS OF MANUFACTURE OF PRODUCTIO N OF ARTICLE OR THING HAS NO ITA NO.525/PN/2013 ITA NO.681/PN/2013 RELEVANCE TO THE CLAIM OF THE ASSESSEE FOR ADDITION AL DEPRECIATION CONTAINED IN SECTION 32(1)(IIA) OF THE ACT. THERE CANNOT BE A V IEW THAT SETTING UP A WINDMILL DOES NOT FALL WITHIN THE EXPRESSION ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INSTALLED APPEARING IN SECTION 32(1)(IIA) OF THE ACT. ON THIS ASPECT ITSELF, WE ARE UNABLE TO APPROVE THE RE ASONS FORMULATED BY THE ASSESSING OFFICER IN ORDER TO TREAT THE ALLOWANCE O F ADDITIONAL DEPRECIATION OF RS.54,80,000/- ON WINDMILL IN THE ORIGINAL ASSESSME NT AS AN ITEM WHICH HAD ESCAPED ASSESSMENT. MOREOVER, AS HAS BEEN CONTENDE D BY THE LD. REPRESENTATIVE BEFORE US ALLOWANCE OF ADDITIONAL DE PRECIATION ON WINDMILL IN THE CASE OF AN ASSESSEE, WHO IS OTHERWISE ENGAGED I N THE BUSINESS OF MANUFACTURE OF AN ARTICLE OR THING IS JUSTIFIED HAV ING REGARD TO A DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VT M LTD., 319 ITR 336 (MAD.). PERTINENTLY, THE NORMAL DEPRECIATION ON WI NDMILL IN TERMS OF SECTION 32(1) OF THE ACT WAS ALSO ALLOWED IN THE ORIGINAL A SSESSMENT, AND THAT HAS NOT BEEN DISTURBED BY THE ASSESSING OFFICER AT THE TIME OF INITIATING THE RE- ASSESSMENT PROCEEDINGS. FOR ALL THE AFORESAID REAS ONS, WE THEREFORE DO NOT FIND ANY JUSTIFICATION FOR THE ASSESSING OFFICER TO BALDLY FORMULATE A BELIEF WHICH IS NOT EVEN IN CONSONANCE WITH THE PHRASEOLOGY OF T HE RELEVANT PROVISION OR ANY OTHER JUDICIAL PRONOUNCEMENT TO SAY THAT ADDITI ONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT ON WINDMILL IS NOT ALLOWABLE IN THE PRESENT CASE. 13. IN VIEW OF THE AFORESAID DISCUSSION, WE THEREFO RE HOLD THAT THE INITIATION OF PROCEEDINGS BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE U/S 147/148 OF THE ACT IN THE PRESENT CASE SUFFER FROM LEGAL INFIR MITIES AS DETAILED ABOVE, AND AS A CONSEQUENCE THE SAME ARE LIABLE TO BE HELD AS INVALID. WE HOLD SO. 14. AS A RESULT, THE CONSEQUENT ASSESSMENT FINALIZ ED ON 28.12.2011 U/S 143(3) R.W.S. 147 OF THE ACT IS LIABLE TO BE QUASHE D. WE DIRECT ACCORDINGLY. ITA NO.525/PN/2013 ITA NO.681/PN/2013 15. SINCE THE ASSESSEE-COMPANY HAS SUCCEEDED ON THE PRELIMINARILY ISSUE, THE OTHER GROUNDS OF APPEAL RELATING TO THE MERITS OF THE ADDITIONS ARE RENDERED ACADEMIC AND ARE NOT BEING ADJUDICATED FOR THE PRESENT. SIMILARLY, THE APPEAL OF THE REVENUE AGAINST THE ORDER OF THE CIT(A) WHEREIN CERTAIN RELIEFS HAVE BEEN ALLOWED IS ALSO RENDERED INFRUCTU OUS BECAUSE THE ASSESSMENT FINALIZED ON 28.12.2011 (SUPRA) ITSELF H AS BEEN HELD TO BE BAD IN LAW. THEREFORE, THE APPEAL OF THE REVENUE IS ALSO DISMISSED AS INFRUCTUOUS. 16. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED AS ABOVE, THE CROSS-APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 24 TH NOVEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE