Rekhi Holdings Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5649/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65527 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 09-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 16-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI SR DR HEARING ON
• Keywords: Difference of opinion; Competent authority; Change of opinion; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 5649/DEL/2011 ASSESSMENT YEAR: 2003-04 REKHI HOLDINGS PVT. LTD. ACIT, 36, SANT NAGAR, CIRCLE 15 (1), EAST OF KAILASH, VS. NEW DELHI NEW DELHI. (ASSESSEE) (REVENUE) ASSESSEE BY: SH. VED JAIN, ADV. REVENUE BY: SMT. VEENA JOSHI, SR. DR. HEARING ON : 09/07/2012 ORDER PRONOUNCED ON THE DATE: .. ORDER PER I.C.SUDHIR, JM: THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER ON SEVERAL GROUNDS. THE GROUND NO. 1 IS GENERAL IN NATURE AND IN GROUND NOS. 2 TO 5 THE ASSESSEE HAS QUESTIONED THE VALIDITY OF NOTICES ISSUED U/S 1 48 AND ASSESSMENT MADE IN FURTHERANCE THERETO U/S 143 (3) READ WITH 147 OF TH E ACT. IN GROUND NO. - 6 THE FIRST APPELLATE ORDER HAS BEEN QUESTIONED ON TH E GROUND THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN TREATING THE LOSS ON SALE/PURCHASE OF SHARES TO BE LOSS FROM SPECULATION BUSINESS INVOKING THE ITA NO.5649/DEL/2011 2 PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT AND FURTHER IN NOT ALLOWING THE SET-OFF OF LOSS ON SALE/PURCHASE OF SH ARES FROM OTHER INCOME. 2. FOR A READY REFERENCE THE GROUNDS RAISED ARE REPROD UCED HERE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED [CIT (A)] HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRM ING THE ACTION OF THE A.O. IN INITIATING THE PROCEEDINGS UNDER SE CTION 147. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED [CIT (A)] HAS ERRED IN REJECTING THE CONTENTION OF THE ASSES SEE THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE LEARNED A.O. ARE BAD IN THE EYE OF LAW AS THE REASONS RECORDED FOR THE ISSUE OF NOTICE UNDER SECTION 148 ARE BAD IN THE EYE OF LAW AND AR E CONTRARY TO THE FACTS. 3.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L EARNED[CIT (A)] HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING TH E CONTENTION OF THE ASSESSEE THAT THE PROCEEDING INITIATED UNDER S ECTION 147 R/W SECTION 148 ARE BARRED BY LIMITATION HAVING INITIA TED AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMEN T YEAR DESPITE ITA NO.5649/DEL/2011 3 THE FACT THAT THE ORIGINAL ASSESSMENT WAS COMPLETE D UNDER SECTION 143(3) OF THE ACT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LEARNED [CIT (A)] HAS ERRED IN REJECTING THE CONTENTION OF THE ASSES SEE THAT THE ORDER PASSED BY THE LEARNED A.O. IS BAD BOTH IN TH E EYE OF LAW AND ON FACTS, AS THE ASSESSEE HAD ALREADY DISCLOSE D FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSM ENT UNDER SECTION 143(3). (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED [CIT (A)] HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT THE REASSESSMENT PROCEEDING INITIATED UNDER SECTION 147 AFTER A PERIOD OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR IN THE CASE WH ERE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 14 3(3) IS BAD IN LAW WITHOUT THERE BEING ANY ALLEGATION THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSM ENT. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED [CIT (A)] HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT THE REASSESSMENT PROCEEDING CANNOT BE ITA NO.5649/DEL/2011 4 INITIATED TO REVIEW THE EARLIER ORDER PASSED BY TH E ASSESSING OFFICER UNDER SECTION 143(3). (V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REA SSESSMENT ORDER IS OTHERWISE UNTENABLE IN THE EYE OF LAW IN THE ABSENCE OF ANY ADDITION ON THE GROUND FOR WHICH THE REASSE SSMENT PROCEEDINGS WERE INITIATED. 4.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L EARNED [CIT A)] HAS ERRED IN REJECTING THE CONTENTION OF THE A SSESSEE THAT THE LEARNED A.O. HAS ERRED BOTH ON FACTS AND IN LAW IN MAKING A REASSESSMENT ORDER DESPITE THE FACT THAT THE LOSS ASSESSED AFTER REASSESSMENT IS THE SAME AS WAS COM PUTED EARLIER AND A SUCH THERE WAS NO ESCAPEMENT OF INCO ME, REQUIRING REASSESSMENT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED [CIT A)] HAS ERRED IN REJECTING THE CONTENTION OF THE A SSESSEE THAT THE ORDER PASSED BY THE LEARNED A.O. IS BAD I N LAW AS THE A.O. HAS TRAVELED BEYOND THE REASONS RECORDED FOR THE REASSESSMENT. 6.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED [CIT A)] HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRM ING THE ITA NO.5649/DEL/2011 5 ACTION OF THE LEARNED A.O. IN TREATING THE LOSS ON SALE/PURCHASE OF SHARES TO BE LOSS FROM SPECULATION BUSINESS IN VOKING THE PROVISIONS OF EXPLANATION TO SECTION 73. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L EARNED [CIT A)] HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ACTION OF THE LEARNED A.O. IN NOT ALLOWING THE SET OFF LOSS ON SALE/PURCHASE OF SHARES FORM THE OTHER INCOME. 3. SINCE THE ISSUE RAISED IN GROUND NOS. 2 TO 5 IS RE GARDING THE VALIDITY OF NOTICE ISSUED U/S 148 AND THE ASSESSMENT FRAMED IN FURTHERANCE THERETO, WHICH GOES TO THE ROOT OF THE MATTER, WE PREFERRED TO ADJUDICATE UPON THE ISSUE FIRST. 4. THE RELEVANT FACTS ARE THAT THE RETURN OF INCOME FO R THE ASSESSMENT YEAR 2003-04 UNDER CONSIDERATION WAS FILED BY THE A SSESSEE ON 28.11.2003 DECLARING A LOSS OF RS.2,26,39,436/-. THE SAID RETU RN WAS PROCESSED U/S 143 (2) AND THEREAFTER THE CASE WAS SELECTED FOR SCRUTI NY. AFTER CONSIDERING THE VARIOUS DETAILS AND DOCUMENTS FILED BY THE ASSESSEE , THE ASSESSMENT ORDER U/S 143 (3) WAS FRAMED ON 27.2.2006 WHEREIN THE RET URNED INCOME OF THE ASSESSEE WAS ACCEPTED. THEREAFTER NOTICE U/S 148 DA TED 29.3.2010 WAS ISSUED SUPPLYING THE FOLLOWING REASONS TO THE ASSESSEE: ITA NO.5649/DEL/2011 6 DURING THE YEAR THE ASSESSEE COMPANY HAD A LOSS O F RS.2,26,39,436/-. THE ASSESSMENT U/S 143 (3) WAS CO MPLETED ON 27.02.2006 DETERMINING THE ASSESSED LOSS OF RS.2,26 ,39,436/-. LATER, IT WAS OBSERVED THAT THE ASSESSEE HAD DEBITE D TO P & L A/C A LOSS FROM SHARE TRADING OF RS.2,11,49,686/- B UT AS PER THE DETAILS FILED BY THE ASSESSEE THE LOSS WORKED OUT T O RS.1,88,03,485/- AND THE EXCESS LOSS OF RS.23,46,20 1/- SHOULD HAVE BEEN ADDED TO THE INCOME OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEV E THAT INCOME OF RS.23,46,201/- HAS ESCAPED ASSESSMENT IN THIS CA SE AND THE SAME IS TO BE BROUGHT TO TAX UNDER SECTION 147/148 OF THE INCOME TAX ACT. 5. IN THE ASSESSMENT MADE U/S 147 READ WITH 143 (3) OF THE ACT THE AO HAS ASSESSED THE TOTAL LOSS FROM THE BUSINESS AT RS .14,89,750/-AGAINST THE LOSS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME AT RS.2,26,39,436/-. 6. BEFORE THE LD. CIT (A) THE ASSESSEE QUESTIONED NOT ONLY THE VALIDITY OF NOTICE ISSUED U/S 148 OF THE ACT AND ASSESSMENT MAD E IN FURTHERANCE THERETO U/S 147/143 (3) OF THE ACT BUT ALSO QUESTIONED THE ACTION OF THE AO IN MAKING ASSESSMENT AT A LOSS OF RS.14,89,750/- AS AG AINST THE CLAIMED LOSS OF ITA NO.5649/DEL/2011 7 RS.2,26,39,436/-. THE ASSESSEE HOWEVER, COULD NOT S UCCEED IN ITS FIRST APPEAL, HENCE THE PRESENT APPEAL BEFORE US. 7. THE CONTENTION OF THE LD. AR REMAINED THAT BEFORE T HE LD. CIT (A) THE VALIDITY OF NOTICE ISSUED U/S 148 AND THE ASSESSMEN T FRAMED IN FURTHERANCE THERETO WAS ALSO QUESTIONED ON THE GROUND THAT THE CASE HAS BEEN REOPENED AFTER A PERIOD OF 4 YEARS FROM THE END OF THE ASSES SMENT YEAR WITHOUT THERE BEING ANY WHISPER IN THE REASONS SO RECORDED FOR RE OPENING THAT THE INCOME HAS ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PA RT OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS NECESSA RY FOR ASSESSMENT AND MORE SO WHEN THE ORIGINAL ASSESSMENT WAS MADE U/S 143 (3 ) VIDE GROUND NO. 3 (I) OF THE FIRST APPEAL. HOWEVER THE LD. CIT (A) HAS NO T ADJUDICATED UPON THE ISSUE. HE SUBMITTED THAT SINCE THE ISSUE RAISED IS LEGAL IN NATURE, THE SAME CAN BE DECIDED BY THE TRIBUNAL. HE POINTED OUT THAT THE ASSESSMENT COULD HAVE BEEN REOPENED U/S 147 BY 31 ST MARCH, 2008 WHEREAS THE NOTICE U/S 148 HAS BEEN ISSUED BY THE AO ON 29.3.2010. THUS THE SAID N OTICE IS BARRED BY 727 DAYS. HE REFERRED THE CONTENTS OF PROVISO TO SECTIO N 147 OF THE ACT WHEREIN IT HAS BEEN MADE CLEAR THAT WHERE ASSESSMENT U/S 143 ( 3) HAS BEEN MADE, NO ACTION U/S 147 CAN BE TAKEN AFTER THE EXPIRY OF 4 Y EARS UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR THE PURPOSE OF ITA NO.5649/DEL/2011 8 ASSESSMENT. THE LD. AR SUBMITTED FURTHER THAT THERE WAS FULLY AND TRULY DISCLOSURE REGARDING THE CLAIMED LOSS BY THE ASSESS EE BEFORE THE AO DURING THE COURSE OF ASSESSMENT FRAMED U/S 143 (3) OF THE ACT. EVEN IN THE REASONS RECORDED NOTHING HAS BEEN ALLEGED THAT THERE WAS FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT. THE LD. AR SUBMITTED THAT RE OPENING IS NOT ALLOWED FOR MERE CHANGE OF OPINION OR FOR AN ISSUE WHICH TH E AO IN THE ORIGINAL ASSESSMENT OUGHT TO HAVE EXAMINED BUT HAS FAILED TO DO SO. IN SUPPORT HE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: I CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (DEL) II CIT VS. EICHER LTD. (2007) 294 ITR 310 (DEL) III CALCUTTA DISCOUNT CO. LTD. VS. ITO (1961) 41 IT R 191 (SC) IV CIT VS. R. DALMIA (1974) 961 ITR 463 (DEL) V HARYANA ACRYLIC MANUFACTURING CO. VS. CIT ( 2009) 308 ITR 38 (DEL) VI TANNA BUILDERS (P) LTD. VS. NEELA KRISHNAN AND O RS. 283 ITR 448 VII KCP LTD. VS. ITO (1984) 146 ITR 284 (AP) VIII GARDEN SILK MILLS LTD. VS. DCIT 222 ITR 27 (GU J) IX VARELI WEAVERS PVT. LTD. VS. DCIT 240 ITR 77 (GU J) ITA NO.5649/DEL/2011 9 X KRISHNAN METAL INDUSTRIES VS. ACIT 225 ITR 853 (G UJ) XI KAPITAL BUSINESS SYSTEM LTD. VS. ACIT ITA NOS. 4775 & 4776/DEL/2007 (A.YS. 1998-99 AND 2004-05) ORDER D ATED 2010 XII ITO VS. VARUN SHARMA ITA NO. 5441/DEL/2011 (A. Y. 2004-05) ORDER DATED 31.5.2012 8. THE LD. AR CONTENDED FURTHER THAT THE ASSESSMENT WA S REOPENED BY THE AO BY RECORDING THE REASONS THAT THE ASSESSEE H AD NOT FILED THE DETAILS TO THE EXTENT OF RS.23,46,201/- WITH RESPECT TO LOSS O N TRADING OF SHARES CLAIMED BY IT, WHEREAS, WHILE PASSING THE ASSESSMENT ORDER HE HAS IGNORED THE SAID FINDING AND HAS CONSIDERED THE FIGURE OF LOSS EXACT LY THE SAME AS CLAIMED BY THE ASSESSEE. MEANING THEREBY THAT THE REASONS FOR WHICH THE ASSESSMENT WAS REOPENED HAVE NOT BEEN FINALLY CONCLUDED. HE SUBMIT TED THAT SINCE THE MAIN REASON ON THE BASIS OF WHICH THE ASSESSMENT HAS BEE N REOPENED HAS NOT BEEN DECIDED, THE REASSESSMENT IS BAD IN LAW AND THE ORD ER IS LIABLE TO BE QUASHED. IN SUPPORT HE PLACED RELIANCE ON THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. I TA NO. 1714/2009. THE LD. AR ALSO REFERRED PAGE NOS. 1 TO 128 OF THE PAPE R BOOK FILED ON BEHALF OF THE ASSESSEE. THESE DOCUMENTS ARE THE COPIES OF ACK NOWLEDGEMENT OF RETURN OF INCOME ORIGINALLY FILED ON 28.11.2003, COMPUTATI ON OF INCOME, AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, MEMORAND UM AND ARTICLE OF ITA NO.5649/DEL/2011 10 ASSOCIATION, COPY OF NOTICE ISSUED U/S 143 (2) DATE D 13.10.2005 IN THE ORIGINAL PROCEEDINGS U/S 143 (3), QUESTIONNAIRE DAT ED 19.10.2005, REPLY DATED 8.11.2005 TO THE AO, NOTICE U/S 143 (3) DATED 5.01. 2006, LETTER FILED BEFORE THE AO ON 16.01.2006, GIVING SCRIPT WISE DETAILS AS PER POINT WITH OTHER EVIDENCES BY SALE/PURCHASE OF SHARES AND LETTER DAT ED 20.01.2006 ADDRESSED TO THE AO ETC. 9. THE LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDER OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE AUDIT OBJ ECTION REMAINED THE BASIS OF ISSUE OF NOTICE U/S 148 OF THE ACT. THE REOPENIN G HAS BEEN DONE BY THE AO AFTER RECORDING THE REASONS AS PER LAW SHOWING REASONS TO BELIEF THOUGH BASED ON INFORMATION FROM THE AUDIT PARTY BU T AFTER APPROVAL OF COMPETENT AUTHORITY. HE PLACED RELIANCE ON THE DECI SIONS FOLLOWED BY THE LD. CIT (A) WHILE CONFIRMING THE VALIDITY OF NOTICE ISS UED U/S 148 AND THE ASSESSMENT MADE IN FURTHERANCE THERETO. HE PLACED R ELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RA JESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 (SC). 10. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT THE ISSUE REGARDING VALIDITY OF NOTICE ISSUED U/S 148 WAS QUESTIONED BE FORE THE LD. CIT (A) ALSO ON THE BASIS THAT IT IS IN VIOLATION OF PROVISO TO SECTION 147 OF THE ACT VIDE GROUND NO. 3 (I) TO THE FIRST APPEAL WHICH HAS NOT BEEN ADJUDICATED UPON BY ITA NO.5649/DEL/2011 11 THE LD. CIT (A). THE LD. CIT (A) HAS HOWEVER, UPHEL D THE VALIDITY OF REOPENING ON OTHER GROUND. SINCE THE LD. CIT (A) HA S NOT DECIDED THE ISSUE OF VALIDITY OF THE NOTICE ISSUED U/S 148 AND ASSESS MENT MADE IN FURTHERANCE THERETO U/S 147 READ WITH 143 (3) OF THE ACT IN VIE W OF THE PROVISO TO SECTION 47 OF THE ACT, WE IN THE INTEREST OF JUSTICE SET AS IDE THE MATTER TO THE FILE OF THE LD. CIT (A) TO DECIDE THE SAME AFTER HEARING TH E PARTIES AND IN VIEW OF THE DECISIONS IF ANY RELIED UPON BY THEM. BEFORE THE TR IBUNAL THE LD. AR HAS ALSO QUESTIONED THE VALIDITY OF THE ASSESSMENT FRAMED U/ S 147 READ WITH 143 (3) OF THE ACT ON THE BASIS THAT THE AO HAS MADE ADDITIONS ON DIFFERENT HEADS AND NO ADDITION HAS BEEN MADE UNDER THE HEAD WHICH REMA INED THE SUBJECT MATTER OF THE REASONS FOR REOPENING THE ASSESSMENT. SINCE ISSUE RAISED IS LEGAL IN NATURE AND ADJUDICATION OF THE SAME DOES NOT REQUIR E CONSIDERATION OF FRESH MATERIAL OUTSIDE THE RECORD WE ALSO SET ASIDE THIS ISSUE FOR CONSIDERATION OF THE LD. CIT (A) AFTER HEARING THE PARTIES IN THIS R EGARD. THE GROUND NOS. 3 TO 5 ARE THUS ALLOWED FOR STATISTICAL PURPOSES. GROUND N O. 1 IS GENERAL IN NATURE HENCE DOES NOT NEED ADJUDICATION. GROUND NO. 2 IS C ONSEQUENTIAL TO THE ISSUES RAISED IN GROUND NOS. 3 TO 5. SO FAR GROUND NO. 6 IS CONCERNED IN THIS GROUND THE ASSESSEE HAS QUESTIONED ACTION OF THE AU THORITIES BELOW IN TREATING THE LOSS ON SALE/PURCHASE OF SHARES TO BE LOSS FROM SPECULATION BUSINESS INVOKING THE PROVISIONS OF EXPLANATION TO SECTION 7 3 OF THE ACT. ITA NO.5649/DEL/2011 12 SINCE NO ARGUMENT HAS BEEN ADVANCED IN SUPPORT OF G ROUND NO 6, WE REJECT THE SAME AS NOT PRESSED. 11. CONSEQUENTLY APPEAL IS PARTLY ALLOWED. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT O N THE DAY 08/10/2012. SD/- SD/- ( T.S. KAPOOR ) (I.C.S UDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /09/2012 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR