SHILPA MILIND DESAI, MUMBAI V. ACIT 15(2), MUMBAI

ITA 6607/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100689 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E SHRIDHAR
• Keywords: Reopening of assessment; Business income; Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 6607 /MUM/2012 ( / ASSESSMENT YEAR : 2007-08 SHILPA MILIND DESAI, A 103, MANISH SUNFLOWER SOCIETY, BLDG. NO. 25/26, FOUR BUNGLOWS, ANDHERI (W), MUMBAI 400 053. / VS. A.C.I.T. 15(2), MUMBAI. ./ PAN : AGXPD 9341E ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI BHUPENDRA SHAH R E SPONDENT BY : SHRI E. SHRIDHAR / DATE OF HEARING : 27-07-2015 / DATE OF PRONOUNCEMENT : 21-08-2015 [ !' / O R D E R PER SANJAY GARG, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2007-08, IS DI RECTED AGAINST THE ORDER OF LD. CIT(A) -26, MUMBAI DATED 8-8-2012. 2. THE ASSESSEE THROUGH HER GROUNDS OF APPEAL HAS A GITATED THE REOPENING OF THE ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 19 61 AS WELL AS THE CONSEQUENTIAL ADDITION ON ACCOUNT OF TREATMENT OF I NCOME FROM SALE AND PURCHASE OF SHARES AS BUSINESS INCOME AS AGAINST CA PITAL GAINS OFFERED BY THE ASSESSEE. ITA 6607/M/12 2 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES. THE RETURN OF INCOME FILED WAS EARLIER PROCESSED U/S 143(1) OF TH E ACT. THE ASSESSMENT WAS THEREAFTER REOPENED BY THE A.O. U/S 147 OF THE ACT. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE HAS BEEN THAT REOPENING IN THIS CASE IS BAD IN LAW. THE REOPENING HAS BEEN MADE NOT ON THE BASIS OF ANY NEW FACT OR EVIDENCE COMING INTO THE KNOWLEDGE OF THE ASSESSING OFFICER, BUT MERELY ON THE BASIS OF AUDIT OBJECTIONS. HE HAS FURTHER SUBMITTED THAT THE POSITION OF THE ASSESSEE AS AN INVESTOR WAS ACCEPTED IN THE EARLIER AND SUBS EQUENT ASSESSMENT YEARS. HE HAS RELIED UPON THE FOLLOWING CASE LAWS IN THIS RESPECT; (I) M/S CALCUTTA DISCOUNT CO. LTD., 41 ITI 191 (SC); (II) CIT VS. HE MCHANDRA, 77 ITR 1 (SC); (III) PHOOLCHAND VS. ITO, 196 ITR 302; AND CIT VS. BHANJ LAVJI, 79 ITR 582. 4. THE OBSERVATION OF THE LD. CIT(A), HOWEVER, HAS BEEN THAT THE ORIGINAL ASSESSMENT WAS NOT COMPLETED U/S 143(3) OF THE ACT, RATHER THE RETURN OF THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE ACT. THE A .O., WHILE PROCESSING THE RETURN OF THE ASSESSEE U/S 143(1) OF THE ACT DID NO T RECORD ANY VIEW, THUS NO QUESTION ARISES FOR CHANGE OF OPINION BY THE A.O. A S ALLEGED BY THE ASSESSEE. THE LD. CIT(A) FURTHER OBSERVED THAT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD., 291 ITR 500 (SC)., THE HON BLE APEX COURT HAS HELD THAT IF INGREDIENT OF SECTION 147 IS FULFILLED, REA SSESSMENT PROCEEDINGS CAN BE INITIATED AFTER PROCESSING OF THE RETURN U/S 143(1) OF THE ACT. HE NOTED THAT, IN THIS CASE, THE A.O. WAS SATISFIED THAT THERE WAS ES CAPEMENT OF INCOME, THEREFORE, THE A.O. HAD LIGHTLY INITIATED THE PROCE EDINGS U/S 148 OF THE ACT. THE LD. CIT(A), THEREFORE, HELD THERE WAS NO ILLEGA LITY IN REOPENING OF THE ASSESSMENT. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND THE FACTS ON RECORD BEFORE US, WE OBSERVE THAT THE LEGISLATIVE INTENTION WHILE INVOKING SECTION 147/148 OF THE ACT IS CLEAR THAT WHEN THE A.O. HAS REASON TO B ELIEVE THAT THERE IS AN INCOME ESCAPING ASSESSMENT, HE MAY RESORT TO THE SA ID PROVISION AFTER ITA 6607/M/12 3 RECORDING HIS REASON FOR DOING SO. THERE MUST BE A SPEAKING ORDER WHEREIN THE A.O. MUST STATE THE REASONS ON HIS APPLICATION OF M IND BEFORE REOPENING OF ASSESSMENT. HOWEVER, IN THE PRESENT CASE, THE A.O. S REASON RECORDED STATES THAT THE ASSESSMENT FOR A.Y. 2007-08 WAS COMPLETED U/S 143(3) OF THE ACT WHICH IS NOT CORRECT AS THE RETURN WAS PROCESSED U/ S 143(1) OF THE ACT. THAT, SECOND GROUND OF A.O. IS SINCE MOST SHARES ARE SOLD WITHIN THREE MONTHS, IT SHOWS SHARES WERE PURCHASED TO EARN PROFIT AND THUS ASSESSEES INCOME IS BUSINESS INCOME AND TO BE TAXED ACCORDINGLY AND SIN CE THE ASSESSEE DID NOT DISCLOSE ALL PARTICULARS OF INCOME, THERE MUST BE S OME INCOME ESCAPING ASSESSMENT. THIS CONCLUSION OF THE A.O. IS BASED ON ASSUMPTIONS BY LOOKING AT THE FACTS FROM DIFFERENT ANGLE. HE HAS NOT COME INTO THE KNOWLEDGE OF ANY NEW INFORMATION OR FACT WHICH MAY JUSTIFY THE REOPE NING OF ASSESSMENT. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE COPY OF AUDIT OBJECTION REPORT WHICH HE HAS GOT IN REPLY TO HIS APPLICATION UNDER RIGHT TO INFORMATION ACT FOR SUPPLY OF COPY OF REAS ONS RECORDED FOR REOPENING OF THE ASSESSMENT. ALONG WITH THE REPORT OF THE AUD IT PARTY, THERE IS AN ATTACHED LETTER DATED 3-9-2010 ALONG WITH UN-DATED COPY OF REASONS RECORDED. WE FIND THAT THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE A.O. IN THIS CASE. THERE ARE VARIOUS DISCREPANCIES/MIS-NOTINGS S UCH AS THE REASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT; THE INCOME OF THE ASSESSEE IS THUS ACCORDINGLY TREATED AS BUSINESS INCOME AND TAXED AC CORDINGLY; THEREFORE THE INCOME HAS ESCAPED ASSESSMENT FOR A.Y. 2007-08, BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT; HENCE, THE A.O. HAD R EASON TO BELIEVE THAT THE INCOME IS UNDER ASSESSED AND HAS ESCAPED ASSESSMENT . ALL THE ABOVE NOTINGS REVEAL THAT THERE IS TOTALLY IN-APPLICATION OF MIND AND THE REOPENING HAS BEEN DONE IN A MECHANICAL MANNER. ITA 6607/M/12 4 7. THE HONBLE HIGH COURT OF BOMBAY IN GODREJ INDUS TRIES LTD. VS. DCIT CIR. 14(1)(2), MUMBAI [2015] 232 TAXMAN 380/58 TAXM ANN.COM 365 (BOMBAY) HAS HELD THAT WHERE ASSESSEE HAS DISCLOSED ALL DETAILS NECESSARY FOR ASSESSMENT, THE NOTICE U/S 148 OF THE ACT IS TO BE QUASHED AND SET ASIDE WHERE THE A.O. HAD MERELY COPIED THE REASONS WHICH HAD BEEN RECORDED BY HER PREDECESSOR AND THERE WAS NO INDEPENDENT APPLIC ATION OF MIND BY THE A.O. A PERUSAL OF THE REASONS RECORDED BY THE A.O. IN THE CASE IN HAND, SHOWS THAT THE SAME CANNOT BE TREATED AS VALID REASONS FO R REOPENING OF THE ASSESSMENT. HOW CAN THE A.O. WRITE IN THE REASONS R ECORDED, THAT THE INCOME OF THE ASSESSEE IS TREATED AS BUSINESS INCOME AND I S TAXED THE SAME ACCORDINGLY. EVEN, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL THE MATERIAL FACTS O F THE CASE BUT THE A.O. HAS MENTIONED SO IN A MECHANICAL MANNER. THE REOPENING OF ASSESSMENT MERELY ON THE BASIS OF THE AUDIT OBJECTION WITHOUT APPLICA TION OF MIND CANNOT BE IN ANY MANNER HELD TO BE JUSTIFIED OR SUSTAINABLE IN T HE EYES OF LAW. WE, THEREFORE, SET ASIDE THE REOPENING OF THE ASSESSMEN T U/S 147 OF THE ACT AND THE ADDITIONS MADE CONSEQUENT TO THE REOPENING OF T HE ASSESSMENT ARE ALSO ACCORDINGLY SET ASIDE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015. !' # $% &! ' 21-08-2015 ( ) SD/- SD/- (G.S. PANNU) (SANJAY GAR G) ACCOUNTANT MEMBER JUDICIAL MEMBER $ * MUMBAI ; &! DATED 21-08-2015 [ .+../ R.K. R.K. R.K. R.K. , SR. PS ITA 6607/M/12 5 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , () / THE CIT(A)- CONCERNED, MUMBAI 4. , / CIT- CONCERNED, MUMBAI 5. /0( ++12 , 12 , $ * / DR, ITAT, MUMBAI G BENCH 6. (45 6 / GUARD FILE. ' / BY ORDER, / + //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ * / ITAT, MUMBAI