DCIT, Circle -8, Kolkata, Kolkata V. M/s Aradhabna Investment Ltd., Kolkata

ITA 676/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87660 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 26-04-2012
• Court: TRIBUNAL
• Department Lawyers: SANJAYACIT LDSR
• Assessee Lawyers: S P CHOUDHURY LD
• Keywords: Reopening of assessment; Speculation loss; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HON BLE SHRI N.K.SAINI , AM & HON BLE SHRI GEORGE MATHAN, JM] I.T.A NO S . 676 /KOL/2012 & 572 /KOL/201 0 A.Y 200 3 - 04 D.C.I.T ,CIRCLE - 8 KOLKATA VS. M/S. ARADHANA INVESTMENT LIMITED PAN: AA ECA1808K [ APPELLANT ] [ R RESPONDENT ] C.O NO.41/KOL/2010 [ARISING OUT OF ITA NO.572/KOL/2010 A.Y 2003 - 04] M/S. ARADHANA INVESTMENT LIMITED VS. D .C.I.T ,CIRCLE - 8 KOLKATA [ CROSS OBJECGTOR ] [ RESPONDENT/DEPARTMENT] APPELLANT /DEPARTMENT BY : SHRI SANJAY,ACIT/ LD/SR.DR RESPONDENT BY : SHRI S.P. CHOUDHURY, ADVOCATE, LD.AR DATE OF HEARING : 27 - 01 - 2015 DATE OF PRONOUNCEMENT: 27 - 01 - 2015 ORDER SHRI N.K. SAINI , ACCOUNTANT MEMBER TH ESE TWO APPEALS BY THE DEPARTMENT AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 30 - 12 - 2009 OF CIT(A), CENTRAL - II, KOLKATA FOR THE ASSESSMENT YEAR 2003 - 04. 2. IT IS NOTICED THAT THE DEPARTMENT HAS FILED TWO APPEALS ONE IN ITA NO.572/KOL/201 0 AND THE SECOND IN ITA NO. 676/KOL / 2012 FOR THE ASSESSMENT YEAR 2003 - 04 . T HE DEPARTMENT VIDE APPLICATION DATED 23 - 01 - 2015 HAS STATED THAT EARLIER APPEAL WAS WRONGLY FILED BY DC/AC, CENTRAL CIRCLE - XIX, KOLKATA ON 19.03.2010 ON WHICH THE ASSESSEE RAISED CROSS OBJECTION ON GROUND THAT THE THEN DC/AC , CENTRAL CIRCLE - XIX, KOLKATA HAS NO JURISDICTION TO FILE THIS APPEAL BEFORE HON BLE ITAT , KOLKATA AS THE CASE OF ASSESSEE HAD BEEN TRANSFERRED TO DC/AC, CIR - 8 , KOLKATA VIDE ORDER NO.19/KOL/127/08 - 09 DATED 23 - 03 - 2009 PASSED BY THE LD.CIT, CENTRAL - III, KOLKATA. SUBSEQUENTLY, CONCERNED ASSESSING OFFICER I.E. DC/AC, CIR - 8, KOLKATA AFTER G ETTING APPROVAL BY THE LD.CIT - III, KOLKATA FILED A FRESH APPEAL U/S. 253 VIDE ITA NO.676/KOL/2012 BEFORE THE ITAT, B BENCH, KOLKATA ON 26 - 04 - 2012. ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 2 3. THE DEPARTMENT VIDE AN APPLICATION DATED 26 - 04 - 2012 REQUESTED TO CONDONE THE DELAY AND HAS STATED AS UNDER : THE LAST DATE FOR FILING SECOND APPEAL IN THE ABOVE MENTIONED CASE WAS 24 - 04 - 2012. BUT IT COULD NOT BE FILED FOR THE FOLLOWING REASONS DATE REASONS 24 - 04 - 2012 ADDITIONAL CIT, RANGE - 8, KOLKATA SUBMITTED THE PROPOSAL TO CIT - III ON 24.04.2012 C IT, KOLKATA - III, KOLKATA, APPROVED THE CASE FOR FILING FURTHER APPEAL 25 - 04 - 2012 FILE RECEIVED FROM CIT OFFICE AND PREPARED FOR PAPER BOOKS FOR FILING APPEAL ON ACCOUNT OF UNAVOIDABLE CIRCUMSTANCES, FILING OF APPEAL WAS DELAYED FOR TWO DAYS. YOU ARE K INDLY REQUESTED TO CONDONE THE DELAY ACCORDINGLY. 4. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE DID NOT OBJECT IF THE DELAY IN FILING OF THE APPEAL IS CONDONED AND HE ALSO DID NOT PRESS FOR THE CROSS OBJECTION STATING THEREIN AS UNDER NOT PRESSED S.P. CHOUDHURY 27.1.15. 5. CONSIDERING THE ABOVE FACTS THE DUPLICATE APPEAL IN ITA NO.572/KOL/2010 FILED FOR THE ASSESSMENT YEAR 2003 - 04 BY THE DEPARTMENT IS DISMISSED AND CROSS OBJECTION NO.41/KOL/2010 ARISING OUT OF ITA NO.572/KOL/2010 BY THE ASSESSEE IS ALSO DISMISSED AS NOT PRESSED. ITA NO.676/KOL/2012 A.Y 2003 - 04 (BY THE DEPARTMENT) 6 . IN THE PRESENT CASE SINCE THE ORIGINAL APPEAL WAS FILED BY THE DEPARTMENT IN TIME AND FOR TECHNICAL REASON THE APPEAL I N ITA NO.676/KOL/2012 HAS BEEN FILED BY THE CONCERNED ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, DID NOT OBJECT FOR THE CONDONATION OF DELAY, IF ANY. WE, T HEREFORE, BY KEEPING IN VIEW OF THIS FACT THAT THE DELAY WAS ATTRIBUTABLE TO THE TECHNICAL REASONS CONDONE THE DELAY, IF ANY AND THE APPEAL IN ITA NO.676/KOL/2012 (BY THE DEPARTMENT) IS ADMITTED. FOR THE AFORESAID VIEW, W E FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF VEDABAI ALIAS VI JAYANTABAI BAB URAO PATIL VS. SHANTARAM BABURAO PATIL & ORS REPORTED IN (2001) 253 ITR 798(SC), WHEREIN IT HAS BEEN HELD AS UNDER: - ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 3 N EXERCISING DISCRETION UNDER SECTION 5 OF THE LIMITATION ACT, 1963, TO CONDONE DELAY FOR SUFFICIENT CAUSE IN NOT PREFERRING AN APPEAL O R OTHER APPLICATION WITHIN THE PERIOD PRESCRIBED, COURTS SHOULD ADOPT A PRAGMATIC APPROACH. A DISTINCTION MUST BE MADE BETWEEN A CASE WHERE THE DELAY IS INORDINATE AND A CASE WHERE THE DELAY IS OF A FEW DAYS. WHEREAS IN THE FORMER CONSIDERATION OF PREJUDI CE TO THE OTHER SIDE WILL BE A RELEVANT FACTOR AND CALLS FOR A MORE CAUTIOUS APPROACH, IN THE LATTER CASE NO SUCH CONSIDERATION MAY ARISE AND SUCH A CASE DESERVES A LIBERAL APPROACH. NO HARD AND FA S T RULE CAN BE LAID DOWN IN THIS REGARD. THE COURT HAS TO EXERCISE ITS DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONSTRUING THE EXPRESSION SUFFICIENT CAUSE THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANCE. THE EXPRESSION SUFFICIENT CAUSE SHOULD RECEIVE A LIBERAL CO NSTRUCTION. ACCORDINGLY, KEEPING IN VIEW , THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE AFORESAID REFERRED TO CASE THE DELAY, IF ANY, IN FILING THE APPEAL IN ITA NO.676/KOL/2012 FOR THE ASSESSMENT YEAR 2003 - 04 IS CONDONED AND THE APPEAL IS A DMITTED. 7. IN THIS APPEAL THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS : - 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ANNULLING THE REASSESSMENT PROCEEDINGS HOLDING THAT THERE WAS NO REASON FOR THE ASSE SSING OFFICER TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THAT THE NOTICE U/S.148 OF THE ACT WAS INVALID. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE REASONS FOR REOPENING THE ASSESSMEN T WERE MERE CHANGE OF OPINION WITHOUT APPRECIATING THAT THE REASON TO BELIEF WAS BASED ON FACTUAL ERROR WHICH IS DISTINCTLY DIFFERENT FROM CHANGE OF OPINION AND THEREFORE REOPENING OF ASSESSMENT WAS VALID IN VIEW OF THE DECISION OF THE HON BLE APEX COURT IN THE CAS E OF CIT VS. M/S. PVS BEEDIES (P) LTD (1999) 237 ITR 13(SC). 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING THE RATIO OF THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF ITO VS. LA XMI MEWALA DAS (1976) 103 ITR 437(SC), WHEREIN IT WAS OPINED THAT THE ASSESSEE CAN NOT CHALLENGE THE SUFFICIENCY OF BELIEF OF ASSESSING OFFICER WHENEVER THE SAID BELIEF IS BASED ON BONAFIDE REASONS. 8. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E COMPANY HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 - 04 ON 27 - 11 - 2003 DECLARING TOTAL INCOME OF R S.1,63,48,267/ - . THE AO HAS PASSED THE ASSESSMENT ORDER U/S.143(3) OF THE I.T ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT ) ON 2 9.03.2006 , WHEREIN THE TOTAL INCOME WAS ASSESSED AT RS. 1,63,63,590/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAS MADE QUERY REGARDING BUSINESS LOSS IN SHARE TRADING AMOUNTING TO RS.1,12,61,578/ - WHICH WAS DULY ANSWERED BY THE ASSESSEE. AFTER CONSID ERING THE SAID EXPLANATION , THE AO TREATED THE SHARE LOSS AS BUSINESS LOSS. THE ASSESSEE BROUGHT TO THE NOTICE OF THE AO THAT INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND OTHER SOURCES ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 4 AMOUNTING TO RS.2,40,90,913/ - WAS MORE THAN BUSINESS LOSS OF RS. 1, 12,61,578/ - . THEREFORE, THE EXPLANATION TO SECTION 73 OF THE ACT WAS NOT APPLICABLE TO THE ASSESSEE . HOWEVER, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 29 - 03 - 2006. THEREAFTER, THE AO HAD R EASON S TO BELIEVE THAT IN THE ASSESSMENT U/S. 143(3) TH E INCOME CHARGEABLE TO TAX WAS UNDER ASSESSED/ESCAPED ASSESSMENT , SO I T WAS A FIT CASE FOR RE - ASSESSMENT U/S. 147 OF THE ACT . ACCORDINGLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED. IN RESPONSE TO SAID NO TICE THE ASSESSEE SUBMITTED AS UNDER: - N THE SAID ASSESSMENT U/S. 143(3), THE SAID BUSINESS LOSS WAS DULY CONSIDERED BY THE AO WHILE FRAMING THE ASSESSMENT AND THAT THE PROVISO TO EXPLANATION TO SECTION 73 OF THE I.T ACT, 1961 SPEAKS ABOUT TWO EXCEPTION AL CLAUSES NAMELY: - ]I) A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES , INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND INCOME FROM OTHER SOURCES. II) A COMPANY THE PRINCIPAL BU SINESS OF WHICH IS THE BUSINESS OF BANKING OR GRANTING OF LOANS AND ADVANCES. THAT AT THE TIME OF ASSESSMENT THE AO FOUND OUT THAT INCOME FROM H.P INCOME, CAPITAL GAINS AND INCOME FROM OTHER SOURCE AMOUNTED TO RS.2,40,90,913/ - , WHICH WAS MORE THAN BUSINESS LOSS RS.1,12,61,578/ - IN SHARE TRADING. THEREFORE, THE AO HAS RIGHTLY ALLOWED THE BUSINESS LOSS IN SHARE TRADING AT RS.1,12,61,578/ - AND HAS NOT TREATED THE SAME AS SPECULATION LOSS. 8.1 THE AO WAS NOT SATISFIED WITH THE ABOVE SUBMISSIONS OF THE ASS ESSEE AND FRAMED ASSESSMENT U/S. 143(3)/147 OF THE ACT BY ADDING SPECULATION LOSS OF RS.1,12,61,578/ - , WHICH WAS EARLIER ALLOWED BY THE AO. 9. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A). BEFORE HIM THE ASSESSEE FILED THE WRITTEN SUB MISSION, WHICH HAS BEEN REPRODUCED IN THE IMPUGNED ORDER AT PAGE NOS. 3 TO 6 AND READS AS UNDER: - N GROUND NO.1,2,3,5 & 6 THE APPELLANT DISPUTES THE REOPENING OF THE ASSESSMENT BY INVOKING SEC. 147/148 OF THE I.T ACT, 1961. THAT FOR THE ASSESSMENT YEAR 2003 - 04, THE ORIGINAL RETURN WAS FILED ON 27,11.2003 SHOWING THE TOTAL INCOME OF RS.1,63,48,267/ - AND THE CASE WAS PROCEEDED U/S. 143(1) ON 01.03.04. LATER ON, NOTICE U/S 143(2) WA S ISSUED ON 01.03.2004 WHICH WAS SERVED ON THE ASSESSEE ON 15.07.04. LATER O N A NOTICE U/S. 142 ( 1) WAS ISSUED AND SERVED ON 15.07.05. THAT FOR SCRUTINY ASSESSMENT PROCEEDING FOR ASSESSMENT YEAR 2003 - 04, REQUISITIONS ON DETAIL INFORMATION IN CONNECTION THEREWITH WAS MADE A LETTER DATED 23.12.05 AND IN COLUMN 17, THE AO HAS MADE RE QUISITION AS UNDER: - N CLOSE PERUSAL OF PROFIT & LOSS A/C VIS - - VIS RELEVANT SCHEDULES, IT IS SEEN THAT YOUR COMPANY IS MAINLY ENGAGED IN THE BUSINESS OF TRADING IN SHARES BECAUSE CORRESPONDING TURN OVER FAR EXCEEDS THE OTHER RECEIPTS SHOWN IN THE PROFI T & LOSS A/C, IT IS FURTHER OBSERVED, THAT DURING THE RELEVANT ACCOUNTING ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 5 YEAR YOUR COMPANY HAD SUSTAINED A LOSS OF RS.1,12,61,578/ - ON ACCOUNT OF SHARE TRADING ACTIVITY. PLEASE EXPLAIN AS TO WHY THIS LOSS SHOULD NOT BE TREATED AS SPECULATION LOSS IN TE RMS OF THE PROVISION OF EXPLANATION TO SEC. 73 OF THE I.T ACT, 1961. REPLY WAS GIVEN ON 29.12.2005 AS UNDER: THAT EXPLANATION TO SEC 73 IS NOT APPLICABLE TO US. FROM THE COMPUTATION FILED ALONG WITH RETURN OF INCOME YOU WOULD FIND THAT THE MAJOR INCOME O F THE COMPANY IS FROM HOUSE PROPERTY, INTEREST, DIVIDEND AND CAPITAL GAIN AND ALSO THE PRINCIPAL BUSINESS OF THE COMPANY IS GRANTING OF LOANS. CONSIDERING THE ABOVE THE SHARE TRADING CANNOT BE TREATED AS SPECULATION BUSINESS. THAT IN THE ORIGINAL ASSESSM ENT WAS MADE U/S. 143(3) AND THE AO HAS EXAMINED THE SHARE TRADING LOSS AND IT WAS FOUND THAT THE INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND INTEREST AND DIVIDEND ARE AS UNDER: RENT : RS. 2,86,27,922/ - INTEREST : RS.1,88,22,850/ - CAPITAL GAIN : RS. 2,35,210/ - DIVIDEND : RS. 38,16,158/ - TOTAL : RS.5,15,02,140/ - THE GROSS TOTAL INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND INTEREST AMOUNTING TO RS.5,15,02,140/ - WHICH I S MUCH MORE THAN THE LOSS INCURRED IN SHARE TRADING, RS.1,12,61, 578/ - . HENCE, EXPLANATION TO SEC. 73 HAS NO APPLICATION AND THE EXPLANATION TO SEC 73 IS REPRODUCED AS UNDER: [EXPLANATION. (WHERE ANY PART OF THE BUSINESS OF A COMPANY ( [OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS I NTEREST ON SECURITIES , INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND INCOME FROM OTHER SOURCES ], OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING O N A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES.] IN THIS CONNECTION, RELIANCE IS PLACED ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF EASTERN AVIATION AND INDUSTRIES LTD VS. CIT 208 ITR P 1023, HELD HENCE FOR THE YEAR UNDER REFERENCE, IT COULD NOT BE SAID TO BE A COMPANY WHOSE GROSS TOTAL INCOME CONCEALED MAINLY OF INCOME WHICH SHALL BE CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. AS SUCH THE EXPLANATION TO SEC.73 CLEARLY APPLICABLE AND THE LOSS SUFFERED BY THE ASSESSEE COMPANY IN ITS SHARE TRADING TRANSACTION INCLUSIVE OF INTEREST PAID ON BORROWED MONIES ATTRIBUTABLE TO THAT BUSINESS WAS TREATED BY TH E TRIBUNAL AS LOSS IN SPECULATION BUSINESS. THAT THE ABOVE PRINCIPAL LAID DOWN BY THE CALCUTTA HIGH COURT THE FACTS OF THE CASE OF THE APPELLANT IS QUITE DIFFERENT AS IN THE CASE OF APPELLANT S INCOME FROM HOUSE PROPERTY CAPITAL GAINS, INTEREST AND INCOME FROM OTHER SOURCES MUCH EXCEEDS THE LOSS INCURRED IN SHARE TRADING BUSINESS. THEREFORE, THE EXPLANATION TO SEC.73 HAS NO APPLICATION ON THE FACTS OF THE CASE. ASSESSMENT HAS BEEN REOPENED THE REASONS RECORDED AS ISSUED TO APPELLANT, IT IS FOUND THAT THE A SSESSMENT HAS BEEN REOPENED FOR A MERE CHANGE OF OPINION AS IN THE ORIGINAL ASSESSMENT THE AO HAS ACCEPTED AFTER THOROUGH ENQUIRY THAT EXPLANATION TO SEC.73 HAS NO APPLICATION AND FOR THIS RELIANCE IS ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 6 PLACED ON THE DECISION OF FULL BENCH DELHI HIGH COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA 256 ITR P 1. IT HAS BEEN HELD THAT AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB SECTION (1) OF SECTION 143 OR SUB SECTION(3) OF SECTION 143, WHERE A REGULAR ORDER OF ASSESSMENT IS PASSED, IN TERMS OF SUB SECTION(3) OF SEC. 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO IT RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE(E) OF SEC. 114 OF THE INDIAN EVIDENCE ACT 187 2 JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED, IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURT HER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HENCE IT IS CLEAR THAT SEC 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REA SSESSMENT PROCEEDING UPON THE MERE CHANGE OF OPINION. THE PROPOSITION AS LAID DOWN IN 256 ITR P 1 HAS BEEN ACCEPTED RECENTLY BY BOMBAY HIGH COURT IN THE CASE OF ASTER ODIS TRADING & INVESTMENT (P) LTD V DCIT REPORTED IN 308 ITR P 190 AND ASIAN PAINTS LTD V DCIT REPORTED IN 308 ITR P 195. SO CONSIDERING THE AFORESAID JUDGMENT PRONOUNCED BY DIFFERENT HIGH COURTS ACCEPTING THE PROPOSITION LAID DOWN IN 256 ITR P 1, THE ASSESSMENT REOPENED BY INVOKING SEC. 147/148 FOR A MERE CHANGE OF OPINION SHOULD BE STUCK DOWN AND THE ASSESSMENT SHOULD BE CANCELLED AND/OR QUASHED. IT IS FURTHER SUBMITTED THAT THE APPELLANT COMPANY IS ALL THROUGH AN INVESTMENT COMPANY AS WOULD BE EVIDENCED FROM THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION WHICH IS PLACED FOR YOUR KIND CONSIDERATION. EXPLANATION TO SEC.73 ATTRACTS TO A COMPANY WHERE THE SHARE DEALING LOSS WOULD BE TREATED AS SPECULATION BUT EXCEPTION HAS BEEN LAID DOWN IN THE EXPLANATIONS IN A CASE WHERE THE GROSS TOTAL INCOME OF A COMPANY CONSISTING MAINLY OF INCOME WH ICH CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES , INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES OR A COMPANY THE PRINCIPLE OF WHICH IS A BUSINESS OF BANKING OR GRANTING OF LOAN AND ADVANCES, EXPLANATION TO SEC.73 WOULD NOT AP PLY. IT IS FURTHER SUBMITTED THAT IN THE BALANCE SHEET AS ON 31.3.2003 THE TOTAL INVESTMENT IN SHARES RS.5,82,40,348/ - , LOANS 8,42,45,902/ - , FIXED DEPOSIT IN BANK RS.7,73,68,889/ - AND INVENTORY I.E SHARE 1,43,68,774/ - . THE TOTAL OF THESE INVESTMENTS AND TH E VALUE OF FIXED ASSETS RS.2,68,91,169/ - . THEREFORE, OUT OF TOTAL OF BALANCE SHEET RS.23,24,47,318/ - ABOUT 90% OF THE FUND IS LAY OUT FOR INVESTMENT, FIXED DEPOSIT, PROPERTY AND LOANS AND ADVANCES. THEREFORE, CONSIDERING THE TOTALITY OF THE FACT EXPLANAT ION TO SEC 73 HAS NO APPLICATION AND REOPENING OF THE ASSESSMENT AND THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WAS THAT AO HAS WRONGLY ALLOWED THE SHARE LOSS RS.1,12,61,578/ - AS BUSINESS LOSS. CONSIDERING THAT THE MAJOR INCOME OF THE COMPANY FROM H OUSE PROPERTY, INTEREST, CAPITAL GAIN AND OTHER SOURCES, THEREFORE, THE LOSS IN SHARE TRADING CANNOT BE TREATED AS SPECULATION LOSS AND THE ASSESSMENT FRAMED U/S. 143(3)/147 IS LIABLE TO BE CANCELLED AND/OR QUASHED. 10. THE LD.CIT(A) AFTER CONSIDERING TH E ABOVE SUBMISSIONS OF THE ASSESSEE HAS DISPOSED OF THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 7 4.1 I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF APPELLANT AND ASSESSING OFFICER. AS FAR AS THE QUESTION OF ASSUMPTION THAT EVERY ISSUE IN RESPECT OF INCOME HAS BEEN DEALT WITH IN A REGULAR ASSESSMENT ORDER U/S. 143(3) AND ANY OTHER OPINION ON THE SAME SETS OF FACT WILL BE A MERE CHANGE OF OPINION , IS CONCERNED, THERE ARE CONTRARY DECISIONS OF VARIOUS HIGH COURTS, H BLE GUJARAT HIGH COURT I N THE CASE OF PRAFUL CHUNILAL PATEL S CASE [1999] 236 ITR 832 HAVE HELD THAT IF LOOKING BACK IT APPEARS TO THE ASSESSING OFFICER (ALBEIT WITHIN FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR) THAT A PARTICULAR ITEM EVEN THOUGH REFLECTED ON THE RECO RD WAS NOT SUBJECTED TO ASSESSMENT AND WAS LEFT OUT WHILE WORKING OUT THE TAXABLE INCOME AND THE TAX PAYABLE THEREON, I.E. WHILE MAKING THE FINAL ASSESSMENT ORDER, THAT WOULD ENABLE HIM TO INITIATE THE PROCEEDINGS IRRESPECTIVE OF THE QUESTION OF NON - DISC LOSURE OF MATERIAL FACTS BY THE ASSESSEE. RECENTLY, H BLE ALLAHABAD HIGH COURT IN CASE OF EMA INDIA VS. ACIT (2009) - TIOL - 526 - HC - ALL) HAVE DISSENTED WITH THE ORDER OF H BLE DELHI HIGH COURT IN CASE OF CIT V. KELVINATOR OF INDIA LTD 256 ITR 1(RELIED UPON BY THE APPELLANT) STATING THAT THIS JUDGEMENT CANNOT BE FOLLOWED AS IT IS CONGTRARY TO THE LAW LAID DOWN BY THE SUPREME COURT IN KALYANJI MAVJI 102 ITR 287, INDIAN EASTERN NEWSPAPER SOCIETY 119 ITR 996 AND A.L.A FIRM 189 ITR 285 WHERE IT WAS HELD THAT IF THE ASSESSING OFFICER HAD NOT CONSIDERED THE MATERIAL ON RECORD AND SUBSEQUENTLY, CAME ACROSS IT, THE CASE FELL WITHIN THE SCOPE OF S.147(B) AND COULD BE REOPENED AND FURTHER ON THE GROUND THAT THE FULL BENCH OF DELHI HIGH COURT ALSO DID NOT CONSIDER THE EFFE CT OF EXPLANATIONS 1 & 2 TO S.147 . 4.2 AS PER SUB CLAUSE(I) OF CLAUSE ( C) OF EXPLANATION 2 OF SECTION 147, IF THE ASSESSING OFFICER DISCOVERS AN ERROR THAT THE INCOME IN THE EARLIER ASSESSMENT ORDER WAS UNDER ASSESSEE THEN IT WOULD BE DEEMED THAT INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THAT WOULD AMOUNT TO A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IN THE PRESENT CASE OF APPELLANT, THE ASSESSING OFFICER HAD SPECIFICALLY ASKED ABOUT THE APPLICATION OF EXPLANATION TO SEC.73 FRO M THE APPELLANT AND APPELLANT HAD CATEGORICALLY REPLIED AND PROVED AS HOW IT WAS A COMPANY WHOSE GROSS TOTAL INCOME CONSISTED MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS, AND INC OME FROM OTHER SOURCES . APPELLANT HAD ALSO STATED THAT THE PRINCIPAL BUSINESS OF APPELLANT WAS GRANTING OF LOANS. THEREAFTER, THE NON INVOKING OF EXPLANATION TO SEC.73 BY ASSESSING OFFICER IN HIS ORDER U/S. 143(3) CLEARLY PROVED THAT ASSESSING OFFICER HA D CONSIDERED THE MATERIAL ON RECORD AND FORMED AN OPINION THAT EXPLANATION TO SEC.73 IS NOT APPLICABLE IN CASE OF THE APPELLANT. HOWEVER, IN THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUING THE NOTICE U/S.148 OF THE I.T ACT , ASSESSING OFFICER HAS STATED THAT THE PRINCIPAL BUSINESS OF APPELLANT IS NOT THAT OF GRANTING OF LOAN BUT DID NOT FIND ANY ERROR IN THE SUBMISSION OF APPELLANT THAT GROSS TOTAL INCOME OF APPELLANT CONSISTED MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES , INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. FOR INVOKING THE EXPLANATION OF SECTION 73 BOTH THE CONDITIONS I.E. ( A) PRINCIPAL BUSINESS OF APPELLANT IS THAT OF GRANTING OF LOAN AND (B) GROSS TOTAL INCOME OF APPELLA NT CONSISTED MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES SHOULD BE ABSENT. THE REASONS RECORDED FOR REOPENING SHOW THAT THE ASSESSING OFFICER DID NOT FIND ANY ERROR IN THE CONDITION FOR NON APPLICATION OF EXPLANATION TO SEC 73 THAT ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 8 GROSS TOTAL INCOME OF APPELLANT CONSISTED MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM SOURCES AND STILL INVOKED THE PROVISIONS OF EXPLANATION TO SEC.73 WHICH WOULD AMOUNT TO REOPENING WITHOUT CORRECTLY SPECIFYING THE ERROR WHICH RESULTED INTO UNDERASSESSMENT. THE GROUND OF REOPENING CAN NEVER BE ERRONEOUS APPLICATION OF THE PROVISI ON OF LAW EVEN IF THE EXPLANATION 2 OF SECTION 147 IS APPLIED. APEX COURT IN CASE OF GANGA SARAN AND SONS PVT. LTD VS. ITO (130 ITR 1)(SC) HAS HELD AS UNDER : THE BELIEF ENTERTAINED BY THE ITO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE C OURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE ITO IN COMING TO THE BELIEF, BUT THE COURT CAN CERTAINLY EXAMIN E WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERTAIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UNDER S. 147(A) . IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED ON FACTS AND LAW COULD REASONABLY ENTERTAIN THE BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT THE ITO COULD NOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSES SMENT AND SUCH ESCAPEMENT WAS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID. THE ABOVE MENTIONED DECISION OF H BLE SUPREME COURT IS APPLICABLE IN THE PRESENT CASE AND THEREFORE I HOLD THAT THERE WAS NO REASON FOR THE ASSESSING OFFICER TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AND THE NOTICE ISSUED BY ASSESSING OFFICER U/S. 148 WAS INVALID AND THEREFORE THE REAS SESSMENT ORDER OF THE ASSESSING OFFICER IS ANNULLED. NOW, T HE DEPARTMENT IS IN APPEAL BEFORE US. 1 1 . THE LD.DR HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AO IN THE ASSESSMENT ORDER AND FURTHER SUBMITTED THAT THE AO WAS HAVING THE REASONS TO BELIE VE THAT THE INCOME HAS ESCAPED ASSESSMENT . ACCORDINGLY, HE ISSUED NOTICE U/S. 148 OF THE ACT. HE FURTHER SUBMITTED THE LD.CIT(A) WAS NOT JUSTIFIED IN CONSIDERING THE RE - ASSESSMENT MADE BY THE AO AS INVALID. 1 2 . IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD.CIT(A). 1 3 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS SPECIFICALLY ASKED THE ASSESSEE ABOUT THE APPLICATION OF EXPLANATION TO SEC. 73 OF THE ACT AND THE ASSESSEE HAD CATEGORICALLY REPLIED AS TO HOW IT WAS A COMPANY WHOSE GROSS TOTAL INCOME ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 9 CONSISTED MAINLY OF INCOME, WHICH WAS CHARGEABLE UNDER THE INTEREST O N SECURITIES , INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND INCOME FROM OTHER SOURCES . THE ASSESSEE HAS STATED THAT ITS PRINCIPAL BUSINESS WAS GRANTING OF LOAN. THEREAFTER, THE AO PASSED THE ASSESSMENT ORDER U/S. 143(3) BY CONSIDERING THE MATERIAL ON RECORD AND FORMED AN OPINION THAT EXPLANATION TO SEC 73 WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. IN THE INSTANT CASE, THE AO HAS RECORDED THE REASONS BEFORE I SSUING OF NOTICE U/S. 148 OF THE ACT AND STATED THAT THE PRINCIPAL BUSINESS OF THE ASSESSEE WAS NOT THAT OF GRANTING OF LOAN BUT DID NOT FIND ANY ERROR IN THE SUBMISSIONS OF THE ASSESSEE THAT GROSS TOTAL INCOME OF ASSESSEE CONSISTED MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES , INCOME FROM HOUSE PROPERTY , CAPITAL GAINS AND INCOME FROM OTHER SOURCES . MOREOVER, THE REASONS RECORDED FOR RE - OPENING SHOWS THAT THE AO DID NOT FIND ANY ERROR IN THE EXPLANATION OF THE ASSES SEE FOR NON - APPLICATION OF EXPLANATION TO SEC. 73, BUT STILL INVOKED THE PROVISIONS OF EXPLANATION TO SEC 73 OF THE ACT. 14. ON A SIMILAR ISSUE THE HON BLE DELHI HIGH COURT (F.B) IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD REPORTED IN (2002) 261 1 TR 1 HAS HELD AS UNDER: - THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL1, 1989, BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , AND SUBSEQUENTLY AMENDED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989 WITH EFFECT FROM APRIL 1, 1989 , AS ALSO OF SECTIONS 148 TO 152 HAVE BEEN ELABORATED IN CIRCULAR NO.549 DATED OCTOBER 31, 1989. A PERUSAL OF CLAUSE 7.2 OF THE SAID CIRCULAR MAKES IT CLEAR THAT THE AMENDMENT HAD BEEN CARRIED OUT ONLY WITH A VIEW TO ALLAY FEARS THAT THE OMISSION OF THE EX PRESSION REASON TO BELIEVE FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENT ON A MERE CHANGE OF OPINION. IT IS, THEREFORE, EVIDENT THAT EVEN ACCORDING TO THE CENTRAL BOARD OF DIRECT TAXES A MERE CHANGE OF OPI NION CANNOT FORM THE BASIS FOR REOPENING A COMPLETED ASSESSMENT. A STATUTE CONFERRING AN ARBITRARY POWER MAY BE HELD TO BE ULTRA VIRES ARTICLE 14 OF THE CONSTITUTION OF INIDA. IF TWO INTERPRETATIONS ARE POSSIBLE, THE INTERPRETATION WHICH UPHOLD CONSTITUTI ONALLY SHOULD BE FAVOURED. IN THE EVENT IT IS HELD THAT BY REASON OF SECTION 147 THE INCOME - TAX OFFICER MAY EXERCISE HIS JURISDICTION FOR INITIATING A PROCEEDING FOR REASSESSMENT ONLY UPON A MERE CHANGE OF OPINION, THE SAME MAY BE HELD TO BE UNCONSTITUTIO NAL. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB - SECTION(1) OF SECTION 143 OR SUB - SECTION(3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SUB - SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOW THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE(E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT, 1872, JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HENCE, IT IS CLEAR THAT SECTION 147 OF THE ITA NO S . 676,/KOL/12 & 572/KOL/10 & CO NO.41/KOL/10 M/S. ARADHANA INVESTMENT LTD. 10 ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. IN THE PRESENT CASE ALSO REOPENING OF ASSESSMENT WAS DONE BY THE AO MERELY ON THE BASIS OF CHANGE OF OPINION. THEREFORE, RE - OPENING IN THIS CASE WAS NOT VALID AND T HE LD.CIT(A) HAS RIGHTLY HELD SO. IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY VALID GROU ND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD.CIT(A) IN ANNULLING THE RE - ASSESSMENT . WE UPHOLD THE SAME. THIS ISSUE OF DEPARTMENTAL APPEAL IS DISMISSED. 15 . IN THE RESULT, THE DEPARTMENTAL APPEAL S AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 - 01 - 2015 \ SD/ - SD/ - [ GEORGE MATHAN ] [ N.K.SAINI ] JUDICIAL MEMBER ACCOUNTANT ME MBER DATED: 27 - 01 - 2015 COPY OF THE ORDER FORWARDED TO: 1 . /APPELLANT - DCIT,CIR - 8, KOLKATA . 2 RESPONDENT : M/S. ARADHANA INVESTMENT LIMITED 3 . CIT, 4 . CIT(A), 5 . DR, KOLKATA BEN CHES, KOLKATA *PP/SPS [ / TRUE COPY] / BY ORDER, /ASSTT REGISTRAR