ITO 6(1)(4), MUMBAI V. AVALON PRODUCTS P.LTD, MUMBAI

ITA 7464/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2760 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 18-12-2013
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN LD
• Assessee Lawyers: SHRI
• Keywords: Reopening of assessment; Business income; Difference of opinion; Change of opinion
• Section: 143(3); 115JB; 147; 148

Judgement Text

ITA NO . 7464 /MUM/201 3 - M/S. AVALON PRODUCTS P.LTD - A - JM 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH: MUMBAI BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI RA M IT KOCHAR, AM I.T.A NO . 7464 / MUM/201 3 A.Y 200 4 - 05 I.T.O, 6(1)(4), MUMBAI V S. M/S. AVALON PRODUCTS PVT. LTD (NOW KNOWN AS PENTAGRAM INV (I) P.LTD PAN: A A DCA0282N ( APPELLANT / DEPARTMENT ) ( RESPONDENT / ASSESSEE ) FOR THE APPELLANT/ DEPARTMENT : SHRI A.RAMCHANDRAN, LD. SR.DR FOR THE RESPONDENT/ ASSESSEE : SHRI RAJESH ATHAVALE & SHRI PRASAD BAPAT, CAS, LD.AR DATE OF HEARING: 2 8 - 06 - 2016 D ATE OF PRONOUNCEMENT : 08 - 0 7 - 2016 ORDER SHRI MAHAVIR SINGH, JUDICIAL MEMBER : TH IS APPEAL OF REVENUE IS ARISING OUT OF ORDER OF C IT(A) IN A PPEAL NO. CIT(A) - 14/RG. - 6(1)/IT - 69/2010 - 11 DATED 11 - 10 - 2013 . ASSESSMENT WAS FRAMED BY ITO - 6(1)(4) , MU MBAI FOR THE ASSESSMENT YEAR 200 4 - 05 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 07 - 12 - 2010 . 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF THE CIT(A) IN QUASHING THE RE - ASS ESSMENT PROCEEDINGS U/S. 147 OF THE ACT . FOR THIS, THE REVENUE HAS RAISED THE FOLLOWING GROUND: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE REOPENING OF ASSESSMENT U/S. 147 BASED ON CHANGE OF OPINION AND BAD IN LAW WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY WAS INVESTMENT COMPANY AND DEALING IN SHARES WERE FOR BUSINESS AND NOT FOR INVESTMENT. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE FILED ITS RETUR N OF INCOME FOR THE ASSESSMENT YEAR 2004 - 05 ON 29 - 10 - 2004 . THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 31/08/2006. SUBSEQUENTLY, THE AO ITA NO . 7464 /MUM/201 3 - M/S. AVALON PRODUCTS P.LTD - A - JM 2 NOTICED THAT THE PROFIT ON SALE OF SHARES EARNED BY THE ASSESSEE WAS ACCEPTED AS CAPIT AL GAIN . ACCORDING TO HIM, THE SAME IS REQUIRED TO BE TAXED UNDER THE HEAD P ROFIT & GAINS O F B USINESS OR P ROFESSION . FOR THIS, HE RECORDED THE FOLLOWING REASONS: - IN THIS CASE, THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 31.08.2006 ACCEPTING THE RETURN ED INCOME AT RS.5,20,875/ - AND BOOK PROFIT U/S. 115JB AT RS. 3,32,75,428/ - . WHILE COMPLETING THE ASSESSMENT, THE PROFIT ON SALE OF SHARES EARNED BY THE ASSESSEE WAS ACCEPTED AS CAPITAL GAINS AS SHOWN BY THE ASSESSEE, WHICH WERE REQUIRED TO BE TAXED UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION . ACCORDINGLY, THE AO FRAMED THE RE - ASSESSMENT U/S. 143(3) R.W.S 147 OF THE ACT TREATING THE LONG TERM CAPITAL GAIN AS DECLARED BY THE ASSESSEE ON ACCOUNT OF PROFIT ON SALE OF SHARES AS BUSINESS INCOME. 4. BEFORE THE CIT(A) THE ASSESSEE CHALLENGED THE VERY JURISDICTIONAL ISSUE OF RE - OPENING OF ASSESSMENT U/S. 147 R.W.S 148 OF THE ACT. ACCORDING TO THE ASSESSEE, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 31 - 08 - 2006 AND NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 30 - 03 - 2010 . THIS ASSESSMENT WAS RE - OPENED AFTER EXPIRY OF 4 YEARS. ASSESSEES CASE FALLS UNDER THE PROVISO OF SECTION 147 OF THE ACT. ACCORDINGLY, THE CIT(A) QUASHED THE RE - ASSESSMENT PROCEEDINGS ON THE ISSUE THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE FULLY AND TRULY THE DISCLOSURE OF I NCOME FOR THE RELEVANT ASSESSMENT YEAR AND CONSEQUENTLY THERE IS A CHANGE OF OPINION TO ASSESS THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS BUSINESS INCOME. AG GRIEVED BY THE ORDER OF THE CIT(A) IN QUASHING THE RE - ASSESSMENT , NOW THE REVENUE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE. WE FIND FROM THE FACTS , WHICH AR E ADMITTED AND CLEAR THAT FOR THE ASSESSMENT YEAR 2004 - 05, THE ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 31 - 08 - 06. DURING TH E ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE PLACED ALL THE EVIDENCES BEFORE THE AO I.E THE DETAILS OF SALE AND PURCHASE OF SHARES OF ITA NO . 7464 /MUM/201 3 - M/S. AVALON PRODUCTS P.LTD - A - JM 3 MAHINDRA & MAHINDRA LTD, SCHENETADY BECK (I) LTD & MAHINDRA INFRASTRUCTURE PROJECTS LTD. THE ASSESSEE HAS FILED COMPLETE DETAILS OF LONG TERM CAPITAL GAIN DURING THE COURSE OF ORIGINAL ASSESSMENT. THE AO AFTER TAKING INTO CONSIDERATIO N THE FACT TREATED THE PROFIT ARISING OUT OF SALE AND PURCHASE OF SHARES AS LONG TERM CAPITAL GAIN. ADMITTEDLY, THE NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 30 - 03 - 2010 I.E AFTER THE EXPIRY OF 4 YEARS. WE FIND THAT THIS ISSUE STANDS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. FORAMER FRANCE REPORTED IN (2003) 264 ITR 566(SC) . IN THIS CASE THE HONBLE SUPREME COURT HAS AFFIRMED THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT REPORTED IN (2001) 247 ITR 436 BY STATING THAT TH E REOPENING IS NOT POSSIBLE UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. IN THIS CASE A LSO , THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS. THE AO HAS RE - OPENED THE ASSESSMENT ON THE SAME SET OF FACTS, WHICH WERE AVAILABLE BEFORE HIM DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. THIS CASE IS COVERED BY THE 2 ND PROVISO OF SECTION 147 OF THE ACT . HENCE, WE CONFIRM THE ORDER OF THE CIT(A) I N QUASHING THE RE - ASSESSMENT PROCEEDINGS . 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 08 .0 7 .2016 DATED : 08 - 07 - 2016 *PP /SR.P.S. SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - MAHAVIR SINGH JUDICIAL MEMBER ITA NO . 7464 /MUM/201 3 - M/S. AVALON PRODUCTS P.LTD - A - JM 4 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT / DEPARTMENT : INCOME TAX OFFICER, 6(1)(4) R.NO. 508, 5 TH FLOOR, AAYKAR BHAVAN, M.K ROAD, MUMBAI - 20. 2 RESPONDENT : M/S. AVALON PRODUCTS PVT. LTD ( NOW KNOWN AS M/S. PENTAGRAM INVESTMENTS (I) PVT. LTD, RAGHUVANSHI MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 19. 3 . THE CIT, 4 . THE CIT(A), MUMBAI 5 . DR, MUMBAI BENCHES, MUMBAI TRUE COPY, BY ORDER, / ASSTT. REGISTRAR