UTI SECURITIES LTD ( NOW KNOWN AS STANDARD CHARTERERED STCI CAPITAL MARKETS LTD), MUMBAI V. ACIT RG 4(2), MUMBAI

ITA 762/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9172 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 20-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 27-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BIRLA
• Assessee Lawyers: B S CHANDRA SHEKHAR
• Keywords: Business income; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH , ! , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.762/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2004-05 STANDARD CHARTERED SECURITIES (I) LTD. (FORMERLY KNOWN AS STANDARD CHARTERED-STCI CAPITAL MARKETS LTD.) (PRIOR TO THAT KNOWN AS UTI SECURITIES LTD.), 23-25 MG ROAD, FORT, MUMBAI-400001. PAN:AAACH0622M VS ACIT RANGE 4(2), R.NO. 642, ,AAYKAR BHAVAN, MUMBAI-20 ( $% / ASSESSEE) ( &'$% / RESPONDENT) ' () ' () ' () ' () * * * * /ASSESSEE BY :SHRI NITESH JOSHI & B.S.CHANDRA SHEKHAR + * / REVENUE BY :SHRI PAWAN KUMAR BIRLA ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING :19 - 03 -2015 -.# + ), / DATE OF PRONOUNCEMENT :25 -03-2015 ' ' ' ' , 1961 + ++ + 254 )1 ( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) CHALLENGING THE ORDER DATED 10.11.2010 OF THE CIT(A )-8,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER OF INCOME TAX, APPEAL -8, MUMBAI HAS ERRED IN CONFIRMING THE REASS ESSMENT PROCEEDINGS INITIATED BY ASSESSING OFFICER (ACIT RANGE 4(2), MUMBAI) MERELY ON THE BAS IS OF REAPPRAISAL OF THE FACTS AND DETAILS WHICH ARE ALREADY ON RECORD. HENCE SUCH RE-OPENING OF THE ASSESSMENT UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 IS BAD IN LAW. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER OF INCOME TAX, APPEAL-8, MUMBAI HAS ERRED IN CONFIRMING THE ADDITI ON MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE FOLLOWING: SR N O PARTICULARS AMOUNT (RS) A. 12,60,747/- DIMINUTION IN STOCK 3) YOUR APPELLANT CRAVES TO LEAVE, ADD, OR DELETE A LL OR ANY OF THE ABOVE GROUNDS WHICH ARE INDEPENDENT OF EACH OTHER. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF INVESTM ENT BANKING AND BROKING IN SHARES, FILED ITS RETURN OF INCOME ON 29.10.2014 DECLARING TOTAL INCOME OF RS 7.78 CRORES.ORIGINAL ASSESSMENT WAS FINALISED U/S.143(3)OF THE ACT ON 29.12.2006,DE TERMINING ITS INCOME AT RS. 9.17 CRORES.LATER ON, A NOTICE U/S.148 WAS ISSUED TO THE ASSESSEE ON 26.03.2009 AND THE ASSESSEE WAS DIRECTED TO FILE RETURN. WHILE COMPLETING THE RE-ASSESSMENT,THE ASSE SSING OFFICER (AO)HELD THAT THE ASSESSEE HAD ADJUSTED RS.12.60 LAKHS AS DIMINUTION IN STOCK AGAI NST THE SHORT TERM CAPITAL GAIN (STCG),THAT SAME WAS NOT ALLOWABLE.HE COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.148 OF THE ACT ON 01.12. 2009,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 9,30,13,530/-. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS CONTENTED THAT RE ASSESSMENT PROCEEDING WERE INITIATED MERELY ON THE BASIS OF CHANGE OF OPINION TO THE SAME SET O F FACTS AND SAME WAS BAD IN LAW,THAT THE AO HAD NOT DISPOSED OFF THE OBJECTION FILED BY THE ASS ESSEE. ITA/762/MUM/2011-AY.2004-05UITSECURITIES 2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,HE HELD THAT THAT THE ASSESSEE HAD ARGUED THAT CLAIM REGARDING DIMUNI TION IN THE VALUE OF STOCK HAD BEEN VERIFIED BEFORE COMPLETING ASSESSMENT U/S 143(3),THAT THE CL AIM MADE BY IT REMAINED UNSUBSTANTIATED,THAT IT HAD NOT BROUGHT TO HIS NOTICE ANY MATERIAL TO IN DICATE THAT THE ASSESSEE'S CLAIM IN THIS REGARD HAD BEEN VERIFIED OR EXAMINED OR WAS ACCEPTED ALLOWABLE AS PER THE PROVISIONS OF LAW BY THE AO DURING THE INITIAL ASSESSMENT PROCEEDINGS,THAT IT C OULD NOT BE SAID THAT THE AO,DURING THE INITIAL ASSESSMENT PROCEEDING UPON CONSIDERATION OF RELEVAN T FACTS,HAD ARRIVED AT A DEFINITE FINDING THAT THE ASSESSEE'S CLAIM REGARDING DIMUNITION IN T HE VALUE OF A STOCK AMOUNTING TO RS. 12,60,747/-WAS ALLOWABLE,THAT IN ABSENCE OF SUCH A FINDING, IT COULD NOT BE SAID THAT THE INITIATION OF REASSESSMENT PROCEEDING AND CONSEQUENTIAL DISALL OWANCE OF THE ASSESSEE'S CLAIM AMOUNTED TO CHANGE OF OPINION ON THE PART OF THE AO,THAT MERELY BECAUSE CERTAIN FACTS WERE PRESENT BEFORE THE AO,IT COULD NOT BE SAID THAT HE HAD FORMED AN OPINI ON REGARDING SUCH FACTS,THAT HE HAD NOT CHANGED ANY OPINION,THAT THERE WAS NO MERIT IN THE ASSESSEE'S CONTENTION.RELYING UPON THE JUDGMENT OF PHOOLCHAND BAJARANLAL(203ITR456),HE DIS MISSED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,AUTHORISED REPRESENTATIVE (AR) STATED THA T THE ASSESSEE HAD CLAIMED A SUM OF RS. 12,60,747/-AS DIMINUTION IN STOCK,THAT THE SAID CLA IM HAD BEEN ADJUSTED AGAINST THE SHORT TERM CAPITAL GAIN AS A REGULAR POLICY FOLLOWED BY IT AND ACCEPTED BY THE DEPARTMENT SINCE THE FIRST ASSESSMENT,THAT THE AO DISALLOWED IT WHILE PASSING ORDER U/S.147 OF THE ACT,THAT IT HAD ASSAILED THE VALIDITY OF THE INITIATION OF RE-ASSESSMENT PRO CEEDINGS ON THE GROUND THAT AFTER THE ISSUE OF NOTICE THE APPELLANT HAD FILED THE OBJECTIONS FOR S UCH REOPENING OF THE ASSESSMENT UNDER SECTION 148 OF THE ACT,VIDE LETTER,16.11.2009,THAT THE AO H AD BRUSHED ASIDE THE OBJECTIONS RAISED BY IT,THAT IT HAD MADE FULL DISCLOSURE NECESSARY FOR C LAIMING DIMINUTION IN STOCK AGAINST THE SHORT TERM CAPITAL GAIN AMOUNTING TO RS.1,260,747/- AND T HE SAME WAS ALLOWED BY THE THEN ASSESSING OFFICER AFTER APPLYING HIS MIND TO THE RELEVANT REC ORDS,THAT HIS SUCCESSOR AGAIN AFTER THE PERUSAL OF THE SAME SET OF FACTS PROPOSED TO REOPEN THE ASSESS MENT,THAT THE SUCCESSOR AO HELD THAT THE ADJUSTMENT WAS WRONGLY ALLOWED,THAT BETWEEN THE DAT E OF ORDER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMING OPINION NO NEW FAC TS HAD EMERGED,THAT IT WAS A CASE OF CHANGE OF OPINION ONLY, THAT NO INCOME HAD ESCAPED ASSESSMENT.HE REFERRED TO PAGE NO.3, 8,25, 27,30,34,59 AND 61 OF THE PAPER BOOK.HE RELIED UPON THE CASE OF KELVINATOR INDIA (320 ITR 561) AND THE CASE OF NDT SYSTEMS AND ANOTHER(363 ITR 603 ),DELIVERED BY THE HONBLE BOMBAY HIGH COURT.DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA AND RELIED UPON THE CASE OF PHULCHAND (SUPRA). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE REASON REGARDING REOPENING THE ASSESSMENT WAS THAT THE INCOME CHARGEABLE TO TAX AMOUNTING TO RS.12,60,747/-,BEING ADJUSTMENT ON ACCOUNT OF DIMIN UTION IN THE VALUE OF THE STOCK AGAINST SHORT TERM CAPITAL GAIN, REMAINED UNTAXED.IT IS CLEAR FRO M THE ORDER OF THE AO THAT ON VERIFICATION OF RECORDS HE FOUND THE ABOVE FACT.WE FURTHER FIND THA T THE ASSESSEE HAD RAISED OBJECTION ABOUT REOPENING OF COMPLETED-ASSESSMENT STATING THAT THE DETAILS OF DIMINUTION IN THE VALUE OF STOCK WERE AVAILABLE ON RECORD.FROM THE ABOVE,IT IS CLEAR THAT THE NOTICE U/S.148 WAS NOT ISSUED BECAUSE OF CHANGE OF LAW OR BECAUSE NEW MATERIAL HAD COME O N RECORD.THE AO HAS ALSO NOT MENTIONED THAT HE HAD RECEIVED SOME INFORMATION ABOUT DIMINUT ION OF STOCK.THE AO,VIDE HIS LETTER DATED 14.12.2005(PG.24-25 OF PB).HAD SPECIFICALLY ASKED T HE ASSESSEE TO FILE DETAILS OF LOSS IN SHARE TRADING ADJUSTED AGAINST OTHER /BUSINESS INCOME,IF ANY AND TO SUBMIT TRADING ACCOUNT.IN REPLY TO THE QUERY RAISED BY THE AO THE ASSESSEE FILED DETAILED REPLY.AT PAGE 30 OF THE PB.IS THE DETAILS OF INVENTORIES AND IT GIVES DETAILS OF QUANTITY AND VA LUE OF THE SECURITIES.IN THE CHART SUBMITTED BY THE ASSESSEE,UNDER THE HEAD DIMINUTION AN AMOUNT OF RS. 12.60 LAKHS HAS BEEN SPECIFICALLY MENTIONED. SIMILARLY,PAGE 34 OF THE PB.MENTIONS ABOUT DIMINUTI ON OF STOCK OF RS.11.59 LAKHS AND OF RSL.1.01 LAKHS RESPECTIVELY AND THE DETAILS REGARDING IT WER E FURNISHED BY THE ASSESSEE AS PER ANNEXTURES G AND H.THUS,ALL THE NECESSARY DETAILS WERE MADE AVAI LABLE TO THE AO AND AFTER CONSIDERING THE SAME ITA/762/MUM/2011-AY.2004-05UITSECURITIES 3 HE ALLOWED THE CLAIM MADE BY THE ASSESSEE.LATER ON, THE AO ON VERIFICATIONHELD THAT CLAIM MADE BY THE ASSESSEE WAS NOT ALLOWABLE.IN THE REASONS RE CORDED THERE IS NOTHING AS TO HOW AND WHY THE AO HAD ARRIVED AT THE SAID CONCLUSION. COURTS ARE OF THE VIEW THAT COMPLETED ASSESSMENTS S HOULD NOT BE RE-OPENED TO REAPPRAISE OR REVIEW THE MATTERS THAT HAVE ATTAINED FINALITY AFTER SCRUT INY.IN THE CASE OF KELVINATOR INDIA (256 ITR1)HONBLE DELHI HIGH COURT HAS LAID DOWN THE BAS IC PRINCIPLES WITH REGARD TO RE-OPENING OF ASSESSMENT IN FOLLOWING MANNER: THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, AND SUBSEQUENTLY AM ENDED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989, WITH EFFECT FROM APRIL 1, 19 89, AS ALSO OF SECTIONS 148 TO 152 HAVE BEEN ELABORATED IN CIRCULAR NO. 54,DATED OCTOBER 31, 198 9. A PERUSAL OF CLAUSE 7.2 OF THE SAID CIRCULAR MAKES IT CLEAR THAT THE AMENDMENTS HAD BEEN CARRIED OUT ONLY WITH A VIEW TO ALLAY FEARS THAT THE OMISSION OF THE EXPRESSION REASON TO BELIEVE FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON A MERE CHANGE OF OPINION. IT IS, THEREFORE, EVIDENT THAT EVEN ACCORDING TO THE CENTRAL BOARD OF DIRECT TAXES A MERE CHANGE OF OPINION 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 CON STITUTION OF INDIA. IF TWO INTERPRETATIONS ARE POSSIBLE, THE INTERPRETATION WHICH UPHOLDS CONSTITU TIONALITY SHOULD BE FAVOURED. IN THE EVENT IT IS HELD THAT BY REASON OF SECTION 147 THE INCOME-TAX O FFICER MAY EXERCISE HIS JURISDICTION FOR INITIATING A PROCEEDING FOR REASSESSMENT ONLY UPON A MERE CHANGE OF OPINION, THE SAME MAY BE HELD TO BE UNCONSTITUTIONAL. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERM S 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 KNOWN THAT A PRESUMPTION CAN AL SO 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 BE EN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSE SSING 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 ACT DOE S NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSIN G OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. UPHOLDING THE ABOVE MENTIONED JUDGMENT OF THE HONB LE DELHI HIGH COURT THE HONBLE APEX COURT OBSERVED AS UNDER: THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION O F SECTION 147 OF THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AF TER THE AMENDMENT, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT, BUT THIS DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHE CK THE ABUSE OF POWER. HENCE AFTER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESS MENT, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF. IN THE CASE OF ARONI COMMERCIALS LTD. (367 ITR 405) ,THE HONBLE BOMBAY HIGH COURT HAS ALSO DEALT THE ISSUE OF RE-OPENING OF ASSESSMENT.IN THAT MATTER CONTROVERSY WAS WHETHER THE PROFITS WOULD BE CHARGEABLE TO TAX AS BUSINESS INCOME OR NOT AS CAPITAL GAINS. THIS ISSUE WAS RAISED BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE SUBMITTED ITS REPLY DATED 29. 07. 2009.CONSIDERING THOSE FACTS THE COURT HELD AS UNDE R: IT MUST FOLLOW THAT THE ASSESSING OFFICER WAS SATI SFIED WITH THE EXPLANATION AS FURNISHED BY THE ASSESSEE. THEREFORE, THERE WAS NO REASON FOR THE AS SESSING OFFICER TO HAVE A REASONABLE BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT . THEREFORE, THE NOTICE ISSUED UNDER SECTION148IN RESPECT OF THE ASSESSMENT YEAR 2007-08 AS WELL AS THE ORDER DISPOSING OF THE ASSESSEES OBJECTIONS TO THE REASONS FOR REOPENING WERE LIABLE TO BE SET ASIDE.THAT ONCE A ITA/762/MUM/2011-AY.2004-05UITSECURITIES 4 QUERY HAD BEEN RAISED WITH REGARD TO A PARTICULAR I SSUE, IT MUST FOLLOW THAT THE ASSESSING OFFICER HAD DULY APPLIED HIS MIND TO THE QUERIES RAISED AND TAKEN A VIEW ON THE MATTER. THEREFORE, IT COULD NOT BE ACCEPTED THAT THIS WAS NOT A CASE OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER IN ISSUING THE NOTICE. FROM THE ABOVE DISCUSSION ONE THING IS CLEAR THAT F OR ISSUING NOTICE U/S.148 THERE SHOULD BE TANGIBLE MATERIAL ON RECORD AND THAT ASSESSMENT R E-OPENED BECAUSE OF CHANGE IN OPINION ARE NOT SUSTAINABLE.CONSIDERING THE PECULIAR FACTS AND THE CIRCUMSTANCES OF THE CASE UNDER APPEAL,WE ARE OF THE OPINION THAT IT IS A CASE OF MERE CHANGE OF OPI NION AND HENCE UNSUSTAINABLE IN THE EYES OF LAW.THEREFORE,REVERSING THE ORDER OF THE FAA,WE DEC IDE EFFECTIVE GROUND OF APPEAL,FILED BY THE ASSESSEE, IN ITS FAVOUR. AS A RESULT,APPEAL FILED BY THE ASS ESSEE STANDS PARTLY ALLOWED. )1 ' () 2 3 + / 4 + ) 5 6. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH,MARCH, 2015. 0 + -.# 8 9' 25 :,2015 . + / @ SD/- SD/- ( /I P BANSAL) ( ! / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, 9' /DATE: 25.03.2015 SK 0 0 0 0 + ++ + &)A &)A &)A &)A B A#) B A#) B A#) B A#) / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR F BENCH, ITAT, MUMBAI / AE/ &)' , , . . . 6. GUARD FILE/ / 'A) &) //TRUE COPY// 0' / BY ORDER, F / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI.