DCIT 7(3), MUMBAI V. DEEPAK ROY, MUMBAI

ITA 7781/MUM/2012

• Counselvise Citation: 778119914 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DURGA DUTT
• Assessee Lawyers: DR K SHIVRAM; RAHUL SARDA
• Keywords: Business income; Rectification of order; Salary income; Earning of tax free income; Difference of opinion; Assessment record; Revised return; Change of opinion
• Section: 148; 28; 154; 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM) .. , , ./I.T.A. NO.7781/MUM/2012 ( / ASSESSMENT YEARS : 2006-07) DY. COMMISSIONER OF INCOME TAX, 7(3), ROOM NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. / VS. SHRI DEEPAK ROY FLAT NO.11,1 ST FLOOR, RAMBHA, NAPEANSEA RAMBHA CHS LTD, NAPEAN SEA ROAD, MUMBAI-400006 ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ %& ./PAN/GIR NO. :AAAPR7703R !' ' / APPELLANT BY : SHRI DURGA DUTT #$!' ( ' /RESPONDENT BY : DR . K SHIVRAM (S R.ADVOCATE) AND SHRI RAHUL SARDA ) * ( +, / DATE OF HEARING : 7.7.2014 -. ( +, /DATE OF PRONOUNCEMENT : 25 .7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 31.10.2012 PASSED BY LD CIT(A)-13, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE IS IN APPEAL BEFORE US CHALLENGI NG THE DECISION OF LD CIT(A) IN HOLDING THAT THE RE-OPENING OF ASSESSMENT IS BAD IN LAW. I.T.A. NO.7781/MUM/2012 2 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE STATED IN BRIEF. THE ASSESSEE WAS THE MANAGING DIRECTOR OF A COMPANY NAMED M/S TR IUMPH DISTELLERS & VINTNERS PVT LTD. DURING THE YEAR UNDER CONSIDERAT ION, HE FILED HIS RETURN OF INCOME ON 31.08.2006 DECLARING INCOME FROM SALARY, PROFESSIONAL FEES FROM MARKETING CONSULTANCY, HOUSE PROPERTY INCOME, CAPIT AL GAINS FROM SALE OF INVESTMENTS AND DIVIDEND INCOME. THE ASSESSEE RETU RNED A TOTAL INCOME OF RS.2,54,93,804/-. IT WAS PROCESSED U/S 143(1) OF TH E ACT. THE SAID RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND THE REGULAR AS SESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 29.12.2008 ACCEPTING THE INCOM E RETURNED. IT IS PERTINENT TO NOTE THE ASSESSEE HAD FILED A REVISED RETURN ON 30-07-2007 REVISING THE TOTAL INCOME AT RS.2,83,62,142/-, WHEREIN HE HAD INCLUDED INTEREST INCOME FROM THE INVESTMENT MADE IN CORPORATION BANK CAPITAL GAINS S CHEME. WHILE PASSING THE ASSESSMENT ORDER, THE AO OMITTED TO CONSIDER THE RE VISED RETURN AND HENCE HE HAD ASSESSED THE INCOME RETURNED IN THE ORIGINAL RE TURN OF INCOME. HENCE, THE ASSESSEE MOVED A RECTIFICATION PETITION U/S 154 OF THE ACT ON 28-01-2009 BEFORE THE AO TO CONSIDER THE REVISED RETURN OF INCOME. C ONSEQUENT THERETO, THE AO PASSED THE RECTIFICATION ORDER ON 15.04.2009 ASSESS ING THE TOTAL INCOME AT RS.2,83,62,142/-. 4. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE DATED 25-03-2011 U/S 148 OF THE ACT ON THE REASONING THAT THE INCOME FROM SALE OF SHARES HAS BEEN WRONGLY ASSESSED UNDER THE HEAD INCOME FROM SHORT TERM CAPITAL GAIN, INSTEAD OF ASSESSING THE SAME UNDER THE HEAD INCOME FROM BUSINESS, SINCE THE ASSESSEE HAS INDULGED IN TRADING OF SHARES AND MUTUAL FUND UNITS. THOUGH THE ASSESSEE OBJECTED TO THE RE -OPENING OF ASSESSMENT, YET I.T.A. NO.7781/MUM/2012 3 THE AO COMPLETED THE ASSESSMENT BY ASSESSING THE AM OUNT DECLARED UNDER THE HEAD SHORT TERM CAPITAL GAIN AS INCOME FROM BUSINES S. THE TOTAL INCOME WAS DETERMINED AT RS.2,83,62,142/-, I.E., AT THE VERY S AME AMOUNT AS DETERMINED IN THE RECTIFICATION ORDER. THUS, THERE WAS NO CHANGE IN THE TOTAL INCOME, BUT THE CONCESSIONAL RATE OF TAX APPLICABLE TO SHORT TERM C APITAL GAIN (RS.90,87,226), WHICH WAS CLAIMED BY THE ASSESSEE, WAS DENIED BY TH E AO. IT IS NOTICED THAT THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN OF RS. 1.39 CRORES AND CLAIMED THE SAME AS EXEMPT, BUT THE AO DID NOT DISTURB THE SAID CLAIM IN THE REASSESSMENT PROCEEDING. 5. IN THE APPEAL FILED BY THE ASSESSEE, THE LD CIT( A) HELD THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE BASIS OF CHANGE OF OPINION AND ACCORDINGLY QUASHED THE REOPENING. ON MERITS ALSO, THE LD CIT(A) ALSO HELD THAT THE GAIN ARISING ON SALE OF SHARES IS ASSESSABLE AS SHORT TERM CAPITAL GAIN ONLY. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL CHALLE NGING THE DECISION OF LD CIT(A) IN RESPECT OF LEGAL ISSUE. 6. THE LD D.R SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THERE WAS CHANGE OF OPINION, SINCE THE ASSESSING OF FICER DID NOT FORM ANY OPINION ABOUT THE IMPUGNED ISSUE DURING THE COURSE OF ORIGI NAL ASSESSMENT PROCEEDING. IN THIS REGARD, HE DREW OUR ATTENTION TO THE ORIGIN AL ASSESSMENT ORDER DATED 29- 12-2008 AND SUBMITTED THAT THE AO DID NOT DISCUSS A NYTHING IN THE SAID ORDER. HE FURTHER CONTENDED THAT THE DECISION RENDERED BY LD CIT(A) IS CONTRARY TO THE RATIO LAID DOWN BY DELHI HIGH COURT IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD. I.T.A. NO.7781/MUM/2012 4 7. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE A SSESSEE HAD FURNISHED ALL THE DETAILS RELATING TO THE SHARE TRANSACTIONS TO T HE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. THE AO, THEREAFTER, PASSED THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT ACC EPTING THE INCOME DECLARED UNDER THE SHORT TERM CAPITAL GAINS. ACCORDINGLY, H E CONTENDED THAT THE AO HAS RE-OPENED THE ASSESSMENT ONLY ON THE BASIS OF CHANG E OF OPINION. HE ALSO PLACED RELIANCE ON THE DECISION RENDERED BY THE HONBLE JU RISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF ASIAN PAINTS LTD VS. CIT (2009 )(308 ITR 195) AND SUBMITTED THAT THE AO CANNOT TAKE ADVANTAGE OF HIS OWN WRONG, WHEN HE FAILED TO APPLY HIS MIND TO THE RELEVANT MATERIAL WHILE FRAMING ORIGINA L ASSESSMENT ORDER. THE LD A.R FURTHER SUBMITTED THAT LD CIT(A) HAD DECIDED TH E ISSUE ON MERITS ALSO AND THE SAID DECISION HAS BEEN ACCEPTED BY THE DEPARTME NT, MEANING THEREBY, THE ASSESSEE WOULD BE GETTING RELIEF EVEN IF THE LEGAL ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL. ACCORDINGLY HE SUBMITTED THAT THE ISSUE URGED BY THE REVENUE WOULD RENDERED ACADEMIC IN NATURE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE AO HAS MAINLY RE-OPENED THE ASSESSMENT ONL Y FOR ASSESSING THE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME. THE REASONS FOR RE-OPENING OF ASSESSMENT HAS BEEN EXTRACTED BY THE AO AS UNDER:- (I) FOR THE YEAR UNDER CONSIDERATION, IT IS SEEN T HAT THE ASSESSEE HAS FETCHED THE INCOME TO THE TUNE OF RS.1,12,75,513/ - FROM TRADING OF SHARES AND MUTUAL FUNDS. THE AMOUNT HAS BEEN OFFER ED FOR TAXATION UNDER THE HEAD SHORT TERM CAPITAL GAINS AND TAXES @ 10%. THE ASSESSEE HAS ALSO SHOWN LONG TERM CAPITAL GAIN OF SHARES AT RS.1,39,77,427/- WHICH IS CLAIMED AS EXEMPT; (II) ON PERUSAL OF THE DETAILS FURNISHED, WITH RESP ECT TO THE LIST OF SHARE TRANSACTIONS ON RECORD TREATED AS TRANSITION OF C APITAL ASSET REVEAL THE FOLLOWING: I.T.A. NO.7781/MUM/2012 5 (A) NO. OF SHARE TRANSACTIONS THROUGH OUT THE YEAR STA NDS AT 265. (B) THE TOTAL PURCHASE OF SHARES DURING THE YEAR UNDER REVIEW IS SEEN TO BE RS.10,22,38,569/-; (C) SIMILARLY, THE TOTAL QUANTUM OF SALE OF SHARES WORK S OUT TO RS.12,03,29,482/- D) IT IS SEEN THAT SHARES HAVE BEEN TRADED IN A FRE QUENT AND CONSISTENT MANNER THROUGH OUT THE YEAR UNDER REVIEW . A FEW INSTANCES ON THE BASIS OF TEST CHECK IS A UNDER : MONTH NO. OF SHARE TRANSAC TIONS PROFIT ON SHARES TRADE (RS.) MAY 36 8,01,549 JUNE 43 27,55,396 AUGUST 50 29,28,752 SEPTEMBER 22 14,83,159 NOVEMBER 26 31,38,880 (III) ANALYZING THE ABOVE CHARACTERISTICS OF THE TR ANSACTIONS, IT IS CLEAR THAT IT IS A FIT CASE FOR TAXING THE INCOME UNDER T HE HEAD BUSINESS INCOME U/S 28 OF THE IT ACT. 1961; (IV) ON PERUSAL OF THE RECORD, IT IS SEEN THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME TO THE TUNE OF RS.99,59,005/- DUR ING THE YEAR UNDER CONSIDERATION. THIS INCOME IS EXEMPTED FROM TAX AN D THEREFORE, DOES NOT FORM PART OF THE TOTAL TAXABLE INCOME OF THE YEAR. HOWEVER, THE EXPENSES PERTAINING TO THE EXEMPT INCOME U/S 14A OF THE ACT, ARE REQUIRED TO BE DISALLOWED IN THE LIGHT OF PROVISIONS OF RULE 8D T HE DECISION IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD (117 ITD 169, MUM BAI BENCH); (V) THE EXPENSES RELATED TO CAPITAL GAINS ARE CLAI MED TO THE EXTENT OF RS.2,33,831/- WHICH ALSO TO BE CONSIDERED FOR DISAL LOWANCE IN VIEW OF THE FACT THAT THE ASSESSEE HAS EARNED HUGE INCOME FROM LONG TERM CAPITAL GAINS CLAIMED AS EXEMPT AND SHORT TERM CAPITAL; GA INS TAXABLE AT LOWER RATE WE HAVE ALREADY NOTICED THAT THE ORIGINAL ASSESSMEN T WAS COMPLETED U/S 143(3) OF THE ACT AND LATER IT WAS RECTIFIED BY A RECTIFIC ATION ORDER PASSED U/S 154 OF THE ACT. I.T.A. NO.7781/MUM/2012 6 9. WE NOTICE THAT THE LD CIT(A) HAS CONSIDERED THE FACTS AVAILABLE IN THIS CASE IN DETAIL AND ACCORDINGLY HE HAS GIVEN HIS DEC ISION. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT PORTION OF HIS ORDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THE FACTS OF THE CASE HAVE BEEN EXPLAINED IN DETAILS IN ABOVE PARAS. THE APPEL LANT INTER-ALIA EARNED PROFIT ON SALE OF INVESTMENTS IN MUTUAL FUND AND SH ARES WHICH WERE DISCLOSED AND OFFERED TO TAX AS SHORT TERM CAPITAL GAIN. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE APPELLANT HAD FILED ALL THE DETAILS AND INFORMATION PERTAINING TO SALES/PURCHASE AND OTHER TRANSACTIONS PERTAINING TO MUTUAL FUND/ SHARES GIVING RISE TO SHORT TERM CA PITAL GAINS. IN THE ORIGINAL ASSESSMENT ORDER, THE AO DID NOT DISTURB APPELLANTS CLAIM OF S.T.C. GAINS. THEREAFTER, THE AO ALSO INITIATED PR OCEEDINGS U/S.154 OF THE ACT IN WHICH ALSO THE SAID DETAILS OF THE APPELLANT WERE CONSIDERED BY THE AO. THEREAFTER, THE AO HAD REOPENED THE ASSESSMENT BY ISSUE OF NOTICE U/S.148 OF THE ACT. FOR RE-OPENING THE PARA 2.L.(A) ASSESSMENT THE AO RECORDED THE REASON. SUCH REASONS HAVE BEEN MENTION ED IN THE ABOVE. PERUSAL OF THE 'REASONS RECORDED BY THE AO FOR REOP ENING THE ASSESSMENT' CLEARLY REVEALS THAT THE REOPENING WAS MADE ON THE BASIS OF INFORMATION ALREADY AVAILABLE ON RECORD. THERE IS NO MENTION OF ANY FURTHER INFORMATION COMING IN POSSESSION OF AO AFTER PASSI NG OF ORIGINAL ASSESSMENT ORDER. IN OTHER WORDS, INFORMATION/DETA ILS/FACTS MENTIONED IN THE REASONS FOR REOPENING WERE ALREADY AVAILABLE IN THE ASSESSMENT RECORD. THE ASSESSMENT YEAR UNDER CONSIDERATION IS AY 2006-07. NOTICE U/S 148 OF THE ACT WAS ISSUED ON 25- 03-201. THUS , REOPENING WAS MADE WITHIN 4 YEARS FROM THE END OF THE AY UNDER CONSIDE RATION. CONSEQUENTLY, THE PROVISIONS OF PROVISO TO SEC.147 OF THE ACT WAS NOT APPLICABLE. HOWEVER, IT WAS EVIDENT FIRSTLY FROM THE FACTS OF T HE CASE AND SECONDLY FROM THE REASONS RECORDED ITSELF THAT THE REOPENING WAS MADE ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD, THIS AMOUNTS TO REOPENING ON THE BASIS OF CHANGE OF OPINION I.E. REOPENING ON THE BASIS OF MATERIAL ALREADY CONSIDERED BY THE AO AT THE TIME OF FRAMIN G THE ORIGINAL ASSESSMENT ORDER. IN THE CASE OF INDIAN EASTERN N EWSPAPER SOCIETY VS CIT, 119 ITR 996(SC), IT IS HELD THAT IT IS A SETTLED POSITION IN LAW THAT WHERE ASSESSM ENT SOUGHT TO BE REOPENED IS BEFORE THE EXPIRY OF 4 YEARS FROM THE E ND OF RELEVANT AY, THEN IN SUCH CASES, POWER FOR REOPENING IS VERY WIDE. HOWEVER, EVEN WHEN SUCH A POWER IS VERY WIDE, YET SUCH POWER WOULD NOT JUSTIFY A REVIEW OF THE ASSESSMENT ORDER ALREADY PA SSED. ' IN THE CASE UNDER CONSIDERATION, THE AO HAS REOPENE D THE ASSESSMENT ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD. THIS AMOUNTS TO REVIEW OF EARLIER ASSESSMENT ORDER AND CHANGE OF OPINION W HICH IS NOT PERMISSIBLE UNDER THE LAW. IN THE CASE OF KELVINATOR OF INDIA , 320 ITR 561, THE SUPREME COURT HELD THAT EVEN WITHIN 4 YEARS, THE RE OPENING CANNOT BE I.T.A. NO.7781/MUM/2012 7 MADE ON THE BASIS OF CHANGE OF OPINION. RECENTLY, T HE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF CIT VS. USHA INTERNATIONA L LTD REPORTED IN (2012) 77 DTR (DEL)(FULL BENCH) 396 ORDER DATED 21- 09-2012 THE FULL BENCH HAS CONSIDERED AS TO WHAT AMOUNTS TO CHANGE O F OPINION HOLDING THAT ' IN SUCH A CASE, IF ASSESSMENT IS REOPENED IN RESPECT OF THE MATTER COVERED BY THE DISCLOSURE, IT WOULD AMOUNT TO CHANG E OF OPINION IN THE FACTS AND CIRCUMSTANCES, INITIATION OF PROC EEDING UJS.147 OF THE ACT ARE HELD TO BE INVALID SINCE THE REOPENING WAS MADE ON THE BASIS OF CHANGE OF OPINION. CONSEQUENTLY, THE ASSESSMENT ORDER FRAMED ON THE BASIS OF SUCH INVALID REOPENING IS ALSO QUASHED 10. ON A CAREFUL PERUSAL OF THE ORDER OF LD CIT(A), THE RIVAL SUBMISSIONS AND THE FACTS PREVAILING IN THIS CASE, WE TEND TO AGREE WITH THE VIEW EXPRESSED BY LD CIT(A). A PERUSAL OF THE SUBMISSIONS MADE BY THE A SSESSEE WOULD SHOW THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS RELATING TO SHARE TRANSACTIONS BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. THE AO HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT BY CONSIDERING THOSE DETAILS. LATER THE ASSESSING OFFICER HAS PASSED A RECTIFICATION ORDER U/S 154 OF THE ACT ALSO. HENCE, ON BOTH THE OCCASIONS, THE AO WAS VERY MUCH AWARE O F THE FACT THAT THE ASSESSEE HAS DECLARED THE GAINS ARISING ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS, THAT TOO BOTH THE SHORT TERM CAPITAL GAINS A ND LONG TERM CAPITAL GAINS. A CAREFUL PERUSAL OF THE REASONS RECORDED FOR RE-OPEN ING ALSO SHOWS THAT THE ASSESSING OFFICER HAS ENTERTAINED THE REASONS ONLY FROM THE FACTS ALREADY AVAILABLE ON RECORD. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE AO HAS RE- OPENED THE IMPUGNED ASSESSMENT ONLY ON THE BASIS OF CHANGE OF OPINION A ND ACCORDINGLY THE LD CIT(A) WAS JUSTIFIED IN QUASHING THE REOPENING OF ASSESSME NT. I.T.A. NO.7781/MUM/2012 8 11 IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25TH JULY , 2014. -. ) / 0 1 25TH JULY, 2014 . ( 2* 3 SD SD ( / VIVEK VARMA) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ) * MUMBAI: 25 TH JULY,2014. . . ./ SRL , SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ) 5+ ( ) / THE CIT(A)- CONCERNED 4. ) 5+ / CIT CONCERNED 5. 62 #+ 7 , , 7 , ) * / DR, ITAT, MUMBAI CONCERNED 6. 2 8* / GUARD FILE. 9 ) / BY ORDER, TRUE COPY : % (ASSTT. REGISTRAR) , 7 , ) * /ITAT, MUMBAI