DCIT 10 (1), MUMBAI V. IL & FS INVESTMENT MANAGERS LTD, MUMBAI

ITA 7815/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70898 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 12-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: D V LAKHANI
• Keywords: Business income; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.7815/MUM/2010 ASSESSMENT YEAR : 2004-05 ACIT RANGE - 10(1) ROOM NO.455, AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. IL & FS INVESTMENT MANAGERS LTD. PLOT NO.C-22, G-BLOCK, BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-400 051. PAN NO. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.V. LAKHANI RE VENUE BY : SHRI O.P. SINGH DATE OF HEARING : 22/08/2013 DATE OF PRONOUNCEMENT : 30 / 0 8 /2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS IS A REVENUE APPEAL AGAINST THE ORDERS OF THE CIT(A)-21, MUMBAI DATED 23.08.2010. THE REVENUE HAS RAISED THR EE GROUNDS ON THE ISSUE OF RE-OPENING OF THE ASSESSMENT UNDER SECTION 147 WHICH WAS HELD BY THE LD. CIT(A) AS BAD IN LAW. 2. BRIEFLY STATED, THE ASSESSEE, ENGAGED IN THE BUS INESS OF MANAGING PRIVATE INSTITUTION FUNDS FOR INVESTMENTS, HAD FIL ED RETURN OF INCOME ON 28/10/2004 DECLARING INCOME OF RS.3,51,70,280/-. TH E AO PROCESSED THE RETURN AND VIDE ASSESSMENT ORDER UNDER SECTION 143(3) DATED 20.12.2006 ASSESSED TOTAL INCOME AT RS.5,51,21,615/ -. THIS ORDER WAS ALSO SUBJECTED TO MODIFICATION VIDE ORDER DATED 15/ 01/2007. ITA NO.7815/M/10 A.Y.04-05 2 SUBSEQUENTLY, THE AO FELT THAT THE ASSESSEES CLAIM OF LOSS ON ACCOUNT OF SALE OF SHARES WAS NOT CORRECT AND ACCORDINGLY RE-O PENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 ON 25.03.2009. THE ASSESSEE OBJECTED TO THE RE-ASSESSMENT PROCEEDINGS STATING T HAT IT WAS ONLY CHANGE OF OPINION, WHICH WAS NOT PERMISSIBLE UNDER LAW. THIS OBJECTION WAS DISPOSED OFF BY AO. ALSO, IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE STOCKS OF FIVE COMPANIES WERE HELD AS STOCK-IN -TRADE AND TOTAL SHARES OF THE FIVE COMPANIES WERE SOLD FOR AN AMOUNT OF RS .5,000/-, I.E. FOR RS.1,000/- EACH COMPANY AND THE ASSESSEE INCURRED LOSS OF RS. 2,31,58,400 AS THE SAID COMPANIES WERE NOT IN TRADE AND NO LONGER AVAILABLE. IT WAS THE SUBMISSION THAT AS LOSS INCUR RED WAS BUSINESS LOSS AND AS THIS WAS EXAMINED AT THE TIME OF ASSESSMENT, THERE WAS NO NEED FOR RE-OPENING OF THE ASSESSMENT. THE AO HOWEVER, R EJECTED THE CONTENTIONS AND TREATED THE LOSS AS CAPITAL LOSS AN D EXCLUDED THE SAME FROM THE BUSINESS INCOME COMPUTED. 3. THE ASSESSEE CONTENDED THE SAME BEFORE THE CIT(A ). IT REFERRED TO VARIOUS CLARIFICATIONS FILED BEFORE THE AO AT THE T IME OF ORIGINAL ASSESSMENT VIDE LETTER DATED 07.09.2006 BY AO AND R EPLIES DATED 20.11.2006, 30.11.2006 AND 11.12.2006 TO SUBMIT THA T AFTER DUE EXAMINATION, AO ALLOWED BUSINESS LOSS. AFTER EXAMIN ING THE FACTS ON RECORD, THE LD. CIT(A) CONSIDERED THAT RE-OPENING O F THE ASSESSMENT WAS NOT VALID. HIS CONCLUDING PART OF ORDER IN PAGE 8 A ND 9 IN PARA-2 IS AS UNDER :- THE ABOVE FACTS SHOWS THAT DURING ORIGINAL ASSESS MENT PROCEEDING, THE AO RAISED QUERIES ON THIS ISSUE AND IN RESPONSE THE APPELLANT FILED DETAILED AND REPEATED EXPLANATIONS ON THE ISSUE TO THE AO DURING ORIGINAL ASSESSMENT PROCEEDINGS. THOU GH IN THE ASSESSMENT ORDER, THE AO DID NOT MAKE ANY ADDITION/ DISALLOWANCE ON THIS ISSUE BUT THE ABOVE FACT SHOWS THAT THIS IS SUE WAS EXAMINED BY THE AO DURING ORIGINAL ASSESSMENT PROCE EDINGS. PERUSAL OF REASONS RECORDED FOR REOPENING THE ASSES SMENT SHOWS THAT THE REOPENING WAS MADE ON THE ISSUE WHICH WAS ALREADY EXAMINED BY THE AO DURING ORIGINAL ASSESSMENT PROCE EDINGS. IN THE ITA NO.7815/M/10 A.Y.04-05 3 FACTS AND CIRCUMSTANCES, APPELLANTS ARGUMENTS APPE ARS TO BE CORRECT THAT THE REOPENING WAS BASED MERELY ON CHAN GE OF OPINION. THERE ARE VARIOUS DECISIONS OF COURTS AND TRIBUNALS HOLDING THAT THE REOPENING ON THE BASIS OF MERE CHANGE OF OPINIO N IS NOT PERMISSIBLE UNDER THE LAW EVEN IF THE ASSESSMENT WA S REOPENED WITHIN FOUR YEARS FROM THE END OF RELEVANT ASSESSME NT YEAR. APART FROM THE DECISION RELIED UPON BY THE APPELLANT, THE LATEST DECISION ON THIS ISSUE IS CIT VS. KELVINATOR OF INDIA LTD. R EPORTED IN (2010) 24 DTR (SC) 49 A.Y. 1987-88 ORDER DATED 18.01.2010 WHERE THE HONBLE SUPREME COURT HELD THAT NO REOPENING IS PER MISSIBLE EVEN WITHIN FOUR YEARS FROM THE END OF RELEVANT ASSESSME NT YEAR ON THE BASIS OF CHANGE OF OPINION. CONSIDERING THE ABOVE F ACTS, IT WAS CLEAR THAT THE ISSUE UNDER CONSIDERATION WAS ALREAD Y CONSIDERED BY THE AO IN ORIGINAL ASSESSMENT PROCEEDINGS AND THERE FORE, REOPENING ON THE BASIS OF SAME ISSUE AMOUNTED TO RE OPENING ON THE BASIS OF CHANGE OF OPINION. THOUGH IN THE CASE UNDE R CONSIDERATION THE REOPENING WAS MADE WITHIN FOUR YEARS, BUT THE H ONBLE COURT HELD THAT EVEN WITHIN FOUR YEARS THE REOPENING WAS NOT ALLOWED ON THE BASIS OF CHANGE OF OPINION. ADMITTEDLY, IN THE CASE UNDER CONSIDERATION THE REOPENING WAS MADE ON THE BASIS O F CHANGE OF OPINION ONLY AND THEREFORE, THE REOPENING OF THE AS SESSMENT WAS VOID ABINITIO. THE REOPENING WAS NOT VALID. CONSEQU ENTLY, THE REASSESSMENT ORDER MADE ON THE BASIS OF SUCH INVALI D REOPENING WAS ALSO INVALID AND THEREFORE, CANCELLED. IN THE F ACTS AND CIRCUMSTANCES THE GROUND NO. 1 AND 2 ARE ALLOWED. 4. BEFORE US, THE LD. DR SUPPORTED THE ORDER OF AO TO SUBMIT THAT ASSESSEES HAS SHOWN THE SHARES AS AN INVESTMENT, T HEREFORE, LOSS CLAIMED AS BUSINESS LOSS WAS NOT CORRECT. FURTHER, IT WAS SUBMITTED THAT THE AO DID NOT FORM ANY OPINION, THAT IS WHY THERE IS NO CHANGE OF OPINION AS CONSIDERED BY THE LD. CIT(A). 4.2 THE LD. COUNSEL REFERRING TO THE PAPER BOOK PLACED ON RECORD FROM PAGE 1 TO 24 AND ALSO FURTHER DETAILS PLACED ON A Q UERY WHETHER ASSESSEE HAS TREATED THEM AS STOCK-IN-TRADE IN EARLIER YEARS FILED PAGES 1-218 I.E. COMPUTATION OF INCOME, BALANCE SHEET, P&L ACCOUNT, ASSESSMENT ORDERS FROM ASSESSMENT YEARS 1997-98 TO 2004-05, IT WAS SU BMITTED THAT ASSESSEE WAS SHOWING THE SHARES AS STOCK-IN-TRADE A ND OFFERED INCOME OR CLAIMED LOSS UNDER THE HEAD BUSINESS ONLY. THEREF ORE, THE CLAIM OF THE ASSESSEE WAS EXAMINED AND ACCEPTED ORIGINALLY AND, THEREFORE, RE- ITA NO.7815/M/10 A.Y.04-05 4 OPENING OF ASSESSMENT IS BAD IN LAW. HE SUPPORTED T HE ORDERS OF LD. CIT(A). THE LD. COUNSEL RELIED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF RITU INVESTMENT (P) LTD. VS. DCIT 51 DTR DEL. 162 DATED 22/11/2010 FOR THE PROPOSITION THAT AO INITIA LLY EXPRESSED THE VIEW THAT INCOME WAS BUSINESS INCOME AND LATER TREA TED AS SHORT TERM CAPITAL GAIN, THEREFORE, INITIATION OF PROCEEDINGS IS IN THE REALM OF CHANGE OF OPINION, AND THEREFORE, PROCEEDINGS ARE LIABLE T O BE QUASHED. 5. AFTER CONSIDERING THE DOCUMENTS PLACED ON RECORD , BASED ON HISTORY OF THE SALES OF SAME STOCKS IN VARIOUS ASSE SSMENT ORDERS AS PLACED ON RECORD BY THE LD. COUNSEL, WE ARE OF THE OPINION THAT SUCH STOCKS ARE ALWAYS TREATED AS STOCK-IN-TRADE AND PRO FIT OR LOSS ON SALE OF SHARES IN VARIOUS EARLIER YEARS WAS CONSIDERED UNDE R HEAD BUSINESS ONLY. THIS WAS EVIDENCED BY ASSESSMENT ORDERS IN VA RIOUS YEARS. IN VIEW OF THIS, THERE IS NO DISPUTE WITH THE FACT THAT FIV E COMPANIES SHARES SOLD BY THE ASSESSEE IN BLOCK FOR CONSIDERATION OF RS.5, 000/- WAS ONLY SALE OF STOCK-IN-TRADE AND THEREFORE, THE LOSS CLAIMED WAS A BUSINESS LOSS. FURTHER, THE AO IN THE COURSE OF ORIGINAL ASSESSMEN T SOUGHT VARIOUS CLARIFICATIONS AND DETAILS WHICH WERE ALREADY CONSI DERED BY THE LD. CIT(A) IN HIS ORDER, WHICH NEED NOT BE REPEATED AGAIN. CO NSIDERING THE FACTS, WE AGREE WITH THE FINDINGS OF THE LD. CIT(A). THE R EVENUE GROUNDS ARE ACCORDINGLY REJECTED. 6. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER (AMIT SHUKLA ) JUDICIAL MEMBER MUMBAI, DATED: 30/08/2013. JV. ITA NO.7815/M/10 A.Y.04-05 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.