Ved Parkash Paliwal V. Assistant Commissioner of Income Tax Circle, Panipat and another

CWP/15730/2008

AI Insights

The case involves Ved Parkash Paliwal, the petitioner, who challenged a notice for reassessment issued by the Assistant Commissioner of Income Tax, Panipat, under Section 148 of the Income Tax Act, 1961. The reassessment was based on alleged escapement of income for the assessment year 2002-03, identified through a speculative transaction and incorrect set-off of losses. The petitioner argued that the reassessment was unjustified as there was full disclosure in the original returns, and the reassessment was merely a change of opinion by the tax authorities. The court agreed with the petitioner, noting that the reassessment did not meet the legal requirements for initiation after the stipulated period.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 799766 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 12-12-2008
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Dr. V.P. Gopinathan (2001) 248 ITR-149 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SANJEEV KAUSHIK
• Assessee Lawyers: R P SAWHNEY; SAURAV KHURANA
• Keywords: Income Escapement; Interest on FDRs; Notice; Reassessment; Short Term Capital Loss; Speculative transaction; Loan expenditure
• Section: 147; 148; 143(3); 43(5)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.M.No.24345 of 2008 in/and C.W.P. No.15730 of 2008 Date of decision: 12.12.2008 Ved Parkash Paliwal. -----Petitioner Vs. Assistant Commissioner of Income Tax Circle, Panipat & another. -----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N. MITTAL Present:- Mr. R.P. Sawhney, Sr. Advocate with Mr. Saurav Khurana, Advocate for the petitioner. Mr. Sanjeev Kaushik, Standing Counsel for respondents. ----- ORDER: 1. This petition was filed for quashing of notice for reassessment dated 5.2.2008, Annexure P-5, under Section 148 of the Income Tax Act, 1961 (for short, “the Act”). 2. After notice was issued, assessment order dated 13.10.2008, Annexure P-10 has been passed, on account of which the petitioner has filed application for amendment of the writ petition to challenge the said order also. C.M. No.24345 is allowed and the amended petition is taken on record. C.W.P. No.15730 of 2008 3. The assessee filed his return for the assessment year 2002- 03 on 31.7.2002 and filed revised return on 10.7.2003. Assessment was completed on 30.9.2004. 4. After more than four years from the expiry of the assessment year i.e. on 5.2.2008, the impugned notice under Section 148 of the Act was issued, alleging escapement of income within the meaning of Section 147 of the Act. In the reasons for the notice, it was mentioned as under:- “While completing the assessment u/s 143(3) dated 30.09.2004, short term capital loss on account of future and options bills at Rs.2245008/- was allowed whereas transaction of future and option bill is of speculative nature and as per sub-section (5) of Section 43 of the Income Tax Act, 1961 loss from speculative profit can be set off only against speculation profit and not against another income. Thus income to the tune of Rs.22,45,008/- is escaped assessment. From the details of interest filed by the assessee with the return of income, it is seen that the assessee earned interest on FDRs with bank at Rs.2928904/- out of which interest paid on loans amounting to Rs.1808558/- (1777315 + 31243) has been deducted by the assessee and balance interest of Rs.11,20,346/- has been shown in the computation of income. Interest paid on loans are not allowable expenditure because no income from business has been shown and utilization of loan is against capital expenditure or transaction of speculative transaction. Hence not allowable expenditure in view of the judgment of Hon’ble Supreme Court of India in the case of CIT Vs. Dr. V.P. Gopinathan (2001) 248 ITR-149 (SC). 2 C.W.P. No.15730 of 2008 Keeping in view the facts, I have reason to belief that income to the tune of Rs.40,53,566/- (2245008/- + 1808558) has escaped assessment as the assessee failed to declare fully and truly its income for the Assessment Year 2002-03, in terms of section 147 of the Income Tax Act, 1961.” 5. Learned counsel for the petitioner submitted that under proviso to Section 147 of the Act, which applies if reassessment is proposed after four years, only ground for reassessment can be failure of the assessee to file return or to make true and full disclosure of the material. Reasons given in the impugned notice show that there was true and full disclosure of material by the assessee in the return filed and reassessment of income was proposed on merits by change of opinion and not on the ground of failure of the assessee to disclose true and full material. 6. We have heard learned counsel for the parties. 7. Learned counsel for the revenue is unable to point out that in the return of the assessee, there was any omission to give any material. In such a situation, even if the Assessing Officer finds that there is an escapement of income, reassessment was not permissible after expiry of four years. 8. For the above reasons, the notice for reassessment is without jurisdiction. Consequently, the order of assessment is also without jurisdiction. 9. Accordingly, we allow this petition and quash the impugned notice and order of reassessment. 3 C.W.P. No.15730 of 2008 10. On the request of learned counsel for the revenue, it is made clear that this order will not be a bar to passing of any fresh order, if so permissible under law. 11. The petition is disposed of. ( ADARSH KUMAR GOEL ) JUDGE December 12, 2008 ( L. N. MITTAL ) ashwani JUDGE 4 "