2009 (11) TMI 30 - HC - Income Tax

High Court Upholds Assessee's Victory on Reopening Assessment

The High Court ruled in favor of the assessee, holding that the original assessment could not be reopened under Section 148 based on the treatment of ... Dealing in Shares – Re assessment - Capital Assets versus Business Assets – held that - the ITAT has stated that it is the distorted reading of the order of the CIT(A) passed in those block assessment proceedings. We agree with this observation of the Income Tax Appellate Tribunal. Reading of the order of the CIT(A) in block assessment proceedings clearly demonstrates that the CIT(A) held that stocks were rightly shown by the assessee as investment in his books of accounts which could not be treated as stock-in-trade. We are of the opinion that in view of this categorical finding of the CIT(A) in block assessment proceedings which had attained finality, notice under Section 148 predicated on the same ground was impermissible. - In view of the order of the CIT(A) which was even upheld by the Tribunal it was not open to the A.O. to re-open the proceedings under Section 148, on the ground which had been dealt with specifically and decided in favour of the assessee. - It is trite law that even where two views are possible, proceedings under Section 148 cannot initiated Issues: Reopening of assessment under Section 148 based on treatment of shares as stock-in-trade instead of investment for income tax assessment.In this case, the respondent assessee filed a return of income for the assessment year 1995-96, showing income from short-term capital gain from the sale of shares treated as investment. Subsequently, a notice was issued under Section 148 to re-assess the income, treating the shares as stock-in-trade. The Income Tax Appellate Tribunal (ITAT) quashed the re-assessment proceedings under Section 147/148, stating that the notice was not based on a valid reason. The ITAT highlighted that a prior block assessment under Section 158BC had already determined the shares as investments, not stock-in-trade. The CIT(A) had also ruled in favor of the assessee, upholding the treatment of shares as investments. The High Court concluded that the original assessment could not be reopened on the same ground. The court emphasized that since a final decision had been made regarding the nature of the shares in previous proceedings, initiating re-assessment based on the same ground was impermissible. The court further stated that when a specific issue has been decided in favor of the assessee, reopening the assessment under Section 148 is not justified. The court dismissed the appeal, noting that no legal question arose as the issue had already been conclusively settled in favor of the assessee by the CIT(A) and ITAT.