TaxTMI 
TaxTMI 
2013 (6) TMI 523
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.....147 of the IT Act, dated 29/09/2010 according to which it was required to show cause as to why the short-term capital gain shown at Rs.18,26,277/- should not be treated as a business income. We have been informed that earlier an assessment u/s.143 was finalized on 24/12/2007 according to which the short-term capital gain was assessed as such. A notice u/s.148 was issued on 4/8/2009 and the assessee was also served with the reasons recorded. 4. The main contention of ld.AR Mr.Tej Shah before us is that the reopening was done by change of opinion by the AO which is not permissible in the eyes of law. In support of this contention, he has cited the observation of the AO made as per the original assessment order passed u/s.143(3) dated 24/12/2007 wherein there was a discussion on this issue in compliance of a notice u/s.143(2) as also the AO had given a finding that the assessee had made the investment out of owned funds and earned "gain out of it". For ready reference, paras-2 & 3 of the said assessment order is reproduced below: "2. The case was selected for scrutiny by issuing notice u/s.143(2) of the I.T.Act on 26.09.2006 which was duly served upon the assessee on 29.09.2006. Th....
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.... shares amounted to short-term capital gain or business income was fully verified by the Assessing Officer during the first scrutiny proceedings and therefore the reopening is only based on "change of opinion" is not correct. In the first scrutiny proceedings the Assessing Officer although had called for amongst others, the details of the short-term capital gains shown by the assessee and asked him to justify the same along with documentary evidence, but it is seen that the submission filed by the assessee did not contain the details of the shares transacted. Relevant portion of the assessee submission dated 07.08.2007, is reproduced hereunder:- "13. JUSTIFICATION FOR STCG:- I am enclosing herewith a copy of broker a/c. with whom I have traded during the year under consideration. Their Daily Bills are also available but due to volume they are not carried with us but if required can be produced. Since our main activity is consulting on investment in share market which were are conducting since last 3-4 years and we are regularly filing our return of income with the department also. This year considering the market I have also decided to trade in the shares and earned out of it." ....
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....it under the head "short-term capital gain" of Rs.18,26,277/- and paid the tax accordingly. We have also noted that the assessee has furnished the P&L account drawn as on 31.3.2005 and therein also there was clear mention of the gain earned on share transaction. When the assessment proceedings were going on, then a questionnaire has been issued dated 11.5.2007, as well as a notice u/s.143(2)/142(1) dated 18.7.2007 was issued. As per query No.13 of the questionnaire, the assessee was required to furnish and justify the short-term capital gain along with complete documentary evidences. The assessee has vehemently pleaded before us that all the requisite details were furnished before the AO at the time of assessment proceedings. On due verification of all those details, the AO had made an observation in the said original assessment order passed u/s.143(3) dated 24.12.2007; as is evident from para-3 of the said assessment order, already reproduced hereinabove; which says that books of accounts, bills, vouchers, etc. were produced during the course of hearing which were verified and test-checked. An another observation has also been made in the said paragraph by the AO that the assessee....
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....claim and any reopening of an assessment of this nature even within a period of four years from the end of relevant assessment year would amount to change of opinion. We are further of the opinion that in any such case, as long as there is some tangible material on the basis of which the Assessing Officer can form a belief that the income chargeable to tax has escaped assessment, it would be permissible to reopen the assessment in exercise of powers under section 147 of the Act, particularly after the amendments made with effect from 1.4.1989. Such tangible material need not be alien to the record." "43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition." "48. Before closing this issue, we would like to clarify one aspect. We have expressed....