TaxTMI 
TaxTMI 
2015 (11) TMI 181
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.... The learned CIT (Appeals) erred in confirming action of the A.O. as to income earned on transaction in shares of Rs. 91 ,28,881/- subject to SIT is taxable under the head "Income from Business or Profession" instead of "Capital Gain" declared by the appellant without properly appreciating the fact of the case and laws applicable thereto. 4. The learned CIT (Appeals) erred in confirming the action of the A.O. to hold the appellant as a "Share Trader" instead of an "Investor" without properly appreciating facts of the case and laws applicable thereto. 5. The learned CIT (Appeals) erred in confirming the action of the A.O. in disallowing expenses of Rs. 24,000/- u/s 40(a)(ia) of the Act. 6. The appellant prays that income earned from transaction in shares may be directed to be taxed as 'Capital Gain' instead of 'Business Income'. 7. The appellant prays that the above disallowances confirmed may be deleted. 8. The appellant craves leave to add, alter or amend any ground of appeal at the time of hearing or before." 2. The Brief facts are that in this case Assessee had filed return of income on 27-10-2006 u/s 139(1) and ori....
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....he AO that income has escaped from assessment. Relying upon the judgment of Hon'ble Bombay High Court in the case of Dr. Amin's Pathology Laboratory vs JCIT 252 ITR 673 (Bom), it was also submitted that there being no formation of opinion on the part of the AO in original assessment order, reopening was valid and the same needs to be upheld. On specific query from the Bench to Ld. DR with respect to any fresh material, he could not controvert the submissions of the Ld. Counsel that there was no fresh tangible material coming into possession of the AO before recording the impugned reasons. However, he reiterated that there was no change of opinion on the part of the AO while recording Reasons for reopening of this case. 6. We have heard both the parties and have gone through the orders of the lower authorities. We have also gone through the 'Reasons' recorded. It was noted by us that perusal of the 'Reasons' recorded, available at page no.21 to 22 of the paper book, indicated that these 'Reasons' have been recorded by the AO on the basis of records available with him since the time of framing of original assessment proceedings u/s 143(3) vide order dated 15.12.2008. These 'Reason....
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....usal of the Profit and Loss Account and the submissions on record reveal that TDS has remained to be deducted in accordance with chapter-XVII(A) of the I.T. Act, on professional fees of Rs. 24,000/-. It should be therefore disallowed u/s 40(a)(ia) r.w.s.200(1) of the I.T. Act, 1961. Therefore I have reason to believe that the income of the assessee chargeable to tax, has escaped assessment for A.Y.2006-07. Proceedings u/s147 of the Act are therefore initiated. Issue notice u/s 148 of the Act." 6.1. The provisions of section 147 have been enshrined in the statute with a view to enable the AO to assess the escaped income. For this purpose, the AO has been conferred with the requisite powers under the law to reopen an already concluded assessment. On the other hand, the Constitution of our country has attached great sanctity to the concept of finality of litigation. Thus, by making suitable provisions at appropriate places in the statute itself, legislature has ensured that sword of litigation should not be kept hanging on the heads of the litigating parties, be it the Government or the Citizens. That's why, strict provisions with regard to assumption of jurisdict....
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....easons' recorded. The 'Reasons' should show that, there is rational nexus and cause & effect relationship between the material sought be relied upon in the Reasons and belief sought to be formed by the AO about escapement of income. (iii) In case; reopening is sought to be done by the AO after expiry of four years from the end of the relevant assessment year and the original assessment was framed u/s 143(3) then reasons can be recorded only if there was failure on the part of the assessee in disclosure of material of facts, as has been envisaged in first proviso to section 147. (iv) Before issuing notice u/s 148, the AO has to obtain, on the reasons recorded by him, sanction for reopening of the case, from the competent authority as envisaged u/s 151 viz. Additional Commissioner or the Commissioner of Income Tax, as the case may be. Before granting its sanction, the sanctioning authority is required to record its satisfaction based upon its independent application of mind, making out a case that as per the facts narrated and material referred to in the 'Reasons' recorded by the AO, a belief can be formed about escapement of income and case sought to be reopened is....
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....the eyes of law at the very inception. 6.6. In the present case, it was noticed by us that the case of the assesse is that there was no fresh tangible material in the possession of AO at the time of recording of impugned reasons. A perusal of the 'Reasons' recorded by the AO in this case reveals that at the time of recording of these 'Reasons' the AO had examined original assessment records only and no fresh material had come in the possession of the AO. In response to our specific query also, Ld DR could not point out any fresh material available with the AO at the time of reopening of the case of the assessee. Thus, assertion of the assessee that there was no fresh material with AO for reopening of this case, remained uncontroverted. 6.7. Under these facts and circumstances, let us now examine settled position of law on this issue. It has been held in various judgments coming from various courts that availability of fresh tangible material in the possession of AO at the time of recording of impugned reasons is a sine qua none, before the AO can record reasons for reopening of the case. We begin with the judgment of Hon'ble Supreme Court in the case of CIT vs. Kelvinator Ind....
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...., it was an arbitrary exercise of power conferred u/s 147. Thus, reopening was held to be invalid on this ground itself. 6.11. In the case of Mohan Gupta (HUF) vs. CIT 366 ITR 115, same view has been followed by Hon'ble Delhi High Cout. 6.12. Further, in the case of CIT vs. K. L. Arora in ITA 118/2014 dated 21-04-2014, Hon'ble Delhi High Court observed as under: "This Court is of the opinion that no fault can be found with the Tribunal's order. It is well settled that in order to issue a valid reassessment notice, the AO has to be satisfied on the basis of tangible material or information subsequently available to him that the assessee had not made full and true disclosure which led to income escaping assessment at the stage when the original assessment was completed. Short of that a re-appreciation of the existing materials which really amounts to review is impermissible. The Tribunal, in the circumstances of this case was justified in concluding that re-assessment proceedings themselves were not in accordance with law and consequently dismissing the Revenue's appeal. No question of law arises for consideration." 6.13. In the case of CIT vs. Shri Atul Kumar Swami....
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....formation or material which had subsequently come to the notice of the AO to enable him to form the requisite belief that any income liable to be assessed had escaped assessment, therefore, the initiation of reassessment proceedings was not valid. 6.16. Hon'ble Madras High Court in the case of Bapalal & Co. Exports 289 ITR 37, held that in the absence of any new material, the AO is not empowered to reopen an assessment irrespective of the fact whether it was made under s. 143(1) or s. 143(3). 6.17. Recently, Mumbai Bench of ITAT in the case HV Transmissions Ltd. in I.T.A No. 2230/Mum/2010 held that even though original assessment was made under s. 143(1) and not under s. 143(3), assessee having made full disclosure of its income, AO was not justified in reopening the assessment in the absence of any new material. Hon'ble Bench has relied upon third member judgment from Mumbai Bench of ITAT in the case Telco Dadajee Dhackjee Ltd vs DCIT ( ITA No 4613/Mumbai/2013 dt 12-5-2010), in support of this view. 6.18. Similar view has been expressed by Hon'ble Delhi Bench of ITAT in the case of M/s Nexgen School of Business Vs. Deputy Commissioner of Income Tax, [ITA No. 5609/DEL/2010....