TaxTMI 
TaxTMI 
2016 (5) TMI 404
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.... of reassessment proceedings u/s 147 of the Act. Against this, the assessee has preferred petition under Rule 27 of ITAT Rules in respect of ground decided against him by the Learned CIT(A). Accordingly we admit the petition under Rule 27 of the ITAT Rules on the legal validity of reassessment proceedings and proceed to adjudicate the same at the first instance before going into the merits of the addition. 3. The brief facts of the issue is that the assessee filed its return of income on 30.10.2004 for the Asst Year 2004-05 disclosing total income of Rs. 7,08,070/- which was processed u/s 143(1) of the Act. Later the case was selected for scrutiny and assessment u/s 143(3) of the Act was framed on 26.12.2006. Thereafter, the assessment was reopened by issuance of notice u/s 148 of the Act dated 8.3.2010 which is admittedly beyond the four years from the end of the relevant assessment year. The reassessment was completed after making certain disallowances. 4. We find that the assessment was reopened by the Learned AO by recording the following reasons :- It was observed that the assessee had earned income from shares division and exports division during the period and....
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....nature or not, was not considered by the Learned AO in the original assessment and hence it does not tantamount to formation of any opinion on the part of the Learned AO and consequently there is no question of any change of opinion. 6. The Learned AR placed the copy of the scrutiny assessment order framed u/s 143(3) of the Act dated 26.12.2006, wherein the Learned AO had made the computation as below:- INCOME FROM BUSINESS: Rs. 9,28,979/- INCOME FROM SPECULATION : Profit from Speculation Business Rs. 75,76,701.91 Less: Dividend received exempt u/s 10(33) Rs. 41,86,449.91 Profit Rs. 33,90,252.00 Less: Speculation Loss brought forward From A.Yr. 2001-02 Rs. 31,11,507.86 From A.Yr. 2003-04 Rs. 2,90,686.37 Rs. 34,02,194.23 Set off restricted to Rs. 33,90,252.00 (remaining balance of Rs. 11,942.23 for A.Yr. 2003-04 is allowed to carry forward as per law) INCOME FROM OTHER SOURCES : Rs. 33,657/- Gross Total Income Rs. 9,62,636/- Less: Deduction u/s 80HHC Rs. 2,54,570/- Assessed Total Income Rs. 7,08,066/- Rounded off to Rs. 7,08,070/- Assessed u/s 1....
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....) and had further applied his mind to carry forward the left over speculation loss of Asst Year 2003-04 of Rs. 11,942/- to subsequent years as per law. Hence it could be safely concluded that the Learned AO had duly applied his mind on the impugned issue on the taxability of share trading profits as 'income from speculation'. To this extent, the reasoning given by the Learned CIT(A) for upholding the validity of reassessment is not justified. We also hold that the Learned AO by his judicial behaviour in the original assessment proceedings u/s 143(3) of the Act had indeed formed an opinion on proper application of mind. We also agree with the arguments of the Learned AR that there is no fresh tangible material available with the Learned AO to justify the impugned action of resorting to reopen the assessment. We hold that where there was no new material or information which came to the knowledge of the Learned AO to re-initiate proceedings and since he had derived the facts and materials placed by the assessee itself during the original assessment proceedings , that did not constitute new information. Hence subsequent action on the part of the Learned AO in reopening the assessment b....
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....of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989 , the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament reintroduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer." The Delhi High Court in CIT vs. Kelvinator of India Limited [2002] 256 ITR 1 (Del.) [decision affirmed by the Supreme Court in [2010] 320 ITR 561 (SC)] held that if two interpretations are possible, the interpretation which upholds constitutionality, it is trite, should be favoured. In the event it is held that by ....
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....Learned Tribunal. c. In ACIT vs ICICI Securities Primary Dealership Ltd , the Hon'ble Apex Court in Civil Appeal No. 5960 of 2012 dated 22.8.2012 held as under :- " Leave granted. We have heard counsel on both sides. The assessee had disclosed full details in the Return of Income in the matter of its dealing in stocks and shares. According to the assessee, the loss incurred was a business loss, whereas, according to the revenue, the loss incurred was a speculative loss. Rejection of the objections of the assessee to the re-opening of the assessment by the assessing officer vide his order dated 23.6.2006, is clearly a change of opinion. In the circumstances, we are of the view that the order re-opening the assessment was not maintainable. The civil appeal is, accordingly, dismissed. No order as to costs." d. In CIT Vs. Orient Craft Ltd reported in 29 Taxmann. Com 392(Del),the Hon'ble Delhi High Court held that :- "Finality of intimation under section 143(1) can be disturbed only if Assessing Officer has 'reason to believe' . The assessee's contention that even an assessment made under section 143(1) of the Act can be reo....
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....e there was a full-fledged scrutiny assessment made under section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression 'reason to believe ' in cases where assessments were framed earlier under section 143(3) and cases where mere intimations were issued earlier under section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed. [Para 13] * The Supreme Court in Rajesh Jhaveri Stock brokers (P.) Ltd.'s case (supra) has held that the strict requirements of section 147 can be compromised. On the contrary, from the observations it would appear clear that th....