TaxTMI 
TaxTMI 
2025 (1) TMI 826
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....ng income from salary, house property, business, capital gain and other sources. 4. On 30 September 2015, petitioner filed his return of income for Assessment year 2015-16 under section 139 of the Act declaring total income of Rs.69.68 crore which consisted of long-term and short-term capital gains. 5. On 19 September 2016, petitioner's case was selected for limited scrutiny by issuing notice under section 143 (2) for examining long-term capital gain. The petitioner responded to the notice and filed return of income, audit report, financial statements, etc. including working of long term capital gain and short term capital loss. On 13 December 2017, the assessing officer converted the limited scrutiny to complete scrutiny after taking prior approval from Principal Commissioner Of Income Tax, Pune to more particularly examine the transaction of sale and purchase of shares resulting into capital gain. 6. On 29 December 2017, an assessment order under section 143 (3) of the Act came to be passed assessing income about Rs.72.84 crore. In the assessment order, addition/ disallowance was made on account of deemed rent, disallowance of commission, profit from sale of shares, with....
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.... was converted into Complete Scrutiny as per the approval taken by A.O. from PCIT. In the order u/s 143 (3), A.O. treated Long Term Capital Gain as business income but allowed Short Term Capital loss of Rs. 13,18,27,767/- to be set off. On going through the records, it is seen that the assessee has carried out Purchase and Sale of large quantity of shares of HCL Technology, Persistent Systems and Tech Mahindra in the month of March 2015. In all these Shares, companies had declared 1:1 Bonus and Shares were purchased about 8-10 days before the record date and sold within one week from the record date. The details of these transactions are tabulated in table no. 1:- Table No. 1 Sr.No. Name of the Company No. of Shares Record date for bonus shares has been taken from money control.com Date of Bonus & Ratio of Bonus shares allowed Date of Acquisition (in Rs.) Cost of Acquisition Date of transfer Net Sale consideration (in Rs.) Capital Gain/Loss (in Rs.) 20/03/2015 1. Tech Mahindra 13,432 1:1 09.03.2015 19356430 25.03.2015 8836528 -10519902....
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....s with a view to reduce its tax liability by setting off against Long Term Capital Gain which was taxable @ 20% and bonus shares held for one year and could be sold there after by showing Long Term Capital Gain without paying any taxes. These facts clearly shows that the large scale purchase and sale of shares during March 2015 have been carried out only with a view to create Short Term Capital Loss during F.Y. 2015-16 to avoid payment of taxes on the entire Long Term Capital Gain. Supreme Court case of "McDowell And Co. Vs CTO 154 ITR 148 (SC)" is clearly applicable to the facts of this case. The Apex Court has held that colorable devices cannot be permitted to be part of tax planning and it is wrong to encourage or entertain the belief that payment of tax can be avoided by resorting to dubious methods. In view of the above, Short-Term Capital Loss of Rs. 13,18,27,767/- should have been disallowed. Thus resulted in under assessment of income by Rs. 13,18,27,767/-. 4. Enquiries made by the AO as sequel to information collected/received:- This office has perused the details available on record and found that the assessee has created a Short-Term Capital Lo....
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....ffice, I have reason to believe that the income chargeable to tax to the extent of Rs. 13,18,27,767/- is escaped income for A. Y. 2015-16. I am, therefore, satisfied that it is a fit case for initiating the proceedings u/s 147 or the Income Tax Act, 1961 to assess above discussed income and to assess any other income which may come to the notice during the assessment proceedings u/s 147 of the Income Tax Act, 1961. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India:- N.A. 8. Findings of the AO on true and full disclosure of the material facts necessary for assessment under Proviso to section 147: As discussed in para 2 to 6, it is proved that the failure was on the part of the assessee in disclosing fully and truly all material facts before the AO which was necessary for the relevant assessment. Therefore, the income of the assessee chargeable to tax to the extent at Rs.13,18,27,767/- has been escaped assessment as per information gathered for the A.Y. 2015-16. 9. Applicability of the provisions of section 147 / 151 to the facts of the case:- In ....
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....nd books of account in such a manner that it would require due diligence by the AO to extract these information. For aforesaid reasons, it is not a case of change of opinion by the AO. (emphasis supplied) 11. On 22 March 2022, the Assessing Officer issued draft assessment order proposing to assess income at Rs. 86.03 crore by disallowing short- term capital loss of Rs.13.18 crore. 12. On 24 March 2022, the petitioner filed his objection to reopening and requested to drop the re-assessment proceedings on the ground more particularly set out therein. 13. On 25 March 2022 petitioner also filed his reply to the draft assessment order and requested the Assessing Officer not to proceed with the assessment till the objections to reopening the case are decided. 14. On 27 March 2022, the Assessing Officer passed a brief one page order rejecting the objections filed by the petitioner and immediately thereafter within three days on 30 March 2022 passed the impugned order assessing income at Rs.86.03 Crores. 15. Mr. Naniwadekar, learned counsel for the petitioner submits that the reasons recorded do not disclose what were material facts which the petitioner failed to disclose....
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....viso to Section 147 of the Act as it exists is applicable and which reads as under :- 147. Income escaping assessment. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment" for any assessment year, he may", subject to the provisions of sections 148 to 153, assess or reassess" such" income "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings" under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in respo....
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.... there was a failure to disclose fully and truly material facts does not confer jurisdiction on the Assessing Officer to reopen the case after the expiry of four years. In our view, considering the facts of the present case, the ratio laid down by the Co- ordinate bench in the case of Hindustan Lever Ltd. (supra) squarely applies and, therefore, the impugned proceedings are wholly without jurisdiction. 24. It is also important to note that the original assessment of the petitioner was selected for limited scrutiny which was converted into complete scrutiny to examine the transactions of capital gains. The petitioner in the course of the assessment proceedings gave the details of long term capital gain and short term capital loss including the date of acquisition and date of transfer. The petitioner also gave details of loss on transfer of mutual funds. It is only after examining all the details relating to capital gain and capital loss that an assessment order came to be passed under Section 143 of the Act. In our view, based on these very details, the present proceedings have been initiated which is impermissible since it does not satisfy the pre-condition prescribed under the ....
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....venue is wholly mis-conceived. 27. It is also important to note that the petitioner had raised various objections to the reasons furnished for re-opening the case. In the order rejecting the objection none has been rebutted. In our view, even on these grounds the present proceeding is required to be quashed in the absence of any rebuttal in the order rejecting the rejection. 28. We also note that request for reasons recorded to be furnished was made by the petitioner on 1 April 2021, and thereafter reiterated subsequently vide letters dated 26 November 2021 and 11 March 2022 and in spite of repeated reminders, the Assessing Officer furnished the reasons recorded at the fag end of the assessment getting time barred which is 11 March 2022 i.e., after almost when a period of one year was to get over. There is no reason mentioned as to why the Assessing Officer did not furnish the reasons to the petitioner immediately on the petitioner filing his return of income and making requests for the same on 1 April 2021 moreso, when the reasons have to be recorded before issuing the notice under Section 148 which was dated 23 March 2021. The object of furnishing the reasons is to give ade....