TaxTMI 
TaxTMI 
2000 (11) TMI 278
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee-company was recorded under section 132(4) wherein he admitted that he had floated the assessee-company as an investment company along with 5 other investment companies with a view to invest its unaccounted income in the names of various benami shareholders. 4. In so far as assessment year 1989-90 is concerned, the Assessing Officer noticed that the assessee has claimed the deduction of short-term capital loss amounting to Rs. 3,87,225 on the sale transactions of share as under: ------------------------------------------------------------------------------------ Name of the No. of Date Purchase Date Sale Company shares amount Amt. ---------....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e brokerage of R.J. Financial Consultancy Services which is a firm in which Shri J.K. Doshi, director of the assessee company is a partner is his capacity as karta of his HUF. Another partner of the said broker firm is Smt. J.D. Shah who is the wife of the aforementioned Shri J.K. Doshi. Smt. J.D. Shah is also a director of the assessee-company along with her husband. The Assessing Officer took note of the fact that the span of purchase and sale of shares as per the aforementioned transactions is only 15 days. Both these scrips namely TISCO and Reliance are Group A scrips and no evidence was available on record that the delivery of the scrips had been taken by the assessee before the sale thereof. The Assessing Officer on the basis of the information on record held the belief that the loss of Rs.3,87,225 represented speculation loss which could be set off under section 73(1) only against speculation profit. Proceeding on this basis the Assessing Officer therefore initiated proceedings under section 148 vide notice dated 27-3-1991 which was served on the assessee on the same date. From the above facts it would be seen that the proceedings have been initiated by the Assessing O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....possession of the Assessing Officer. The ld. D.R. referred to various facts and circumstances brought out by the Assessing Officer in the office letter dated 18-3-1993 immediately after filing of the return on 1-3-1993. In this letter, the grounds for initiating action under section 147 have been communicated to the assessee. The ld. D.R. referred to para 5 of the assessment order which indicate the salient points mentioned by the Assessing Officer for taking action under section 147 and communicated to the assessee during the impugned proceedings under section 147. The ld. D.R. further added that the share transactions involving purchase of shares through the broker firm which is a sister concern of the assessee have been squared of within a span of 15 days without taking delivery of shares and the transactions are therefore clearly speculation transaction, as per the definition contained under section 43(5). 8. In the rejoinder the ld. counsel for the assessee heavily relied upon the decision of Gujarat High Court in the case of Garden Silk Mills (P.) Ltd. and invited our attention to the observations at page 673 and argued that their Lordships have explained the principles la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the power, and we may add that it is his duty to reopen the door and demand the amount legally owing. His formation of belief is not a judicial decision, but an administrative decision. It does not determine anything at this initial stage, but the Assessing Officer has a duty to proceed so as to obtain what the tax payer was always bound to pay if the increase is justified at all. The decision to initiate the proceedings is not to be preceded by any judicial or quasi-judicial enquiry. His reasoning may be the result of official information or his own investigation or may come from anv source that he considers reliable. His reason is not to be judged by a court by the standard of what the ideal man would think. He is the actual man trusted by the Legislature and charged with the duty of forming of a belief, for the mere purpose of determining whether he should proceed to collect what is strictly due by law, and no other authority can substitute its standard of sufficient reason in the circumstances, or his opinion or belief for his. Unless the ground of material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee. Their Lordships in the said decision held that action under section 147 would not be justified on the basis of change of opinion earlier adopted by the Assessing Officer. In the instant case, the Assessing Officer has earlier processed the return under section 143(1) and there was no occasion for application of mind on the part of the Assessing Officer to the point in issue whether the loss in the share transaction is a speculation loss or not. Section 143(1) does not envisage consideration of any point and formation of any opinion by the Assessing Officer for assessment purposes. In the instant case it cannot be said that there is any change of opinion on the part of the Assessing Officer with regard to the loss of Rs.3,87,225 as speculation loss. While processing the return earlier under section 143(1)(a) there was no occasion for the Assessing Officer to adjudicate the issue. In our opinion the facts in the instant case are therefore entirely distinguishable from that of Garden Silk Mills (P.) Ltd. The decision therefore does not help the assessee. 11. For the aforesaid reasons we uphold the action under section 147 and dismiss ground No. 1. 12. Ground No. 2 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rest where the advance tax paid by the assessee is less than 90% of the assessed tax and the period for which the interest is to be charged commences from first day of April "to the date of determination of total income, under sub-section (1) of section 143 and where a regular assessment is made to the date of such regular assessment". Explanation (2) provides that where an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of the section. The question which arises for determination before us is whether the assessment made by the Assessing Officer under section 147 vide order dated 24-3-1993 can be treated as a regular assessment by applying the provisions enacted in Explanation (2) below section 234B. The Assessing Officer processed the return under section 143(1)(a) on 29-6-1990. For the purpose of determining the question whether the impugned assessment under section 147 can be treated as regular assessment it would be necessary to consider whether the intimation sent by the Assessing Officer under section 143(1)(a) can be treated as an assessment. The entire procedure of assessment contained....