Income-tax Officer v. M/s. Aska Investments Pvt. Ltd
[Citation -2016-LL-1004-56]

Citation 2016-LL-1004-56
Appellant Name Income-tax Officer
Respondent Name M/s. Aska Investments Pvt. Ltd.
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 04/10/2016
Assessment Year 2004-05
Judgment View Judgment
Keyword Tags reassessment proceedings • long term capital loss • reassessment order • change of opinion • original return
Bot Summary: Only the total loss on sale of share was shown in the Profit loss on sale of share as claimed by the assessee was allowed at the time of assessment. In order to determine the true nature of assessee's business in shares, it is pertinent to take a look at the treatment, it has made to gains/losses in shares in other years. From the perusal of records available with this office, it is found that in all the subsequent years, that is, Assessment Years 2005-06, 2006-07 and 2007-08, the loss on shares have been shown separately in the Computation of Income as Long Term Capital Loss and have not been set off against business income. Detail of loss on sale of shares viz date of acquisition, cost price, date of sale, sale price, Loss/profit thereon along with copy of contract notes, copy of bills. The then AO was satisfied with the details and documents and allowed such loss while making re-assessment U/s.143(3)/147 on 27/11/2006 except loss of Rs.7,617/- which was held as long term loss. 7.Considering the above submissions, the CIT-A opined that the AO already raised the issue in first reassessment and found the order under made under 2nd reassessment proceedings was a change of opinion which is reproduced as under as under: As the facts of the present case leave no doubt that the AO. had specifically raised the issue of Loss on Sale of Shares in the first reassessment order, the second reassessment order is nothing but a change of opinion as explained in the various decisions above. In such proceedings the AO found from profit loss account and raised a doubt how the assessee suffered loss when it sold shares valuing of Rs.11,59,207/- and when no purchase and sale activity disclosed in the profit loss account.


IN INCOME TAX APPELLATE TRIBUNAL,A BENCH, KOLKATA Before Shri P.M.Jagtap, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member I.T.A. No. 2682/KOL/2013 A.Y: 2004-05 Income-tax Officer Vs. M/s. Aska Investments Pvt. Ltd. PAN:AACCA 1005C (Appellant) (Respondent) Appearances by: Shri Rajat Kr. Kureel, JCIT, Ld.Sr.DR for revenue Shri Manish Tiwari, FCA, Ld.AR of assessee Date of hearing : 14-07- 2016 Date of pronouncement : 04 -10-2016 ORDER Shri S.S. Viswanethra Ravi, JM: This appeal by Revenue is directed against order dated 02-09-2013 of Commissioner of Income Tax(Appeals),XXXII, Kolkata for assessment year 2004-05. 2.In this appeal, Revenue has raised following effective ground:- (i) That on facts and circumstances of case and in law, Ld. CIT(A)-XXXII, Kolkata has erred in cancelling Assessment Order u/s. 147/143(3)/147(3) dated 15/12/2009 passed by AO without considering issue that reopening u/s. 147 is valid when failure to disclose fully and truly material facts which could have been found by AO by further probing as decided in case of Indo-Aden Salt Mfg. & Trg. Co P.Ltd v. CIT (SC) 159 ITR 624 as well as in R.B Bansilal Abirchand Firm v. CIT (SC) 70 ITR 74, thereby, making deletion of perverse, unlawful and unjustified. 3.Brief facts of case are that Assessee is company and dealing in business of finance, Share and Real Estate. original assessment was completed on 27. 11. 2006 u/s 143(3) of Act and thereafter, assessment was reopened u/s.147 on following grounds : "On scrutiny of records, it appears from Profit & Loss Account that assessee debited sum of Rs.56,11,539.85 as "Loss on sale of Share" and same was allowed in assessment. It was also noticed from Tax Audit Report of assessee company was engaged in Financing and not dealing in trading of share shown as opening stock, purchase, sales and closing stock of shares in assessee for Financial Year 2003-2004. It was also seen from assessment record that assessee was frequent purchaser and seller of shares which was not at all part of its business. Only total loss on sale of share was shown in Profit & loss on sale of share as claimed by assessee was allowed at time of assessment. I have reason to believe that wrong claim of loss on sale of shares, chargeable to tax has escaped assessment within meaning of Section 147 of 1. T. Act, 1961." 4.In response to notice u/s.148 of Act, assessee filed letter on 12.03.2009 stating that original return as filed on 25.10.2004 may be treated as return as filed in section 148 of Act proceedings. Thereafter, notices u/s.143(2) & 142(1) were issued and in response to which assessee company appeared and submitted details. 5.The AO was of view that Assesee treated loss on shares separately in all subsequent year A.Ys 2005-06, 2006-07 and 2007-08 and shown as Long Term Capital Loss in Computation of Income and sought no set off against business income in such A.Ys. claim of loss of Rs.56,11,539.85 was disallowed. relevant portion of which is reproduced herein below: assessee maintained that said loss of Rs.56,11,539.85 which was adjusted against business income was business loss and not loss on Short Term Transactions in shares because they treat said activity as their business. However, in order to determine true nature of assessee's business in shares, it is pertinent to take look at treatment, it has made to gains/losses in shares in other years. From perusal of records available with this office, it is found that in all subsequent years, that is, Assessment Years 2005-06, 2006-07 and 2007-08, loss on shares have been shown separately in Computation of Income as Long Term Capital Loss and have not been set off against business income. assessee has not even been maintaining different portfolios for investment and trading. In light of these facts, it can not be held that assessee has been treating same as absolutely business transactions. Thus loss of Rs.56,11,539.85 can not be adjusted against business income of assessee, and are disallowed. 6.The assessee has challenged such disallowance before CIT-A and contended by way of written submission dated 29.03.2011 is as under:- "The company was surprised to receive another notice U/s. 148 dt.02/12/2008 for alleged escapement of income resulting from loss on sale of shares to extent of Rs.56,11,540/- which was debited in P&L A/c and allowed earlier. appellant contested initiation of reassessment proceeding through written reply dated 09/12/2008 and requested to treat earlier return as return U/s.147. In response to statutory notices VIs 143(2) & 142(1), company reiterated its stand regarding invalid assumption of jurisdiction U/s. 147 and submitted written explanation pointing out factual as well as legal position with supporting documents. In background of above facts on record, we make detailed submissions on various grounds. Ground No. 1 (a) to 1 (c) All these grounds have been preferred to contest invalid assumption of jurisdiction U/s. 147 of Act. reassessment proceeding initiated through issue of notice Uls.148 dt. 011212008 is ab-inito void and without valid assumption of jurisdiction for reasons explained below: . (1) power conferred by Section 147 and 148 is not unbridled one. It is hedged with several safe guards conceived in interest of eliminating room for abuse of this power by Assessing Officer. Reliance is placed to decision in Sri Krishna (P) Ltd -vs- CIT,221 ITR 538 (SC). (2)The powers of Assessing Officer to reopen assessment though wide are not plenary. words of statute are 'reason to believe' and not 'reason to suspect '. belief entertained by Assessing Officer must not be arbitrary or irrational. It must be based on reasons which are relevant and material. (3)The expression 'reason to believe' must be in good faith; it cannot merely be q pretence as opined in case of S. Narayanappa -vs-CIT,63 ITR 219 (SC). (4)The words 'reason to believe' suggest that belief must be that of honest and reasonable person based upon reasonable grounds but not on mere suspicion, gossip or rumor. (5)Without prejudice to above, we like to add that Ld. A.O. has exceeded his jurisdictional limit to initiate proceeding U/s. 147 for second time on 02/12/2008 by mere change of opinion. This is not permitted in law. In this context, we invite your attention to decision of Apex Court in case of CITvs-BHanji Lavji reported at 79ITR 582 (SC). So far as factual position to suggest that re-assessment proceeding was initiated on mere change of opinion, we like to draw your attention to letter No. 41 dated 1610512006 (Copy enclosed) issued by previous officer in course of earlier reassessment proceeding. In said letter No. 41 dtd. 16/05/2006, Assessing officer asked for specific particulars and query remained as under: 5. Detail of loss on sale of shares viz date of acquisition, cost price, date of sale, sale price, Loss/profit thereon along with copy of contract notes, copy of bills. From share Investment A/c, it is seen that during year share of Rs.ll,59,207/- whereas no purchase and sale activity was shown in P & L. Submit explanation. above query was complied by appellant company vide letter dated 08/-8/2006 ( copy enclosed). then AO was satisfied with details and documents and allowed such loss while making re-assessment U/s.143(3)/147 on 27/11/2006 except loss of Rs.7,617/- which was held as long term loss. In view of factual and legal position explained above, we sincerely believe that Your Honour may not hesitate that re-assessment proceeding initiated for second time on 02/12/2008 is void and not maintainable in law. 7.Considering above submissions, CIT-A opined that AO already raised issue in first reassessment and found order under made under 2nd reassessment proceedings was change of opinion which is reproduced as under as under: As facts of present case leave no doubt that AO. had specifically raised issue of Loss on Sale of Shares in first reassessment order, second reassessment order is nothing but change of opinion as explained in various decisions above. Therefore assessee's Ground of Appeal No I (a), l(b) & l(c) are allowed and second reassessment order is held to be invalid and is cancelled. 8.Aggrieved by order of CIT-A, Revenue before us by raising aforementioned grounds of appeal. Ld.DR relied on order of AO and Ld.AR supported order of CIT-A. 9. Heard rival submissions and perused relevant material on record. We find that original assessment order was completed U/Sec 147 r/w 143(3) of Act. In such proceedings AO found from profit & loss account and raised doubt how assessee suffered loss when it sold shares valuing of Rs.11,59,207/- and when no purchase and sale activity disclosed in profit & loss account. Accordingly AO, ACIT, Circle-7 had issued questionnaire U/S 142(1) vide letter F.No. ACIT/Cir7/Kol/AACCA1005C/2006-07/41 dated 16-5-06. assessee replied vide letter dated12.05.06 mentioning that it also deals in share and securities and does sales & purchase in capital market and submitted details of shares sale, purchase & loss. AO examined and verified such details of share transactions giving quantity and rates of opening stock, inward & outward transactions and profit/loss. AO also conducted inquires from share brokers Shri N. M. Lohia & Smt Renu Poddar u/s 133(6) of Act AND accepted contentions of assessee and held that loss of Rs. 7,617/- as long term capital loss on sale of shares and passed reassessment order u/s 147/143(3) to that effect on 27.11.06. These are facts are admitted and undisputed by parties. It is also noticed from record that, in spite of, objections raised by Assessee, AO did not refer to same in 2nd reassessment proceedings and made addition of Rs.56,11,539/- without any basis, in our opinion, is change of opinion when all details were provided under 142(1) of Act in 1st reassessment proceedings. In this regard we may refer to decision of Honble High Court in case of Tupperware India P.Ltd (supra) is squarely applicable. relevant finding of which is reproduced herein below for better understanding:- 12. At outset it requires to be factually noticed that reopening order of AO only refers to report of Statutory Auditor under Section 44AB of Act which report was already enclosed with return filed by Assessee. Therefore, factually, there was no new material that AO came across so as to have reasons to believe that income had escaped assessment. 10.In present case, material evidence relating to additions said to have been provided in 1st reassessment proceedings initiated under Section 147 of Act, in our opinion, AO relied only on existing facts to reopen assessment again, since there was no new material brought on record by AO to re-open 1st reassessment again u/s. 147 of Act, therefore, 2nd reassessment, is not justified. We find that facts of case of Tupperware (I) Pvt. Ltd (supra) of Honble Delhi High Court are squarely applicable to facts of present case. Respectfully following same, we uphold impugned order of CIT(A) in annulling 2nd re-assessment made u/s. 147. Accordingly grounds raised by Revenue are liable to be dismissed. 11.In result, appeal of Revenue is dismissed Order Pronounced in Open Court on 4th October, 2016. Sd/- Sd/- P.M.JAGTAP S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 04 /10/2016 Copy of order forwarded to:- 1. Appellant/Assessee: Income Tax Officer, Ward 7(1), Kolkata P7 Chowringhee Square, R.No. 21, 5th Floor, Kol-69. 2.The Respondent/Assessee: M/s. Aska Investments Pvt. Ltd 1 Rowdon Street, 2nd Floor, Kolkata-700017. 3. CIT 4. CIT(A) 5. Departmental Representative 6. Guard File True Copy By order Assistant Registrar PRADIP SPS Income Tax Appellate Tribunal Kolkata benches, Kolkata Income-tax Officer v. M/s. Aska Investments Pvt. Ltd
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