2016 (8) TMI 1152 - HC - Income Tax

Reopening of assessment - claim of loss - Held that - It is not in dispute that originally the assessee had made a misrepresentation of fact which misled the assessing officer in believing that the loss was suffered in the course of share broking business. Whereas the truth is that loss was suffered in sale and purchase of shares which had no connection with the business of the assessee as a share broker. There is in fact tangible material to come to the conclusion that income escaped assessment which we have already discussed. There is thus no question of any change of opinion. For the aforesaid reasons an additional question is formulated by us as follows Whether there is any change of opinion in the facts and circumstances of the case in reassessing the income of the assessee under section 147/143(3) of the Income Tax Act? The aforesaid question is answered in the negative. Considering the view we have taken and considering that the CIT(A) and the learned Tribunal did not go into the merits of the matter we refrain from expressing our views with regard to the other questions. The order passed by the learned Tribunal and the CIT(A) are both set aside. The matter is remanded to the CIT(A) for hearing the appeal on merits.

Issues Involved:
1. Justification of the Tribunal in following its own order over a High Court judgment.
2. Applicability of the High Court judgment in the given facts and circumstances.
3. Legitimacy of the Tribunal's decision not to interfere with the CIT(A)'s orders under the explanation to section 73 of the Income Tax Act, 1961.
4. Whether there was a change of opinion in reassessing the income under section 147/143(3) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal in Following Its Own Order Over a High Court Judgment:
The Tribunal's decision to follow its own previous order in ITA 684(Kol.)/2008 dated June 23, 2008, instead of adhering to the High Court judgment reported in 2008 ITR 1023 (Cal.), was questioned. The Tribunal's dismissal of the revenue's appeal without further analysis was challenged.

2. Applicability of the High Court Judgment:
The applicability of the High Court judgment in the given facts and circumstances was scrutinized. The Tribunal and CIT(A) had set aside the reassessment order under section 147 based on the premise of a "change of opinion," which was contested by the revenue.

3. Legitimacy of the Tribunal's Decision Not to Interfere with the CIT(A)'s Orders:
The Tribunal's concurrence with the CIT(A) that the reassessment under section 147 was initiated merely on a change of opinion was challenged. The CIT(A) had originally opined that the proceedings under section 147 were not permissible due to the change of opinion by the successor A.O.

4. Change of Opinion in Reassessing the Income:
The core issue was whether the reassessment under section 147/143(3) was a result of a change of opinion. The original assessment allowed the set-off of a loss of Rs. 80,01,831 against brokerage income, which was later reassessed to be a speculation loss under the explanation to section 73. The revenue argued that the reassessment was not a change of opinion but was based on the discovery of misrepresented facts by the assessee.

Detailed Analysis:

The original assessment under section 143(3) was completed on 12th March 2004, followed by a reassessment under section 147/143(3) on 28th December 2006. The reassessment was challenged by the assessee and set aside by the CIT(A) on the grounds of change of opinion, a decision upheld by the Tribunal.

The revenue's argument was that the reassessment was based on new tangible material indicating misrepresentation by the assessee, not merely a change of opinion. The assessee had misled the original assessing officer to believe that the loss was part of the share broking business, while it was actually from the purchase and sale of shares, unrelated to the brokerage business.

The Court noted that the assessee's letter dated February 8, 2003, misrepresented facts, leading the original assessing officer to an incorrect conclusion. The succeeding officer, upon realizing the misrepresentation, initiated reassessment proceedings. The Court emphasized that the reassessment was not due to a change of opinion but due to the discovery of new facts indicating income escapement.

The Court referenced several judgments, including Indian and Eastern Newspaper Society v. CIT and CIT v. Kelvinator of India Ltd., to support the principle that reassessment based on the same material is not permissible. However, in this case, the reassessment was justified due to tangible material indicating misrepresentation.

The Court formulated an additional question on whether there was any change of opinion in reassessing the income under section 147/143(3). This question was answered in the negative, indicating that the reassessment was justified.

The Court set aside the orders of the Tribunal and CIT(A) and remanded the matter to the CIT(A) for a hearing on merits, clarifying that the views expressed were solely for the disposal of the appeal and would not preclude the CIT(A) from deciding the merits in accordance with the law.

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