2015 (10) TMI 993 - AT - Income Tax

Validity of reopening of assessment - set off of short term capital gain derived from sale of shares against long term capital loss is not permissible as per section 74(i)(b) and gain derived from sale of house property has to be assessed as STCG and cannot be set off against brought forward business losses as the assessee is engaged in the business of dealing with securities - Held that - Reopening of assessment in the instant case is not only on a mere change of opinion but also amounts to review of the assessment order passed earlier u/s 143(3) of the Act. That part, there being no failure on the part of the assessee in disclosing truly and fully all material facts reopening of assessment after expiry of four years from the end of the assessment year is clearly against the statutory mandate, hence, is without jurisidiction. In case of Parashuram Pottery Works Co. Ltd. V/s. ITO, Circle-I, Ward A, Rajkot (1976 (11) TMI 1 - SUPREME Court) held that the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment. In case of CIT Vs. Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT OF INDIA held that reopening of assessment in absence of fresh tangible material and on consideration of very same material considered in the original assessment will be on a mere change of opinion. Therefore, considering the facts of the present case vis- -vis the relevant statutory provision as well as in the light of ratio laid down by the Hon ble Supreme Court referred to above, we do not find any infirmity in the order of the learned CIT(A) in cancelling the impugned assessment order. Accordingly, we uphold the same by dismissing the grounds raised by the department. - Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment u/s 147
2. Reopening of assessment beyond four years

Analysis:
1. The appeal was against the order of CIT(A)-III, Hyderabad for the assessment year 2005-06. The Revenue challenged the CIT(A)'s decision on the validity of the assessment under section 147. The Revenue contended that the CIT(A) erred in holding that the assessment u/s 147 was not valid. The facts revealed that the assessee, a company dealing in securities, had filed a return declaring a loss. The AO reopened the assessment u/s 147 based on short term capital gains and set off against long term capital loss. The CIT(A) found that the reopening of the assessment was bad in law as there was no new information or default by the appellant. The CIT(A) held that the AO's decision to reopen the assessment after six years was a mere change of opinion and not justified. The Revenue appealed against this decision.

2. The second issue revolved around the reopening of the assessment beyond four years from the end of the relevant assessment year. The AO had reopened the assessment based on a reexamination of the computation of income and statements filed by the assessee. The AO believed that certain set-offs were impermissible under the law. However, it was noted that the reopening was solely based on the assessee's own filings and not on any new material discovered by the AO. The Tribunal observed that there was no failure on the part of the assessee to disclose all material facts necessary for assessment completion. The Tribunal cited legal precedents to emphasize that the duty of the assessee is to disclose primary facts, and it is the AO's responsibility to draw correct inferences. Reopening the assessment without fresh tangible material and based on the same facts considered earlier was deemed a mere change of opinion. The Tribunal upheld the CIT(A)'s decision, stating that the reopening of the assessment was without jurisdiction.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision on the validity of the assessment under section 147 and the reopening of the assessment beyond four years.