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2015 (12) TMI 1019 - AT - Income TaxReopening of assessment - Held that - The order of the A.O, no where speaks about having a new material or any tangible material to reopen the case. The Learned CIT(A) has recorded a finding that the assessing officer has called for relevant details during the course of original assessment proceedings. Hence it is quite clear that the reopening was done on the basis of change of opinion. It is well settled proposition that reopening cannot be done on the basis of change of opinion. - Decided in favour of assessee. Consideration of sale price - substitution of sale value - Held that - The assessee sold 7,99,800 shares to Rainbow Agri Industries at the face value at ₹ 1/-. The A.O. determined fair market value at ₹ 3.50/- without bringing any material on record to show that the assessee received more than the agreed consideration. In the above said judgments of K.P.Varghese Vs. ITO (1981 (9) TMI 1 - SUPREME Court) and Rupee Finance & Management (P) Ltd. Vs. ACIT 7(2), Mumbai (2007 (2) TMI 240 - ITAT BOMBAY-J) it has been held that the fair market value and sale value is clearly distinguishable. Therefore, we are of the view that, without any supporting material, the A.O. cannot substitute market value. Therefore, order of the CIT(A) under challenge is not required to be interfered with on any ground. - Decided in favour of assessee.
Issues:
1. Reopening of assessment for assessment year 2002-03 based on finance charges, interest disallowance, and loss on sale of shares and debentures. 2. Challenge to the validity of reopening by the assessee before CIT(A) for assessment year 2002-03. 3. Disallowance of finance charges and loss claim on sale of shares and debentures by the assessing officer. 4. CIT(A)'s decision annulling the assessment for assessment year 2002-03. 5. Appeal filed by revenue for assessment year 2009-10 regarding sale of shares at a lower price than determined by assessing officer. 6. Application of fair market value vs. sale value in determining capital gains for the sale of shares in assessment year 2009-10. Analysis: 1. The Revenue filed appeals for assessment years 2002-03 & 2009-10 concerning the same assessee, with issues related to finance charges, interest disallowance, and loss on sale of shares and debentures. The original assessment for 2002-03 was reopened under section 147 of the Income Tax Act 1961. The CIT(A) annulled the assessment, citing that the assessing officer's action amounted to a change of opinion without new material, following legal precedents like Kelvinator of India Ltd. and ACTI & Others vs. ICICI Securities Primary Dealership Ltd. 2. The CIT(A) found the assessing officer's reopening of the assessment for 2002-03 unjustified, as it was based on a change of opinion without new information. The original assessment completed under section 143(3) was considered conclusive. The decision was supported by legal principles outlined in various judgments, including the Supreme Court's ruling in Kelvinator of India Ltd. 3. The appeal for assessment year 2009-10 focused on the sale of shares at a value lower than determined by the assessing officer. The assessing officer valued each share at a higher rate than the sale price accepted by the CIT(A). Legal precedents, such as K.P.Varghese Vs. ITO and Rupee Finance & Management (P) Ltd. Vs. ACIT, were cited to differentiate between fair market value and sale value in computing capital gains. 4. The CIT(A) accepted the sale price of shares at face value, emphasizing the distinction between fair market value and sale value without any supporting material to justify substituting the market value. The decision to dismiss the revenue's appeals for both assessment years was based on the lack of evidence to support the assessing officer's valuation and the legal principles governing the determination of capital gains. 5. In conclusion, the appeals by the Revenue for both assessment years were dismissed, with the judgments highlighting the importance of factual evidence, legal precedents, and the distinction between fair market value and sale value in assessing income tax liabilities related to finance charges, interest disallowance, and sale of shares and debentures.
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