2018 (4) TMI 1179 - AT - Income Tax

Validity of re-assessment proceeding u/s 147 - exemption claimed by the assessee u/s 10(38) of the Act on the sale of shares but the fact is that no STT was paid by the assessee on the sale of shares - Held that - Assessee has furnished the details of the investment in the form of some chart as evident from the order sheet entry of the AO relating to assessment proceedings under section 143(3) of the Act. The assessee has duly disclosed its exempted income in its computation of income. As such we note that the AO initiated the proceedings u/s 147 of the Act on the basis of the materials which were available before him during the assessment proceedings under section 143(3) of the Act. From the above facts, we find that the AO at the time of original assessment had in his possession all the relevant details regarding the LTCG. Accordingly, we disagree with the view taken by the ld. CIT(A) for validating the initiation of the reassessment proceedings u/s 147 of the Act as valid. The relevant data /information was available before the AO at the time of assessment and it was duly verified. Thus, it can be inferred that the AO in the original assessment proceedings has consciously treated the LTCG as exempted income. Thus, in our considered view the initiation of proceedings u/s 147 of the Act on the same set of documents is nothing but mere change of opinion. AO initiated the proceedings u/s 147 after taking the approval from the Ld CIT for issuing notice u/s 148 of the Act. The permission was obtained by the AO on 16-08-2010 for initiating the proceedings u/s 147 of the Act whereas the proceedings u/s 154 of the Act were dropped on 18-08-2010. From the above, it is implied that proceedings were initiated and pending by the AO on the same issue simultaneously u/s 147 and 154 of the Act which is not permitted in the eyes of law. Reassessment proceedings cannot be resorted after realizing that the error cannot be rectified u/s 154 - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings initiated under section 147 of the Income Tax Act, 1961.
2. Sustaining the addition of ?18,38,241/- on account of capital gains.
3. Exemption of ?18,38,241/- under section 10(38) of the Income Tax Act, 1961.
4. Admissibility of additional grounds of appeal.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Initiated Under Section 147 of the Income Tax Act, 1961:

The primary issue revolves around the validity of the reassessment proceedings initiated under section 147. The assessee contended that the reassessment was based on a mere change of opinion, which is not permissible under the law. Initially, the assessee's return was scrutinized under section 143(3), and the assessment was completed. Subsequently, the Assessing Officer (AO) issued a notice under section 154 for rectification, which was later dropped. However, the AO then issued a notice under section 148 for reopening the assessment.

The Tribunal observed that the AO had all the relevant details regarding the Long Term Capital Gains (LTCG) during the original assessment proceedings and had consciously treated the LTCG as exempted income. The Tribunal cited the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which emphasizes that reassessment on mere change of opinion is not permissible. The Tribunal concluded that the reassessment proceedings initiated under section 147 were invalid as they were based on the same set of documents available during the original assessment, amounting to a change of opinion.

2. Sustaining the Addition of ?18,38,241/- on Account of Capital Gains:

The assessee challenged the addition of ?18,38,241/- on account of capital gains, which was sustained by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO had alleged that the LTCG claimed by the assessee was not exempt as no Securities Transaction Tax (STT) was paid on the sale of shares. The Tribunal noted that the assessee had duly disclosed the details of the capital gains and had provided the necessary evidence during the original assessment proceedings. The Tribunal held that the AO's action of reopening the assessment on the same issue without any new tangible material was not justified.

3. Exemption of ?18,38,241/- Under Section 10(38) of the Income Tax Act, 1961:

The assessee claimed exemption of ?18,38,241/- under section 10(38) for LTCG on the sale of shares. The AO had initially accepted this claim during the original assessment. However, during the reassessment, the AO contended that the exemption was not allowable as no STT was paid. The Tribunal observed that the AO had examined the claim during the original assessment and had accepted it. The reopening of the assessment on the same issue without any new material amounted to a change of opinion, which is not permissible. Therefore, the Tribunal held that the exemption claimed by the assessee under section 10(38) was valid.

4. Admissibility of Additional Grounds of Appeal:

The assessee filed additional grounds of appeal, contending that the reassessment proceedings were initiated based on a mere change of opinion and on the basis of a Revenue Audit objection. The Tribunal admitted the additional grounds, relying on the Supreme Court's decision in NTPC vs. CIT, which allows raising legal issues at any stage of the proceedings. The Tribunal found that the additional grounds were similar to the original grounds of appeal and proceeded to adjudicate the appeal.

Conclusion:

The Tribunal concluded that the reassessment proceedings initiated under section 147 were invalid as they were based on a mere change of opinion. Consequently, the addition of ?18,38,241/- on account of capital gains was unsustainable. The Tribunal allowed the assessee's appeal, holding that the exemption claimed under section 10(38) was valid. The additional grounds of appeal were admitted and adjudicated in favor of the assessee. The Tribunal's decision was pronounced in the open court on 20/04/2018.

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