2023 (8) TMI 1344 - HC - Income Tax

Reopening of assessment u/s 147 - review v/s reopening - LTCG and STCG pertaining to the sale of investment comprising of the Government of India Bonds - scope of change of opinion - HELD THAT - As there is no new fresh material available with the respondent nor there is any live link shown by the respondent with the material on record for formation of reasonable belief to reopen the assessment within the period of four years. The respondent has relied upon the assessment record for the year under consideration. The respondent has also relied upon the Circular No. 665 of CBDT dated 5th October, 1993 for the issue of considering the LTCG and STCG shown by the petitioner in the return of income considering the sell of the Government of India Securities as investment instead of stock-in-trade. AO during the course of regular assessment has considered the computation of LTCG and STCG which was declared by the petitioner in the Return of Income together with the audited accounts produced on record along with the return filed by the assessee. AO has allowed the Long Term Capital Gains and Short Term Capital Gains claimed by the assessee considering the sell of the Government Securities as investment and not stock-in-trade. Therefore, the reasons recorded by the respondent is mere change of opinion in the facts of the case. As decided in case of Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT that AO has no power to review, he has only power to re-assess and mere change of opinion cannot be the reason to reopen. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves challenging a notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2017-18 by a Co-operative Society engaged in banking and allied activities. The petitioner contested the re-assessment of total income based on the treatment of Long Term Capital Gain (LTCG) and Short Term Capital Gain (STCG) from the sale of securities.

Details of the Judgment:

Issue 1: Reopening of Assessment
The petitioner challenged a notice under Section 148 for Assessment Year 2017-18, citing lack of new material for re-assessment. The respondent relied on Circular No. 665 of the CBDT from 1993, arguing that gains from securities should be treated as business income. The petitioner contended that the Assessing Officer had already considered LTCG and STCG during the initial assessment.

Issue 2: Legal Interpretation
The petitioner argued that the respondent's reasons for reopening lacked a live link to new material and constituted a mere change of opinion. The petitioner referenced Circular No. 665 and the treatment of securities by banks as stock-in-trade or investment. The Assessing Officer had allowed the LTCG and STCG based on the sale of Government Securities as investments, not stock-in-trade.

Issue 3: Judicial Precedent
Citing the case of Commissioner of Income Tax versus Kelvinator of India Limited, the petitioner contended that a mere change of opinion cannot justify reassessment. The court found that the reasons recorded by the respondent did not provide sufficient grounds for reopening the assessment within the four-year period.

Conclusion:
The court allowed the petition, quashing the notice under Section 148 and rejecting the objections raised by the petitioner. The judgment emphasized that the Assessing Officer's power is limited to reassessment, not review, and mere change of opinion is not a valid reason for reopening. The petitioner's objections were upheld, and the impugned notice was deemed unwarranted.