2000 (11) TMI 278 - AT - Income Tax

Summary

Issues Involved:
1. Validity of proceedings initiated under section 147 of the I.T. Act, 1961.
2. Disallowance of loss of Rs.3,87,225 on sale of shares.
3. Set off of loss occasioned in a speculative transaction against business income.
4. Chargeability of interest under section 234B in a fresh assessment under section 147.

Issue-wise Detailed Analysis:

1. Validity of proceedings initiated under section 147 of the I.T. Act, 1961:

The first ground of appeal challenges the finding of the CIT(A) upholding the validity of proceedings initiated under section 147. The original return of income was filed on 26-12-1989, and processed under section 143(1)(a) on 28-6-1990. Subsequently, a search operation was conducted on 8-8-1990, revealing unaccounted income invested through benami shareholders. The Assessing Officer (AO) noticed a short-term capital loss of Rs.3,87,225 on share transactions, which he believed represented speculation loss. Consequently, proceedings under section 148 were initiated on 27-3-1991, within four years from the end of the relevant assessment year.

The CIT(A) upheld these proceedings, stating that the conditions under the amended section 147 were satisfied. The assessee argued that there was no material for the AO's belief of income escapement, relying on various judicial decisions. The revenue countered that under the new procedure, the AO only needed a bona fide belief of income escapement within four years, without requiring specific information.

The Tribunal concluded that the requisite conditions for initiating action under section 147 were satisfied, and the proceedings were validly initiated. The AO's belief was deemed bona fide, supported by the short span of share transactions and the involvement of related parties, indicating speculation transactions.

2. Disallowance of loss of Rs.3,87,225 on sale of shares:

The second ground pertains to the disallowance of the loss on sale of shares. The CIT(A) dismissed this ground, noting it was not pressed by the assessee. However, the assessee contended that the grievance was never given up. The Tribunal remitted the issue regarding the claim of deduction of loss of Rs.3,87,225 to the CIT(A) for fresh adjudication.

3. Set off of loss occasioned in a speculative transaction against business income:

This ground is connected to the issue of treating the loss in share transactions as speculative. Since the Tribunal restored the issue regarding the deduction of loss on sale of shares to the CIT(A), this ground was also remitted for fresh consideration.

4. Chargeability of interest under section 234B in a fresh assessment under section 147:

The revenue's appeal challenged the CIT(A)'s decision that interest under section 234B is not chargeable in a fresh assessment if not initially charged under section 143(1)(a). The Tribunal examined section 234B(1) and Explanation (2), concluding that the assessment under section 147 is considered a regular assessment. The Tribunal noted that an intimation under section 143(1)(a) does not amount to an assessment. Therefore, the assessment under section 147 is the first assessment, making interest under section 234B chargeable.

Conclusion:

The Tribunal upheld the validity of proceedings under section 147, remitted the issue of disallowance of loss to the CIT(A), and reversed the CIT(A)'s finding on interest under section 234B, allowing the revenue's appeal. The assessee's appeal was partly allowed, and the revenue's appeal was allowed.