2014 (5) TMI 779 - HC - Income Tax

Validity of notice u/s 148 of the Act Bar of limitation No concealment of information Deduction of VSAT expenses Derivative loss Applicability of section 43(5)(b) of the Act - Held that - The reasons indicate that the proposed reopening is not on the basis of any new or tangible material - The applicability of the Notification is prospective - the reasons that the derivative transactions till 25th January 2006 were not entitled to the benefit of the Notification and were treated as speculative transactions - It would be absurd to presume that the AO was not aware of the fact that the transactions pertained to the period prior to 25th January 2006 as he was dealing with the return of income for the AY 2005-06 notice u/s 148 of the Act do not say that the escapement of income was on account of failure on the part of the assessee to fully and truly disclose the facts.

Issues:
1. Challenge to Notice issued under section 148 of the Income Tax Act 1961
2. Rejection of objection to the Notice by Respondent No.1
3. Assessment Order passed by the Assessing Officer
4. Proposed reopening of assessment more than four years after the end of the Assessment Year
5. Alleged concealment of information by the Petitioner
6. Deduction claimed and granted for expenses of V SAT deposit
7. Notification by CBDT regarding derivative transactions

Analysis:
1. The Petitioner challenged a Notice issued under section 148 of the Income Tax Act 1961 dated 29th March 2011 and the subsequent order of Respondent No.1 dated 6th December 2011 rejecting the objection. The Petitioner's return of income for the Assessment Year 2005-06 was filed on 30th October 2005, and a notice under section 142(1) was issued by the Respondent, to which the Petitioner replied in July 2007, providing details on V SAT deposit and derivative losses.

2. An assessment order was passed by the Assessing Officer on 24th December 2007 under section 143(3) of the Act. The Respondent issued the impugned notice dated 29th March 2011 under section 148, more than four years after the end of the Assessment Year. The reasons for reopening did not suggest any concealment of information and were based on the existing record before the Assessing Officer.

3. The first reason for reopening related to the deduction claimed for V SAT deposit expenses, where Rs.1,50,000 per terminal was retained by the NSE upon surrender. The Petitioner had provided details on this issue in their reply to the Respondent in July 2007, making the proposed reopening on this ground unsustainable.

4. The second reason mentioned the Notification by CBDT regarding derivative transactions, alleging that transactions before 25th January 2006 were treated as speculative. However, the details on derivative losses were already furnished by the Petitioner in their earlier reply, indicating that the Assessing Officer was aware of the transactions pertaining to the period before the Notification.

5. The reasons for the impugned notice did not indicate any failure on the part of the Petitioner to fully and truly disclose the facts. Consequently, the Court made the rule absolute in terms of the prayer clause, and no costs were awarded. The Court found the proposed reopening, especially regarding the V SAT deposit expenses and derivative transactions, unsustainable based on the information already disclosed by the Petitioner.

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