2014 (8) TMI 763 - AT - Income Tax

Reopening of assessment u/s 147 Preconditions for initiation of proceedings satisfied or not Held that - The AO himself has mentioned that the assessee has invested as share capital in M/s Isher Dass Sahni and Bros. Pvt.Ltd. But the accounts of the assessee did not reflect this investment - the assessee has disclosed the fact of investment in shares of M/s Isher Dass Sahni and Bros. Pvt.Ltd.- the investment is made by the third party - part of the investment which is made directly by the assessee is by cheque and some part is paid by the third party following the decision in ACIT and Others Vs. ICICI Securities Primary Dealership Ltd. 2012 (8) TMI 754 - SUPREME COURT - the assessee had disclosed the full details in the return of income with regard to dealing in stock and shares - the assessment was reopened on the ground that the loss incurred by the assessee from the sale of shares was a speculation loss and not business loss - The assessee also explained the source of investment in shares - nothing new has come to the notice of the Revenue but the assessment is being sought to be reopened on a mere relook of the matter already available on record - thus, the reopening of assessment by the AO u/s 147 was not valid - the notice issued u/s 148 beyond the period of four years from the end of the relevant assessment year is set aside Decided in favour of Assessee.

Summary

Issues Involved:
1. Validity of initiation of proceedings under Section 147 of the Income Tax Act.
2. Validity of the addition of Rs. 1,66,23,750 under Section 69 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of initiation of proceedings under Section 147 of the Income Tax Act:

The appellant contended that the initiation of proceedings under Section 147 and the completion of assessment under Section 143(3)/147 were unsustainable in law. The argument was based on the fact that the original assessment for AY 2004-05 was completed under Section 143(3) on 17.11.2006, and the reopening notice under Section 148 was issued on 25.3.2011, which was after four years from the end of the relevant assessment year. According to the proviso to Section 147, reopening is not permissible unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

The appellant's counsel emphasized that the reasons recorded for reopening were based on the material already available on record, and no new material had come to the Revenue's knowledge post the original assessment. The counsel argued that the reopening was merely a change of opinion, which is not permissible under the law. The counsel supported this argument with several judicial precedents, including Satnam Overseas Ltd. vs. Addl. CIT, CIT vs. Usha International Ltd., and ACIT vs. Securities Primary Dealership Ltd.

The respondent (Revenue) argued that there were contradictions in the appellant's explanations regarding the source of investment and that the original assessment order was cryptic, indicating no opinion was formed by the Assessing Officer. Therefore, the question of change of opinion does not arise.

The Tribunal noted that the Assessing Officer had mentioned in the reasons recorded for reopening that the information was observed from the records, indicating the information was already available during the original assessment. The Tribunal found that the appellant had disclosed the investment in shares during the original assessment proceedings and had provided explanations regarding the source of investment. The Tribunal held that the reopening of the assessment was based on a mere relook of the already available material, which amounted to a change of opinion. Citing the decision of the Hon'ble Supreme Court in ACIT vs. ICICI Securities Primary Dealership Ltd., the Tribunal quashed the notice issued under Section 148 and the consequential assessment order.

2. Validity of the addition of Rs. 1,66,23,750 under Section 69 of the Income Tax Act:

Since the Tribunal quashed the assessment order while adjudicating on the validity of the initiation of proceedings under Section 147, the grounds of appeal related to the addition made by the Assessing Officer and sustained by the CIT(A) under Section 69 did not survive for adjudication. Consequently, the Tribunal did not address these grounds separately.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the notice issued under Section 148 and the consequential assessment order. The decision was pronounced in the open Court on 14th August 2014.