2015 (11) TMI 181 - AT - Income Tax

Reopening of assessment - A.O. reopening the assessment on the basis of audit objection - Held that - In the present case, it has already been discussed that admitted facts are that there was no fresh material coming into the possession of the AO, at the time of recording of the Reasons . If there are no new tangible materials , then there would be no reasons to believe , and consequently reopening would be an impermissible review. Under these circumstances there would not arise any need to go the next stage to examine the next question, i.e., whether there was review or change of opinion . The condition with respect to availability of new tangible material is step anterior to the condition of no change of opinion or review . See CIT, Delhi Versus M/s. Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA - Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment under section 147.
2. Basis of reopening - audit objection.
3. Classification of income from share transactions.
4. Determination of the appellant as a "Share Trader" vs. "Investor".
5. Disallowance of expenses under section 40(a)(ia).
6. Taxation of income from share transactions as "Capital Gain" vs. "Business Income".

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The appellant challenged the reopening of the assessment by the Assessing Officer (AO) under section 147, arguing that it was done without any fresh tangible material and was based on the same set of records available during the original assessment. The tribunal examined the "Reasons" recorded by the AO and found that the reasons were based on the original records without any new material. The tribunal relied on various judicial precedents, including the Supreme Court's decision in CIT vs. Kelvinator India Ltd., which mandates the presence of fresh tangible material for reopening. The tribunal concluded that the reopening was invalid due to the absence of new material, making the reassessment order illegal.

2. Basis of Reopening - Audit Objection:
The appellant contended that the reopening was based on an audit objection, which is not permissible in law. The tribunal did not specifically address this issue separately, as the primary ground of the absence of fresh tangible material was sufficient to quash the reopening.

3. Classification of Income from Share Transactions:
The AO had classified the income from share transactions as "Income from Business or Profession" instead of "Capital Gain" as declared by the appellant. The tribunal did not adjudicate this issue separately since the reassessment order was quashed on jurisdictional grounds.

4. Determination of the Appellant as a "Share Trader" vs. "Investor":
The AO had determined the appellant as a "Share Trader" rather than an "Investor." This classification was also not separately adjudicated by the tribunal due to the quashing of the reassessment order.

5. Disallowance of Expenses under Section 40(a)(ia):
The AO had disallowed expenses of Rs. 24,000 under section 40(a)(ia) of the Income Tax Act. The tribunal did not address this issue separately, as the reassessment order was quashed on jurisdictional grounds.

6. Taxation of Income from Share Transactions as "Capital Gain" vs. "Business Income":
The appellant prayed for the income from share transactions to be taxed as "Capital Gain" instead of "Business Income." The tribunal did not adjudicate this issue separately due to the quashing of the reassessment order.

Conclusion:
The tribunal concluded that the reopening of the assessment was invalid due to the absence of fresh tangible material, making the reassessment order illegal. Consequently, the tribunal quashed the reassessment order and did not adjudicate the other grounds raised by the appellant. The appeal of the assessee was partly allowed, with the reassessment order being quashed on jurisdictional grounds.

← Previous Next →