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TMI Blog2010 (12) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 passed by the said authority dealing with the objections filed by the assessee. 2. The facts, in brief, are that the assessee-petitioner is a private limited company and has been assessed to income tax from 1976-77. It is engaged in the business of investment and trading in securities, investments in real estate. For the assessment year 2005-06, the assessee company filed its return of income on 31st October, 2005 declaring an income of ₹ 1,60,35,700/- as set forth along with computation of income, audited accounts, etc. before the assessing officer. The income in entirety, as pleaded, was fully disclosed before the assessing officer and the said officer passed the order of assessment on 12th December, 2007 under Section 143(3) of the Act. After the said order of assessment came to be passed, a notice was issued under Section 148(1). As stated earlier, objections were filed and eventually the same were disposed of by order dated 18th October, 2010. 3. Mr. C.S. Aggarwal, learned senior counsel along with Mr. Prakash Kumar, learned counsel for the petitioner raised the following contentions:- (a) The assessing officer has dealt with the objections as if there was escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion from stock-in-trade was definitely an adventure in the nature of trade and would construe to be a business activity. I have reasons to believe that income of ₹ 2,01,81,691/- has escaped assessment by virtue of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment in this year in this case and the same is to be brought to tax under section 147/148 of the I.Tax Act." 7. After the objections were filed, the same were dealt with by the order dated 18th October, 2010 whereby the assessing officer referred to certain decisions and eventually came to hold as follows- "4.2 Further, as per the explanation 1 to section 147 of the IT Act, production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of proviso to section 147 of the IT Act. 4.3 Thus, to summarize, in the present case, the Assessing Officer had rightly initiated the reassessment proceedings u/s 147 of the IT Act, after recording in detail the reasons to believe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsion of a capital asset into stock-in-trade of a business. Here the case is viceversa. As per the said section, the profits on such conversion, for the purpose of section 48 shall be chargeable to income tax, as the income of previous year in which such stock-in-trade is sold and the fair market value of the asset on the date of such conversion, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. This section is not applicable to a case of transfer by way of conversion from stock-in-trade to a capital asset. Further, the assessee has transferred the stock-in-trade at cost and has not disclosed the profits even on sale of such equity shares made later during the year. For instance 20,000 shares of Avery India which were held as stock-intrade as on 1.4.04 were converted into investments as on 17.5.04 at cost of ₹ 696,000/-. The unit cost comes to ₹ 34.8 and market rate on the date of conversion was ₹ 35. On conversion, there was a profit of ₹ 4000/-. Assessee has sold 5000 shares out of above, taking the unit cost at ₹ 34.8/-, and has booked the entire profits as short term cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments is income but while reopening of the assessment, he has taken a view that it is an adventure in the nature of trade vis-à-vis short term capital gain. 11. In this context, we may refer with profit to the decision of the Full Bench of this Court in Commissioner of Income-Tax v. Kelvinator of India Ltd., [2002] 256 ITR 1 (Del) (FB) wherein the Full Bench has held thus:- "The scope and effect of section 147 as substituted with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987, and subsequently amended by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989, as also of sections 148 to 152 have been elaborated in Circular No.549 dated October 31, 1989. A perusal of clause 7.2 of the said Circular makes it clear that the amendments had been carried out only with a view to allay fears that the omission of the expression "reason to believe" from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on a mere change of opinion. It is, therefore, evident that even according to the Central Board of Direct Taxes a mere change of opinion cannot form the basis for reopening a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quot;reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief…." 13. From the aforesaid enunciation of law, it is quite vivid that change of opinion cannot clothe the assessing officer with the juri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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