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TMI Blog2015 (3) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded the reasons before issuing of notice u/s. 148 of the Act and stated that the principal business of the assessee was not that of granting of loan but did not find any error in the submissions of the assessee that gross total income of assessee consisted mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital Gains" and "Income from other sources". Moreover, the reasons recorded for re-opening shows that the AO did not find any error in the explanation of the assessee for non- application of Explanation to Sec. 73, but still invoked the provisions of Explanation to Sec 73 of the Act. In the present case reopening of assessment was done by the AO merely on the basis of change of opinion. Therefore, re-opening in this case was not valid and the ld.CIT(A) has rightly held so. In that view of the matter, we do not find any valid ground to interfere with the findings given by the ld.CIT(A) in annulling the re-assessment. - Decided in favour of assessee. - ITA Nos.676/Kol/2012 & 572/Kol/2010, C.O No.41/Kol/2010 - - - Dated:- 27-1-2015 - N. K. Saini, AM And George Mathan, JM,JJ. For the Appellant : Shri Sanjay, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment is dismissed and cross objection No.41/Kol/2010 arising out of ITA No.572/Kol/2010 by the assessee is also dismissed as not pressed. ITA No.676/Kol/2012 A.Y 2003-04 (by the department) 6. In the present case since the original appeal was filed by the department in time and for technical reason the appeal in ITA No.676/Kol/2012 has been filed by the concerned assessing officer. The ld. Counsel for the assessee, however, did not object for the condonation of delay, if any. We, therefore, by keeping in view of this fact that the delay was attributable to the technical reasons condone the delay, if any and the appeal in ITA No.676/Kol/2012 (by the department) is admitted. For the aforesaid view, we find support from the ratio laid down by the Hon ble Supreme Court in the case of Vedabai alias Vijayantabai Baburao Patil Vs. Shantaram Baburao Patil Ors reported in (2001) 253 ITR 798(SC), wherein it has been held as under:- n exercising discretion under section 5 of the Limitation Act, 1963, to condone delay for sufficient cause in not preferring an appeal or other application within the period prescribed, courts should adopt a pragmatic approach. A distinction must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter referred to as the Act ) on 29.03.2006, wherein the total income was assessed at ₹ 1,63,63,590/-. During the course of assessment proceedings the AO has made query regarding business loss in share trading amounting to ₹ 1,12,61,578/- which was duly answered by the assessee. After considering the said explanation, the AO treated the share loss as business loss. The assessee brought to the notice of the AO that income from house property, capital gains and other sources amounting to ₹ 2,40,90,913/- was more than business loss of ₹ 1,12,61,578/-. Therefore, the Explanation to Section 73 of the Act was not applicable to the assessee. However, after considering the submissions of the assessee the AO completed the assessment u/s. 143(3) of the Act on 29-03-2006. Thereafter, the AO had reasons to believe that in the assessment u/s. 143(3) the income chargeable to tax was under assessed/escaped assessment, so it was a fit case for reassessment u/s. 147 of the Act. Accordingly, notice u/s. 148 of the Act was issued. In response to said notice the assessee submitted as under:- n the said assessment u/s. 143(3), the said business loss was duly considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e explain as to why this loss should not be treated as speculation loss in terms of the provision of Explanation to Sec. 73 of the I.T Act, 1961. Reply was given on 29.12.2005 as under: That explanation to Sec 73 is not applicable to us. From the computation filed along with return of income you would find that the major income of the Company is from house property, interest, dividend and capital gain and also the principal business of the company is granting of loans. Considering the above the share trading cannot be treated as speculation business. That in the original assessment was made u/s. 143(3) and the AO has examined the share trading loss and it was found that the income from house property, capital gain and interest and dividend are as under: Rent : Rs.2,86,27,922/- Interest : Rs.1,88,22,850/- Capital Gain : ₹ 2,35,210/- Dividend : ₹ 38,16,158/- Total : Rs.5,15,02,140/- The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 ITR p 1. It has been held that an order of assessment can be passed either in terms of sub section (1) of section 143 or sub section(3) of section 143, where a regular order of assessment is passed, in terms of sub section(3) of Sec. 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also it raised to the effect that in terms of clause(e) of Sec. 114 of the Indian Evidence Act 1872 judicial and official acts have been regularly performed, if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the assessing officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong. Hence it is clear that Sec 147 of the Act does not postulate conferment of power upon the assessing officer to initiate reassessment proceeding upon the mere change of opinion. The proposition as laid down in 256 ITR p 1 has been accepted recently by Bombay High Court in the case of Aster Odis Trading Investment (P) Ltd V DCIT reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with in a regular assessment order u/s. 143(3) and any other opinion on the same sets of fact will be a mere change of opinion, is concerned, there are contrary decisions of various High Courts, H ble Gujarat High Court in the case of Praful Chunilal Patel s case [1999] 236 ITR 832 have held that if looking back it appears to the Assessing Officer (albeit within four years of the end of the relevant assessment year) that a particular item even though reflected on the record was not subjected to assessment and was left out while working out the taxable income and the tax payable thereon, i.e. while making the final assessment order, that would enable him to initiate the proceedings irrespective of the question of non-disclosure of material facts by the assessee. Recently, H ble Allahabad High Court in case of EMA India Vs. ACIT (2009)-TIOL-526-HC-ALL) have dissented with the order of H ble Delhi High Court in case of CIT V. Kelvinator of India Ltd 256 ITR 1 (relied upon by the appellant) stating that this judgement cannot be followed as it is congtrary to the law laid down by the Supreme Court in Kalyanji Mavji 102 ITR 287 , Indian Eastern Newspaper Society 119 ITR 996 and A.L.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation to Sec 73 that gross total income of appellant consisted mainly of income which is chargeable under the heads Interest on securities, Income from house property, Capital Gains and Income from sources and still invoked the provisions of Explanation to Sec.73 which would amount to reopening without correctly specifying the error which resulted into underassessment. The ground of reopening can never be erroneous application of the provision of law even if the Explanation 2 of Section 147 is applied. Apex Court in case of Ganga Saran and Sons Pvt. Ltd Vs. ITO (130 ITR 1)(SC) has held as under : The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the ITO in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under S. 147(a). If there is no rational and intelligible nexus between the reasons an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not that of granting of loan but did not find any error in the submissions of the assessee that gross total income of assessee consisted mainly of income which is chargeable under the heads Interest on securities , Income from house property , Capital Gains and Income from other sources . Moreover, the reasons recorded for re-opening shows that the AO did not find any error in the explanation of the assessee for non- application of Explanation to Sec. 73, but still invoked the provisions of Explanation to Sec 73 of the Act. 14. On a similar issue the Hon ble Delhi High Court (F.B) in the case of CIT Vs. Kelvinator of India Ltd reported in (2002) 261 ITR 1 has held as under:- The scope and effect of section 147 as substituted with effect from April1, 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 amendment had been carried out only with a view to allay fears that the omission of the expression reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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