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TMI Blog2012 (12) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law, the CIT(A) erred in the upholding the action of the AO in reopening the assessment under section 147 of the Income Tax Act, 1961 ('the Act'). 2.2 The Appellant prays that the reopening under section 147 of the Act be held as ab-initio void and/or otherwise bad-in-law. Without prejudice to Ground I and Ground II above: Ground III: Charging 'Income from Business' as 'Capital Gains' 3.1 On the facts and in the circumstances of the case and in law, the CIT(A) erred in the upholding the action of the AO in charging income/loss earned by the Appellant from buying and selling of shares and securities as 'Capital Gains', as against 'business income' as offered by the Appellant. 3.2 The Appellant prays the income/loss from buying and selling of shares and securities be held as chargeable under the head 'Profits and Gains of Business Profession' as offered by the Appellant. Without prejudice to Ground I and Ground II above: Ground IV: Disallowance of Miscellaneous Expenses of ₹ 3,01,453/- 4.1 On the facts and in the circumstances of the case and in law, the CIT(A) erred in the upholding the action of the AO in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 600/- has escaped from assessment. 3. Therefore, in view of the above, I have reason to believe that income amounting to ₹ 44,90,600/- of the assessee has escaped assessment within the meaning of provision of section 147 Notice u/s. 148 of the IT. Act is issued. ' 2.1 In response to the notice issued by the AO, assessee-company vide its letter dt. 07-04-2010 requested him to consider the original return as filed in response to notice issued u/s. 148 of the Act. On request of the assessee, AO furnished the reasons of re-opening to the assessee vide his office letter dt. 16-07-2010. Assessee filed objections before the AO vide its letter dt. 04-08-2010.As per the decision of the Hon'ble Supreme Court delivered in the case of GKN Driveshaft (India) Ltd. v. ITO [2003] 259 ITR 19, objections filed by the assessee were dealt with by the AO by his letter dt.06-08-2010. After considering the submissions of the assessee, AO initiated the reassessment proceedings. Dealing with the issue of sale of shares he determined the profit/loss on sale of equity shares as under: Profit on sale of un-quoted Equity Shares of Calcutta Electric Supply Co. Ltd., (CESCL) Date of Purchase/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow as to how the capital loss was claimed as 'Business Loss', that as a trader of shares and securities if the appellant was holding the investment as stock-in-trade he was fully justified to show the profit/loss as business profit/loss, that if the securities/shares were held as investment the profit/loss should have been shown as capital loss/profit, the facts of appellant's case justified the issuance of notice u/s. 148 of the Act, that judicial decisions relied upon by the assessee were distinguishable on facts, that the issuance of notice u/s. 148 was entirely based on the appellant's failure to show his income/ loss correctly under a proper head. Relying upon the cases of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC); Dr. Amin's Pathology Laboratory v. P.N. Prasad, Jt. CIT 252 ITR 673 (Bom.); and Chettinad Corpn. (P.) Ltd. v. CIT [1993] 200 ITR 320 (SC) he held that the re-opening u/s. 147 r.w.s. 148 was justified. 4. Before us, AR submitted that during the original assessment proceedings, AO had asked for the details about the transactions-in-question. He referred to page Nos. 14 and 15 of the Paper Book (PB) he also referred to the reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve perused the material available on file. In the case of Kelvinator of India Ltd. (supra) Hon'ble Supreme Court had Kelvinator of India Ltd. (supra) had framed the following question while deciding the appeals filed before it: 'A short question which arises for determination in this batch of civil appeals is, whether the concept of 'change of opinion' stands obliterated with effect from 1st April, 1989, i.e., after substitution of section 147 of the Income-tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987 ?' After considering the rival submissions the Hon'ble Apex Court held as under: 'The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-conditions 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. ' 5.1 From the above decision of the Hon'ble Supreme Court it is clear that concept of change of opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. After saying so the Assistant Commissioner observed that subject to the above remarks the total income was computed as per the chart mentioned in the order. From the perusal of the order we do not find any application of mind on the part of the Assistant Commissioner of Income-tax to the facts of the case, the issue to be dealt with and the reasons for passing the order. The value of the land was not determined by the Revenue. The issue relating to capital gain or casual income was also not addressed by the Revenue. In the light of the same, in the facts of the case, we find that the Assessing Officer was justified in issuing the notice under section 148 of the Act on May 17, 2000. ' 5.2 Word 'opinion' in our humble understanding is a mental status that envisages a definite thought process, availability of material with regard to a particular subject, deliberation upon various angles of the issue-in-question and finally choosing one of the alternatives by the person concerned. In other words it is a culmination of an intellectual exercise of reaching at a definite conclusion after considering available pieces of information related with a particular issue. If in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven a single rupee form a taxpayer, if it is not due. But, at the same time State cannot be deprived of the taxes that are due from citizens. It can also be said that for determining due taxes a logical and informed assessment is the basic pre-condition. So, if in the original assessment particular income escapes taxation and results in depriving the Exchequer its due revenue, it is the duty of the AO to reassess the same. To save the tax-payers from unnecessary harassment by over enthusiastic tax-administrators Hon'ble Supreme Court has held that change of opinion cannot and should not form basis of reassessment exercise. As existence of second step of a ladder presupposes the first step, similarly for change of opinion there should be a pre-existing opinion. As discussed earlier, in the present case AO had not formed any opinion and as a result there was no change in his opinion. Therefore, considering the peculiar facts and circumstances of the present case we uphold the order of the FAA. 5.3 We have also perused the other case laws relied upon by the AR. We find that in the case of German Remedies Ltd. (supra) notice of reassessment was based on mere suspicion and same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings were initiated; was deliberated upon by the AO and the assessee had filed detailed reply in that regard. Other cases relied upon by the AR are also distinguishable of facts, as held by the FAA. As a result, Ground 2 and 3 are decided against the assessee. 6. Next Ground of Appeal is about disallowance of 'Miscellaneous Expenses Written Off' amounting to ₹ 3.01 lakhs. During the re-assessment proceedings, AO found the appellant had debited ₹ 3.01 Lakhs being 1/10th of the total expenses under the head Miscellaneous Expenses Written-off. He directed the appellant to furnish justification for the said debit entry because as per the provisions of section 35D of the Act, the same was not an allowable deduction to a Non-Banking Financial Company (NBFC). After considering the submission of the assessee, he held that in view of the specific provisions of section 35D, the deduction was allowable to a manufacturing company and not the NBFC. He further held that even if it was accepted that the expenditure had been incurred on increase in share capital, the appellant was not eligible for deduction. Finally, he disallowed amount of ₹ 3,01,403/- u/s. 35 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that orders of the Revenue Authorities do not need any interference from our side. 6.2.1 In the case of Ship Scrap Traders (supra) provisions dealing with deductions under sections 80 HHA and 80-I have been discussed and it has nothing to do with the Sec. 35D of the Act. Similarly, in the case of Emirates Commercial Bank Ltd. (supra) issue of investment allowance (Sec. 32A) was decided-issue of Amortisation of certain preliminary expenses (Sec. 35D) was not before the Hon'ble Bombay High Court. 6.3 As far as non-recording of reasons with regard to Miscellaneous Expenses Written Off' is concerned, we are of the opinion that after the amendment to Section 147 w.e.f. 1.4.1989, there is a total change in the law about the re-opening of assessments. Explanation 3 to section 147 of the Act, inserted by the Finance (No. 2) Act 2009, provides that the AO may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under section 147 of the Act notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was overruled by decision of the Full Bench of the same Hon'ble High Court delivered in the case of CIT v. Best Wood Industries & Saw Mills [2011] 331 ITR 63 (Ker.). In the case of Vipan Khanna (supra) principles enumerated by the decision of Sun Engineering Works (P.) Ltd. (supra) have been relied upon. As stated earlier, decision of the Hon'ble Supreme Court does not deal with amended provisions of the Act. Therefore, Ground No.4 filed by the appellant company is decided against it. 7. Last Ground of Appeal deals with disallowance of Administrative Expenses of ₹ 1.5 Lakhs and General Expenses of ₹ 93,750/- respectively. During the assessment proceedings, AO directed the appellant to furnish the details along with the documentary evidences regarding Administrative Expenses and General Expenses. In its reply, assessee submitted debit notes issued by the KEC International Ltd. (parent company) with regard to above referred two expenses were in the name of appellant-company. AO held that appellant had not furnished any bills, vouchers to substantiate its claim, that in absence of documentary evidences such as Bills, Vouchers and Bank Pass book entries etc., expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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