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TMI Blog2022 (1) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sole objective of substituting his view as against that of his predecessor, therein, sought to reopen the case of the assessee company. We are afraid that such a substitution of a view of a successor A.O cannot form a justifiable basis for reopening the case of an assessee. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Kelvinator of India [ 2010 (1) TMI 11 - SUPREME COURT] wherein the Hon ble Apex Court had observed that merely on the basis of a change of opinion the case of an assessee cannot be . Hon ble High Court of Bombay in the case of Asian Paints Ltd. [ 2008 (7) TMI 237 - BOMBAY HIGH COURT ] had observed, that as no new information/material was received by the A.O, therefore, the fresh application of mind by him to the same set of facts and material which were available on record at the time of framing of the assessment but had inadvertently remained omitted to be considered would tantamount to review of order, which is not permissible as per law. Thus as per the mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the monies do not belong to the appellants and the provisions of section 68 are not applicable to the facts of the case. 3. The CIT(A) erred in upholding the action of the Assessing Officer in treating business loss of ₹ 9,09,65,476 as speculation loss by invoking the provisions of Explanation to section 73. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer inasmuch as the Assessing Officer has fallen in error in treating the business loss as speculation loss by invoking the provisions of Explanation to section 73. 4. The CIT(A) erred in upholding the action of the Assessing Officer in charging interest ₹ 5,64,279, ₹ 4,06,28,111 and ₹ 3,23,607 under sections 234A, 234B and 234D of the Act. The appellants contend that the CIT(A) ought not to have upheld the action of Assessing Officer in charging interest under sections 234A, 234B and 234D inasmuch as - (a) the Assessing Officer has not given an opportunity to the appellants before charging the said interest as required by the principles of nature justice, (b) the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Address of the Share Subscribers Number of shares Allotted Amount received as share application money (in Rs.) 1 M/s Jay Investtrade Private Ltd. 21, Modi Street, Achal Building, 3rd Floor, Fort, Mumbai 400001 1,30,000 1,30,00,000/- 2 M/s Shanti Financial Services Private Ltd. 21, Modi Street, Achal Building, 3rd Floor, Fort, Mumbai 400001 8,00,000 8,00,00,000/- 3 M/s HSM Financial Services Private 21, Modi Street, Achal Building, 3rd Floor, Fort, Ltd. Mumbai 400001 2,00,000 2,00,00,000/- 4 M/s Kundan Leasing and Finvest Private Ltd. 21, Modi Street, Achal Building, 3rd Floor, Fort, Mumbai 400001 5,70,000/- 5,70,00,000/- Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 130000 preference shares of Chandra Financial Services P. Ltd. 50000 preference shares of Shanti Financial Services Pvt. Ltd. 1,30,00,000/- 50,00,000/- 3. Shanti Financial Services Pvt. Ltd. 8,00,000 preference shares of Chandra Financial Services P. Ltd. 1,50,000 preference shares of jay Investrade P. Ltd. 8,00,00,000/- 1,50,00,000/- Backed by his aforesaid observations the A.O was of the view that there was a circular flow of money in the form of investments wherein the same company was investing in and allotting its preference shares to other companies. Apart from the aforesaid, it was gathered by the A.O that all the aforementioned companies (including the assessee company) had suffered huge losses during the year under consideration, as under: Sr. No. Name of the company Returned income for A.Y. 2009-10 (In Rs.) 1 Chandra Financial Services P. Ltd. Loss of ₹ 9,23,62,408/- 2 Jay Investrad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clear violation of the SEBI Act, 1992 r.w. Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, therefore, as per the A.O its claim of non-genuine and unlawful business loss and set-off/carry forward of the same was to be disallowed. Alternatively, the A.O was of the view that as the business loss shown by the assessee was from trading of shares of other companies, therefore, as per Explanation to Sec. 73 of the Act the same being in the nature of a speculation loss was not eligible for set-off against the other heads of income. Accordingly, in the backdrop of his aforesaid observations the A.O vide his order passed u/s 144 r.w.s 147, dated 20.03.2015 assessed the income of the assessee company at ₹ 17 crores. 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that there was circular flow of money amongst the assessee and the other companies to whom shares were claimed to have been allotted; and that the said share subscribers had no financial capacity to make the investments in question, the CIT(A) was not inclined to acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. A.R had drawn our attention to the Annexure to notice u/s 142(1), dated 10.02.2011, wherein at Serial No. 17 and Serial No. 20 the A.O had, inter alia, raised queries pertaining to the increase in share capital a/w details as regards the names and addresses of the shareholders who were having more than 10% of shares and their shareholding pattern, income tax credentials etc. Our attention was drawn by the ld. A.R to the reply dated 02.11.2011 that was filed by the assessee in compliance to the aforesaid notice issued u/s 142(1) of the Act, wherein at Serial Nos. 9 11 the assessee had furnished an Explanatory note as regards the increase in share capital a/w the details as regards the shareholders. Backed by his aforesaid contentions the ld. A.R had assailed the validity of the reopening of the concluded assessment of the assessee company for two fold reasons, viz. (i) that the case of the assessee was reopened in the absence of any material/information on the basis of which the A.O could have formed a bonafide belief that the income of the assessee chargeable to tax had escaped assessment; and (ii) that the reopening of the assessee s case was even otherwise not sustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not objected to the validity of the jurisdiction assumed by the A.O u/s 147 of the Act before the lower authorities, therefore, it could not be permitted to now raise the same for the very first time in the course of the present appellate proceedings. Insofar the aforesaid objection of the ld. D.R is concerned, we are unable to persuade ourselves to accept the same. As noticed by us hereinabove, the ld. D.R in order to drive home his claim that the assessee having not challenged the validity of the jurisdiction assumed by the A.O u/s 147 of the Act, thus, could not be allowed to raise its objection qua the same in the course of the appellate proceedings had relied on the judgment of the Hon ble High Court of Madras in the case of Hanon Automotive Systems India (P.) Ltd. Vs. DCIT, Circle-2(2) (2019) 101 taxmann.com 514 (Madras). In our considered view, the support drawn by the ld. D.R on the aforesaid judicial pronouncement is misconceived and in fact misplaced in context of the facts involved in the case of the assessee before us. On a perusal of the aforesaid judgment, we find that the issue before the Hon ble High Court was as to whether or not the assessee without raising its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the reasons to believe on the basis of which the case of the assessee company was reopened by the A.O u/s 147 of the Act, which reads as under: As is discernible from the aforesaid, the case of the assessee was reopened by the A.O, for the reason, that as per him the share premium of ₹ 15.30 crores received by the assessee had remained unexplained in light of the decision of the Hon ble High Court of Bombay in the case of Major Metals Ltd. vs. UOI 207 taxman.com 185 (Bom). However, we find that there is no whisper by the A.O in the reasons of any such material and/or information that had formed a basis for him to arrive at a bonafide belief that the share premium received by the assessee company had remained unexplained. In our considered view, as per the mandate of law, the A.O for reopening of a concluded assessment is required to have before him reasons which had formed a basis for him to arrive at a bonafide belief that the income of the assessee chargeable to tax for the year under consideration had escaped assessment. Our aforesaid view is fortified by the judgment of the Hon ble Apex Court in the case of ACIT Vs. Rejesh Jhaveri Stock Brokers Pvt. Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) dated 29.12.2011. As noticed by us hereinabove, the A.O vide his notice issued u/s 142(1), dated 10.02.2011 had specifically raised queries as regards the increase in the share capital; and had also called for the names and addresses of the shareholders who were having more than 10% of shares in the assessee company a/w their shareholding and PAN numbers. Also, the A.O had categorically directed the assessee to furnish the details of additions to share capital a/w names and addresses of the parties concerned. In reply, we find that the assessee company had vide its letter dated 2nd November, 2011, furnished the requisite details of the shareholders a/w an explanatory note pertaining to the increase in share capital during the year under consideration. In the backdrop of the aforesaid facts, we are of the considered view that the A.O while framing the regular assessment u/s 143(3), dated 29.12.2011 had consciously formed an opinion that the additions to the share capital of the assessee company was in order. Backed by the aforesaid facts, we find substance in the claim of the ld. A.R that the reassessment proceedings had been initiated by the A.O not on the basis of any fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, s. 147 would give arbitrary powers to the AO 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 AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition 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 in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, AO 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. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 1, nothing new has happened and there is no change of law, no new material has come on record, no information has been received. It is merely a fresh application of mind by the same officer to the same set of facts. Thus, it is a case of mere change of opinion, which, in our opinion, does not provide jurisdiction to respondent No. 1 to initiate proceedings under s. 148 of the Act. It can now be taken as a settled law, because of a series of judgments of various High Courts and the Supreme Court, which have been referred to in the judgment of the Full Bench of the Delhi High Court in the case of Kelvinator of India Ltd. (supra) referred to above, that under s. 147 assessment cannot be reopened on a mere change of opinion. We further find that the Hon ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom), had observed, that as no new information/material was received by the A.O, therefore, the fresh application of mind by him to the same set of facts and material which were available on record at the time of framing of the assessment but had inadvertently remained omitted to be considered would tantamount to review of order, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, the power cannot be held to be validly exercised. The Supreme Court has held thus : ...Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which we are afraid s. 147 would give arbitrary powers to the AO 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 AO 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 AO. Hence, after 1st April, 1989, AO 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 link with the formation of the belief. 24. In the present case, for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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