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TMI Blog2022 (8) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] applies. CIT(A) has rightly held that the action of the AO in reopening the assessment does not satisfy the proviso to section 147 of the Act. We find no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the Revenue is dismissed. - I.T.A. No.3293/Chny/2016 - - - Dated:- 29-7-2022 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Shri D. Hema Bhupal, JCIT For the Respondent : Shri N. Arjunraj, CA for Shri S. Sridhar, Advocate ORDER PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Chennai, dated 28.09.2016 relevant to the assessment year 2008-09. 2. Facts are, in brief, that the assessee filed its return of income for the assessment year 2008-09 on 13.09.2008 disclosing total income of ₹.1,83,53,540/- after setting off of carry forward loss of ₹.9,67,40,138/-. The case was taken up for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 [ Act in short] dated 12.08.2009 was issued. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon by the assessee, the ld. CIT(A) has held that the action of the Assessing Officer in reopening the assessment does not satisfy the proviso to section 147 of the Act by observing as under: 12. I have carefully perused the facts, submissions, made by the appellant and material on record. Where an assessment is reopened after expiry of four years, from the relevant assessment year, in such a case the reopening is mandated only if income chargeable to tax as escaped assessment for reason of the failure on the part of the assessee to make return u/s 139 or respond to notice u/s 142(1) / 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In other words, to invoke the provisions there has to be income which has escaped assessment by reason of the failure on the part of the assessee to make a return u/s 139 or 142(1) or 148 or disclosed fully and truly all material facts necessary for assessment for the assessment year. Further there are four more Explanations thereafter. 13. There have been several decisions by various courts on what constitutes 'all material facts'. The appellant has specifically relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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 section 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 also inserted the word opinion in section 147 of the Act (unquote). 15. Taking the sum totality of facts before me into account that being the AO taking a view different than taken by him in the assessment originally finalised on 31.12.2010 on the same set of facts but based on a different opinion that being as to whether the proceeds from sale of mutual funds would be taxable as investments yielding capital gains or as business income of the appellant, I am of the considered view that the plea of the appellant has considerable merit and has to be allowed. The action of the AO in reopening the assessment does not satisfy the proviso to s.147 and hence cannot be upheld. This ground of appeal is allowed. 4. The Revenue is in appeal before the Tribunal. The ld. DR strongly supported the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 63,67,846 30% Short term capital gains (STT) Rs.1,09,80,607 10% The total turnover for earning the above capital gain of Rs. 1.95 crores was Rs. 355.95 crores. As per the CBDT Circular No. 4 Dated: 2007 dt. 15th June 2007 the following conditions are laid down to determine whether a transaction is in the nature of investment or trading viz. a) The substantial nature of transactions. b) The Magnitude of sales and the ratio between purchases and sales and the holding would furnish a good guide to the nature of transactions. c) The purchase and sale of shares with a motive of earning profit would result in the transaction being in the nature of trade. In the instant case the number of transactions that had been entered into during the year are numerous. In respect of the second clause being the ratio between the purchase and sales and holding of shares the figures are as follows: Total Sales Rs.355,94,66,619 Total purchases Rs.353,98,88,336 Holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced hereinabove. 7.1 By following the decision in the case of CIT v. Kelvinator of India Ltd. (supra), in a Writ Petition No. 1917 of 2019 dated 21.08.2019 in the case of Marico Ltd. v. ACIT, the Hon ble Bombay High Court has observed and held as under: 4. Mr. Pardiwala, learned Senior Advocate appearing in support of the Petition submits as under :- (a) Although the impugned notice for reopening has been issued within a period of four years from the end of Assessment Year i.e. 2014-15, yet the jurisdiction to reopen an assessment cannot be exercised on account of change of opinion. It is submitted that jurisdiction to re-open an assessment is not a jurisdiction to review an order as held by the Apex Court in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561; xxxxxxxxxxxxxx xxxxxxxxxxxxxx 6. We have considered the rival submissions. It is a settled position in law that the power to reopen an assessment within a period of four years from the end of the relevant assessment year, even when the assessment has been made under Section 143(3) of the Act, is not curtailed by the proviso to Section 147 of the Act. Therefore, even where an assessee has disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The head-notes of the above judgement are reproduced as under: Mere escape of income is insufficient to justify the initiation of action under section 147 of the Income-tax Act, 1961, after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Unless the condition in the proviso to section 147 of the Income tax Act, 1961, is satisfied, the Assessing Officer does not acquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire proceedings. If the Assessing Officer chooses to entertain the belief that the assessment has been made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken from that account, the extent of the amount utilised from that account, as also the closing balance as on March 31, 1989. All the information required in relation to the account had been placed before the Assessing Officer. The assessee could not have done anything more. The utilisation of the Modvat credit results in the payment of the excise duty on the final products to the extent of the credit utilised. The description given by the assessee to the payment so made as excise duty paid was the correct and normal term to describe the payment and no fault could be found with the assessee for using that term and not bifurcating that amount into the amount paid through the deposit account and the amount paid by adjustment of the Modvat credit. There was no failure on the part of the assessee to disclose truly and fully any fact in relation to the Modvat account or the amount of excise duty paid. The notice was liable to be quashed. 7.5 In the case of Hindustan Lever Ltd. v. R.B. Wadkar, ACIT (1) 268 ITR 332, the Hon ble Bombay High Court has held as under: Held, that the notice was clearly beyond the period of four years. The reasons recorded by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Commissioner (Appeals) and the Tribunal held that the invocation of the proviso to section 147 to be invalid and set aside the reassessments under section 147/148. On appeal: Held, dismissing the appeals, that the findings of the Tribunal was that all the relevant facts were available on record and that it could not be said that at the time when the assessee filed the returns, he had failed to disclose fully and truly all material facts necessary for the assessments because the amendment which was introduced retrospectively was not there. The law cannot contemplate the performance of an impossible act. Thus, the Tribunal rightly concluded that the proviso to section 147 could not be invoked merely because there was an amendment in the future which was introduced retrospectively and covered the period in question. 7.8 Over and above, way back in 1976 itself, the Hon ble Apex Court has predominantly laid down the law that the impugned notice issued after four years of the end of the relevant assessment year is not sustainable in law and is liable to be quashed, when there was not even a whisper in the reasons that there was any omission or failure on the part of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) that M. K., who was shown to be one of the creditors of the respondent had since confessed that he was doing only name-lending; and (ii) that N.M., D.K.N., B.S. and others, whose names too were mentioned in the list of the creditors of the respondent, were known name-lenders. The respondent thereupon filed a writ petition claiming that there was no material before the Income-tax Officer on which he could have reason to believe that income chargeable to assessment for the year had escaped assessment by reason of the respondent's failure to disclose material facts, and stated that he had produced all books of account, bank statements and other necessary documents in connection with his return. The High Court, by a majority, held that the pre-conditions for the exercise of jurisdiction under section 147 were not fulfilled. On appeal: Held, affirming the decision of the High Court, on the facts, (i) that the second ground could not have led to the formation of the belief that the income of the respondent chargeable to tax had escaped assessment for the assessment year 1958-59 because of failure of the assessee to disclose fully and truly all material facts; CHHUGAMAL R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the Income-tax Officer is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression reason to bel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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