Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC’’ BENCH, AHMEDABAD
BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1030/AHD/2019 With C.O.No.168/Ahd/2019 िनधा�रण वष�/Asstt. Year: 2008-09 I.T.O, M/s. PRSSB Services Ltd., Ward-3(1)(4), Vs. Sakar-1, 5th Floor, Ahmedabad. East Wing, Opp. Gandhigra, Railway Station, Navrangpura, Ahmedabad-380009.
PAN: AAACP9125H
(Applicant) (Respondent)
Revenue by : Shri Deepak Soni, A.R Assessee by : Shri Ramesh Kumar, Sr. D.R सुनवाई क� तारीख/Date of Hearing : 02/11/2022 घोषणा क� तारीख /Date of Pronouncement: 07/12/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal and CO have been filed at the instance of the Revenue and the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-9, Ahmedabad, dated 08/04/2019 (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) r.w.s 147 of the Income Tax Act 1961 (here-in-after referred
ITA no.1030/AHD/2019 With C.O.No.168/Ahd/2019 A.Y. 2008-09 2
to as "the Act"). The assessee has filed the Cross Objection in the Revenue’s appeal bearing ITA No. 168/Ahd/2019 for the Assessment Year 2008-2009.
First, we take up the Cross objection filed by the assessee bearing CO No. 168/Ahd/2019
The assessee has raised following cross objection: Your appellant being dissatisfied with the order passed by the Commissioner of Income tax (Appeals) presents the cross objections against the same on the following amongst other grounds. 1.0 The CIT(A) erred in upholding validity of the order under section 143(3) r.w.s, 147 framed by the assessing officer. The assessee submits that the order under section 143(3) r.w.s. 147 being bad in law ought to have been quashed by the CIT(A). 2.0 The CIT(A) erred in upholding validity of the notice u/s 148 and action of reassessment u/s 147. The notice u/s 148 was bad in law and action of reassessment is contrary to the facts. The notice u/s 148 and order u/s 147 be quashed. 2.1 The CIT (A) ought to have held that the notice of demand dated 13th December, 2013 and demand of Rs. 11,47,675/- are erroneous. The notice of demand be quashed and in consequence thereof demand of Rs. 11,47,675/- be also quashed. 2.1 The assessee submits that demand of Rs. 11,47,675/- in any event is excessive. The assessing officer be directed to allow credit in respect of payment of taxes and also rebate u/s 88E. The assessee prays for leave to add, alter, amend and/or withdraw all or any of the grounds before final hearing of the appeal.
The first objection raised by the assessee is that the learned CIT (A) erred in upholding the validity of assessment framed under section 147 r.w.s. 143(3) of the Act.
The facts in brief are that the assessee is a public company and engaged in the business of trading in shares and investment. The assessee in the return of income for the year under consideration declared loss of Rs. 2,06,78,596/- which was selected for regular scrutiny. The regular assessment under section 143(3) of the Act was completed vide order dated 20-12-2010 and loss of the assessee was assessed at Rs. 2,01,03,550/- only.
ITA no.1030/AHD/2019 With C.O.No.168/Ahd/2019 A.Y. 2008-09 3
4.1 The assessment was subsequently reopened vide notice dated 30th March 2013 which was served on assessee on 1st April 2013 for the reason that the income has escaped to the assessment. As per the AO the assessee engaged in the business of trading of shares & Securities at large scale (sum of sale amount of Rs. 24.92 Crore approx). However, the assessee claimed exempted long term capital gain for Rs. 2,29,13,255/- only on sale of bonus shares received in the immediate preceding year whereas the original share acquired by the assessee in immediate preceding year was sold in that year only immediately after credit of bonus share at profit. In the balance sheet for the year ending 31st March 2007 the assessee has shown investment of Rs. 1 crore in the shares of M/s Parvin Ratilal Shares and Stock Broker Ltd only. The bonus share of different companies which were sold by the assessee in the year under consideration i.e. F.Y. 2007-08 has not been considered as investment in the balance sheet ending as on 31st March 2007. Hence the sale proceed from the sale of bonus shares were in the nature of trading receipt and not the capital receipt as claimed by the assessee. Therefore, the income to the extent of Rs. 2,29,13,255/- escaped the assessment.
4.2 The assessee objected the reopening by contending that notice under section 148 of the Act was served on assessee after the expiry of 4 years from the end of relevant assessment year i.e. time limit to serve notice was expiring on 31st March 2013 whereas the same was served as on 1st April 2013.
4.3 The assessee further contended that it rightly claimed exemption under section 10(38) of the Act on account of long term capital gain on sale of shares held as investment. It was also contended that during the regular assessment proceeding under section 143(3) its claim was duly verified by the AO and thereafter same was accepted as genuine. Therefore, the reopening assessment on the basis of same set of documents relating to the sale of share which has been verified during regular assessment is not justified.
However the AO disposed off the objection raised by the assessee by way of a separate order dated 02nd December 2013. The AO held that the notice under section 148 of the Act
ITA no.1030/AHD/2019 With C.O.No.168/Ahd/2019 A.Y. 2008-09 4
was issued on 30th March 2013, hence the same was within the time limit of 4 year. The AO further held that the assessee engaged in trading of shares & securities at large scale for long time. The impugned claim of exempted long term capital was arising from sale of bonus shares whereas the original share against which bonus shares were allotted to the assessee was sold in immediate previous year which was treated as business transaction. Hence, the sale of bonus share in the year under consideration should also be treated as business transaction only.
Aggrieved assessee preferred appeal before the learned CIT(A) who upheld the validity of the assessment by observing as under:
5.3 I have perused the assessment order and found that the A.O. has furnished the copy of reasons recorded to the appellant vide letter dated 11.07.2013 and the appellant had filed the objections vide its letter dated 19.07.2013 which stood disposed off vide order dated 02.12.2013, The A.R. of the appellant attended the hearings and furnished the required details. Thus, the principles as laid down by the Hon'ble Supreme Court in the case of GN Driveshafts Ltd (Supra)have been fully complied with by the A.O. in spite of the fact that the appellant did not file a fresh return of income which was required to be filed as per the strict compliance of notice u/s.148 of the Act issued on 30.03.2013. Further, the time limit provided in section 149{1) speaks about the issuing of notice u/s.148 of the Act and not "serving" of the notice u/s.148 of the Act. Once the notice issued u/s.148 of the Act within the prescribed time limit u/s.149(1) of the Act and sent for service or process of serving the notice has been started by the A.O., it may happen that the notice is served after the expiry period of four or six years from the end of the relevant assessment year. Since the appellant has participated in the re- assessment proceedings after disposing off the objections filed by it and in compliance to notice u/s.143(2) of the Act, the objection now raised in relation to belated service of notice u/s.148 of the Act on 01.04.2013 has no relevance in view of the provisions of section 292BB of the Act. Considering these facts, the ground no.2 of the appeal is dimissed.
Being aggrieved by the order of the learned CIT(A), the assessee is in cross objection before us.
The learned AR for the assessee before us filed a paper book running from pages 1 to 136 and contended that the reopening was made by the AO under the provisions of section 147 of the Act without having any fresh material. As such, the AO on verification of the same set of books of accounts which were available during the original proceedings initiated the
ITA no.1030/AHD/2019 With C.O.No.168/Ahd/2019 A.Y. 2008-09 5
proceedings under section 147 of the Act which is nothing but change of opinion. According to the learned AR the proceedings under section 47 of the Act are not sustainable. On the other hand, the learned DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the case on hand, the proceedings under section 147 of the Act were initiated after recording the reasons as extracted below: "It is noticed that the assessee was engaged in the trading of shares and securities business in large scale since long. During the P.Y. relevant to A.Y.2008-09 also, there were huge trading transactions and the sales transactions alone was to the tune of Rs.24,91,76,274/-. The assessee had himself treated his business as share trading, commodity trading and speculation business, but in the case of sale of following bonus shares, the profit (Rs.2,29,13,255/-) there from was returned as a Long Term Capital Gain and claimed exemption u/s.10(38} of the Act thereon. Name of Scrips No. of Bonus shares Date of credit of Shares held allotted against bonus shares as original original shares Dabur India 16200 8100 29/01/2007 HCL Techno 11700 11700 24/03/2007 Larsen & Turbo 5250 5250 11/10/2006 Sundram fastner 9000 9000 09/02/2007
Zandu Pharma 48 16 06/02/2007
Further, it is noticed from assessment records that in the beginning of the previous year relevant to A. Y.2008-09, the assessee was holding only these bonus shares but the original shares against bonus shares were given, were already sold during the previous year itself immediately after allotment of bonus shares and earned profit. All these (above) shares were bonus shares, no cost - value shown was in the balance-sheet. Therefore, the assessees's contention that these shares purchased for investment purpose is not acceptable and these bonus shares the Company got during the course of normal business of share trading, the shares held by it were to be treated as its stock-in-trade in the normal course of his business and not as a capital asset. Even some equity shares shown in B/s. as on 31/03/2006 (Guj.po wer, IBP & IDBlJ were sold nature of trade since the dominant intention was to earn profit by resale. The business transaction was given the colour of LTCG with an intention to evade tax.
ITA no.1030/AHD/2019 With C.O.No.168/Ahd/2019 A.Y. 2008-09 6
9.1 From the above reasons recorded by the AO, it is revealed that the proceedings under section 147 of the Act were initiated on the verification of the case records which were available with the AO during the original assessment proceedings framed under section 143(3) of the Act. In the reason recorded there no whisper that the AO was having any fresh tangible material. Thus, the reopening of the assessment was initiated on the basis of same set of document already available with the AO at the time of regular assessment which is nothing but change of opinion. To our considered opinion reopening of assessment cannot be initiated in absence of fresh material or based on change of opinion. In holding so we draw support and guidance from the judgment of Hon’ble Supreme Court in the case of PCIT vs. Fibers and Fabrics International (P.) Ltd. reported in 139 taxmann.com 562 where the Hon’ble Supreme Court upheld the following finding of the Hon’ble Karnataka High Court: 11. It is pertinent to mention that no material was gathered in the survey proceeding to suggest that expenditure incurred towards sales commission is not an allowable expenditure and disallowance made in respect of the expenditure for the subsequent Assessment Year 2006-07 cannot be a ground for reopening the assessment. The tribunal has therefore, rightly recorded the findings of fact that there is no tangible material on the basis of which assessment for Assessment Year 2005-06 was reopened and the assessment of the subsequent Assessment Year is based on the inferences drawn from certain facts which cannot be construed as tangible material. The reasons mentioned in the notice for reassessment are based on mere change of opinion and therefore, the reopening of the assessment proceeding is not permissible in the facts and circumstances of the case. The aforesaid finding cannot be said to be perverse. For the aforementioned reasons, the substantial questions of law involved in this appeal are answered against the revenue and in favour of the assessee.
9.1 The principles laid down by the Hon’ble Karnataka High court and subsequently confirmed by Hon’ble Supreme Court in the case cited above are squarely applicable to the facts of the present case. Admittedly, the AO on verification of the same set of documents which were available during the original proceedings formed reasons to believe that there is an escapement of income on account of exemption claimed on the sale of shares. In view of the above, we hold that the proceedings initiated under section 147 of the Act are not sustainable and therefore liable to be quashed for the reasons discussed above. Hence, the ground of cross objection raised by the assessee is hereby allowed.
9.2 As the assessee succeeds on the technical ground raised by it in cross objection, we do not find any reason to give independent finding on objection raised by it in the memo of
ITA no.1030/AHD/2019 With C.O.No.168/Ahd/2019 A.Y. 2008-09 7
appeal on merit. As such, the other objection raised by the assessee becomes infructuous and therefore we dismiss the same.
9.3 In the result, the cross objection filed by the assessee is partly allowed.
Coming to appeal of the Revenue in ITA No. 1030/Ahd/2019
The revenue in its ground of appeal has challenged the addition deleted by the learned CIT(A) on merit. At the outset we note that we have quashed the assessment order framed under section 143(3) r.w.s 147 of the Act on account of validity of reopening. Thus issue raised by the revenue on merit become infructuous. Hence the grounds of appeal of the Revenue is hereby dismissed as infructuous.
In the result appeal of the Revenue is hereby dismissed as infructuous.
In the combined result, the cross objection filed by the assessee is partly allowed whereas the appeal of the Revenue is dismissed as infructuous.
Order pronounced in the Court on 07/12/2022 at Ahmedabad.
Sd/- Sd/- (SUCHITRA KAMBLE) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER
(True Copy) Ahmedabad; Dated 07/12/2022 Manish