ARCHWAY INVESTMENT COMPANY LTD,MUMBAI vs. ITO 2(1)(1), MUMBAI

The only issue in this appeal of the assessee is against assumption of jurisdiction by the AO u/s 148 r.w.s. 147 of the Act for reopening of assessment on change of opinion.

Brief facts relating to the above issue are that the assessee is a private limited company engaged in the business of investment activities. Original assessment was completed under section 143 (3) of the Act vide order dated 28.12.2007. Subsequently, the assessing officer recorded reasons for reopening of assessment in assessee’s case by issuing notice under section 148 of the act. The reasons recorded by the AO reads as under:-

In view of the above reasons, the learned Counsel for the assessee stated that the AO on verification of records of purchase and sale of shares noticed that this claim by the assessee as deduction from Short Term Capital Gain in respect of shares is hit by Explanation to Section of the Act. The learned Counsel for the assessee stated that the AO has required the assessee to explain the claim of loss of Rs.18,00,160/- to be set off against Short Term Capital Gain which is filed in assessee’s paper book at page 31. The learned Counsel for the assessee further stated that complete information regarding computation of capital loss on equity shares were available before the AO during the course of original assessment proceedings including the names of companies whose shares were purchased along with date and amount. The learned Counsel for the assessee also drew our attention to page 40 of the assessee’s paper book wherein the AO, during the course of original assessment proceedings, required the assessee to explain the differential amount of Rs.18 lacs should not be treated as unexplained credit being difference between the original computation and revised computation. The learned Counsel for the assessee also drew our attention to page 30 of assessee’s paper book wherein complete computation of Short Term Capital Gain and capital loss arising out of equity shares and set off of the same were filed before the AO during the course of original assessment proceedings. In view of the above, the learned Counsel for the assessee stated that thus reopening of the assessment by the AO is clearly based on change of opinion and nothing else.

On the other hand, the learned Sr. DR relied on the orders of the lower authorities.

We have heard the rival contentions and gone through the facts and circumstances of the case. The facts are clear that the assessee claimed loss on sale of equity shares and claimed the same against Short Term Capital Gains arising out of sale of shares. We find that this information was available before the AO during the course of original assessment proceedings and this information was filed by the assessee in lieu of questionnaire raised by the AO. In such circumstances, we are of the view that this issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of CIT Vs Kelvinator India Ltd. reported in 320 ITR 561 (SC) wherein it is held that as under:- “After the amendment the Assessing Officer has to have reasons to believe that the income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of change of opinion must be treated as an inbuilt test to check the abuse of power."

In view of the above, we are of the view that reopening of the assessment is bad in law and hence we quash the same.

In the result, the appeal of the assessee is allowed.