ITO 6(1)(4), MUMBAI vs. AVALON PRODUCTS P.LTD, MUMBAI

The first issue in this appeal of revenue is against the order of the CIT(A) in quashing the re-assessment proceedings u/s. 147 of the Act. For this, the revenue has raised the following ground:- “Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in treating the reopening of assessment u/s. 147 based on change of opinion and bad in law without appreciating the fact that the assessee company was “Investment Company” and dealing in shares were for business and not for investment. “

Brief facts leading to the above issue are that the assessee filed its return of income for the assessment year 2004-05 on 29-10-2004. The original assessment was completed u/s. 143(3) of the Act vide order dated 31/08/2006. Subsequently, the AO

Before the CIT(A) the assessee challenged the very jurisdictional issue of re- opening of assessment u/s. 147 r.w.s 148 of the Act. According to the assessee, the original assessment was completed u/s. 143(3) of the Act on 31-08-2006 and notice u/s. 148 of the Act was issued on 30-03-2010. This assessment was re-opened after expiry of 4 years. Assessee’s case falls under the proviso of section 147 of the Act. Accordingly, the CIT(A) quashed the re-assessment proceedings on the issue that there is no failure on the part of the assessee to make fully and truly the disclosure of income for the relevant assessment year and consequently there is a change of opinion to assess the long term capital gain declared by the assessee as business income. Aggrieved by the order of the CIT(A) in quashing the re-assessment, now the revenue is in second appeal before the Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts, which are admitted and clear that for the assessment year 2004-05, the original assessment u/s. 143(3) of the Act was completed on 31-08-06. During the original assessment proceedings the assessee placed all the evidences before the AO i.e the details of sale and purchase of shares of 2 M/s. Avalon Products P.Ltd-A-JM Mahindra & Mahindra Ltd, Schenetady Beck (I) Ltd & Mahindra Infrastructure projects Ltd. The assessee has filed complete details of long term capital gain during the course of original assessment. The AO after taking into consideration the fact treated the profit arising out of sale and purchase of shares as long term capital gain. Admittedly, the notice u/s. 148 of the Act was issued on 30-03-2010 i.e after the expiry of 4 years. We find that this issue stands covered by the decision of the Hon’ble Supreme Court in the case of CIT Vs. Foramer France reported in (2003) 264 ITR 566(SC). In this case the Hon’ble Supreme Court has affirmed the decision of the Hon’ble Allahabad High Court reported in (2001) 247 ITR 436 by stating that the reopening is not possible unless any income chargeable to tax has escaped the assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. In this case also, there is no failure on the part of the assessee to disclose any material facts. The AO has re-opened the assessment on the same set of facts, which were available before him during the course of original assessment proceedings. This case is covered by the 2nd proviso of section 147 of the Act. Hence, we confirm the order of the CIT(A) in quashing the re-assessment proceedings.

In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 08 .07.2016