D.C.I.T. RG.3(3), MUMBAI vs. RAMA CAPITAL AND FISCAL SERVICES LTD., MUMBAI

आदेश / O R D E R PER AMARJIT SINGH, JM:

(1) Finance charges of Rs.45,63,302/-(Schedule – VI-Operating & Other expenses). Details of acceptance/purpose for which sales tax deferred liability was accepted. (2) Why interest disallowance should not be made on interest free loans given to holding company. (3) Details of loss in sale of shares and debentures and explanation as to why these loss should not be disallowed . Subsequently, the financial charges to the tune of Rs. 46,67,915/- and loss claim on sale of shares and debentures amounting to Rs.5,38,332/- ( 1,83,84,865 – 1,78,46,533) was disallowed.

I have considered the A.O.’s order as well as the appellant’s submission. Having considered both, I find that the A.O. has worked out the aforesaid disallowance based on the appellant’s own record which was available with the department during the course of &206/M/13 Assessment Year: 2002-03 & 2009-10 assessment proceedings. As submitted by the appellant that the erstwhile A.O. has called for all the details for which the A.O. has reopened the case of the appellant. Further to that, even I find that the A.O. reopened the assessment based on the details available on record without any new information brought or gathered by the A.O. other than what was available on record. Hence I am of the considered view that A.O.’s action of reopening of assessment will amounts to change of opinion, as has been declared and stated by the Hon’ble Supreme Court in the case of Kelvinator of India Ltd. 320 ITR 561(SC). Further I find that the Hon’ble Supreme Court in the case of ACTI & Others vs. ICICI Securities Primary Dealership Ltd. has clearly held that “rejection of the objections of the assessee to the reopening of the assessment by the Assessing officer was clearly a change of opinion and the order reopening the assessment was not sustainable. In addition to this, my view also gets support from the decision of NYK Line (India) Ltd. vs. DCIT, wherein the Bombay High Court has held that “ The power of the Assessing officer to reopen an assessment within a period of four years of the relevant assessment year is undoubtedly wider than where a period of four years has elapsed. However, the decision of the Supreme Court in CIT vs. Kelvinator of India Ltd. [2010} 320 ITR 561 (SC) makes it clear that an assessment cannot be reopened on the basis of a mere change of opinion. There should be tangible material to come to a conclusion that there is an escapement of income from assessment year may furnish a foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which came to light in the course of assessment for the subsequent assessment year which emerge in the order of the assessment. Otherwise, a mere change of opinion on the part of the Assessing officer in the course of assessment for a subsequent assessment year would not by itself legitimize the reopening of an assessment for an earlier year. Hence in my considered view the reopening of assessment itself is not maintainable as per provisions of law, as original assessment was completed u/s 143(3) of the IT Act after considering the complete records from the appellant. In my view, the reopening is simply a change of opinion without any new information received in that particular year from the date of original assessment to the date of this assessment order, as held by the Apex Court in the case of Kelvinator of India Ltd. 320 ITR 561(SC). Accordingly in my considered view, this is simply change of opinion & hence the original assessment cannot be reopened on such grounds. Thus, in view of the aforesaid facts of the case, I am of the considered view that the A.O. was not justified in reopening the assessment in the instant case. Accordingly the A.O 's order is annulled.

It is not in dispute that the original assessment was completed on 30.11.2004. Subsequently, the matter was taken up under section 147 of the Act. The order of the A.O, no where speaks about having a new material or any Assessment Year: 2002-03 & 2009-10 tangible material to reopen the case. The Learned CIT(A) has recorded a finding that the assessing officer has called for relevant details during the course of original assessment proceedings. Hence it is quite clear that the reopening was done on the basis of change of opinion. It is well settled proposition that reopening cannot be done on the basis of change of opinion. In this regard, we rely on the decision of Hon’ble Supreme Court in the case of Kelvinator of India Ltd. 320 ITR 561(SC). Hence, in our view, the Learned CIT(A) was justified in annulling its assessment. Therefore, the appeal filed by the revenue is dismissed.

Section 48 of the Income Tax Act, 1961 – Capital gains – Computation of – Assessment years 2002-03 and 2003-04 – Whether under section 48 starting point for computation of capital gains is amount of full value of consideration received or accruing as a result of transfer of capital asset and expression ‘full consideration’ cannot be construed as having reference to market value of assets transferred but refers to price bargained for by parties and it cannot refer to Assessment Year: 2002-03 & 2009-10 adequacy of consideration – Held, yes – Whether where assessee- companies transferred shares to a group company under an arrangement at cost for which they purchased those shares and there was no material to show that assessee had received more than what had been disclosed in books, difference between ‘fair market value’ and cost at which shares were transferred could not be brought to tax under head ‘Capital gains’ – Held, yes The Hon’ble Supreme Court in the matter of K.P.Varghese Vs. ITO (1981) 131 ITR 597 speaks that has observed as under:

Since literal interpretation of section 52(2) leads to manifestly unreasonable and absurd consequence, the same should be construed having regard to the object and purpose for which it has been enacted and the setting in which it occurs. A fair and reasonable construction of section 52(2)would be read into it a condition that it would apply only where the consideration for the transfer is understated or, in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. Accordingly, if the revenue seeks to bring a case within section 52(2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15 per cent of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub-section (2) can be invoked by the revenue and the burden of showing that these two conditions are satisfied rests on the revenue. The burden may be discharged by the revenue by establishing facts and circumstance from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement of Assessment Year: 2002-03 & 2009-10 concealment of the consideration in respect of the transfer. Therefore, section 52(2) had no application to the present case and the ITO could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under section 148.