TMI Blog2004 (6) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... following acts of the authorities below are grossly arbitrary, wholly erroneous and totally unjust, and must be quashed. (a) In construing the un quoted equity shares of the Delhi Stock Exchange Ltd. in two parts, viz., (i) shares (ii) ticket and in attributing to them two separate distinctive values based on a perverse application of facts and interpretation of the statute. (b) In ignoring the mandatory requirement of cl. 11 of Part C of Schedule III of the WT Act, 1957, for the valuation of unquoted equity shares of the Delhi Stock Exchange Association Ltd. and proceeding on imaginary, fanciful and preposterous grounds by omitting to note that the methodology ascribed paid no need to such superficial consideration. (c) In capaciously ignoring the fact that the ticket as such was neither as an asset nor properly eligible to tax under the WT Act, 1957, and was expressly not taxable because of its not being a personal asset in view of the binding precedent of the Hon'ble Bombay High Court in the case of Vijay Bubna. (d) In failing to appreciate and concede that the ticket value, even if any, was not taxable being an intangible, incorporeal right which did not constitute a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship, share with the stock exchange at nil value, and claimed the same as exempt. It was, therefore, contended that the initiation of reassessment proceedings by the AO is bad in law as there was no information in his possession that there is a failure or omission by the assessee to make return of wealth. It has further been considered that the AO has proceeded to take action merely on the basis of change of opinion and on the basis of such a change reopening of assessment cannot be upheld. The order passed in another case is not an intimation to give jurisdiction to reassess. Reliance has been placed on various legal authorities and written arguments thereto have been filed as under: "(1) CIT vs. Foramer France (2003) 185 CTR (SC) 512 : (2003) 264 CTR 566 (SC) Reassessment-Not on basis of mere change of opinion-Law same before and after amendment by Direct Tax Laws (Amendment) Act, 1987-IT Act, 1961. (v) On the facts, the notices were bad as they were only on the basis of a change of opinion and the law that an assessment could not be reopened on a change of opinion was the same before and after amendment by the Direct Tax Laws (Amendment) Act, 1987, of s. 147, and (vi) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king recourse to initiate a proceeding of reassessment. In a case of this nature the Revenue is not without remedy. Sec. 263 of the Act empowers the CIT to review an order which is prejudicial to the Revenue. The scope and effect of s. 147 as substituted w.e.f. 1st April, 1989, and subsequently amended as also of ss. 148 to 152 have been elaborated in Circular No. 549. A perusal of cl. 7.2 of the said circular makes it clear that the amendments had been carried out only with a view to allay fears that the omission of the expression "reason to believe" from s. 147 would give arbitrary powers to the AO to reopen past assessments on a mere change of opinion. It is, therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for reopening a completed assessment. A statute conferring an arbitrary power may be held to be ultra virus Art. 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality should be favoured. In the event it is held that by reason of s. 147 the ITO may exercise his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe income has escaped assessment-Assessee-company manufacturing photo films and article placed under Schedule XI manufacturers of photo films not entitled to deduction under s. 80-I because item fell under Schedule XI-ITO reopening assessment and withdrawing deduction granted earlier-Between date of orders of assessment sought to be reopened and date of forming opinion by the ITO nothing new happened-No change of law, no new material came on record and no information received-Mere fresh application of mind by same ITO to same set of facts Amounted to mere change of opinion-Notices for reassessment invalid. (6) Marudhar Hotels (P) Ltd. vs. Dy. CIT (2003) 181 CTR (Raj) 253 : (2003) 259 ITR 509 (Raj). Reassessment-Reason for believing income had escaped assessment-Change of opinion not sufficient cause for reassessment-Reassessment proceedings to change basis for calculation of depreciation-Not valid. Held (i) : That a perusal of the reasons recorded by the AO itself showed that no failure on the part of the assessee had been attributed for the alleged escapement of assessment and, therefore, in the absence of any such failure on the part of the assessee under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s. 147 of the Act cannot be put to service. The notices were liable to be quashed." 3. On the other hand, the learned Departmental Representative contends that the acknowledgements of returns for the two years were not before the AO. The assessee had contended that these returns were filed prior to taking action under s. 17. This is not a correct claim and no such returns came for consideration. If at all they were filed, the same might have been filed with an officer who did not have any jurisdiction on the case of the assessee. Such returns, therefore, cannot be taken as valid returns. The AO also, however, had a definite information that the assessee had not disclosed the value of right in the stock exchange and the same having been escaped for an assessment, initiation of action was valid. It is not a case of mere change of opinion as alleged by the assessee. The orders of the authorities below on this legal ground need no interference. 4. We have heard the parties with reference to material on record and precedents referred. The AO initiated penalty (reassessment) proceedings under s. 17 by recording reasons for both the years. The assessee had not filed any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been done without taking into account the value of right which was part of the asset for the purpose of wealth-tax. The existence of such information was realised by the AO after receipt of information from the learned CIT(A) in similar other cases of other stock brokers who were also having shares and right of trading in Delhi Stock Exchange. It is only after receipt of such information and application of mind by the AO a decision was taken to initiate proceedings under s. 17 of the Act as the assessee had not disclosed the same to the Department. He did not initiate action merely on the information of CIT(A). Mere filing of return also cannot be treated to be an order of assessment and such a view stands fortified by the jurisdictional High Court in the case of Mahanagar Telephones Niqam Ltd. vs. Chairman, CBDT (2000) 162 CTR (Del) 554 : (2000) 246 ITR 173 (Del), where it has elaborately dealt with the issue as to what constitutes information. According to the Hon'ble Court, information means the communication or reception of knowledge or intelligence. It includes knowledge obtained from investigation, study or instruction. "To inform" means to impart knowledge. The details ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and do not find any infirmity in the conclusion arrived by the learned CIT(A) in rejecting the ground of the assessee, finding no force in such grounds before us, the same stand rejected. 7. On the aspect of merits, elaborate arguments were advanced by both the parties and have duly been considered in the light of Special Bench decision in the case of Jagan Nath Sayal vs. Asstt. CIT (2000) 67 TTJ (Del)(SB) 1 : (2000) 72 ITD 1 (Del)(SB) as well as the Supreme Court decision in Stock Exchange. Ahmedabad vs. Asstt. CIT (2001) 166 CTR (SC) 285 : (2001) 248 ITR 209 (SC) and Bombay Tribunal decision in the case of Dy. CWT vs. Ashwin C. Shah (2002) 76 TTJ (Mumbai) 823 : (2002) 254 ITR 90 (Mumbai)(AT) : (2002) 82 ITD 573 (Mumbai). An identical issue has already been considered at length in the case of G.K. Iyer vs. Asstt. CWT in WTA Nos. 23 24/Del/2001, dt. 11th June, 2004, where one of us had constituted the Bench with Hon'ble President of the Tribunal and taken decision vide paras 4 to 10 as under: "4. We have heard the arguments of both the sides. At the outset, we may point out that all the contentions raised by the learned counsel of the appellant have been the same as raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similarity in the rules and regulations of the two exchanges so as to advance her case. However, careful reading of the said judgment would reveal that in the aforementioned case at p. 103, para 'E', the learned counsel of the assessee had pointed out before the Mumbai Tribunal that: 'Delhi Stock Exchange has its own memorandum of articles and association; contents of memorandum and articles of association were completely different from the rules framed by BSE and ASE, therefore, the decision of the rendered by the Special Bench cannot be applied to cases arising under the rules of the BSE". On the same page in para 'F' the Bench held on perusal of the memorandum of articles of association of the DSE, we find the contention of Mr. Patil as correct. The membership of the DSE is open to individuals who are members of the company. It would thus appear that one has to be a shareholder of the DSE Ltd. in order to become a member eligible to do business. There is no rule similar to r. 5 of the BSE which in terms declares that the membership of the BSE is a personal privilege.' 7. Finally at p. 104 in para B the Bench has held as under: 'Our view is that the order of the Special Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner laid down in the rules. As per the rules the entire consideration is to be applied first to the dues of exchange and thereafter towards contracts, and surplus in the sole discretion of the governing body. No claim of the legal heirs survives. On 7th Feb., 1994, Mr. Rajesh Shah died. On 12th Feb., 1994, the legal heirs informed the exchange that they would not be able to meet the dues of the deceased. Consequently, the right of nomination vested absolutely in the exchange. A provisional attachment order was issued by the Department on 15th Feb., 1994, in respect of the stock exchange card of Mr. Shah. In such circumstances when the right of nomination of the legal heirs had already ceased and vested in the exchange, garnishee notice could not be exercised as the legal heirs had no right in it. It was under these circumstances the Hon'ble Court held that the membership right was not the property of the deceased and as such could not be attached. It would have been a different situation had the legal heirs not given up their right of nomination or the deceased himself would have been alive. Therefore, in our humble' opinion, the aforesaid decision does not advance the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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