9911796707
TMI Blog2010 (12) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,35,700/- as set forth along with computation of income, audited accounts, etc. before the assessing officer. The income in entirety, as pleaded, was fully disclosed before the assessing officer and the said officer passed the order of assessment on 12th December, 2007 under Section 143(3) of the Act. After the said order of assessment came to be passed, a notice was issued under Section 148(1). As stated earlier, objections were filed and eventually the same were disposed of by order dated 18th October, 2010. 3. Mr. C.S. Aggarwal, learned senior counsel along with Mr. Prakash Kumar, learned counsel for the petitioner raised the following contentions:- (a) The assessing officer has dealt with the objections as if there was escapement of turnover but if the order of assessment and the order rejecting the objections are scrutinized appropriately, it would be clear that there has been change of opinion and, hence, initiation of proceeding under Section 147 and issuance of notice under Section 148 are vulnerable in law. (b) The assessing officer has treated the income as business income but while issuing notice the assessing officer has stated that it will be adventure in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jections were filed, the same were dealt with by the order dated 18th October, 2010 whereby the assessing officer referred to certain decisions and eventually came to hold as follows- "4.2 Further, as per the explanation 1 to section 147 of the IT Act, production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of proviso to section 147 of the IT Act. 4.3 Thus, to summarize, in the present case, the Assessing Officer had rightly initiated the reassessment proceedings u/s 147 of the IT Act, after recording in detail the reasons to believe that income has escaped taxation and there is no change of opinion as contended by the assessee." In the ultimate eventuate, the objections were rejected. 8. The first issue that emerges for consideration is whether there has been change of opinion or not. The assessing officer while passing the assessment order under Section 143(3) of the Act and while dealing with the income on account of transfer of equity shares of company from stock-in-trade to investments has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to a case of transfer by way of conversion from stock-in-trade to a capital asset. Further, the assessee has transferred the stock-in-trade at cost and has not disclosed the profits even on sale of such equity shares made later during the year. For instance 20,000 shares of Avery India which were held as stock-intrade as on 1.4.04 were converted into investments as on 17.5.04 at cost of Rs. 696,000/-. The unit cost comes to Rs. 34.8 and market rate on the date of conversion was Rs. 35. On conversion, there was a profit of Rs. 4000/-. Assessee has sold 5000 shares out of above, taking the unit cost at Rs. 34.8/-, and has booked the entire profits as short term capital gain, attracting a lower rate of tax at the rate of 10%. The short term gain has been worked out as under:- Date of purchase Name of script No. Cost Date of Sale Sale amount Gain/Loss 18.5.04 Avery India 5000 174000 12.2.05 247400 73400 Similarly, in the case of 9 other equity shares, converted into investment from stock in trade on 17.5.04 and sold later during the year, the entire gain (i.e. gain on conversion and gains on appreciation) has been shown as capital gain. The gain arising on conversi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y amended by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989, as also of sections 148 to 152 have been elaborated in Circular No.549 dated October 31, 1989. A perusal of clause 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 section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on a mere change of opinion. It is, therefore, evident that even according to the Central Board of Direct Taxes 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 vires Article 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 section 147 the Income-tax Officer may exercise his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. An order of assessment can be passed either in terms of sub-section (1) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief...." 13. From the aforesaid enunciation of law, it is quite vivid that change of opinion cannot clothe the assessing officer with the jurisdiction to initiate the proceeding under Section 147 of the Act. 14. It is also worth noting, an error of judgment also does not confer such a jurisdiction on the assessing officer. In this context, we may fruitfully refer to the decision in Gemini Leather Stores v. Income-Tax Officer, B-Ward, Agra and others, [1975] 100 ITR 1(SC) wherein it has been held that when the Income-tax Officer had all the material facts before him when he had framed the original assessment, he could not take recourse to Section 147(a) to remedy the error resulting from his own oversight. Similar view was expressed in Indian and Eastern ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
