9911796707
TMI Blog2013 (11) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... year as well as subsequent year. Further, the transaction of purchase and sale giving rise to the LTCG have been accepted by the authorities below, even in the reopening of the assessment, the assessee is treating the same as investment by showing in the books of account; these are delivery based transactions; therefore, having accepted similar transaction in the earlier years as well as in the subsequent year the Assessing Officer cannot take a different view in the absence of distinguishing material factors - In view of principles of consistency, accepted the claim of the assessee as the transaction of purchase and sale of shares and securities in question as investment and arising out of the transaction is capital gain and not business income – Decided in favor of Assessee. - ITA No.650/Mum/2013 - - - Dated:- 19-4-2013 - Vijay Pal Rao and N K Billaiya, JJ. For the Appellant : Shri Tej Shah For the Respondent : Shri S D Srivastava ORDER:- Per: Vijay Pal Rao: This appeal by the assessee is directed against the order dated 13.12.2012 of the Commissioner of Income Tax(Appeals) for the Assessment Year 2006-07. 2. The assessee has raised the following effectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8% sale occasions were less than 12 months. Taking into consideration the number, volume and frequency of transactions carried out by the assessee, the activity of purchase and sale of shares amounts to trading activity and not an investment activity and hence, the profits earned from the activity amounting to Rs. 20.60 crores should be brought to tax as business income as against assessee s claim of STCG. 3.2 In respect of the notice u/s 148, the assessee submitted that the return of income filed on 16.11.2004 may be treated as return filed in response to the said notice.The assessee vide its letter dated 16.12.2011 filed objections for reopening of the assessment. The Assessing Officer rejected the objections raised by the assessee against the reopening of the assessment and assessed the amount of Rs. 20.60 crores claimed by the assessee as STCG as business income while passing the reassessment order dt 29.12.2011. 3.3 The assessee challenged the action of the Assessing Officer before the Commissioner of Income Tax (Appeals) including the validity of reopening of the assessment. The Commissioner of Income Tax (Appeals) did not accept the contention of the assessee against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that he transactions are similar in the nature as in the earlier years. 4.1 Thus, the ld AR has forcefully contended that the Assessing Officer has taken a view after due investigation and examination of the relevant material and issue of STCG as well as business income. The ld AR then referred the order passed u/s 143(3) for the AYs 2005-06 and 2007-08 as well as the order u/s 143(3) for the Assessment Year 2008-09 and submitted that the claim of the assessee had been accepted in the earlier year as well as subsequent year. Even for the Assessment Year 2009-10, the Assessing Officer has accepted the claim of the assessee. 4.2 The ld AR further contended that there is no change in the facts and circumstances of the case for the earlier year as well as subsequent year. Therefore, once the Assessing Officer has taken a view after examination of the relevant record and having conducted proper enquiry, then the reassessment on the basis of audit objection is nothing; but on change of opinion. In support of his contention, he has relied upon the decision of the Hon ble Supreme Court in the case of Commissioner of Income-tax v. Kelvinator of India Ltd. reported in 320 ITR 561 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in the original assessment proceedings and thereafter, no new material facts or information came to the knowledge of the Assessing Officer, then the reopening on the basis of material already available on record is not permitted as the same is on the basis of change of opinion. 4.6 On the other hand, the ld DR has contended that the audit party has pointed out a very crucial and important fact about the number of transactions, which is very high as more than 1062. Therefore, the audit party has pointed out an important fact, which was over looked by the Assessing Officer while passing the original assessment order. In support of his contention, he has relied upon the decision of the Hon ble Supreme Court in the case of Commissioner of Income-tax v. P.V.S. Beedies Pvt. Ltd. reported in 237 ITR 13 and submitted that the Hon ble Supreme Court has held that internal audit party had merely pointed out a fact which had been overlooked by the Income-tax Officer in the assessment and therefore, reopening of a case on the basis of a factual error pointed out by the audit party was permissible under law. 4.7 The ld DR has further contended that even otherwise, from the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares amounts to trading activity and not an investment activity and hence profit earned from such activity amounting to Rs. 20.60 Cr should be brought to tax business income as against assessee s claim of short term capital gains . I therefore have reason to believe that income to the extent of differential tax amount has escaped assessment within the meaning of section 147 of the I.T. Act.. The assessment is therefore reopened u/s. 147 of the I.T. Act. 5.1 It is to be noted that in the original assessment proceedings, the Assessing Officer issued notice u/s 143(2) as well as 142(1) and issued questionnaire to the assessee vide letter dated 11.6.2008. The relevant part of the questionnaire in paras 7,13 to 19 are as under: vii) Nature of business carried on by you during the year. (xiii) In the computation of total income you have shown tax free income of Rs.1,92,24,566/-, please give details thereof and basis as to how the same is exempt. (xiv) Proof of payment of security transaction tax and service tax along with payments attributable to tax free income. xv) Details of dividend received along with dividend warrants. (xvi) Details of profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by the brokers are also enclosed. During the year assessee company received dividend on equity shares and mutual funds units aggregating to Rs. 1,05,51,794/- The details of dividend are enclosed. Assessee company has not violated the provisions of section 94(7) of the I T Act, The assessee company has not incurred any loss on sale of equity subsequent to the receipt of dividend. 14. Copies of bills are also enclosed showing the transaction and the payment of security transaction tax. STT certificate issued by the brokers are also enclosed. No service Tax is payable by the assessee company. 15. Details of dividend along with the warrants enclosed. 16. Details of capital gain Rs. 86,72,771/- being long term capital gain, Rs. 204,58,028/- being short term capital gains. 17. Rs. 15,19,230/- being short term capital gain on MF units in required format enclosed. 18. Details of new investment are mentioned in the enclosed in the investment details. The source of this investment are out of sale proceeds of investment and interest free unsecured loans from the shareholders. 19. During the assessment year in question assessee earned income under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition of short term capital asset as provided u/s 2 (42A) of the IT Act which states that if the shares are held by an assessee for not more then 12 months the same are to be treated as short term capital asset and accordingly as per section 2(42B) the capital gain arising on the transfer of such asset should be treated as Short Term Capital gain. Under such circumstances even if the shares are sold by the assessee within the period of 12 months the income arising from such sale has been rightly computed under the head short term capital gain. Also your honor s attention is also invited to the definition of Long term Capital asset as provided u/s 2 (29A) of the IT Act which states that capital asset which is not an short term capital asset in not shell if the shares are held for the more then one year will be treated as long term capital assets. It is further submitted that mere volume of transaction done by the assessee would not alter the nature of transaction from investment to stock in trade. The transaction of the sale of share held with intention of investment by the assessee has to be considered separately with out regards to the volume and frequency of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the case of J.M.Shares Stock Brokers Ltd. ITR No. 2801/Mum/2000, decided on 30-11-2007 a copy of the same is enclosed. From the records submitted before you it can be seen that assessee has shown shares under the head investment. The balance sheet of the assessee reveals that assessee does not have any stock in trade of shares during the year. Further it can be seem that assessee is not indulging in frequent buying of shares from the market and selling the same in the market. It can also be seen that the intention to hold the share as investment and for this reason, the assessee had not claimed any loss on account of depreciation in shares. In view of the above and considering the facts it is submitted that the assessee company complied all the principals laid in the circular No. 4/2007 for determining the shares held by the assessee as investment and to accept assessee claim of income as long term capital gain and short term capital gains. 5.2 It is evident from the record that the Assessing Officer issued detailed questionnaire asking each and every relevant details on the issue of claim of STCG and the nature of transaction. The assessee has also filed det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to earlier years. 5.4 It is discernible from the assessment order passed u/s 143(3) that the Assessing Officer has taken a definite view after duly applied his mind on the issue in question and taking into consideration all the relevant facts, material and evidence. Therefore, there is no doubt while passing the assessment order u/s 143(3), the Assessing Officer took a view and then accepted the claim of the assessee. The reason for reopening of the assessment on the issue of treating the STCG as business income is mainly the number of sale and purchase occasions as 1062 which appears to be misconceived and misunderstood by the authorities below. Thus number of sale and purchase as basis of reopening is factually not correct as it is evident from the details of the script-wise transactions that the assessee has purchased the shares of 62 scripts during the year and the quantum of the shares of a script is large. It is manifest from the details that the order placed by the assessee has been executed by electronic system of Stock Exchange in various segments depending upon the availability of the number of shares for sale on the floor of stock exchange. Therefore, when the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the issue of validity of reopening of assessment has held in paras 9 10 as under: 9. It is clear from the observations made above that the Full Bench of the Delhi High Court has taken a view that in a situation where according to the Assessing Officer he failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of section 147. We find, ourself, in respectful agreement with the view taken by the Full Bench of the Delhi High Court. 10 It is further to be seen that the Legislature has not conferred power on the Assessing Officer to review its own order. Therefore, the power under section 147 cannot be used to review the order. In the present case, though the Assessing Officer has used the phrase reason to believe , admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the Assessing Officer, nothing new has happened, therefore, no new material has come on record, no new information has been received, it is merely a fresh application of mind by the same Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original assessment and the audit party mainly pointed out that the crucial fact which was overlooked by the ITO whereas in the case in hand, it is manifest from the record that the Assessing Officer has made a detailed enquiry through questionnaire and after considering the reply of the assessee on all the aspects of the issue of nature of transaction accepted the same. 6.4 Even otherwise, the issue of nature of transaction of purchase and sale of shares and securities is debatable issue and having accepted the claim of the assessee in the past, in the original assessment for this Assessment Year as well as in the subsequent year, further leaves no doubt that the Assessing Officer consciously accepted the claim of the assessee. 6.5 In the case of Dr Amin s Pathology Laboratory (supra), the issue before the Hon ble High Court was whether there was failure on the part of the assessee to disclose the material fact necessary for the assessment. In the said case, the Assessing Officer failed to notice an important item i.e. an amount of Rs. 6,70,758 which represented unpaid purchases and the assessee firm claimed the expense in respect of all purchases. Accordingly, in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
