TMI Blog2014 (8) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... be impossible for the AO to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. The notice u/s 147 of the Act seeking to reopen the AY and the order rejecting the petitioner's objection to reopen the assessment are not sustainable in law - The entire proceeding for reopening the assessment had emanated only on account of change of opinion on the part of the AO – thus, the assessment order set aside - there was no reason for the AO to have had a reasonable belief that income chargeable to tax has escaped assessment –thus, the Notice issued u/s 148 of the Act also set aside – Decided in favour of Assessee. - Writ Petition No.1327 of 2013 - - - Dated:- 16-7-2014 - M. S. Sanklecha And G. S. Kulkarni,JJ. For the Petitioner : Mr. Jehangir D. Mistry, Mr. A. K. Jasani For the Respondent : Mr. P. C. Chhotaroy JUDGMENT P. C. This petition assails the notice dated 29.3.2012 issued under section 148 of the Income Tax Act,1961 (for short the Act) seeking to re-open the assessment for A.Y.2007-08. 2. At the very outset, when the matter was called out, Mr.Mistry learned senior counsel appearing for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment of income, resulting in the income being assessed at low rate/claimed exempt. Accordingly, the assessment for A.Y.2008-09 is reopened by issue of notice u/s 148 of the Income Tax Act, 1961. The order dated 6.8.2012 disposing of the petitioner's objections for A.Y.2007-08 (in this case) is as under : The objection raised by the assessee are hereby disposed off as under : The first objection of the assessee is regarding the reopening being done merely on the basis of change of opinion. It is observed that reopening is not due to any change of opinion but on the basis of clear observations by the AO that assessee did not carry out any business activity other than share trading and offered the income from share trading as Short Term Capital Gain @ 10% when sold within 12 months and claimed as Long Term Capital Gain as exempt when sold after 12 months. Therefore, it is a clear observation that income should have been treated as business and taxed at 30 % instead of taxing the same @10% or claiming as exempt. The AO has a cause or justification to think that the income has been assessed under the wrong head at a lower rate/claimed exempt. The second o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, proviso 1 to section 147 of the Act states that no action should be taken under this section after the expiry of four years from the relevant assessment year, by reason of their failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In your case the assessment has been reopened within the period of four years. Therefore even if there is no failure on your part, the income can be reassessed. As stated above the reopening of the case is not based on mere change of opinion. Therefore, the decisions quoted by the assessee do not apply to the facts of this case. 3. As the reasons for reopening of assessment and of the order disposing of objections are identical for A.Y.2008-09 and 2007-08 we were inclined to allow this petition for A.Y.2007-08 by following our earlier decision in petitioner's own case for A.Y.2008-09 reported in 362 ITR 403. However, the above proposed course of action was very strongly and vehemently opposed to by Mr.Chotaroy learned counsel appearing for the Revenue. It is submitted by Mr.Chotaray learned counsel for the Revenue that the decision rendered in the petitioner's own case reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fatal. In support reliance is placed upon a decision of this Court in Patel KNR JV vs. Commissioner of Income Tax ors reported in (2014) 362 ITR 351 (Bom). The aforesaid decision dealt with the challenge to a transfer of a case from Bombay to Hyderabad and was concerned with Section 127 of the Act. In the above case, this Court refused to interfere with the order of transfer on the ground that there was inordinate delay on the part of the petitioner in moving the Court to obtain any interim or ad interim reliefs stalling the transfer of the case. Resultantly, there was no bar for the Deputy Commissioner of Income tax Hyderabad issuing notices for reopening the assessment for A.Y 2009-10 to 2012-13. It is at that point of time that the petitioners therein had moved this Court seeking a stay of the transfer of the case dated 31.8.2012. It was in the aforesaid circumstances, that the Court held that there were laches on the part of the petitioner in moving this Court as the assessing authority in Hyderabad had already initiated proceedings for reopening assessment before they sought ad interim and interim reliefs from this Court. The facts of that case were completely different. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on itself points out that that when an assessment sought to be reopened by an Officer who is not competent to do so or where on the face of it it would appear that the reopening is barred by limitation or lacks inherent jurisdiction, the court would certainly entertain a challenge to the reopening notice in its writ jurisdiction. The Hon'ble Madras High Court itself drew a distinction between the adjudicating facts and jurisdictional facts. It was in the above context that challenges to the reopening notice under Sections 147 and 148 of the Act was not interfered with by the Hon'ble Madras High Court as the challenge before it appears to have been with regard to adjudicating facts as contrasted with the jurisdictional facts raised in this case. Jurisdictional facts are those facts which gives jurisdiction to enter upon enquiry, while adjudicatory facts come up for consideration after validly entering upon enquiry i.e. having jurisdiction. In this case, the challenge is based on lack of jurisdiction in issuing the impugned notice by the Assessing Officer on the ground that the pre-condition for issuing notice under Section 147 of the Act is not satisfied i.e. notice should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Hindusthan Lever Ltd vs R.B.Wadkar Asst.Commissioner of Income Tax 268 ITR 332 that the challenge to the re-opening of assessment proceedings can be resisted only on the basis of the reasons recorded at the time of issuing the notice and no further reasons can be added to or supplemented to support reasons recorded while issuing the impugned notice. Thus, we see no reason to look beyond the reasons furnished to the petitioners to test the validity of the impugned reopening notice dated 29.3.2012 in seeking to reopen the assessment for A.Y.2007-08. 11. The next contention in the affidavit is that the examination of the Profit and Loss Account would indicate that trading of shares is their only business. This aspect of the matter was subject to examination during the original proceedings under section 143 (3) of the Act. In the present case also the petitioners have similar to facts in the earlier decision in 362 ITR 403 has drawn the attention of the Court to the fact that during the assessment proceedings under section 143 (3) of the Act for A.Y.2007-09 the Assessing Officer had specifically asked of the petitioners to explain as to why the sale of investments should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not applied his mind to the tangible material available on record. In this case, the controversy is whether the profit would be chargeable to tax as business income or not as capital gains. This was the issue which was raised by the Assessing Officer during the assessment proceedings and the petitioner submitted its reply dated 29.7.2009 to the above query. It must follow that the Assessing Officer was satisfied with the explanation as furnished by the petitioner. Therefore, the decision of our Court in the matter of Electronics Corporation of India Ltd (supra) would have no application to the facts of the present case. 13. We don't find any substance in the distinction sought to be made by the Revenue for not following the decision rendered by this Court on 11.2.2014 in the petitioner's own case for the A.Y.2008-09 as reported in 362 ITR 403. 14. Accordingly, we hold that there is no reason for the Assessing Officer to have a reasonable belief that the income is chargeable to tax has escaped assessment. Accordingly, we set aside the impugned notice dated 29.3.2012 issued under section 148 of the Act in respect of A.Y.2007-08 as well as order dated 6.8.2012 dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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