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2015 (6) TMI 240 - ITAT MUMBAI

2015 (6) TMI 240 - ITAT MUMBAI - TMI - Validity of reopening of assessment - transactions of sale and purchase of shares was assessed to tax as capital gain @ 10% instead of income from speculative transaction to be taxed at 30% - Held that:- When there is no addition made by the A.O. on the issue of treatment of short term capital gain as speculative transaction by accepting the fact that it was not really speculative transaction then the additions made by the A.O. by way of reassessment of sho .....

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pak J. Shukla For the Respondent : Shri N. Padmanaban ORDER Per Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dated 15-03-2012 of ld. CIT(A)- 27, Mumbai pertaining to A.Y. 2006-07. 2. The assessee has raised the following grounds of appeal:- 1. On the facts and circumstances of the case and in law the learned C.I.T. (Appeals) erred in holding that the assessment was validly reopened. 2. On the facts and circumstances of the case and in law the learned CIT(A) err .....

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rt Term Capital Gains' in the original assessment. 4. Without Prejudice to above it is submitted that the learned C.LT. (Appeals) erred in holding that there was churning in the shares of McDowell Ltd. and the profit on these share transactions of ₹ 25,20,747 j - was taxable as 'Business Income' instead of 'Short Term Capital Gains.' 5. It is prayed that ₹ 26,92,862j - be directed to be assessed as 'Short Term Capital Gains. 3. Ground No. 1 & 2 is regardin .....

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he assessee filed return of income in response to notice u/s 148 of the Act. During the course of assessment proceeding, the assessee pointed out that there was a typing mistake in the details of sale and purchase of shares filed by the assessee and particularly in the date of sale of shares of Pfizer Ltd. which was shown to have been sold on 10-2-2005 instead of 10-02-2006. Thus there was a mistake in typing the year of sale and accordingly the A.O. has reopened the assessment on the basis of w .....

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ssessee challenged the action of the A.O. before the ld. CIT(A) including the validity reassessment of the short term capital gain as business income but could not succeed. 4. Before us the ld. Counsel for the assessee has referred the details of purchase and sale of shares at page 9 & 10 of the paper book and submitted that at Sl. 77 of the details, the shares of Pfizer Ltd. was shown to have been sold on 10-2-2005 instead of 10-02-2006 whereas the shares were purchased on 5-12-2005, theref .....

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is not open to the A.O. u/s 147. In support of his contention, he relied upon the judgment of Hon ble jurisdictional High Court in the case of CIT vs. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bom.) 5. On the other hand, the ld. D.R. relied upon the orders of authorities below and submitted that as per Explanation 3 to section 147, the A.O. may assess or reassess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of proce .....

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uring the course of reassessment proceedings. 7. Having considered the rival submissions as well as relevant material available on record we note that the original assessment completed u/s 143(3) of the Act on 26-12-2008. Thereafter the A.O. reopened the assessment by issuing notice u/s 148 of the Act on 30-3-2011 on the basis of reason recorded for reopening as under:- SUB: Reason recorded for reopening of the assessment for A. Y. 2006-07 - reg. Please refer to the above. Your above assessment .....

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erved upon you on 30.03.2011. You are therefore, requested to file your return of income for above assessment year within 7 days from date of service of this letter. Notice u/s. 142(1) is enclosed for your compliance. Yours faithfully, Sd/- (V.S. JADHAV) Asstt. Commissioner of Income Tax - 16(1), Mumbai. 8. It s apparent from the above reasons recorded that the A.O. has reopened the assessment by noting the fact that there is a speculation transaction amounting to ₹ 95,647/- which should h .....

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05 10/02/2005 553,228.40 95,463.35 Thus, it is clear that there is an apparent mistake in the details which shows the date of purchase of shares as 5-12-2005 and date of sale as 10-2-2005 which is not possible. In the reassessment proceeding, the assessee produced the purchase and sale contract/bill to show that the correct date of sale was 10-2-2006 and not 10-2-2005. The A.O. accepted the correct date as 10-2-2006 and did not make any addition on this account and accordingly dropped the procee .....

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n reproduced by the A.O. in para 2 of his assessment order. The A.O. after considering the reply has accepted the short term capital gain as under:- The number, frequency and pattern of the share transactions resulting in capital gain is examined in the light of criteria laid down in Instruction No. 4/2007 dated 15-06-2007 and in the light of the explanation of the assessee and various decisions of courts and tribunals quoted that assessee explanation is acceptable. 9. Thus it is manifest from t .....

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r income as held by the Hon ble jurisdictional High Court in the case of Jet Airways (I) Ltd. (supra) in para No. 22 & 23 as under:- 22. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought .....

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o a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. .....

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sue of interpretation that has arisen for decision in these appeals, both as a.matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such inco .....

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