TMI Blog2015 (11) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... J. K. Garg (DR) ORDER Per Ashwani Taneja (Accountant Member) The present appeal has been filed by the assessee against order dated 22.02.2013, passed by the Ld. Commissioner of Income Tax (Appeals)-13, Mumbai {hereinafter called as CIT(A)}, for the assessment year 2006-07, against the order passed u/s 147 r.w.s. 143(3), by the Assessing Officer (hereinafter called as AO ). The Assessee has raised following grounds of appeal:- 1. The learned CIT (Appeals) erred in confirming action of the A.O. for reopening the assessment without properly appreciating the fact of the case and laws applicable thereto. 2. The learned CIT (Appeals) erred in confirming action of the A.O. for reopening the assessment on the basis of audit objection which is not permissible in law. 3. The learned CIT (Appeals) erred in confirming action of the A.O. as to income earned on transaction in shares of ₹ 91 ,28,881/- subject to SIT is taxable under the head Income from Business or Profession instead of Capital Gain declared by the appellant without properly appreciating the fact of the case and laws applicable thereto. 4. The learned CIT (Appeals) erred in confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Orient Craft Ltd.(2013) 354 ITR 536. It was also submitted that in any case, there was change of opinion on the part of AO while recording impugned Reasons and therefore reopening of the case was invalid on this ground also. It was argued, in nutshell that the reopening is beyond jurisdiction and needs to be quashed. 5. On the other hand, Ld. DR has argued that the Reasons recorded by the AO are valid in the eyes of law. It has been further submitted by him that reopening has been done within the period of four years from the end of the impugned assessment year. It has been further submitted that there was no change of opinion, because in the original proceedings, various aspects were over-looked by the AO and after reconsidering the material available on record, it was noticed by the AO that income has escaped from assessment. Relying upon the judgment of Hon ble Bombay High Court in the case of Dr. Amin s Pathology Laboratory vs JCIT 252 ITR 673 (Bom), it was also submitted that there being no formation of opinion on the part of the AO in original assessment order, reopening was valid and the same needs to be upheld. On specific query from the Bench to Ld. DR with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are invariably within a period of 3 months and many of these transactions of purchase and sales are effected between a period of 2 to 1 5 days. In addition, there have been trading through Kotak Securities of 41 scrips and no. of shares traded is 45,453/-. Quantum of Sales :- The total value of purchase of shares in the 334 transactions effected during the year works out to ₹ 6,69,79,280/-. Similarly, the total quantum of sales for the year works out to ₹ 7,61,08,161/-. From the above characteristics with regard to the transaction it appears that prima facie these transactions are in the nature of business and trade and not investment oriented. Tax effect on this account works out to ₹ 27,38,664/-. iii) Perusal of the Profit and Loss Account and the submissions on record reveal that TDS has remained to be deducted in accordance with chapter-XVII(A) of the I.T. Act, on professional fees of ₹ 24,000/-. It should be therefore disallowed u/s 40(a)(ia) r.w.s.200(1) of the I.T. Act, 1961. Therefore I have reason to believe that the income of the assessee chargeable to tax, has escaped assessment for A.Y.2006-07. Proceedings u/s1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g obligations upon the AO for making mandatory compliances, in a step-wise manner, for valid assumption of jurisdiction for reopening and reframing of reassessment order, can be summarized as under: (i) Availability of the new tangible material indicating escaped income of the assessee, which should have come into possession of the AO, after the passing of original assessment order, whether u/s 143(3) or 143(1), (ii) Recording of the Reasons by the AO: Reasons recorded should not be based upon the change of opinion of the Assesing Officer. Reasons should be such that any person of ordinary prudence should be in a position to make a belief about escapement of income on the basis of facts narrated and material referred to, in the Reasons recorded. The Reasons should show that, there is rational nexus and cause effect relationship between the material sought be relied upon in the Reasons and belief sought to be formed by the AO about escapement of income. (iii) In case; reopening is sought to be done by the AO after expiry of four years from the end of the relevant assessment year and the original assessment was framed u/s 143(3) then reasons can be recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck to the facts and circumstances of the case before us, we are required to examine the first thing first i.e. whether, in this case, there was any fresh tangible material in the possession of the AO at the time of recording of the Reasons . In case, the first condition is fulfilled, then we are required to examine the compliance of prescribed conditions at the next step, and so on. In case, the first condition itself is not fulfilled, the proceedings become invalid in the eyes of law, there and then, and there would not be any requirement to examine any further. If the case of the AO fails on the first step itself, we would not be required to look into the other subsequent aspects, as proceedings will become invalid in the eyes of law at the very inception. 6.6. In the present case, it was noticed by us that the case of the assesse is that there was no fresh tangible material in the possession of AO at the time of recording of impugned reasons. A perusal of the Reasons recorded by the AO in this case reveals that at the time of recording of these Reasons the AO had examined original assessment records only and no fresh material had come in the possession of the AO. In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... and it is further noticed...... in the impugned notice. 6.10. In the case of CIT vs. Orient Craft Ltd. 354 ITR 536, it was observed by Hon ble Delhi High Court that in the said case, Reasons for reassessment disclosed that AO reached belief that there was escapement of income on going through the return of income filed by assessee after he accepted return u/s. 143(1) without scrutiny, and nothing more. In these facts, it was held by the Hon ble High Court that it was nothing but review of earlier proceedings and abuse of power by AO. It was further held that since there was no whisper in reasons recorded, of any tangible material which came to possession of AO subsequent to issue of intimation, therefore, it was an arbitrary exercise of power conferred u/s 147. Thus, reopening was held to be invalid on this ground itself. 6.11. In the case of Mohan Gupta (HUF) vs. CIT 366 ITR 115, same view has been followed by Hon ble Delhi High Cout. 6.12. Further, in the case of CIT vs. K. L. Arora in ITA 118/2014 dated 21-04-2014, Hon ble Delhi High Court observed as under: This Court is of the opinion that no fault can be found with the Tribunal s order. It is well se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the reopening of assessment amounts to review or change of opinion arises. In other words, if there are no reasons to believe based on new, tangible materials , then the reopening amounts to an impermissible review. Here, there is nothing to show what triggered the issuance of notice of reassessment no information or new facts which led the AO to believe that full disclosure had not been made (Kelvinator of India Ltd [(2010)320 ITR 561 (SC)] and Orient Craft Ltd [(2003)354 ITR 536 (Delhi)] followed, Usha International [(2012)348 ITR 485 (Del) (FB)] referred) 6.15. In the case of CIT vs Jyoti Devi 218 CTR 264, Hon ble Rajasthan High Court held that since Revenue could not point out any information or material which had subsequently come to the notice of the AO to enable him to form the requisite belief that any income liable to be assessed had escaped assessment, therefore, the initiation of reassessment proceedings was not valid. 6.16. Hon ble Madras High Court in the case of Bapalal Co. Exports 289 ITR 37, held that in the absence of any new material, the AO is not empowered to reopen an assessment irrespective of the fact whether it was made under s. 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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