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2015 (11) TMI 181 - ITAT MUMBAI

2015 (11) TMI 181 - ITAT MUMBAI - [2016] 47 ITR (Trib) 149 - Reopening of assessment - A.O. reopening the assessment on the basis of audit objection - Held that:- In the present case, it has already been discussed that admitted facts are that there was no fresh material coming into the possession of the AO, at the time of recording of the ‘Reasons’.

If there are no “new tangible materials”, then there would be no “reasons to believe”, and consequently reopening would be an impermissib .....

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Joginder Singh, Judicial Member And Shri Ashwani Taneja, Accountant Member For the Petitioner : Dr. K. Shivaram (AR) For the Respondent : Mr. 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 (hereinaft .....

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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 confirming the action of the A.O. to hold the appellant as a "Share Trader" instead of an "Investor" without properly appreciating facts of the case and laws appli .....

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re. 2. The Brief facts are that in this case Assessee had filed return of income on 27-10-2006 u/s 139(1) and original assessment was done by AO u/s 143(3) vide order dated 15.12.2008. Subsequently, this case was reopened u/s 147 and AO framed re-assessment order dated 31.12.2012 u/s 143 read with 147 of the Income Tax Act 1961. Against this, the Assessee filed an appeal before Ld. CIT(A), wherein he challenged the action of the AO of re-opening of assessment u/s 147 and also challenged addition .....

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pening done by the AO. Attention of the bench was drawn by him upon the Reasons recorded by the AO and it was submitted that the reopening was bad in law. It was further submitted by him that the Reasons have been recorded without there being any fresh tangible material coming into the possession of the AO. It has been submitted by him that the AO has recorded the Reasons on the basis of same set of material and records which were available at the time of framing of original assessment u/s 143(3 .....

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tion 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 .....

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no fresh tangible material coming into possession of the AO before recording the impugned reasons. However, he reiterated that there was no change of opinion on the part of the AO while recording Reasons for reopening of this case. 6. We have heard both the parties and have gone through the orders of the lower authorities. We have also gone through the Reasons recorded. It was noted by us that perusal of the Reasons recorded, available at page no.21 to 22 of the paper book, indicated that these .....

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he Reasons, as recorded by the AO: Date :22.02.2011 In this case, the assessment for A.Y.2006-07 was completed u/s.143(3) of the I.T. Act, 1961 vide order dated 15.12.2008 of DCIT-7(3),Mumbai, assessing the income of the assessee at ₹ 1,03,20,800/- as - against the returned income of ₹ 1,00,10,778/-. i) Perusal of the records reveal that assessee has derived dividend income to the tune of ₹ 14,S8,519r. However, the disallowance with regard to section 1 4A of the I.T. Act has re .....

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r :- August 2005 -122 January 2006 -55 May 2005 -41 June 2005 -53 July 2005 -66 September 2005 -76 December 2005 -53 Frequency and Pattern of Transaction :- The frequency and retention of the shares after purchase 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 .....

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ons 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/s147 of the Act are therefore initiated. Issue notice u/s 148 of the Act. 6.1. The provisions of section 147 have been enshr .....

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the litigating parties, be it the Government or the Citizens. That s why, strict provisions with regard to assumption of jurisdiction, especially in cases of already concluded assessments, have been kept on the statute. 6.2. In the Income Tax Act, the provisions of section 147 to 151 of the Act deal with the issues of reopening of the assessment and framing of the re-assessment order by the AO. In these provisions, on the one hand, requisite powers have been given to the AO to carry out the task .....

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on by the AO, for reopening of the case and for making the assessment of the reopened case. Various courts have held that since these provisions deal with the jurisdictional issues, these have to be followed strictly and applied literally, by the officers for reopening of the assessment and for framing the re-assessment orders. The compliance of the mandatory conditions has to be made by the AO at various stages, as prescribed in these provisions. The compliance of these mandatory conditions has .....

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rial 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 Re .....

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closure of material of facts, as has been envisaged in first proviso to section 147. (iv) Before issuing notice u/s 148, the AO has to obtain, on the reasons recorded by him, sanction for reopening of the case, from the competent authority as envisaged u/s 151 viz. Additional Commissioner or the Commissioner of Income Tax, as the case may be. Before granting its sanction, the sanctioning authority is required to record its satisfaction based upon its independent application of mind, making out a .....

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to notice u/s 148 and may request for the copy of reasons. (vii) The AO is bound, as per law, to provide a certified and verbatim copy of Reasons to the assessee. (viii) The assessee may file its objections before the AO, to the Reasons recorded, if any. (ix) In pursuance to judgment of Hon ble Supreme Court in the case of GKN Driveshafts 259 ITR 19 (SC), the AO is obliged to dispose of these objections and intimate the same to the assessee, before proceeding further with the reassessment procee .....

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s 147 to 151 of Income Tax Act, 1961 read with other relevant provisions of the Act, in a step-wise and chronological manner. Therefore, validity of the reopening proceedings initiated by the AO, can be examined in this step-wise or chronological manner only. 6.5. Thus, coming back 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 recor .....

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nvalid 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 response to our specific query a .....

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recording of impugned reasons is a sine qua none, before the AO can record reasons for reopening of the case. We begin with the judgment of Hon ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment, the AO should have in its possession tangible material . The term tangible material has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fr .....

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ossession, fresh tangible material before reopening of the case. 6.9 In the case of Bombay Stock Exchange Ltd. (writ petition no.2468 dt. 12.06.2014) (89 CCH 118), Hon ble Bombay High Court observed as under: 5. It is pertinent to note that Respondent No.1 has not set out in the reasons which fact or other material was not disclosed by the Petitioner that led to income escaping assessment. In fact, on going through the reasons, we find that Respondent No.1 has come to the conclusion/belief that .....

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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 ma .....

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nd with the Tribunal s order. It is well settled that in order to issue a valid reassessment notice, the AO has to be satisfied on the basis of tangible material or information subsequently available to him that the assessee had not made full and true disclosure which led to income escaping assessment at the stage when the original assessment was completed. Short of that a re-appreciation of the existing materials which really amounts to review is impermissible. The Tribunal, in the circumstance .....

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t of income-In instant case note forming part of return clearly mentioned and described nature of the receipt under a non-compete agreement-Reasons for issuance of notice u/s 147 nowhere mentioned that revenue came up with any other fresh material warranting reopening of assessment-Mere conclusion of proceedings u/s 143(1) ipso facto does not bring invocation of powers for reopening assessment-Reopening of assessment was unjustified-Revenue s appeal dismissed. 6.14. Further reliance can be place .....

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ould have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective trigger , the AO does not possess jurisdiction to reopen the assessment. It is at the next stage that the question, whether the reopening of assessment amounts to review or change of opinion aris .....

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. 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 mate .....

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udgment from Mumbai Bench of ITAT in the case Telco Dadajee Dhackjee Ltd vs DCIT ( ITA No 4613/Mumbai/2013 dt 12-5-2010), in support of this view. 6.18. Similar view has been expressed by Hon ble Delhi Bench of ITAT in the case of M/s Nexgen School of Business Vs. Deputy Commissioner of Income Tax, [ITA No. 5609/DEL/2010] holding that the Assessing Officer was not justified to initiate the reopening proceedings in absence of any new information or material on record since the date of filling and .....

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