Uti Securities Ltd ( Now Known As ... vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण एफ खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH सव ौी आई पी बंसल , याियक सदःय एवं राजे ि, लेखा सदःय Before S/Sh. I P Bansal,Judicial Member & Rajendra,Accountant Member आयकर अपील सं/.ITA No.762/Mum/2011,िनधा िनधा रण वष /Assessment Year-2004-05 Standard Chartered Securities (I) Ltd. ACIT Range 4(2), (Formerly known as Standard R.No. 642, ,Aaykar Bhavan, Chartered-STCI Capital Markets Vs Mumbai-20 Ltd.) (Prior to that known as UTI Securities Ltd.), 23-25 MG Road, Fort, Mumbai-400001.

PAN:AAACH0622M (अपीलाथ% /Assessee) (ू'यथ% / Respondent) िनधा (रती ओर से/Assessee by :Shri Nitesh Joshi & B.S.Chandrashekhar राजःव क+ ओर से/ Revenue by :Shri Pawan Kumar Birla सुनवाई वाई क+ तार,ख/ Date of Hearing :19- 03 -2015 घोषणा क+ तार,ख / Date of Pronouncement :25-03-2015 आ यकर अ िधिनयम, िधिनयम 1961 क+ धारा ( 1 ) 254 के अ तग त आदे श Order u/s.254(1)of the Income-tax Act,1961(Act)

Challenging the order dated 10.11.2010 of the CIT(A)-8,Mumbai,assessee-company has raised following Grounds of Appeal:

On the facts and circumstances of the case and in law, the learned Commissioner of Income tax, Appeal -8, Mumbai has erred in confirming the reassessment proceedings initiated by Assessing Officer (ACIT Range 4(2), Mumbai) merely on the basis of reappraisal of the facts and details which are already on record. Hence such re-opening of the assessment under section 148 of the Income-tax Act, 1961 is bad in law.

On the facts and circumstances of the case and in law, the learned Commissioner of Income tax, Appeal-8, Mumbai has erred in confirming the addition made by the Assessing officer on account of the following:

Sr N o Particulars Amount (Rs) A. 12,60,747/- Diminution in stock

3) Your Appellant craves to leave, add, or delete all or any of the above grounds which are independent of each other.

2.Assessee-company,engaged in the business of investment banking and broking in shares, filed its return of income on 29.10.2014 declaring total income of Rs 7.78 Crores.Original assessment was finalised u/s.143(3)of the Act on 29.12.2006,determining its income at Rs. 9.17 Crores.Later on, a notice u/s.148 was issued to the assessee on 26.03.2009 and the assessee was directed to file return. While completing the re-assessment,the Assessing Officer (AO)held that the assessee had adjusted Rs.12.60 Lakhs as diminution in stock against the short term capital gain (STCG),that same was not allowable.He completed the assessment u/s.143(3) r.w.s.148 of the Act on 01.12. 2009,determining the income of the assessee at Rs. 9,30,13,530/-.

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him it was contented that reassessment proceeding were initiated merely on the basis of change of opinion to the same set of facts and same was bad in law,that the AO had not disposed off the objection filed by the assessee.

ITA/762/Mum/2011-AY.2004-05UITSecurities

After considering the submissions of the assessee and the assessment order,he held that that the assessee had argued that claim regarding dimunition in the value of stock had been verified before completing assessment u/s 143(3),that the claim made by it remained unsubstantiated,that it had not brought to his notice any material to indicate that the assessee's claim in this regard had been verified or examined or was accepted allowable as per the provisions of law by the AO during the initial assessment proceedings,that it could not be said that the AO,during the initial assessment proceeding upon consideration of relevant facts,had arrived at a definite finding that the assessee's claim regarding dimunition in the value of a stock amounting to Rs. 12,60,747/-was allowable,that in absence of such a finding, it could not be said that the initiation of reassessment proceeding and consequential disallowance of the assessee's claim amounted to change of opinion on the part of the AO,that merely because certain facts were present before the AO,it could not be said that he had formed an opinion regarding such facts,that he had not changed any opinion,that there was no merit in the assessee's contention.Relying upon the judgment of Phoolchand Bajaranlal(203ITR456),he dismissed the appeal filed by the assessee.

4.Before us,Authorised Representative (AR) stated that the assessee had claimed a sum of Rs. 12,60,747/-as diminution in stock,that the said claim had been adjusted against the short term capital gain as a regular policy followed by it and accepted by the department since the first assessment,that the AO disallowed it while passing order u/s.147 of the Act,that it had assailed the validity of the initiation of re-assessment proceedings on the ground that after the issue of notice the appellant had filed the objections for such reopening of the assessment under section 148 of the Act,vide letter,16.11.2009,that the AO had brushed aside the objections raised by it,that it had made full disclosure necessary for claiming diminution in stock against the short term capital gain amounting to Rs.1,260,747/- and the same was allowed by the then assessing officer after applying his mind to the relevant records,that his successor again after the perusal of the same set of facts proposed to reopen the assessment,that the successor AO held that the adjustment was wrongly allowed,that between the date of order of assessment sought to be reopened and the date of forming opinion no new facts had emerged,that it was a case of change of opinion only, that no income had escaped assessment.He referred to page no.3, 8,25, 27,30,34,59 and 61 of the paper book.He relied upon the case of Kelvinator India (320 ITR 561) and the case of NDT Systems and Another(363 ITR 603),delivered by the Hon'ble Bombay High Court.Departmental Representative(DR)supported the order of the FAA and relied upon the case of Phulchand (supra).

5.We have heard the rival submissions and perused the material before us.We find that the reason regarding reopening the assessment was that the income chargeable to tax amounting to Rs.12,60,747/-,being adjustment on account of diminution in the value of the stock against short term capital gain, remained untaxed.It is clear from the order of the AO that on verification of records he found the above fact.We further find that the assessee had raised objection about reopening of completed-assessment stating that the details of diminution in the value of stock were available on record.From the above,it is clear that the notice u/s.148 was not issued because of change of law or because new material had come on record.The AO has also not mentioned that he had received some information about diminution of stock.The AO,vide his letter dated 14.12.2005(pg.24-25 of PB).had specifically asked the assessee to file details of loss in share trading adjusted against other /business income,if any and to submit trading account.In reply to the query raised by the AO the assessee filed detailed reply.At page 30 of the PB.is the details of inventories and it gives details of quantity and value of the securities.In the chart submitted by the assessee,under the head diminution an amount of Rs.12.60 lakhs has been specifically mentioned. Similarly,page 34 of the PB.mentions about diminution of stock of Rs.11.59 lakhs and of Rsl.1.01 lakhs respectively and the details regarding it were furnished by the assessee as per annextures G and H.Thus,all the necessary details were made available to the AO and after considering the same 2 ITA/762/Mum/2011-AY.2004-05UITSecurities

he allowed the claim made by the assessee.Later on,the AO 'on verification'held that claim made by the assessee was not allowable.In the reasons recorded there is nothing as to how and why the AO had arrived at the said conclusion.

Courts are of the view that completed assessments should not be re-opened to reappraise or review the matters that have attained finality after scrutiny.In the case of Kelvinator India (256 ITR1)Hon'ble Delhi High Court has laid down the basic principles with regard to re-opening of assessment in following manner:

"The scope and effect of section 147 as substituted with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987, and subsequently amended by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989, as also of sections 148 to 152 have been elaborated in Circular No. 54,dated October 31, 1989. A perusal of clause 7.2 of the said circular makes it clear that the amendments had been carried out only with a view to allay fears that the omission of the expression "reason to believe" from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on a mere change of opinion. It is, therefore, evident that even according to the Central Board of Direct Taxes a mere change of opinion cannot form the basis for reopening a completed assessment.....A statute conferring an arbitrary power may be held to be ultra vires article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality should be favoured. In the event it is held that by reason of section 147 the Income-tax Officer may exercise his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional.

An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub- section (3) of section 143.When a regular order of assessment is passed in terms of the sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause

(e) of section 114 of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong. Hence, it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion."

Upholding the above mentioned judgment of the Hon'ble Delhi High Court the Hon'ble Apex Court observed as under:

"The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief."

In the case of Aroni Commercials Ltd. (367 ITR 405),the Hon'ble Bombay High Court has also dealt the issue of re-opening of assessment.In that matter controversy was whether the profits would be chargeable to tax as "business income" or not as "capital gains." This issue was raised by the AO during the assessment proceedings and the assessee submitted its reply dated 29. 07. 2009.Considering those facts the Court held as under:

"It must follow that the Assessing Officer was satisfied with the explanation as furnished by the assessee. Therefore, there was no reason for the Assessing Officer to have a reasonable belief that the income chargeable to tax had escaped assessment. Therefore, the notice issued under section148in respect of the assessment year 2007-08 as well as the order disposing of the assessee's objections to the reasons for reopening were liable to be set aside.......That once a

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query had been raised with regard to a particular issue, it must follow that the Assessing Officer had duly applied his mind to the queries raised and taken a view on the matter. Therefore, it could not be accepted that this was not a case of change of opinion on the part of the Assessing Officer in issuing the notice."

From the above discussion one thing is clear that for issuing notice u/s.148 there should be 'tangible material' on record and that assessment re-opened because of change in opinion are not sustainable.Considering the peculiar facts and the circumstances of the case under appeal,we are of the opinion that it is a case of mere change of opinion and hence unsustainable in the eyes of law.Therefore,reversing the order of the FAA,we decide effective ground of appeal,filed by the assessee, in its favour.

As a result,appeal filed by the assessee stands partly allowed. फलतः िनधा (रती 2ारा दा3खल क+ गई अपील मंजूर क+ जाती है .

Order pronounced in the open court on 25th,March,2015.

आदे श क+ घोषणा खुले यायालय म8 9दनांक 25 माच ,2015 को क+ गई ।

Sd/- Sd/- आई पी बंसल/I (आई ल P Bansal) (राजे ि / RAJENDRA) याियक सदःय / JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई/Mumbai,9दनांक/Date: 25.03.2015 SK आदे श क+ ूितिलAप अमेAषत/Copy षत of the Order forwarded to : 1.Appellant /अपीलाथ% 2. Respondent /ू'यथ%

3.The concerned CIT(A)/संबC अपीलीय आयकर आयुD, 4.The concerned CIT /संबC आयकर आयुD

5.DR "F" Bench, ITAT, Mumbai /Aवभागीय ूितिनिध, एफ खंडपीठ,आ.अ. याया.मुब ं ई

6.Guard File/गाड फाईल स'याAपत ूित //True Copy// आदे शानुसार/ BY ORDER,

उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.

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