Whether Writ petition challenging lack of jurisdiction to issue notice u/s 148 on the ground that it is based on change of opinion & preconditions of S.147 are not satisfied is maintainable?

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO. 1327 of 2013

Aroni Commercials Ltd

Petitioner

Versus.

The Assistant Commissioner of Income Tax 2 (1)

Mumbai &anr

Respondents

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Advocates for petitioner - Mr.JehangirD.MistrySr.Counsel i/b

Mr,A.K.Jasani

For Respondents - Mr.P.C.Chhotaroy

Before Coram:

Hon’ble M.S.SANKLECHA & Hon’bleG.S.KULKARNI, J

DATED: 16 JULY, 2014

P. C.

This petition assails the notice dated 29.3.2012 issued under section148 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 petitioners stated that the issue stands concluded by the decision of this Court in the petitioner's own case as identical facts and grounds for A.Y.2008-09 by order dated 11.2.2014 in the Writ Petition No.137 of 2014 rendered on 11.2.2014 reported in 362ITR 403 in favour of the petitioner. The reasons furnished for reopening the assessment for A.Y.2007-08 (in this case) are as under:

“ It is observed that the assessee is only engaged in the business of share trading and regularly doing purchase and sale of shares. The assessee has manipulated the affairs in such a way that where script has been sold within twelve months, it is claimed as short term capital gains and taxed at a lower rate by applying section 111A. As assessee is engaged in share trading activity only, all the income/receipts should be treated as business income including short term capital and long term capital gain. Reliance is also placed on the Board's circular No.4 dated 15.06.2007.

In view of the above, I have reason to believe that income chargeable to tax has escaped assessment for a,Y.2007-08 by reason of the failure on part of the assessee to disclose fully and truly the income under the correct head and all material facts necessary for the assessment of income resulting in the income being assessed at low rate/claimed exempt. Hence, the assessment is reopened by issue of Notice u/s 148.”

The reasons furnished by reopening the assessment for A.Y.2008-09(subject matter of challenge in W.P.No.137 of 2014 dated 11.2.2014)reported in 362 ITR 403 is as under:

“It is observed that the assessee is only engaged in the business of share trading and regularly doing purchase and sale of shares. The assessee has manipulated the affairs in such a way that where scrip has been sold within twelve months, it is claimed as short term capital gains and taxed at a lower rate by applying section111A. As assessee is engaged in share trading activity only, all income/receipts should be treated as business income including short terms capital gain. Reliance is also placed on the Board's CircularNo.4 dated 15 June 2007.

In view of the above, I have reason to believe that income chargeable to tax has escaped assessment for A.Y.2008-09 by reason of the failure on the part of the assessee to disclose fully and truly the income under the correct head and all material facts necessary for the assessment of income, resulting in the income being assessed at low rate/claimed exempt. Accordingly, the assessment forA.Y.20089-09 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 forA.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 objection regarding exact failure on part of the assessee not brought out in the reasons recorded is also not acceptable as the fact is clearly stated that the assessee failed to disclose the income under the correct head, resulting in the income being assessed at a lower rate/claimed exempt. Further, proviso 1 to Section 147of 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 the failure on the part of the assessee to disclosefully 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 does not apply to the facts of this case. Thus the objections raised are not valid and devoid of any merits.

The order dated 20.11.2003 disposing of the petitioner's objections for A.Y.2008-09 subject matter of challenge by petitioner as reported in 362ITR 402 are inter alia as under :

8) “The objection raised by the assessee are hereby disposed off as under:

8.1) & 8.2) ..................

8.3) The third 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 that assessee did not carryout any business activity other than share trading and offered the income from share trading as Short Term Capital Gain @ 10% when sold within 12months 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 income and taxed @ 30%instead of taxing the same @ 10% or claiming as exempt. The AO has a cause or justifications to think that the income has been assessed under the wrong head at a lower rate/claimed exempt.”

8.4) The fourth objection regarding exact failure on the part of the assessee not brought out in the reasons recorded is also not acceptable as the fact is clearly stated that the assessee failed to disclose the income under the correct head, resulting in the income being assessed at a lower rate/claimed exempt. Further, 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 disclosefully 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.”

To read the full judgment, please find the attached file:

Attached file:

http://www.bombayhighcourt.nic.in/generatenewauth.php?auth=cGF0aD0uL2RhdGEvb3JpZ2luYWwvMjAxNC8mZm5hbWU9V1AyNjYxMzE2MDcxNC5wZGYmc21mbGFnPU4