Income Tax Appellate Tribunal - Kolkata
Isg Traders Ltd, Kolkata vs Department Of Income Tax on 12 August, 2015
I . T. A . N o. 1 00 / KOL ./ 20 1 2
Ass es sm e nt ye a r: 2 00 4- 2 00 5
Page 1 of 7
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri S.V. Me hrotra, Accounta nt Me mber
and Shri Maha vir Singh, Judicial Member
I.T .A. No . 100 /KOL/ 2 0 12
Assess ment year : 2004 -2 00 5
Dep u ty Com mis si one r of Income Ta x,... ........ .................Ap p ella nt
Circle-12 , Kolka ta ,
P-7, C howring hee Squa re,
A a ya ka r Bha wa n, 7 t h Floor,
Kol ka ta -700 069
-Vs.-
M/s. ISG Trad ers Ltd.,.................................. ...................Resp ond e nt
31, N eta ji Sub ha s Roa d, 2 n d Floor,
Kol ka ta -700 001
[PA N : A A BC I 1355 C]
Appeara nces by :
Shri Su bhra jyoti Bhattacharjee, JCIT, Sr. D.R., fo r th e Departm ent
Shri D. S. Daml e, FCA, f or the ass es s ee
Dat e of concluding t he hearin g : August 07, 2 015
Dat e of pr onouncing th e order : August 12, 2 015
O R D E R
Per S.V. Mehrotra:
This app eal h as b een filed by the Revenue again st the ord er o f ld. Commissioner o f Inco me Tax (Appe als) -XII, Kolkata d ated 10.10.2011 fo r the as se ssment yea r 2004-05 by taking the followin g eff ective gro unds of app eal:-
1. Wheth er on th e fa cts and the circumstan ces of th e cas e, Ld. CIT(AI is correct in law in holding that the proceedings u/s. 147 were bad in la w without specifying any cogent rea son th ereof.
2. Wheth er on th e fa cts and the circumstan ces of th e cas e, Ld. CIT(AI is correct in allowing lo ng term capital loss of Rs.3,25,52,531/-.
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2. Brief facts of the case are that the as se ses e-Comp any filed its retu rn of inco me showi ng a total los s of Rs.4,85,00,762/-. The ass ess men t was comp leted und er sectio n 143(3 ) det ermini ng to tal in com e of Rs. 5,80,973/- vide ord er d ated 30.11.20 06. Subsequently the Ass es sin g Officer i s sued no tic e under section 14 8 on 22.06.2 007 fo r th e fo llo win g reasons:-
"(1 ) Service charges receiv ed of Rs.16,46,910/- have been ass es sed u nder the h ead 'income from house property' wh en th e same is assessable under th e h ead 'income from other sour ces' ther eby exces s deduction @ 30% u/s 24 has been allowed to th e a ss es see.
(2) Ren t paid of Rs.51 ,000/- has been wro ngly allowed as d eductio n from income u nder th e h ead 'income from hou se p ropert y' wh en n o such dedu ction ca n be allowed u/s. 2 4.
(3) From th e details of co mputation of lon g term capital gain, it is seen that th e assess ee h as t raded in its o wn shares and in the process has booked a long term capital loss of Rs.3,25,52,531 /-. From the assess ment r ecords of AY 2003-04, it is also seen tha t th e companies which w er e holding long term capital lo ss of Rs.3,2 5,52,531/-.
From th e a ss essm en t r ecords of AY 2003-04 , it is also seen th at th e co mpanies which were holding these sh ares had already amalga mated with the assessee comp any prior to the financial year r elevant to AY 2004-05. Hence, the transactions by the ass es s ee co mpany in its own shares a re not permissibl e and the resu ltan t long term capital loss is liable to be disallowed.
In view of the above r easons, proceeding under section 147 was initiated and notice under section 1 48 wa s issued to th e ass essee on 22.06.200 7. In r espon se to the said notice, th e assess ee company filed retu rn of inco me dated 26.07.2007. Th er eafter notice u nder section 143(2) & 142 (1) wer e issu ed to the assess ee on 25.08.2008 & 02.09.2008 resp ectively".
The as ses sm ent was co mplet ed under sect ion 143(3) re ad with s ection 147 at a total income of R s.5,80,973/-. However, the A ssessin g Office r I . T. A . N o. 1 00 / KOL ./ 20 1 2 Ass es sm e nt ye a r: 2 00 4- 2 00 5 Page 3 of 7 disallowed the assessee's clai m fo r c arry forward los s of lon g te rm capit al ga in in as ses see's h and.
3. Ld. CIT(Appe als) canc elled th e re-as sessment p roce edin gs for the following reaso ns:-
(i) In th e course of regu la r as se ssment under section 143(3 ), suffici ent m ateri al was av ailable with t he assessin g Officer and he did not dra w any adverse inf e renc e ag ainst the asses see. Suffici en t information and documents were av ailable on Assessin g Officer's record at the ti me of re gular assessmen t which showed that the loss on sale of sh a res o f I SG T raders Limi t ed, which were own ed and held by M/s. U.I. Tradin g Co. Lim ited a nd K.V. Trad in g Co. Limit ed, which had amal gamated with the as se sse e-comp any ef fectiv e from 01.03.2003 and, thereby, income/loss of th e a mal ga matin g co mpani e s was as ses sed in the ass es see's han d. Thus the reasses smen t proce edin gs were initiat ed b y the Ass essin g Office r on re-app raisal of the fact s al re ady on record a t the time of pas sin g of the o rd er unde r section 143 (3).
(ii) The re-open in g of ass es sme nt could not be don e on the basis of me re chan ge of opinion within fou r years f rom the end of the rel evant ass es sment yea r in view of t he deci sion of the Hon'ble Sup reme Court in the c ase of Kelv inato r of Indi a Li mited rep o rted in 320 ITR 561(SC) as well as the d eci sion of th e Hon 'ble Calcutta High Court in the cas e of Amrit Feeds Limited -vs.- ACIT, Circle-2, Kolkata repo rted in 239 CTR 82. He o bserved that subsequent to co mpletion of th e as se ssment, no fresh m aterial o r evidence ca me in Asse ssin g Office r's po ssess ion o n the basi s of which he fo rmed reasons to beli eve that inco me chargeable to tax h ad escaped as se ssm ent.
4. Ld. D.R. for the Revenu e submitted th at the Ass es sin g Offi cer n ever formed hi s opinion on th e is sue in re gard to eff ect of amalgamation on I . T. A . N o. 1 00 / KOL ./ 20 1 2 Ass es sm e nt ye a r: 2 00 4- 2 00 5 Page 4 of 7 transfer of sha res. H e nev er enquired as to wheth er the capital lo ss could be carri ed fo rward by asses se e on sal e of its own shares by transferee co mpani e s, which were tran sfe rred just prior to the appointed date. He referred to page s 26 to 28 of th e pap e r book wherein th e qu est ionnaire dated 1 9.10.2006 is contained and pointed out that the As sessin g Office r only required the assessee to furni sh contract notes in respect of the sale of shares. He, therefore, submitt ed th at the ld. CIT(Appe als) e rred i n holding that it was a ca se of chan g e of o pinion .
5. Ld. counsel for the ass essee referred to pa ges 25 to 28 of the pap e r book and pointed out th at th e A ssessin g Of fic er h ad i ssued notice und e r sect ion 142 along with the que stionnai re in which he specific ally requi red the a ss ess ee to furni sh contract n otes in respect of th e sale of share s. He p ointed ou t that thes e queries were mad e with reference to the co mput ation of total inco me filed by the a ss ese se contain ed at p ages 21 to 24 o f the pap er boo k and pointed out that at page 23 (back side), the asse ses e had furni shed the d etail s of long term capital los s a mounting to Rs. 4,90,81,73 5/-, which, inter ali a, included th e loss in resp ect of share s of I SG Traders Limi ted amountin g to Rs.3,2 5,52,531/-. L d. counsel furthe r referred to pages 82 & 83 of the paper book, wherein the b ills fo r sal e of shares d ated 09.05.2003 are co ntained. Ld. co unsel furth er pointed ou t that the A ss essin g Offic er h as reco rded reason s in respect of thre e items, a s noted ea rli er, but it wa s only with ref erence to the third reason that the Ass es sin g Officer m ade disallowance of carry forward of capital loss.
5.1. Ld. co unsel furthe r referred to pa ges 30 to 3 2 of the paper book, wherein the as sess ment ord e r p as sed und er s ection 143(3) i s cont ained and pointed out that th e A ssessi ng Of fice r h as, int er alia, observ ed as under:-
"3. Durin g the ass essmen t pro ceeding s, the assessee has submitt ed tha t a sum of Rs.38,41 ,393/- being long term capita l loss in resp ect o f sale of 3,50,000 equ ity shares of Duncans Industri es Limit ed wa s ina dvert ently not I . T. A . N o. 1 00 / KOL ./ 20 1 2 Ass es sm e nt ye a r: 2 00 4- 2 00 5 Page 5 of 7 consid ered at the tim e of filing of retu rn o f income. The assess ee has submitt ed th e details of this amount along with copies o f contract no tes a nd bills. In vi ew o f th e details submitt ed by th e ass essee, the long term capital loss o f Rs.38,41,3 93/- is allowed to be ca rri ed forwa rd".
5.2. Ld. co unsel submitted that this sho ws th at he had conside red th e long term c apital loss claimed by the assessee in resp ect o f a mal ga matin g Compani es.
6. We hav e consid ered the submi ssions of both the parties and have peru sed the reco rd s of the cas e. Admit tedly in the computation of total inco me, the ass ess ee had sp ecifically claim ed the lon g te rm capit al loss in resp ect of sha res of ISG Traders Limit ed. There cannot be any quarrel with the p ropo sition that a comp any cannot clai m loss in resp ect of it s own sh are s. Th ere fore, whe n asses se e clai med this loss in it s co mputation of income then a no rmal query fro m th e A ss essin g Office r had to be on th is cou nt. The Asse ssin g Officer in hi s notice und e r s ection 142(1) specifi cally required the as sessee to furnish cont ract no tes in resp ect of s ale o f shares and, the refore, it is clear th at he had duly app lied hi s mind to th e f act s on reco rd. It i s t ru e th at the re i s no spe cific mention of th e share s of as sesse e- company held by amalga mati ng co mpany o n which loss was cl aimed by the as se ses e after a malga mation. But once Assessin g Of ficer had con sid ered the compu tation and raised queries in regard to sal e of sha res and fu rther while p assin g the as se ssm ent o rd er accepted th e sam e an d also co n sidered the furth er loss claimed by the assessee, which was in resp ect of equity shares of Duncan s Industries L imited, was in advert ently not co nsidered at the ti me o f filin g of return of in co me, then it can not b e said that the A ss es sin g O fficer had not app lied his mind to the f acts of th e case on record.
6.1. Before the ld. CIT(Appe als), the as se ssee had sp ecifi cally pointed out that at th e ti me of ori gin al as ses sment the As ses sin g Offi cer was in possessio n of assessee' s audit ed fin an cial accounts fo r years ended on I . T. A . N o. 1 00 / KOL ./ 20 1 2 Ass es sm e nt ye a r: 2 00 4- 2 00 5 Page 6 of 7 31.03.2003 and 31.03.2004. In these accounts, th e assessee h ad mad e disclosu res about amal gam ation of three co mp ani es in terms of the o rde r of the Hon'b le Calcutta High Cou rt pa ssed in M ay, 2003 by which three Compani es were amalgamated ret rospe ctively from 01.03.2003 Copies of the contract notes and bills in suppo rt o f s ale of shares of ISG Traders Limited were filed befo re th e A ssessin g Of ficer in the course of ori gin al as se ssm ent. These pap e rs clearly establish ed that two of the am al gamatin g compani es, viz. U.I. Trading Co. L imited and K.V. Trading Co. had sold 7, 08,420 an d 76,71,208 equity shares of I SG Traders Li mit ed to M/s. Julex Comme rcial Co. Limited o n 09.05. 2003. On sale of these share s, the amal gamatin g co mpani es suffered loss. The los s su ff ered on share s sold on 0 9.05.2003 was ass es sed in the as se ssee's hand s in the original assessment because the amal g amation of the two comp an ie s wa s mad e e ffe ctive f rom 01.03 .2003. In the ass essment ord er p assed unde r sect ion 147/143(3), it is stated th at th e t ran s action fo r sale of sh ares of the asses see-co mpany held by the tran sfe ree comp any were effected on 09.05.2003 as on 28.02.200 3 (i.e. before 01.03.200 3- appo inted date of am al gamation). Thus, it i s eviden t that the re ass es sment p roce edin g was initiat ed for re-app raisal of the fact s already on reco rd and thi s was clearly a case of me re chan g e of opinion. No fresh tan gible mat erial ca me to Ass essin g Officer's pos ses sion to justify the initiation of reassessment proce edin gs and th e det ails rega rdin g amalgama tion were already on record and the quantific atio n of long term capital gains h ad duly b een co nsidered by him in the o rigin al a sse ss ment. Furthe r, it is well settled law that there should be live ne xus between rea sons reco rd ed and formation of belief. In the p res ent case the A ssessi ng Offic er fo rmed th e belief regardin g escap e ment of income on the ground that as se ss ee had claimed loss by trading in its own shares which was factually inco rrect. Therefore, in view of the deci sion of the Hon'ble Sup rem e Court in the case of Kelvinato r of I ndia Li mit ed report ed in 320 ITR 561, the reasses smen t proc eed in g s were bad in law, which ri ghtly cancelled by the ld. CIT(Ap peals). We acco rd in gly co nfirm the ord er of ld. CIT(Appe als) on thes e observation s.
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7. As we h ave al ready co nfi rmed the ord er of ld . CIT(App eal s) cancelling the reassessmen t proc eedi ng s, Gro und No. 2 has become infru ctuous and acco rdin gly d ismi s sed.
8. In the result, the appeal filed by the R evenue is dismissed.
Orde r p ronounced in th e open Co urt on 12 t h Au gust, 2015.
Sd/- Sd/-
Mahav ir Singh S .V. Mehrotra
(Judi cial Member) (A ccounta nt M ember)
Kolkata, th e 12 t h day of August, 2015
Co pies to : (1) Dep u ty Com mis si one r of Income Ta x,
Circle-12 , Kolka ta,
P-7, C howring hee Squa re,
A a ya ka r Bha wa n, 7 t h Floor,
Kol ka ta -700 069
(2) M/s. ISG Trad ers Ltd.,
31, N eta ji Sub ha s Roa d, 2 n d Floor,
Kol ka ta -700 001
(3) Comm iss ioner of Income-tax (Appeal s)-X II, Kol kata (4) Com mis sioner of Incom e Tax- , Kol kata (5) The Depar tmental R epr es entative (6) Guard Fil e B y order Assistant Registrar Income Tax App ellate Tribunal Kolkata Ben ch es, Kolkata Laha/Sr. P.S.