Reassessment proceedings u/s 147 unsustainable on account of change of opinion

Gulshan Investment Co. Ltd. Vs ITO (ITAT Delhi)

ITAT Delhi held that reassessment proceedings initiated u/s 147 of the Income Tax Act unsustainable as sufficient enquiry was made by AO on the impugned transaction and hence it tantamount to change of opinion on part of AO.

Facts- The assessee is a registered Non-Banking Finance Company (NBFC) and is engaged in the business of purchase and sale of shares, securities, commodities and mutual funds, trading in derivatives, future & option and also derivative of commodities in commodity exchanges.

AO after taking into consideration all the details and after due examination of details furnished by the assessee had framed the assessment u/s. 143(3) of the Act determining speculation loss and net speculation loss was arrived which was carried forward to next and also made disallowance u/s. 14A of the Income Tax Act.

Subsequently, based on information received from the Investigation Wing, Kolkata, according to which certain entities were identified to be involved in facilitating bogus loss or profit to other real beneficiaries based on Forward Marketing Commission (FMC) report that members of National Multi Commodity Exchange (NMCE) were found to be involved in creating artificial volume and suspected evasion of Income Tax, the AO initiated reassessment proceedings u/s. 147 of the Act alleging that the assessee company is one of the beneficiaries of accommodation entries has earned contrived profit of Rs. 1,79,21,950/-.

Accordingly, AO proceeded to made addition u/s 68. CIT(A) upheld the action of AO. Being aggrieved, the present appeal is filed.

Conclusion- Held that sufficient enquiries were already made by the Ld. AO on the impugned transactions mentioned in the reasons. Hence, it also tantamount to change of opinion on the part of the Ld. AO for initiating the reassessment proceedings u/s 147 of the Act.

We have no hesitation to quash the reassessment proceedings initiated u/s 147 of the Act, both on law as well as on merits. Accordingly, the reassessment is hereby quashed and grounds raised by the assessee are allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal of the assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-4, New Delhi, [hereinafter referred to as ‘Ld. CIT(A)’] in Appeal No.CIT(A), Delhi-452/17-18/CIT(A)-4 dated 31/07/2019 against the order passed by Income Tax Officer, Ward-10(4), New Delhi (hereinafter referred to as the ‘Ld. AO’) u/s 143(3) of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’) on 31/12/2017 for the Assessment Year 2010-11.

2. We find that the assessee has challenged the validity of
assumption of jurisdiction u/s 147 of the Act by the Ld. AO vide revised grounds 1 and 2 thereon before us. We deem it fit to address this preliminary ground first.

3. We have heard the rival submissions and perused the materials available on record. The assessee is a registered Non-Banking Finance Company (‘NBFC’) and is engaged in the business of purchase and sale of shares, securities, commodities and mutual funds, trading in derivatives, future & option and also derivative of commodities in commodity exchanges. The return of income for AY 2010-11 was filed by the assessee company on 13/10/2010 declaring loss of Rs.18,43,753/-. The Original assessment was completed u/s 143(3) of the Act determining the total income of the assessee at Rs.26,26,406/-. Before completing the assessment, the Ld. AO had issued a questionnaire together with notice u/s 142(1) of the Act dated 08/01/2013 calling for details of income from operations during the year under consideration and also directing the assessee to explain the speculation loss as shown thereon together supporting details. In this regard, the assessee, vide reply dated 21/01/2013 submitted the details of commodity trading loss (Net) of Rs.42,47,083/- as under: