MOHAN GUPTA Vs. COMMISSIONER OF INCOME TAX XI

JUDGEMENT

(1.) This writ petition challenges orders dated 26.03.2012 and 09.08.2012 of the Income Tax authorities under Section 148 of the Income Tax Act, 1961 ("the Act") for reassessment for the A.Y. 2005-06. The petitioner/assessee is a Hindu Undivided Family, represented by its karta Mohan Gupta. The assessee filed its return of income for the A.Y. 2005-06 declaring net income of Rs. 16,98,732/-. This return was processed under Section 143(1) of the Act. Subsequently, on 26.03.2012, the Revenue issued a notice under Section 148 of the Act for reopening the assessment for A.Y. 2005-06. On 02.04.2012, the assessee filed a return of income pursuant to that notice dated 26.03.2012, requesting a copy of the reasons recorded by the Assessing Officer for reopening the assessment. These reasons were supplied on 18.04.2012, and the assessee preferred objections on 26.04.2012. These were rejected by the Revenue on 09.08.2012. A further exchange of objections and rejections followed by letters dated 24.08.2012 and 26.10.2012, thus leading to the present writ petition.

(2.) Briefly, the return filed and processed for the A.Y. 2005-06 indicated Rs. 6,55,016/- as Short Term Capital Gain ("STCG"). The reason for reopening the assessment of that year relates to the office note of the Assessing Officer for the subsequent A.Y. 2007-08, whereby the need to assess the income on purchase and sale of shares as business income, rather than STCG, was expressed. Specifically, the reasons provided to the assessee for reopening the assessment state as follows:

(3.) The assessment order under Section 143(3) of the Act for the A.Y. 2007-08, from which the reassessment arose, after considering in detail the nature and frequency of the sale and purchase of shares by the assessee concluded that the activity was not for the purposes of investment but in the nature of a business activity, and thus, chargeable as such. The fact that such income was considered to be STGC in previous years was considered insufficient by the Assessing Officer as it is "a settled law that intimation under Section 143(1) are summary processing wherein there is no application of mind." The assessee appealed this order (Appeal No. 114/09-10). The CIT (Appeals) reversed the finding of the Assessing Officer and held that the income was to be treated at STCG and not as business income.