Ved Parkash Paliwal v. Assistant Commissioner Of Income Tax Circle, Panipat & Another

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. C.M.No.24345 of 2008 in/andC.W.P. No.15730 of 2008Date of decision: 12.12.2008 Ved Parkash Paliwal. -----Petitioner Vs. Assistant Commissioner of Income Tax Circle, Panipat & another. -----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'BLE MR JUSTICE L.N. MITTAL Present:-Mr. R.P. Sawhney, Sr. Advocate withMr. Saurav Khurana, Advocatefor the petitioner. Mr. Sanjeev Kaushik, Standing Counselfor respondents. ----- ORDER: 1. This petition was filed for quashing of notice forreassessment dated 5.2.2008, Annexure P-5, under Section 148 of theIncome Tax Act, 1961 (for short, “the Act”). 2. After notice was issued, assessment order dated13.10.2008, Annexure P-10 has been passed, on account of which thepetitioner has filed application for amendment of the writ petition tochallenge the said order also. C.M. No.24345 is allowed and theamended petition is taken on record. 3. The assessee filed his return for the assessment year 2002-03 on 31.7.2002 and filed revised return on 10.7.2003. Assessmentwas completed on 30.9.2004. 4. After more than four years from the expiry of the 4. After more than four years from the expiry of theassessment year i.e. on 5.2.2008, the impugned notice under Section148 of the Act was issued, alleging escapement of income within themeaning of Section 147 of the Act. In the reasons for the notice, it wasmentioned as under:- “While completing the assessment u/s 143(3) dated30.09.2004, short term capital loss on account of future andoptions bills at Rs.2245008/- was allowed whereastransaction of future and option bill is of speculative natureand as per sub-section (5) of Section 43 of the Income TaxAct, 1961 loss from speculative profit can be set off onlyagainst speculation profit and not against another income.Thus income to the tune of Rs.22,45,008/- is escapedassessment. From the details of interest filed by the assessee withthe return of income, it is seen that the assessee earnedinterest on FDRs with bank at Rs.2928904/- out of whichinterest paid on loans amounting to Rs.1808558/- (1777315+ 31243) has been deducted by the assessee and balanceinterest of Rs.11,20,346/- has been shown in thecomputation of income. Interest paid on loans are notallowable expenditure because no income from businesshas been shown and utilization of loan is against capitalexpenditure or transaction of speculative transaction.Hence not allowable expenditure in view of the judgment ofHon’ble Supreme Court of India in the case of CIT Vs. Dr.V.P. Gopinathan (2001) 248 ITR-149 (SC). Keeping in view the facts, I have reason to belief thatincome to the tune of Rs.40,53,566/- (2245008/- +1808558) has escaped assessment as the assessee failedto declare fully and truly its income for the Assessment Year2002-03, in terms of section 147 of the Income Tax Act,1961.” 5. Learned counsel for the petitioner submitted that underproviso to Section 147 of the Act, which applies if reassessment isproposed after four years, only ground for reassessment can be failureof the assessee to file return or to make true and full disclosure of thematerial. Reasons given in the impugned notice show that there wastrue and full disclosure of material by the assessee in the return filedand reassessment of income was proposed on merits by change ofopinion and not on the ground of failure of the assessee to disclose trueand full material. 6. We have heard learned counsel for the parties. 7. Learned counsel for the revenue is unable to point out thatin the return of the assessee, there was any omission to give anymaterial. In such a situation, even if the Assessing Officer finds thatthere is an escapement of income, reassessment was not permissibleafter expiry of four years. 8. For the above reasons, the notice for reassessment iswithout jurisdiction. Consequently, the order of assessment is alsowithout jurisdiction. 6. We have heard learned counsel for the parties. 7. Learned counsel for the revenue is unable to point out thatin the return of the assessee, there was any omission to give anymaterial. In such a situation, even if the Assessing Officer finds thatthere is an escapement of income, reassessment was not permissibleafter expiry of four years. 8. For the above reasons, the notice for reassessment iswithout jurisdiction. Consequently, the order of assessment is alsowithout jurisdiction. 9. Accordingly, we allow this petition and quash the impugnednotice and order of reassessment. 10. On the request of learned counsel for the revenue, it ismade clear that this order will not be a bar to passing of any freshorder, if so permissible under law.11. The petition is disposed of. ( ADARSH KUMAR GOEL )JUDGE December 12, 2008ashwani ( L. N. MITTAL ) JUDGE