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III. Useful Case Laws:
1. CIT Vs. Mohmed Juned Dadani, Tax Appeal No. 964/967 of 2011, Date of Order: 29-01-2013, High Court of Gujarat
AO cannot assess other escaped income if original reason dropped u/s 147 of the Act.
Prior to the
insertion of Explanation 3 to sec. 147 by the Finance Act 2009 w.r.e.f.
1.4.1989, it was clear that if the reason for which the assessment is
reopened fails, the AO could not proceed to assess other income which
had escaped assessment. For assuming jurisdiction to frame an assessment
u/s 147 what is essential is a valid reopening. If the very foundation
of the reopening is knocked out, any further proceeding in respect to
such assessment naturally would not survive. Explanation 3 to sec. 147
does not change this position. Explanation 3 to sec. 147 was inserted to
counter the view taken by some courts (Atlas Cycle Industries 180 ITR
319 (P&H) & Travancore Cements 305 ITR 170 (Ker)) that even if
the jurisdiction was validly exercised, the AO could not assess the
other escaped income that was not referred to in the reasons. It merely
clarifies the existing law and does not expand the powers of the AO u/s
147. If the AO drops the ground for which the notice for reopening was
issued, it means he had no “reason to believe” that income had escaped
assessment and so he has no jurisdiction to assess the other escaped
income.
(Please click here for judgment)
2. CIT Vs. Ashok Mittal, ITA No. 26/2013, Judgment delivered on: 07.02.2013, High Court of Delhi
First to
setting-off the carry forward speculative losses against the
speculative profit and then set-off the business losses to the extent of
the balance speculation profit and other income.
As per the
Boart Circular No.23D of 1960 dated 12.9.1960 issued by the Central
Board of Direct Taxes which conceded that speculation losses carried
forward from previous years may be first set off against the speculation
profits before being set off against any other current profits, if that
procedure is more beneficial to the assesses and decision of Hon’ble
Calcutta High Court in the case of CIT vs. New India Investment
Corporation Ltd. (1994) 205 ITR 618, referred by the Ld. Commissioner of
Income Tax (Appeals), it is evident that carried forward speculation
losses have to be adjusted against the speculation profit before
allowing any other loss to be adjusted against those profits and other
incomes.
(Please click here for judgment)
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