- (1.) THIS petition was filed fro quashing of notice for reassessment dated 5 -2 -2008, Annexure P -5, under section 148 of the Income -tax Act, 1961 (for short, "the Act"). After notice was issued, assessment order dated 13 -10 -2008, Annexure P -10 has been passed, on account of which the petitioner has filed for amendment of the writ petition to challenge the said order also. C.M. No. 24345 is allowed and the amended petition is taken on record.
(2.) THE assessee filed his return for the assessment year 2002 -03 on 31 -7 -2002 and filed revised return on 10 -7 -2003. Assessment was completed on 30 -9 -2004. After more than four years from the expiry of the assessment year i.e. on 5 -2 -2008, the impugned notice under section 148 of the Act was issued, alleging escapement of income within the meaning of section 147 of the Act. In the reasons for the notice, it was mentioned as under: - "While completing the assessment under section 143(3) dated 30 -9 -2004, short term capital loss on account of future and options bills at Rs. 2245008 was allowed whereas transaction of future and option bill is of speculative nature and as per sub -section (5) of section 43 of the Income -tax Act, 1961 loss from speculative profit can be set off only against speculation profit and not against another income. Thus income to the tune of Rs. 22,45,008 is escaped assessment. From the details of interest filed by the assessee with the return of income, it is seen that the assessee earned interest on FDRs with bank at Rs. 2928904 out of which interest paid on loans amounting to Rs. 1808558 (1777315+31243) has been deducted by the assessee and balance interest of Rs. 11,20,346 has been shown in the computation of income. Interest paid on loans are not allowable expenditure because no income from business has been shown and utilization of loan is against capital expenditure or transaction of speculative transaction. Hence not allowable expenditure in view of the judgment of Hon'ble Supreme Court of India in the case of CIT v. Dr. V.P. Goponathan, (2001) 248 ITR 149 (SC). Keeping in view the facts, I have reason to belief that income to the tune of Rs. 40,53,566 (2245008+1808558) has escaped assessment as the assessee failed to declare fully and truly its income for the assessment year 2002 -03, in terms of section 147 of the Income -tax Act, 1961."
(3.) LEARNED counsel for the petitioner submitted that under proviso to section 147 of the act, which applies if reassessment is proposed after four years, only ground for reassessment can be failure of the assessee to file return or to make true and full disclosure of the material. Reasons given in the impugned notice show that there was true and full disclosure of material by the assessee in the return filed and reassessment of income was proposed on merits by change of opinion and not on the ground of failure of the assessee to disclose true and full material.;