IMPORTANT POINT
Reassessment cannot be based on a change of opinion, and the duty of the assessee is to disclose fully and truly all primary relevant facts.

JUDGMENT :

K.R. Shriram, J.

1. By consent, Petition taken up for hearing at the stage of admission itself. Therefore, Rule. Rule made returnable forthwith.

2. Petitioner is in the business of shares and stock broking. Petitioner is challenging the action of Respondent No.1 of issuing notice dated 31st March 2021 under Section 148 of the Income Tax Act, 1961 (“the Act”) seeking to reassess Petitioner’s income for Assessment Year (“AY”) 2015-16. Petitioner is also challenging an order dated 26th February 2022 passed by Respondent No.2 rejecting Petitioner’s objections to the issuance of notice under Section 148 of the Act.

3. Petitioner had filed on 29th September 2015, its return of income for AY 2015-16. Petitioner declared income of 'Nil'. An assessment under Section 143(3) of the Act was made and an assessment order dated 14th December 2017 came to be passed determining Petitioner’s total income at Rs.58,96,900/-.

4. Petitioner thereafter received the impugned notice dated 31st March 2021. Petitioner filed its objections vide letter dated 6th January 2021. Petitioner’s objections came to be rejected by the impugned order dated 25th March 2022.

5. Since in this case, the impugned notice under Section 148 of the Act has been issued after expiry of more than four years from the end of the relevant assessment year and an assessment under Section 143(3) of the Act having been made, the proviso to Section 147 of the Act shall apply. As per the proviso, reassessment is impermissible after expiry of four years from the end of the relevant assessment year and where assessment under Section 143(3) of the Act has been made unless there has been failure on the part of assessee to truly and fully disclose material facts during the assessment. A bare perusal of the reasons recorded would show that there has been no failure on the part of Petitioner to truly and fully disclose material facts. Though the words ‘failure on the part of assessee to disclose fully and truly all material facts necessary for assessment' have been used in the reasons recorded, those have been used only to get over the fetters placed by the proviso to Section 147 of the Act. The reasons for reopening read as under:

"The assesse has filed return of income for A.Y. 2015-16 on 29/09/2015 declaring income of Rs. NIL. The assessment u/s. 143(3) of the Act was completed on 14/12/2017 determining total income at Rs. 58,96,900/-.

2.1 It was noticed from P & L A/c that assessee has debited Rs.35,87,05,815/- exceptional item stating the reasons in note-5 that loss occurred due to a manifest material mistake on October 5, 2012 while executing the sale order on NSE as per SAT orders of August, 2014. The same was added back in the computation of income stating that the same was already claimed in AY 2013-14 and finally the business income of Rs. 17,66,31,378 has been arrived which was set off fully from business loss of previous year (AY 2013-14). It was further noticed in the ITR that major carried forward business loss of Rs.34,39,23,169 was pertaining to AY 2013-14. The loss arrived in AY 2013-14 was due to the reasons as assessee has debited Rs. 35,87,05,815 in the computation as Loss due to erroneous trades.

2.2 Loss occurred as assessee has requested to NSE regarding the trades executed on October 5, 2012 which constitute material mistake in the trade and under Bye law 5(a) framed by NSE, those trades are liable to be annulled. NSE however, has rejected the claim on the ground that if the appellant had complied with regulatory requirements by installing prudent risk management and order management system at the dealers terminal, no mistake could go unnoticed and even if any order was erroneously punched remedial measures could be taken before erroneous order went out of dealers system and reached NSEs trading system and therefore in the facts of present case, appellant being grossly negligent, trades in question cannot be considered as material mistake in the trade and consequentl