THE HON’BLE SRI JUSTICE P.SAM KOSHY AND THE HON’BLE SRI JUSTICE NARSING RAO NANDIKONDA WRIT PETITION No.22221 of 2003 ORDER: (per the Hon’ble Sri Justice Narsing Rao Nandikonda)

The present writ petition is filed challenging reopening of the assessment of the petitioner for the Assessment Year 1996- 1997 and also to quash the notice dated 28.03.2003 issued by the respondent under Section 148 of the Income Tax Act, 1961 (briefly ‘the Act’ hereinafter) on the ground that the same is without jurisdiction and time barred.

2. Heard Sri C.V. Narasimham, learned counsel for the petitioner, and Sri P. Murali Krishna, learned counsel for the respondent. Perused the entire material on record.

3. The brief facts of the case, are that, the petitioner is engaged in the business of investment in shares and trading and had filed its return of income for the Assessment Year 1996- 1997 on 27.11.1996 showing loss of Rs.54,75,960/- and the said return was scrutinized by the Assessing Officer under Section 143(1)(a) of the Act on 14.03.1997 without making any further adjustment and later a notice dated 07.04.1998, under Section 148 of the Act, was issued to the petitioner for reopening the assessment on the ground that the income chargeable to tax for the year 1996-1997 has escaped assessment within the meaning of Section 147 of the Act. Pursuant to the reopening of the assessment, the petitioner filed the same return on 14.05.1998 with the purchase and sale transactions of the shares done on 31.03.1995 and considered during the assessment year 1996-1997 and the said assessment was completed and an order was passed by the respondent.

4. Thereafter, the petitioner filed an application under Section 154 the Act seeking rectification of the assessment order for setting-off the carry forward loss. But the Assessing Officer rejected the said application. Against the said rejection order, an appeal was preferred before the Commissioner of Income Tax (Appeals) under Section 154 of the Act, dated 02.12.1999. The Assessing Officer / Joint Commissioner of Income Tax filed his report on 02.06.2000 before the Commissioner of Income Tax (Appeals) against the order of Joint Commissioner under Section

154 of the Act. In the said report, the Assessing Officer observed that the petitioner’s business is speculative in nature and loss from speculation cannot be set–off. The Commissioner of Income Tax (Appeals) finally held that the Assessing Officer was not competent to review the decision of his predecessor regarding set-off of the loss of earlier year against the profits of the current year.

5. Challenging the same, the Department filed an appeal in ITA No.550/Hyd/2000 before the Income Tax Appellate Tribunal (for short, the ‘ITAT’) against the order of Commissioner of Income Tax (Appeals). The same was dismissed by ITAT vide its order dated 28.10.2005. Meanwhile, another notice dated 28.03.2003 under Section 148 of the Act was issued to reopen the assessment for second time on the ground that there were certain reasons for the respondent to believe that the income chargeable to tax has escaped assessment.

6. According to the petitioner there was a limitation of 4 years’ time under Section 147 of the Act to issue notice under Section 148 of the Act which expired on 31.3.2001. For which the petitioner filed a reply to consider the return filed earlier on 27.11.1996. The petitioner also sought for the reasons to be furnished for reopening the assessment and issuance of notice under Section 148 of the Act, for which the Assessing Officer refused to provide the reasons for reopening of assessment and further intimated that the reasons recorded for re-opening of assessment need not be communicated to the petitioner and asked for certain information to be furnished on 26.09.2003. The petitioner filed reply on 10.10.2003 stating the facts of filing return of income and the rectification petition and the consequential orders and asked for reasons for issuance of notice once