Appeal partly allowed: Recomputation of capital gains required. Other grounds dismissed. Order pronounced 30.05.2018.

The Tribunal partly allowed the appeal, directing the Assessing Officer to recompute the capital gains by adopting the Fair Market Value of the property on the date of dissolution as the cost of acquisition. Other grounds of appeal were dismissed either as not pressed or for lack of merit. The order was pronounced in the open court on 30.05.2018.

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Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in upholding the additions made by the Income Tax Officer (ITO).
2. Whether the CIT(A) erred in not allowing Exemption u/s 54EC for Long Term Capital Gain (LTCG) amounting to Rs. 9,00,000.
3. Whether the CIT(A) erred in not allowing unabsorbed Depreciation and Business loss brought forward from earlier years.
4. Whether the Assessing Officer (A.O) exceeded jurisdiction by addressing new issues beyond the directions given by the CIT under Sec. 263.
5. Whether the period of holding of the asset should be considered from the date of dissolution of the firm or from the original date of acquisition.

Detailed Analysis:

1. Additions Made by the Income Tax Officer:
The CIT(A) upheld the additions made by the A.O without considering the facts of the case and ignoring various documents produced and explanations offered during the hearing. The Tribunal found no specific documents or explanations that were omitted by the CIT(A) and thus dismissed this ground of appeal.

2. Exemption u/s 54EC for LTCG:
The assessee claimed exemption under Sec. 54EC for LTCG arising from the sale of assets acquired from a dissolved partnership firm. The A.O and CIT(A) denied the exemption, stating that the assets were held for only one year and two months, not qualifying as long-term capital assets under Sec. 2(29A). The Tribunal upheld this view, stating that the period of holding should be considered from the date of dissolution, not from the original date of acquisition by the firm. However, it directed the A.O to recompute the capital gains using the Fair Market Value (FMV) of the property on the date of dissolution as the cost of acquisition.

3. Unabsorbed Depreciation and Business Loss:
The CIT(A) restricted the entitlement of the assessee to set off unabsorbed depreciation to Rs. 27,422, pertaining to the period from 17.05.2003 to 31.03.2004. The Tribunal upheld this decision, dismissing the ground of appeal as not pressed by the assessee.

4. Jurisdiction of the Assessing Officer:
The assessee contended that the A.O exceeded his jurisdiction by addressing new issues beyond the directions given by the CIT under Sec. 263. The Tribunal found that the A.O's actions were well within the directions of the CIT and dismissed this ground of appeal.

5. Period of Holding of the Asset:
The assessee argued that the period of holding should be considered from the original date of acquisition by the partnership firm. The Tribunal disagreed, stating that under the Income Tax Act, a firm is treated as a separate assessable entity, and there is no provision to include the period of holding by the firm in the hands of the individual partner. The Tribunal dismissed the additional grounds of appeal related to this issue.

Conclusion:
The Tribunal partly allowed the appeal, directing the A.O to recompute the capital gains by adopting the FMV of the property on the date of dissolution as the cost of acquisition. Other grounds of appeal were dismissed either as not pressed or for lack of merit. The order was pronounced in the open court on 30.05.2018.

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