2018 (12) TMI 1498 - AT - Income Tax

Appellate Tribunal overturns reassessment lacking new material, upholds set-off decision, and allows appeal on disallowance.

The Appellate Tribunal found the reassessment proceedings for Assessment Year 2010-11 lacked new tangible material and were unjustified, annulling the ... Reopening of assessment - application of higher rate of tax @30% on certain Short Term Capital Gains [STCG] of ₹ 343.94 Lacs as against 15% assessed u/s 143(3) - Held that:- AO could not be granted second chance to have a relook at the matter without there being any cogent material on record which comes to his possession subsequently so as to justify reopening. Hence, we are of the opinion that reassessment proceedings stood vitiated for want of fulfillment of primary conditions as envisaged by Section 147 since Ld. AO had formed an opinion during assessment proceedings u/s 143(3) and adopted one of the possible view. Therefore, reopening was not justified on mere change of opinion. Hence, we agree with the conclusion drawn by Ld. CIT(A), though on different reasoning, that reassessment proceedings stood vitiated for want of fulfillment of jurisdictional condition as envisaged by law. Finding no infirmity in the stand of first appellate authority, we dismiss this ground of revenue’s appeal whereas the grounds raised by assessee, under Rule 27, in this regard, stands allowed. So far as the merits of the case is concerned, CIT(A), in our opinion has clinched the issue in right perspective since there is no bar under law from setting-off of the Short Term Capital Loss (STT Paid) suffered from transactions carried out through recognized stock exchange against the Short Term Capital Gains realized from off-market transactions. The same is in line with the statutory provisions of Section 74(1)(a). No infirmity in the impugned order, in this regard. The grounds raised by revenue stands dismissed. Resultantly, the revenue’s appeal stands dismissed. Disallowance u/s 14A - MAT computation - Held that:- We concur with the stand of Ld. AR that the matter stood squarely in assessee’s favour by the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd.[2017 (6) TMI 1124 - ITAT DELHI]. We hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. See M/S JSW ENERGY LTD. [2015 (5) TMI 823 - BOMBAY HIGH COURT]. Resultantly, the appeal stands allowed. Issues:1. Validity of reassessment proceedings for Assessment Year 2010-11.2. Merits of the case regarding set-off of Short Term Capital Loss against Short Term Capital Gain.3. Disallowance under section 14A for Assessment Year 2012-13.Validity of Reassessment Proceedings for Assessment Year 2010-11:The Appellate Tribunal considered the appeal contesting the re-assessment proceedings for the Assessment Year (AY) 2010-11. The reassessment was initiated based on incorrect set-off of Short Term Capital Losses with Short Term Capital Gains, resulting in the application of a higher tax rate. The Tribunal found that the reassessment proceedings lacked new tangible material to justify reopening, indicating a mere change of opinion by the Assessing Officer. It was concluded that the reassessment was not justified solely on a change of opinion, as the AO had already formed an opinion during the initial assessment. Therefore, the reassessment proceedings were deemed vitiated, and the Tribunal upheld the decision of the first appellate authority annulling the reassessment.Merits of the Case - Set-off of Short Term Capital Loss:Regarding the merits of the case, the Appellate Tribunal analyzed the issue of setting off Short Term Capital Loss against Short Term Capital Gain. The Tribunal agreed with the first appellate authority's decision that there was no legal restriction on the assessee from setting off the Short Term Capital Loss against Short Term Capital Gain. It was emphasized that the construction of provisions favoring the taxpayer should be adopted, as clarified in a CBDT Circular. The Tribunal found no fault in the first appellate authority's decision on this matter and dismissed the revenue's appeal.Disallowance under Section 14A for Assessment Year 2012-13:In the case concerning disallowance under section 14A for AY 2012-13, the assessee appealed against the adjustment made in the Book Profit computed under section 115JB of the Income Tax Act. The Tribunal reviewed the adjustment and referred to relevant judicial pronouncements. It was noted that the matter was in favor of the assessee based on a Special Bench decision of the Delhi Tribunal. The Tribunal followed the legal precedence set by various judgments favoring the assessee's position and allowed the appeal, concluding that the adjustment of disallowance under section 14A was not required in Book Profits for the purpose of Section 115JB.In conclusion, the Appellate Tribunal dismissed the revenue's appeal for AY 2010-11 and allowed the assessee's appeal for AY 2012-13, based on the detailed analysis and legal interpretations provided for each issue raised in the respective appeals.