2024 (2) TMI 1235 - AT - Income Tax

Revenue loses on capital loss claims, time-barred reassessment, and business income classification under Section 147

ITAT Chennai ruled in favor of the assessee on multiple grounds. The Tribunal upheld CIT(A)'s decision allowing enhanced capital loss claims despite not ... Enhanced loss not claimed through revised return of income - Increase in computation of capital loss, claimed at assessment stage only by way of filing a letter instead of revised return of income - HELD THAT:- Hon’ble Jurisdictional High Court in the case of Abhinitha Foundation Pvt. Ltd.,[2017 (6) TMI 604 - MADRAS HIGH COURT] has finally considered and held that, what emerges from a perusal of the ratio of the judgments cited above, in particular, the judgments rendered by the Supreme Court in the case of Goetze India Ltd. [2006 (3) TMI 75 - SUPREME COURT], and National Thermal Power Co. Ltd.'s [1996 (12) TMI 7 - SUPREME COURT] case, and those, rendered in Ramco Cements Ltd. [2008 (12) TMI 413 - PUNJAB AND HARYANA HIGH COURT] and CIT vs Malind Laboratories P. Ltd. [2014 (12) TMI 975 - MADRAS HIGH COURT] as also the judgments of Sam Global Securities Ltd.'s case [2013 (9) TMI 876 - DELHI HIGH COURT] and Jai Parabolic Springs Ltd.'s case [2008 (4) TMI 3 - DELHI HIGH COURT] that, even if, the claim made by the assessee company does not form part of the original return or even the revised return, it could still be considered, if, the relevant material was available on record, either by the appellate authorities, (which includes both the CIT (A) and the Tribunal) by themselves, or on remand, by the AO. In the instant case, the Tribunal, on perusal of the record, found that the relevant material qua the claim made by the assessee company u/s 80 IB (10) of the Act was placed on record by the assessee company during the assessment proceedings and therefore, it deemed it fit to direct its re-examination by the Assessing Officer. We uphold the order of CIT(A) and dismiss this appeal of Revenue. Validity of Reopening of assessment - notice beyond period of four years - CIT(A) quashing the reassessment proceedings as there was no omission on the part of the assessee to disclose any material fact necessary relating to the assessment of this assessment year during the original assessment proceedings completed u/s. 143(3) of the Act and assessee’s case was reopened after expiry of 4 years - HELD THAT:- AO has recorded the reason from verification of balance sheet and the profit declared from the profit & loss account, which was subject matter of original assessment proceedings u/s. 143(3) of the Act. From the reason, it is not coming out that what is the failure of the assessee to disclose fully and truly the material facts relating to this assessment year for assessment of the assessee’s income, which has escaped assessment. From the reasons recorded in the present case, we could not comprehend what is the failure of the assessee, as there is no mention by the AO in the reasons recorded of any failure of the assessee to disclose fully and truly all material facts for framing of assessment for the relevant assessment year of escaped income. Once this is the position, we are of the view that the assessee’s case is fully covered by the proviso to section 147 of the Act and the decision of Hon’ble Supreme Court in the case of Foarmer France [2003 (1) TMI 101 - SC ORDER] squarely applies - Decided against revenue. Addition of business income being advance and deposits written off - CIT(A) deleted addition accepting additional evidences - HELD THAT:- Firstly, this information is available before the AO there cannot be any violation of Rule 46A of the Rules. Secondly, it is a fact that this Rs. 2 crores received on account of capital receipt and it cannot be treated as business asset because the amount was received in connection with sale of hotel assets but inadvertently declared by assessee as business income. Since, such amount represents sale consideration against sale of capital asset, it should be adjusted against capital work in progress and it cannot be held as business income. The CIT(A) has rightly deleted the addition. Hence, we confirm the order of CIT(A) and accordingly, the appeal of Revenue is dismissed. Issues Involved:1. Allowance of capital loss claim without filing a revised return (Assessment Year 2008-09).2. Validity of reassessment proceedings (Assessment Year 2009-10).3. Deletion of addition of business income and alleged violation of Rule 46A (Assessment Year 2010-11).Summary:1. Allowance of Capital Loss Claim Without Filing a Revised Return (Assessment Year 2008-09):The Revenue challenged the CIT(A)'s decision to allow the assessee's claim for an increase in the computation of capital loss, which was claimed during the assessment stage by filing a letter instead of a revised return of income. The Revenue cited the Supreme Court's decision in the case of Goetze (India) Ltd., which held that an assessee cannot amend a return for making a claim for deduction other than by filing a revised return. The CIT(A) allowed the claim, noting that the assessee had disclosed the loss from the sale of property in the Profit & Loss account and that the claim was not new but a correction of an earlier omission. The Tribunal upheld the CIT(A)'s decision, emphasizing that the appellate authority has the power to entertain such claims even if not made in the original return, as supported by various judicial precedents.2. Validity of Reassessment Proceedings (Assessment Year 2009-10):The Revenue appealed against the CIT(A)'s decision to quash the reassessment proceedings. The reassessment was initiated based on an audit objection, claiming that the assessee had claimed bad debts as expenses without carrying out any business activity. The CIT(A) quashed the reassessment, noting that there was no omission on the part of the assessee to disclose material facts necessary for the assessment. The Tribunal upheld the CIT(A)'s decision, stating that the reassessment was based on a change of opinion and not on any new material or evidence. The Tribunal emphasized that for reopening an assessment beyond four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts, which was not the case here.3. Deletion of Addition of Business Income and Alleged Violation of Rule 46A (Assessment Year 2010-11):The Revenue contested the CIT(A)'s decision to delete the addition of Rs. 2 crores as business income and alleged that the CIT(A) violated Rule 46A by admitting additional evidence without providing an opportunity to the AO. The Tribunal found that the explanation regarding the Rs. 2 crores received in connection with the sale of hotel assets was already before the AO during the assessment proceedings. Therefore, there was no violation of Rule 46A. The Tribunal also agreed with the CIT(A) that the amount represented a capital receipt and not business income, as it was related to the sale of capital assets. The Tribunal confirmed the CIT(A)'s decision and dismissed the Revenue's appeal.Conclusion:The appeals filed by the Revenue in ITA Nos. 207, 208 & 209/CHNY/2020 were dismissed by the Tribunal, upholding the decisions of the CIT(A) on all issues.