TaxTMI 
TaxTMI 
2012 (11) TMI 387
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....2009. 2. The interconnected common issue in these cross appeals is as regards to the rectification carried out by Assessing Officer u/s. 154 of the Act and thereby CIT(A) confirmed the rectification carried out in respect to disallowance of loss assessed under Long Term Capital Gains suffered on transfer of investment in shares to J. K. Agri Genetic Ltd. For this, assessee has raised following two grounds: "1. For that on the facts and in the circumstances of the case, the CIT(A) erred in holding that the A.O. was justified in disallowing the entire loss; assessed under the head "Long Term capital gains", which the appellant had suffered on transfer of investment in shares to J. K. Agri Genetics Ltd., & that there was a mistake appare....
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....espect to first issue of Long Term Capital Gains on slump sale of sugar undertaking revised from Rs.3 cr. to Rs.37.16 cr. The assessee in its return of income filed audited report in Form No.3CEA wherein net worth of sugar undertaking was arrived at negative (-) Rs.716.80 lacs. According to assessee, the net worth of Sugar undertaking was negative and the same was considered as nil. The Assessing Officer accepted the negative net worth while framing assessment u/s. 143(3) of the Act. The Assessing Officer issued rectification notice u/s. 154 of the Act by stating that there is no scope of converting the negative figure of net worth as nil and there is mistake in not making addition of negative net worth of Rs.716.80 lacs. According to Asses....
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....o the excess value of assets over the book value of liabilities relatable to the undertaking. In the present case, the AO while framing assessment u/s. 143(3) of the Act computed and gone through the book value of liabilities of sugar undertaking, which was at Rs.130,60,86,238/- whereas the value of assets was at Rs.123,44,06,601/-. It means that the book value of liabilities exceeded the value of assets by Rs.7,16,79,637/-. The AO formed an opinion and accepted this fact during the assessment proceedings u/s. 143(3) of the Act. Subsequently, the AO changed his opinion and formed an opinion that the excess of liabilities over the assets represented the additional cost for transfer of undertaking and excess of liabilities is in the nature of....
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....e facts of the above referred two cases. We find that the facts narrated in the order of the lower authorities and as argued by both the sides before us are that the value of assets of the Sugar Division is less than the value liabilities, the net worth was negative which was required to be taken at nil. We find that the interpretation placed by AO in section 50B of the Act is highly debatable. It cannot be said with certainty that a plan reading of section 50B of the Act reveals that the net worth of the undertaking cannot be considered to be the cost of acquisition for the purpose of sections 48 and 49 of the Act, which is required to be computed in accordance with explanations (1) and (2) of Section 50B of the Act. It means that the issu....
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....e disallowance of entire Long Term Capital Loss on transfer of shares by invoking the provisions of section 154 of the Act by resorting to rectify the assessment order originally passed u/s. 143(3) of the Act. In the rectification order u/s. 154 of the Act, the AO held that the above scheme of arrangement was a demerger within the meaning of section 2(19AA) and section 2(19AAA) of the Act. According to AO, as a result, assessee was demerged company and J. K. Genetics Ltd. was a resultant company. We find from the above facts that the scheme of arrangement between the assessee and J. K. Agri Genetics Ltd. was not a scheme of demerger as it understood from section 2(19AA) of the Act. In fact, the assessee did not any time carried out any inve....
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....f opinion, considered the very same transaction as demerger of an undertaking and disallowed the Long Term Capital Loss as not chargeable to tax on the ground that transfer of shares was part of demerger u/s. 2(19AA) of the Act. We are of the view that this adjustment did not amount to mistake apparent from record because there is no jurisdiction for the AO to decide this issue while acting u/s. 154 of the Act as this issue is highly debatable. The enhancement of capital gains income was based upon change of opinion on the part of the A.O. which was beyond the purview of Sec. 154 of the Act which permits rectification of mistake which is apparent from record. Various judicial authorities have repeatedly held that a "mistake" which can be es....