TaxTMI 
TaxTMI 
2017 (1) TMI 327
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....er passed by the A.O. u/s 143(3) of the Act dated 27.12.2010, shall not be revised under the provisions of section 263 of the Act. The CIT, proposed to revise the assessment order for the reason that on examination of the assessment records certain omissions and commissions were noticed, which render the assessment order erroneous in so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. The CIT in the said show cause notice, observed that the A.O. has completed the assessment u/s 143(3) of the Act, without examining the issue of computation of capital gain by the assessee on relinquishment of his share in two partnership firms. The CIT, further, observed that the assessee has computed long term capital gain towards relinquishment of his right in the partnership firms, whereas the amount received from the partnership firm, over and above the amount credited in the capital account of the partner is in the nature of goodwill cannot be considered under the head capital gains. The A.O. without examining the above issue and also without application of mind as to whether computation of capital gain by deducting cost of acquisition is correct or not....
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....ost of acquisition, the assessment order passed by the A.O. u/s 143(3) is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, the assessment order passed by the A.O. u/s 143(3) of the Act has been set aside and direct the A.O. to re-do the assessment denovo after giving the assessee a reasonable opportunity of being heard. Aggrieved by the CIT order, the assessee is in appeal before us. 6. The Ld. A.R. for the assessee submitted that the assessment order passed by the A.O. u/s 143(3) of the Act, dated 27.12.2010 is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has examined the issue of computation of capital gain towards relinquishment of share in partnership firms by the assessee. The A.R. further submitted that during the course of assessment proceedings, the assessee has filed complete details of the transactions and the A.O. has considered the issue of computation of capital gain towards amount received from the partnership firms on account of relinquishment of his share and after satisfied with the explanations offered by the assessee has re-computed the capital gain. The A.O. after considering the....
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....ires from the partnership firm the amount received over and above the capital account of the partner is in the nature of goodwill against which the assessee cannot claim cost of acquisition. This is because when a partner retires from the partnership firm, there is no transfer which envisages the computation of capital gain. The CIT further observed that when partner receives amount towards relinquishment of his right, the entire amount received from the partnership firm is taxable as capital gain, whereas, the assessee has computed capital gain by adopting cost of acquisition, which is incorrect. The A.O. without examining the issue and also without applying his mind, simply allowed the computation of capital gain by the assessee, which renders the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. 8. It is the contention of the assessee that he had furnished all the details pertaining to computation of capital gain towards relinquishment of his share in partnership firm at the time of assessment. The A.O. after satisfied with the explanation offered by the assessee has reworked the computation of capital gain by adopting different indexat....
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.... allowing any deductions towards cost of acquisition of the asset. The CIT further observed that the A.O. without application of mind allowed the cost of acquisition claimed by the assessee, which is otherwise not allowable, therefore, the assessment order passed by the A.O. is prejudicial to the interest of the revenue. It is the contention of the assessee that when a partner retires from the partnership firm taking his share of interest in the firm, no element of transfer of interest in a partnership firm by the retiring partner to the continuing partner. The assessee further contended that when amount received in full and settlement towards partner's share, the amount received over and above his capital account is not liable to be taxed as capital gain because there is no transfer within the meaning of section 2(47)(v) of the Act when a partner retires from the partnership firm. We find force in the arguments of the assessee, for the reason that the coordinate bench of ITAT, Hyderabad, in the case of ACIT Vs. N. Prasad ITA No.1200/Hyd/2010 vide order dated 27.1.2014 held that when a partner retires from the partnership firm, taking his share of interest in the firm, no element o....