TaxTMI 
TaxTMI 
2020 (4) TMI 367
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....reciating the fact that the conditions precedent to passing an order under the said section were not satisfied; 1.2 The Id. CIT erred in holding that the assessment order passed by DCIT is erroneous and prejudicial to the interests of the revenue: 1.3 The Appellant submits that considering the facts and circumstances of its case. and the law prevailing on the subject. the assessment framed by the Id. DCIT was after consideration of facts and hence, setting aside of the same by the Id. CIT under section 263 of the Act is erroneous, in excess of jurisdiction and bad in law: 1.4 The Appellant submits that the impugned order under section 263 of the Act by the CIT be struck down. 2. Without prejudice to the above, 2.1 The Id. CIT has erred in directing the DOT to consider disallowance of carry forward of long term capital loss aggregating to Rs. 1,33,76,692 by treating it as an advance written off. 2.2 The Id. CIT erred in holding that a right to acquire machinery is not in the nature of a capital asset. He erred in not appreciating the fact that the definition of 'transfer' includes relinquishment of right to a acquire a ca....
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.... Rs. 1,33,76,692/- the same was allowed to be carried forward u/s 143(3) of the I. T. Act, 1961. 6. In this regard, the assessee placed reliance upon the several case laws for the proportion that when AO has enquired into the matter and applied his mind to the materials on record and then the view has been taken the same cannot be subject the matter of Ld. CIT invoking the provisions of Section 263 of the I. T. Act, 1961. However, Ld. CIT was not satisfied. He observed that the assessment records indicate that the AO has during the course of assessment proceeding only called for routine details and has not delved in detail or made necessary inquiries on the issue of Long Term Capital Loss and investigation on such issues which should have been made. He noted that as is evident from the records and the assessment order, there was no direct query made by the AO regarding the claim of Long Term Capital Loss. The AO accepted assessee's submission and did not make any further queries regarding the ownership, actual transfer, delivery/handing over possession etc of the said property. The Ld. CIT referred to the provisions of Section 263(1) of the Act, the definition of transfer of cap....
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.... accordance with any order, direction or instruction issued by Board under section 119: or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person] 6. It is pertinent to note that a -Capital Gain" or a "Capital Loss" arises on sale/transfer of a capital asset for a consideration. Definition of sale/transfer of asset as per sec 2(47) is as under 2(47) transfer in relation to capital asset includes - (i) sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or iii) the compulsory acquisition thereof under any law; or (v) in a case where the asset is converted by the owner thereof into, or is treated by him as stock-in-trade of a business carried on by him, such conversion or treatment; or iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred....
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....ly of capital equipment. As per Accounting Standard 10, accounting of fixed assets permits such accounting only if an identifiable asset is created. In this case payment of an advance does not create an identifiable asset. Therefore, the amount of advance continues to be disclosed as advances for capital goods. It is such an advance that is written off by Assessee and therefore, it cannot be termed as capital asset as claimed by Assessee nor a right acquired for a capital asset. It, therefore, cannot be claimed under the provision of Capital Gains under the Income Tax Act, 1961, The Assessee had given an Advance for acquirement of the asset but the transaction was not completed so the assessee did not gain any right over such asset. What the assessee wrote off was sundry balance of advance only. 6.3 In view of the above, the assessee's contention that the company had entered into an agreement for purchase of machinery and also paid an amount to the other party (BHEL). whereby acquiring a right, though in a limited extent, over the property in question is completely incorrect in law. The claim is, therefore, against the provisions of law and not allowable to assessee. T....
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....sequently, the provision written back in the profit and loss account for the year ended 31 March 2013, aggregating to Rs. 3,74,39,5201-, should not be taxable under section 41 of the Act. 4. The Company has received it settlement amount from BHEL amounting to Rs. 40,62,692/and the balance advance receivable from BHEL of Rs. 1,33,76,692/- was written off in the books of accounts during the financial year 2012-13. This amount has been claimed as it capital loss since it was towards acquisition of it capital asset." 8. Referring to the above Ld. Counsel of the assessee stated that the matter has duly been explained to the AO and after acceptance of the same the AO has allowed the claim. Hence Ld. counsel of the assessee submitted that the Ld. CIT cannot invoke the provisions of Section 263 of the I. T. Act. 9. Per contra the Ld. Departmental representative relied upon the orders of the CIT. He referred to the provisions of Section 263 of the Act for the proportion that now Ld. CIT can invoke the jurisdiction u/s 263 of the I. T. Act if the order has been passed without making proper inquiry and verification. Furthermore Ld. DR submitted that the so called explanation as....