TaxTMI 
TaxTMI 
2020 (12) TMI 257
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.... In the first ground, the Department has challenged the quashing of the assessment order passed by the AO u/s 147 /143(3) of the Act where the CIT (A) held that there was a change of opinion as all the facts were on record and had been examined by the AO while passing the original assessment order. • In the second ground, the Department has challenged the deletion of an addition of Rs. 98,60,63,613/- made by the AO by holding the claimed long term capital gain arising on sale of a property being 2 contiguous plots of land and building thereon as short term capital gain u/s 50 of the Act. • In the third ground, the Department has challenged the deletion of disallowance of depreciation of Rs. 2,42,48,977/- made by the AO as the WDV of the relevant block of assets which in his opinion had become nil in terms of the provision of the section 50 of the Act. 3. The facts in brief are that the assessee filed its original return of income for the AY 2009-10 on 29/09/2009. The return of income was subject to scrutiny and income-tax assessment was completed u/s 143(3) on 28/12/2011 at the returned income. Thereafter, a notice 148 of the Act was issued on 30/03/20....
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....e postdated cheques and therefore, a supplementary mortgage deed dated 28/08/2009 was executed and the due payment was rescheduled. But again, IIPM failed to honour its obligations even as per the supplementary mortgage deed. 7. Due to failure of IIPM to make the payments, the assessee filed a suit before the Hon'ble Delhi High Court, which was referred for mediation and conciliation by the Hon'ble High Court. After deliberations in the mediation proceedings, a settlement deed dated 30/05/2015 was executed between the assessee and IIPM. In view of the settlement deed, the Hon'ble Delhi High court passed the decree vides its order dated 05/06/2015 cancelling the aforementioned sale deeds. Cancellation deeds giving effect to the said cancellation of those sale were also executed on 06/06/2015 between the assessee and IIPM. 8. The AO recorded his reasons for reopening the assessment which have been incorporated on page nos. 1-3 of the assessment order. The AO in his reasons has stated that, a perusal of the records shows that the asset on which the assessee declared LTCG during AY 2009-10 formed part of the block of assets on which depreciation had been claimed. A perusal of ....
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....eld the return of income filed with a letter dated 29/02/2016 as null and void by holding that the assessee is not entitled to revise the return of income filed in response to the notice u/s 148 of the Act. 12. The assessing officer held that the depreciation was charged on the property sold. The said asset was included in the block of assets on which depreciation was charged and treatment of sale of the said asset was not made as per provision of Section 50 of the Act. Since depreciation was charged on the asset sold and the sale consideration was more than the WDV of the block of assets, the excess was held by him as a short-term capital gain chargeable u/s 50 of the Act. Further, the assessing officer held that since the sale consideration was more than the WDV of the block of assets, the WDV of the block was reduced to 'nil' and therefore, no depreciation was allowable on the same, whereas the assessee had claimed depreciation of Rs. 2,42,48,997/- on this block of assets and therefore, the AO disallowed the said depreciation also. 13. As regards the reopening, the CIT(A) held that on going through the computation of assessable income for the AY 2006-07 to 2009-10 and othe....
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....ffered in the returns of income for taxation. Further, the value of the said property remained the same at Rs. 6,10,00,000/- since its purchase and the same was reflected year after year in the balance sheets, ledger accounts and depreciation charts. Since, no depreciation had been claimed on the said property, there is no question of invoking section 50 of the Act on sale of the said property comprising plots of land and building built thereon. Thus, the CIT(A) held that the assessee was justified in treating the capital gain arising on sale of the said property as long term capital gain by relying on the decision in the case of Divine Construction Company Vs ACIT (2011) 138 TTJ 72 (ITAT-Mum) where the ITAT held that if depreciation is not claimed then sale of such assets cannot be computed as per the provisions of section 50 of the Act. 18. The learned CIT DR vehemently presented the case of the revenue and submitted that the assessee did not disclose fully and truly all the material facts necessary for that assessment and therefore, the reopening action was valid. The CIT DR placed reliance on the following decisions: a) Multiscreen Media (P.) Ltd. vs. Union of In....
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....s held by the assessee for more than three years. Therefore, the assessee declared the gain arising on sale of the said property as long term capital gain after taking indexation benefit and due applicable income-tax thereon was paid. The said property was let out to IIPM, since the date it was acquired and rental income was duly recorded in the books of account as well as offered for taxation in the returns of income of the 4 assessment years. Since the said property was let out, no depreciation was claimed on the same under the Income-tax Act since the date of its acquisition. The value of the said property remained the same in the books and the depreciation chart. Details of the assets and depreciation claimed thereon are mentioned in the return of income. Thus, all the facts regarding rental income, no depreciation thereon and the long-term capital gain were properly declared in the returns of income and were mentioned in the computation of income and depreciation chart attached with the tax audit report. No discrepancy was pointed out by the assessing officer in the information filed by the assessee in its return of income for all the assessment years since the property was....
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....pplicable to the facts of the case. Thus, he argued that the reopening of the assessment is invalid and should be quashed. 25. We have heard the rival submissions and have perused the paper book, written submissions and synopsis placed on record. The assessee filed its original return of income on 29/09/2009 for the AY 2009-10 which was subject to assessment u/s 143(3) of the Act vide order dated 29/12/2011. The said assessment was reopened by issuing a notice u/s 148 of the Act on 30/03/2015, i.e., beyond the period of four years from the end of the relevant assessment year. Ostensibly, as per proviso to the section 147 of the Act, the assessment can be reopened after four years in case of the assessment completed u/s 143(3) of the Act when there was a failure on the part of the assessee to fully and truly disclose the particulars of income. 26. On perusal of the computation of assessable income for the AY 2009-10 placed at page nos. 1-4 of the paper book, it is seen that the assessee had declared long term capital gain of Rs. 143,85,67,404/- on sale of the said property. On perusal of the details of rental income from AY 2006-07 to 2009-10 placed at page nos. 242, 250, 2....
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....t cannot be reopened on the basis of mere change of opinion on the same set of facts on record. The Ld. DR relied on various case laws as referred above. On perusal of the same, it is seen that in those cases either new material had come to the notice of the assessing officer or there was some incorrect disclosure by the assessee in his return of income. Thus, the said cases are clearly distinguishable from the facts of the assessee and cannot be applied in this case. 31. We agree with the contention of the assessee that the assessment order cannot contain each and every fact verified by the assessing officer. What has been verified by him forms part of the assessment record. All the information regarding long term capital gain, depreciation, sale of asset was part of the return of income as well as the assessment record which only was later on referred to by the assessing officer to record reasons of escapement of income. Thus, the said facts were on the record of the assessing officer and verified by him. Further, the CIT(A) also verified the said information as has been mentioned in its order. Even, we have verified the said information from the documents placed in the pap....
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....ets by following the assessment order for the AY 2009-10. Since we have dismissed the appeal of the revenue for the said assessment year as above, by following the order in the said appeal, this appeal of the revenue is also dismissed. Assessee's appeal no. 4736/Del/2017 34. Now we will take up assessee's appeal. The first four grounds of appeal were to challenge the action of the assessing officer in not considering the revised return of income filed by the assessee on 29/02/2016 excluding the amount of long term capital gain on sale of the property being the plots of land and building for which the sale was cancelled by an order dated 05/06/2015 of the Hon'ble Delhi High Court. 35. As discussed above, the assessee filed a revised return of income during the course of assessment proceedings initiated by the AO u/s 148 of the Act but which was treated by the AO as invalid by holding that the assessee is not entitled to revise the return of income filed in response to the notice issued u/s 148 of the Act. The CIT(A) held that not only the said notice issued u/s 148 of the Act was invalid but also held that the return of income filed in response to the notice issued u/s 148 ....
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.... h) Omega Sports & Radio Works vs CIT [1982] 134 ITR 28 (All.) i) Gammon India Ltd vs CIT [1995] 214 ITR 50 (Bom) j) Maharana Mills (P) Ltd vs ITO [1959] 36 ITR 350 (SC) k) Addl. CIT vs Kanta Behan [1983] 140 ITR 187 (Delhi) l) Rastriya Ispat Nigam Ltd vs ACIT [2016] 74 taxmann.com 112 (AP) m) ACIT vs Hughes Services (FE) Pte Ltd [2005] 93 ITD 77 (Delhi)(TM) 8. Further, the learned Assessing Officer also erred in law and on facts in ignoring the fact that the Revenue can only charge tax as per law as has been held by the Hon'ble Supreme Court of India in the case of CIT vs Shelly Products (2003) 261 ITR 367 (SC) and NTPC Ltd vs CIT 229 ITR 383 (SC)." Admission of additional grounds 40. The Ld. AR on behalf of the assessee submitted that the additional grounds are legal issue which goes to the very root of the taxability of LTCG in wake of decree passed by the Hon'ble Delhi High Court and should be admitted and these grounds do not involve any fresh investigation into facts are arising out of facts already on record. The assessee also submitted that grounds of appeal on a matter of law can be raised any time and even....
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....s held that the revised returns filed after the due date due to delay in sanction of scheme by the NCLT has to be accepted by the department and assessments have to be completed thereon. In Dalmia Power (supra), the NCLT order was the occasion to revise return but in the present case, the consent decree of the Hon'ble Jurisdictional Delhi High Court was the reason to revise the return of income. Further, it was improbable for the assessee in both the circumstances to file the revised return in time as event occasioned the said revision happened later and beyond prescribed limitation period. The Hon'ble Apex Court decided the matter on the basis of demand of justice. Ld. AR also relied on the judgment of the Hon'ble Apex Court in the case of National Thermal Power Corporation Ltd v CIT (1998) 229 ITR 383 (SC) holding that if as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a nontaxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. ....
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....43(3) of the Act was passed on 28/12/2011. Section 154(7) of the Act provides for a rectification within four years from the end of the financial year in which the order u/s 143(3) of the Act was passed which in this case was by 31/03/2016. The assessee filed the letter revising the computation of income on 29/02/2016 with which, the cancellation of the sale deed and consequently, non-accrual of the capital gains was also very well brought to the notice of the AO within the time prescribed by the law. The said letter has to be considered as an application u/s 154 of the Act to give effect to the cancellation of sale deeds of the property resulting into the assessed LTCG as there is no prescribed form of such application. 50. The assessee further submitted that once copies of the cancellation deeds of the sale of the property along with the consent decree of the Hon'ble Jurisdictional Delhi High Court was brought on record which established that the sale transactions were cancelled and capital gains on sale of the said property which had already been declared in the return of income by the assessee was not taxable at all, the mistake in the assessment order became apparent and gl....
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....IT vs Lab India Instruments (P) Ltd., 93 ITD 120ITAT-PUNE f) Lustre Tiles Ltd. Vs ACIT 2007-TIOL-132-ITAT-JAIPUR g) Smt. Sneh Lata Jain v CIT [2004] 140 Taxman 156 J&K High Court h) Sunflag Iron & Steel Co. Ltd. LTD 2016-TIOL-2729-HCMUM-IT i) Tiam House Service Ltd. 242 ITR 539(Mad) k) CIT Vs Vali Brothers. 282 ITR 149(ALL) l) Smt. Jiby Mathew vs DCIT Kottayam in ITAT no. 523/Coch/2019 vide order dated 09/03/2020 53. The AR also submitted that the procedure should not be the handmaid and not the mistress of legal justice and cause of justice should not be subservient to the rules of procedure and placed reliance on the following judgments: a) Kailash v. Nankhu [2005] 4 SCC 480; State of Punjab v. ShamlalMurari [1976] 1 SCC 719 b) Sushil Kumar Sen v. State of Bihar, (1975) 1 SCC 774 are pertinent: (SCC p. 777, paras 5-6 c) State of Punjab v. ShamlalMurari, (1976) 1 SCC 719 d) GhanshyamDass v. Dominion of India, (1984) 3 SCC 46, e) SardarAmarjit Singh Kalra v. Pramod Gupta, [2003] 3 SCC 272. 54. The AR further submitted that if this matter is decided on mere technicalities, the as....
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....15804 of 2017] 57. The assessee further submitted that the it has been held by the Hon'ble Bombay High Court in CIT Vs Lata Mangeshkar Medical Foundation [2019] 410 ITR 347 (Bom) that the period of limitation should not come as an hindrance to do substantial justice between the parties. 58. The assessee further placed reliance on a recent decision of the ITAT in Futura Polyster Ltd. v ITO [2020]118 taxmann.com 243 (Mumbai - Trib.) (Dated 16/07/2020) and submitted that the situation in the said case was akin to the present case. In Futura (supra), the assessee entered into an agreement to sell a piece of land and the assessee filed its return declaring certain amount as long term capital gain from sale of land. In the appellate proceedings, the assessee raised a new plea that the agreement to sell was subsequently cancelled and, thus, in absence of any valid transaction relating to sale of land in existence, nothing could be brought to tax as long-term capital gain. It was held that tax cannot be levied on a hypothetical income. 59. The assessee submitted that there is no estoppel against the statutory provisions. When, the AO became aware that the transfer / sale of proper....
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....rt payments received by the assessee and how the same was to be treated. Thus, the assessee has enriched itself by those payments and the tax treatment of all those payments received by the assessee has to be seen. 64. This transaction involves complex factual issues of determining the exact quantum of income to be taxed within the meaning of section 154 of the Act which takes it outside the purview of section 154 of the Act. 65. The CIT DR also submitted that even if it is presumed that the matter could be rectified u/s 154 of the Act, then this benefit could be allowed as per the procedure laid out in the statute which involves time limit. The assessee sought to rectify the order dated 28.12.2011 passed u/s 143(3) of the Act and thus, the rectification application could be filed within four years from the end of FY 2011-12 i.e. by 31/03/2016. However, there is no such claim for rectification filed by the assessee till 31/03/2016 and thus, the time limit has already expired. The revised return filed by the assessee could not be considered as rectification application in any manner because if the assessee wanted to file a rectification application u/s 154, it should have clea....
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....as below: (ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if, - (a) such sum is forfeited; and (b) the negotiations do not result in transfer of such capital asset; 69. The AR submitted that in this case no money was received as an advance or otherwise in the course of negotiation for transfer of capital asset where the negotiations did not result in transfer of such capital asset because in this case, the assessee had already transferred the capital asset in Sept 2008 by registered conveyance deeds and also handed over the possession of the property to the buyer. Thus, in this case the money remained with the assessee was not on account of the conditions stipulated in the said section because, firstly, the money was not received as an advance but it was the sale consideration of a duly completed transaction by virtue of the registered conveyance deeds; and secondly, the same was also not received in the course of negotiation where the negotiations did not result in transfer of such capital asset as the same had already been transferred. 70. The AR further submitted that the cl....
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....turn as well as computation of income and reasons for revising the return. The assessee placed all the documentary evidences being the sale deeds, mortgage deeds, suit filed by the assessee against buyers, settlement deeds, decree issued by Delhi High Court, and cancellation deeds of the properties executed in pursuance of the settlement agreement and Delhi High court order on record to establish that the sale of the property under consideration had been cancelled and therefore, no capital gain accrued on the sale of the said property to the assessee. Therefore, the assessee excluded the amount of long-term capital gain declared on the sale of the said property in its revised computation of income. 76. However, the lower authorities rejected this relief to the assessee on the ground that a revised return cannot be filed during the reassessment proceedings and thus, ignored all the evidences placed on record and therefore, the assessee is before us claiming that not excluding the long term capital gain on sale of the said property from the taxable income is highly unjust and the same should be rectified. 77. Admittedly, all these documentary evidences establishing the cancella....
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....as observed in the case of CIT vs. Vithalbhai P. Patel (1999) 102 Taxman 36 (Guj) as under: "Admittedly, the purported sale was null and void under the provisions of section 4 of the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972. Under section 4 it was provided that no who owned any vacant land, shall, on or after the appointed day, alienate such land by way of sale, gift, exchange, mortgage other than simple mortgage lease or otherwise or effect a partition or create a trust of such land and any alienation made or partition effected or trust created in contravention of the said provision shall be null or void. Therefore, the transaction in question was null and void ab initio and it was so declared by an order of the collector. Further, the same wad not challenged. Thus, since there was no sale transaction in the eye of law, there could be no capital gain arising out of null and void transfer of such land. Hence, the Tribunal was right in coming to the conclusion that no capital gain had accrued to the assessee. " 79. In the present case, the sale deeds of the property were executed and LTCG was declared in the return of income and ....
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....come or its receipt, but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income', which does not materialize. As observed by the Hon'ble High Court, where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the 'books of account'. On the basis of our aforesaid observations, we are unable to persuade ourselves to concur with the view taken by the lower authorities, and therein vacate the addition towards LTCG made by them, on the basis of the MOU, dated 19-12-2012." 81. In Futura Polyster (supra) as well as in the present case, the assessee declared long term capital gain on sale of properties in their returns of income. In both these cases, the sale of properties got cancelled much later. In both these cases, the ground raised by the assessee to exclude the longterm capital gain from the taxable income was not available at the time of filing the original return of income. Both the assessees rais....
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....e case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) 2002-TIOL-444-SC-LMT and Saroj Aggarwal v CIT 156 ITR 497 SC, wherein it has been observed by the Apex Court that too hyper-technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. 84. Section 154 of the Act provides for rectification of a mistake apparent from record. "Any mistake apparent from the record" covers all mistakes discoverable from a perusal of the whole evidence in the case, or from an omission to apply certain provisions of the Act to the facts of the case, or a mistake due to an overlooking of certain aspects of the case, or a mistake arising on account of a wrong construction of any provisions of the Act. The error may be either of fact or error of law. Thus, we don't agree with the contention of the CIT DR that the section 154 of the Act can be undertaken only to rectify arithmetical errors. Further, there is no format prescribed under the law for filing a rectification application u/s 154. What is relevant that a mistake is brought to the knowledge of the AO and here in this case assessee has filed a very ....
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....assessee omitted to claim the same. This view has been upheld in the case of Lustre Tiles Ltd. Vs. Addl. CIT (2007) 108 ITD 35 where reliance has been placed on Container Corporation of India Ltd. Vs DCIT (2005) 92 ITD 333 (Delhi) wherein the ITAT, Delhi Bench, after discussing several decisions of the Court including that of Anchor Pressings (P) Ltd. Vs CIT (1986) 161 ITR 159 (SC) held that the jurisdiction u/s 154 can be assumed if there is a mistake apparent from record. If on the basis of material on record, the assessee is entitled to a relief which has remained to be allowed, then it would constitute a mistake apparent from record and consequently, such relief cannot be denied merely because the assessee omitted to claim the same by mistake. 87. All the documents to establish that the sale of the said property had been cancelled were on the record of the assessing officer. The long-term capital gain on the said property was not at all taxable in the hands of the assessee in view of cancelled sale transaction. Thus, in view of the settled position of law, the assessing officer was duty bound to allow relief to the assessee even if the assessee did not claim so. Even if t....
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....ue to the assessee can be referred to wherein CBDT has instructed that, " .....Officers of the department should not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist taxpayer in every reasonable way, particularly in the matter of claiming and securing any relief and in this regard the Officers should take initiative in guiding the tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would in the long run benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from government......" 91. Such a guidance to the field officers by the CBDT is to earn taxpayer's confidence and trust. An action or inaction which erodes any taxpayer's faith in Indian tax and judicial system does not do any of us any good. The well- meaning advice given by the CBDT must be implemented to the fullest extent. As to the binding nature of this advice, we may only refer to section 119 of the Act and Hon'ble Supreme Court's judgment in the case of UCO Bank Vs CIT (1999) 237 ITR 889(SC). Hon'ble Supreme Court has time and again held that ....