TaxTMI 
TaxTMI 
2021 (4) TMI 201
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....ernment Securities. During the course of assessment proceedings, the claim of the assessee for such higher amount of Long Term Capital Loss was examined by the Assessing Officer. On such examination, he found that the higher amount of Long Term Capital Loss on the transfer of Government Securities was claimed by the assessee by applying Cost Inflation Index on the cost of the Government Securities. In this regard, he noted that a similar claim of the assessee for the benefit of indexation was initially allowed by the Assessing Officer in the assessment year 2010-11, but the same was finally disallowed by the Assessing Officer in pursuance of the order passed by the concerned ld. CIT under section 263 of the Act. He also noted that an appeal was filed by the assessee against the order passed by the Assessing Officer under section 143(3) read with section 263 of the Act before the ld. CIT(A), but the same was still pending. Following the stand taken in assessee's own case for A. Y. 2010-11 on a similar issue, the claim of the assessee for Long-Term Capital Loss on the sale of Government Securities by applying Cost Inflation Index was rejected by the Assessing Officer. He also reje....
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....3,740 /-, which for the purpose of section 48, shall be deemed to be the full value of the consideration received or accruing as a result of such transfer, as per section 50 C. While assessing the STCG from these four properties, the sale value should have been deemed to be Rs. 9,91,43,740/-, which would result in STCG of Rs. 5,05,46,267 /-. This omission had resulted In underassessment of income of Rs. 1,89,42,140 /-and the tax effect would be Rs. 65,67,201 /-without surcharge and cess". The ld. Principal CIT accordingly issued a show-cause notice to the assessee on 20.11.2018 pointing out the above errors and seeking explanation as to why the assessment made by the Assessing Officer under section 143(3) of the Act should not be revised by invoking the provisions of section 263. Thereafter another notice was issued by the ld. Principal CIT on 19. 02. 2019 under section 263 of the Act pointing out the further error allegedly committed by the Assessing Officer in the assessment completed under section 143(3) of the Act as under :- "During the course of assessment of Return of AY 2015 -16 it was found that Right on Property being 37 flats of different configurations, havi....
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....nder section 263 on 20.11. 2018 and 19.02. 2019, the following written submissions, inter alia, were made by the assessee in respect of each and every error allegedly pointed out by the ld. Principal CIT in the order of the Assessing Officer passed under section 143(3):- "Set off of LTCG of Rs. 86,39.024 /-from Sale of Bonds and LTCG of Rs. 11,302,064 /-from sale of Right to Property against LTCL of Rs. 111,33,28,388!-from sale of Government Securities not permissible to the assessee. During the year the assessee has earned Long Term Capital Gains (LTCG) of Rs. 86,39,024 /-from Sale of Bonds and L TCG of Rs. 1,13,02,064 /-from sale of Right to Property, totalling to Rs. 1,99,41, 088 /-. The said LTCG of Rs. 1,99,41,088 /-was set off by the assessee against Long Term Capital Loss of Rs. 1,11,33,28,388 /-from sale of Government Securities in the current year. In the notice issued u/ s 263 of the Act, your goodself has mentioned that as per the return of income filed by the assessee, indexation benefit on sale of Government securities was taken which resulted in Long Term Capital Loss (LTCL) of Rs. 1,11,33,28,388 /-. However, indexation benefit should not ha....
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...." means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944); Further, section 2 (2) of the Public Debt Act, 1944 defines " Government security" as follows: "Government security" means- (a) a security, created and issued, I by the Government] for the purpose of raising a public loan, and having one of the following forms, namely:- (i) stock transferable by registration in the books of the Bank; or (ii) a promissory note payable to order: or (iii) a bearer bond payable to bearer; or (iv) a form prescribed in this behalf; (b) any other security created and issued by the Government] in such form and for such of the purposes of this Act as may be prescribed; The Government securities which were sold during the year were stocks being of the nature described in clause (i) to section 2 (a) of the Public Debt Act, 1944. The third proviso to section 48 of the Act restricts the i....
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.... period exceeding 36 months. Sr. No. Flat No. Cost of construct ion (A) Actual sale proceeds Stamp duty valuation u/s 50C (B) ST capital gains (B-A) 1 Fkat 21, Kalra Road, Burdwan 26,92,609 36,46,400 36,46,400 9,53,791 2 Flat 2, Kalra Road, Burdwan 19,65,132 28,28,800 29,03,940 9,38,808 1 Flat 2A, Kalra Road, Burdwan 26,92,609 36,46,400 44,67,800 17,75,191 TOTAL 36,67,790 As evident from the above table, the assessee in computation of capital gains from sale of the above three properties has considered the Stamp Duty Valuation u/ s 50 C of the Act as the sale consideration to arrive at the STCG of Rs. 36,67,790 /-. The said short term capital gains of Rs. 36,67,790 /-was offered for taxation in the computation of total income. With regard to the 4^th property, being flat at 5, Lala Lajpat Rai Sarani, it was submitted during assessment that the said flat was acquired in the year 1989 and was therefore a Long Term Capital Asset by virtue of section 2 (29 A) of the Act. In support, reliance was placed on the judgment of the Hon'ble Bombay Hlgh Court i....
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..... In support, reliance was placed on the judgment of the Hon'ble Bombay High Court in the case of CIT vs Ace Builder (supra). The resultant STCG of Rs. 2,9,36.337 /-was set off with LTCL of the current year. A copy of the original computation is enclosed at page 2 -3. However the same was not allowed in the assessment order on the pretext that STCG from sale of the depreciable assets cannot be set off with the Long Term Capital Loss. The assessee has tiled an appeal before the learned CIT(A) against this disallowance and the same is pending for adjudication. In the notice issued u/ s 263 of the Act, your goodself has raised the ground that the assessee has not considered the Stamp Duty Valuation of Rs. 9,91,43,740 /-in computation of STCG in this case which has resulted in underassessment of income of Rs. 1,89,42,140 /-which has rendered the assessment order as erroneous. In this regard, please note that during assessment, it was submitted before the learned AO that immediately before the sale, the property was valued by M/ s N K Chakravarty and Co, registered valuer at a value of Rs. 5,84,00,000 /-. A copy of the Valuation report is enclosed at page 19 -....
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....ing inquiry into a claim which is claimed by assessee and allowed such claim. 3) which is not in accordance with any order/ direction/ instruction (i. e. circulars) issued by CBDT; 4) which is not in accordance with any decision of jurisdictional High Court or Supreme Court which is prejudicial to the assessee or any other person. In other words, where jurisdictional High Court or Supreme Court's decision is against the assessee or any other person and AO passed the order without considering such judgment then such order shall be considered as erroneous and prejudicial to the interest of revenue. Applying this explanation to the facts of the assessee, it is clear that proper enquiries were conducted by the learned AO with regard to the sale of depreciable assets/ flats. The assessee has filed written submissions before the learned AO explaining the reasons as to why the stamp duty valuation should not be considered for computing the Capital Gains with regard to the 4^th property during the course of assessment and the same was duly considered by the ld. AO. As such, the assessment order cannot be said to be erroneous in this case. Your goodself n....
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....Non-current investments', refer Note II of the audited accounts. The investment in Right to Property was never considered as 'stock in trade'by the assessee. The assessee declared a total receipt of Rs. 16,10,57,288 /-in the assessment year 2015 -16 as sale consideration of the property, being 37 flats. The last date of payment in all the 37 cases was 18 -02 -2015. Rights over the said 37 f lats were transferred after more than three years from the date of its acquisition to respective individuals at a total consideration of Rs. 16,10,57,288 /-after receipt of the f inal instalment of sale consideration on 18.02.2015. Accordingly, the appellant considered the indexed cost of acquisition of the right of respective 37 flats as per provisions of sec. 48 r.w.s. 2 (14), 2 (29 A) and 2 (47) of the Act and computed long term capital loss on transfer of the said rights at Rs. 36,60,000 /-in AY 2015 -16. The said investment being a capital asset and disclosed as such in the audited accounts of the company was duly disclosed before the department in AY 2012 -13, 2013 -14 and 2014 -15 and assessments for all these years were completed after proper examination and scrutin....
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....d the facts of the case and accepted the claim of the assessee that the impugned transactions is to be treated as Capital Gains and directed the learned AO to assess the income from the sale of Rights to Property under the head 'Capital Gains' The relevant extract of the CITCA) order is reproduced below: "12. In this case 37 f lats were purchased of different configuration. This was validated by an agreement. The approximate total area was 50051 sq. ft. Assessee purchased entire purchase consideration.clt was reflected in the Audited Accounts as wall. It was shown as investment. Assessee declared total receipt of Rs. 16,10,57,228 /-as sale consideration. The last date of payment in all 37 cases/ flats was 18.02.2015. This was after 3 years. This position was accepted in earlier years. Thus following the decision in Radha Soami Satsang. I have no option but to go by the decision: Radha Soami Satsang on the principles of consistency. Reliance is also placed on the decision of Calcutta ITAT in the case of DCIT vs. M/ s. ABCI Infrastructure Pvt. Ltd. (ITA No. 990 / Kolkata/ 2013). " In light of the aforesaid facts, let us now examine the pro....
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....had not been considered and decided in the appeal-CIT(A) had considered and decided the issue-once the issue was considered and decided by the CIT(A), the remedy of the Revenue cannot l ie in the invocation of the jurisdiction under s. 263 -Revisional order passed by the CIT under s. 263 was not valid "where an order passed by the AO is subject to an appeal that has been filed, the power of the CIT to invoke his revisional jurisdiction under s. 263 can only extend to such matters which have l it" been considered and decided in the appeal. The words which have been used in Expln. (c) to iub-s. (1) of s. 263 are " considered and decided". In other words, it is not merely a consideration that disables, but tile matter has to be considered and decided in the appeal. The submission of counsel appearing on behalf o J the Revenue that the Cf T(A) has not decided the issue, while dealing with the question oJ enhancement, cannot be accepted. The submission which has been urged on behalf of the Revenue is that the CIT(A) was requested to exercise his power of enhancement in pursuance of the request made by the Addl. CIT on 20 th May, 2005 and that the request which was made was to c....
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....In other words, the sale of gold ETF would be STCG instead of LTCG and as a result the indexation benefit would not be available. In this way, the under-assessment was found to be to the tune of Rs. 2,11,99,359 /-as follows: Particulars Sale price Cost price Actual L.T. Capital Gain Remarks Bonds (Long Term) 2,06,79,00,000 205,92,60,976 86,39,024 No tax was levied by the department Govt. Securities 1,20,00,00,000 119,83,82,422 16,17,578 Set off with brought forward L.T. Capital loss Profit on sale right to property 113,02,064 No tax was levied by the Dept . Long term capital gain (Without STT) 199,41,088 86,39,024 plus 1,13,02,064 = Rs. 1,99,41,088/- Gold ETF (short term capital gain 5,90,55,635 5,77,97,364 12,58,271 The assessee as was deptt. Treated it L.T. capital loss of Rs. 46,43,572/- after applying const. Indexation. Short term capital gain (without STT) 12,58,271 In this connection, the assessee has pointed out that the issue at hand was before the CIT(A). Needless....
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....the course of assessment and which was not looked into by the AO before disposing. Clearly the AO has passed an order without applying his mind on the facts emanating from documents on records which were fi led by assessee. Mechanical claim if assessee without the AO exercise his statutory duties to pass an assessment in accordance with law on the facts of each case has therefore resulted in an erroneous assessment as well as one prejudicial to the interest of revenue. 7. Now coming to the issue raised in the second show cause, it needs to be stated that there is no dispute on the facts of the case. The dispute is on the treatment of the income from sale of " Right to Property'which had treated as capital gains. Main business of assessee is NBFC and had also forayed into real estate. On 26.08.2011, an 'agreement for purchase was entered by contracting developer M/ s City star Housing Project Pvt. Lt. For purchase of 37 flats. The entire consideration of Rs. 12,57,82, 542 /-was paid on 30.08.2011 thereby acquiring a right on the 37 flats. This investment was claimed as a capital asset and shown in the audited accounts as 'Investment in Right to Property'ur.cer the head 'Inv....
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....ision u/ s 263. It would seem from the submission that the appellate order referred to is for A. Y. 2015 -16. However, neither copy of the appeal order nor the grounds raised in Form No.35 have been provided. On a perusal of the impugned assessment records for A. Y. 2014 -15, it is seen that the issue at hand was never examined by the AO. Needless to say, a finding or an opinion recorded by a tax authority for one assessment year has no binding effect on the issues in other assessment years. In this case at hand, it is evident that the issue relates to A. Y. 2014 -15 as per discussion on the factual matrix. The AO was required to delve into the nature of the transaction by scratching the surface. 6. Hon'ble Delhi High Court in the case of GEE VEE Enterprise vs. Addl.CIT reported in 99 ITR 375, 386 (Del) has held that the CIT may consider the order of the Assessing Officer to be erroneous not only if it contain some apparent error of reasoning or of law or of fact on the face of i t but also because the Assessing Officer has failed to make enquiries which are called for in the circumstances of the case and it is an order which simply accepted what the assessee has state....
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....vidence which come before it. The Income-tax Officer is not only an adjudicator but also an investigator, He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry, It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry, It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word " erroneous" in section 263 includes the failure to make such an enquiry, The order becomes erroneous because such an inquiry has not be made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 10. Further to this it is noticed that there is no appeal right available to the Revenue from the order of assessment passed by Assessing Officer and i.e. why revisionary powers have been given to the Commissioner and such power were held to be of wide amplitude by the Hon'ble Supreme Court in the case of CIT v. Shree Manjunathesware Packing Products & Camphor Works [1998 ] 231 ITR 53 / 96 Taxman....
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....assessment order with regard to applicability of section 50 C read with section 48 of the IT Act on sale of depreciable property. (5) That, the Ld. Pr.CIT has wrongly assumed jurisdiction uls.263 of the Act for setting aside the original assessment order with regard to treatment of the income from sale of right to property under the head 'Profits from Business'in spite of the fact that the said income is assessable under the head 'Capital Gains'as held by the learned CIT(A) in his order dated 04 -03 -2019 for AY 2015 -16 on identical facts of the case. (6) That, the Ld. Pr.CIT has wrongly assumed jurisdiction u/ s.263 of the Act for setting aside the original assessment order on the pretext that the AO has passed the assessment order without making proper enquiries which he should have made. (7) That, as the order of Ld. Pr. CIT on the above issues suffers from jurisdiction, il legality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for". 7. As submitted by the ld. Counsel for the assessee, Grounds No. 1, 2, 6, 7 & 8 raised by the assessee in this appeal are general in nature, which do not ca....
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....ts made in the Government Securities Act. 10. We have considered the submissions made by the ld. Representatives of both the sides and also perused the relevant material available on record. It is observed that the issue relating to the assessee's claim for Long-Term Capital Loss arising from the sale of Government Securities by applying the Cost Inflation Index was disallowed by the Assessing Officer in the assessment completed under section 143(3). However, the set off of such loss to the extent of Rs. 86,39, 024/-and Rs. 1, 13,02,064/-being the Long-Term Capital Gain from Bonds and Right to property respectively as claimed by the assessee was allowed by the Assessing Officer and keeping in view this error allegedly committed by the Assessing Officer, the ld. Pr. CIT exercising his power conferred upon him under section 263 revised/ set aside the order of the Assessing Officer passed under section 143(3) on this issue. As submitted by the ld. Counsel for the assessee before us, the action of the Assessing Officer in disallowing its Long-Term Capital Loss arising from the sale of Government Securities by applying the Cost Inflation Index was challenged by the assessee in the....
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....r section 143(3) was not brought to the notice of the ld. Principal CIT by the assessee during the course of proceedings under section 263 and the same was intentionally suppressed by the assessee. We are unable to accept this contention of the ld. CIT,D.R. First of all, when the order passed by the ld. CIT(A) on this issue was in favour of the assessee allowing its claim for Long-Term Capital Loss arising from the sale of Government Securities, we find no justifiable reason for the assessee to have suppressed this fact and that too intentionally as alleged by the ld. CIT,D. R. Moreover as clarified by the ld. Counsel for the assessee, notice under section 263 pointing out the error in the order of the Assessing Officer on this issue was issued by the ld. Principal CIT on 20. 11.2018 and since the written submission in response to the said notice was filed before the ld. Pr. CIT on 16. 01.2019 when the appeal against the order under section 143(3) was pending before the ld. CIT(A) and the order dated 28. 02. 2019 was yet to be passed by the ld. CIT(A) disposing of the said appeal, the factual position as prevalent then was pointed out by the assessee in the written submission on 16....
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.... computing the short-term capital gain arising from the sale of flats without taking into consideration the stamp duty valuation, the ld. Counsel for the assessee submitted that four flats forming part of the block of assets 'building'were sold by the assessee during the year under consideration. He submitted that since the sale consideration of the said four flats was more than the opening W.D. V. of the block and additions made during the year, short term capital gain was computed and offered to tax by the assessee in the return of income for the year under consideration. He submitted that out of the said four flats, three flats were held by the assessee for a period of less than 36 months and the short-term capital gain arising from the sale thereof was computed by taking into consideration the stamp duty valuation as sale consideration in terms of section 50C of the Act. He submitted that the remaining forth flat which had been held by the assessee for more than 36 months was valued just before its sale by a Registered Valuer M/ s. M.K. Chakravorty & Company at Rs. 5. 84 crores. The actual consideration of the said flat received by the assessee, however, was Rs. 7,00,80, 000/-a....
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....lable on record. It is observed that the short term capital gain arising from the sale of four flats being the depreciable assets forming part of the block of assets 'building'was computed and offered to tax by the assessee as per section 50 of the Act since the said block of assets was completely exhausted in the year under consideration as a result of sale consideration of the four flats was more than the opening value of the building of the block of assets and the additions made during the year under consideration to the said block. Out of these four flats sold by the assessee, three flats were short-term capital assets being held by the assessee for less than 36 months and the capital gain arising from the sale thereof was computed by the assessee by taking into consideration the stamp duty value wherever it was more than the sale consideration actually received in accordance with section 50C of the Act. In respect of the remaining forth flat which was long-term capital asset being held by the assessee for more than 36 months, the actual sale consideration received by the assessee amounting to Rs. 7,00, 80, 000/-was less than the stamp duty valuation and the same was adopted....
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....5. 84 crores just before its sale by the assessee. It is also relevant to note here that a specific request was also made by the assessee to the Assessing Officer to refer the matter relating to the valuation of the property to DVO in terms of section 50C(2) of the Act if the lower sale consideration actually received by the assessee than the stamp duty value as justified by it was not acceptable. No such reference, however, was made by the Assessing Officer and keeping in view the same as well as all the facts of record, we find merit in the contention of the ld. Counsel for the assessee that the explanation/justification offered by the assessee in the matter was found acceptable by the Assessing Officer and on appreciation thereof a well considered view was taken by the Assessing Officer. This issue thus was examined by the Assessing Officer during the course of assessment proceedings and after having satisfied himself with the explanation/justification offered by the assessee, which was duly supported by the valuation report of the Registered Valuer, a possible view was taken by the Assessing Officer accepting the stand of the assessee. 17. In the case of R.K. Construction....
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....g treatment given by the Assessing Officer was accepted by the Assessing Officer. He contended that when the assessee offered this income as long-term capital gain in AY 2015-16, the Assessing Officer did not accept the same and assessed it as business income. He contended that on appeal, the ld. CIT(A) however allowed the claim of the assessee that this income was chargeable to tax in AY 2015-16 as long-term capital gain and the Tribunal has already upheld the order of the ld. CIT(A) on this issue vide his order dated 05. 12.2019 passed in ITA No. 1470/KOL/2019. He contended that there was thus no error in the order of the Assessing Officer on this issue and the ld. Pr. CIT is not justified in revising the same under section 263. 19. The ld. CIT, D.R., on the other hand, submitted that the right in 37 flats acquired by the assessee in the previous year relevant to A. Y. 2012-13 was transferred to third party individually by way of tripartite agreements executed in A.Ys. 2012-13, 2013-14 and 2014-15. He contended that the intention of the assessee thus was clear to sale the right in the said flats immediately to earn profit and it was thus a clear case of business transactions r....