TaxTMI 
TaxTMI 
2025 (7) TMI 876
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....eleting the addition made by the AO on account of LTCG. As per provisions of Income Tax Act, 1961 and section 53A of the Transfer of property Act, the transfer of Assets took place in A.Y. 2012-13. 3. Briefly the facts of the case are that the assessee is a partnership firm engaged in manufacturing stainless steel jars and jar assemblies for domestic mixer grinders. For the Assessment Year 2012-13, the assessee filed its return of income on 27.08.2012, declaring an income of Rs. 21,70,06,060/- under the head "Capital Gains," after setting off current year losses. The case was initially selected for scrutiny, and the assessment was completed under Section 143(3) of the Income Tax Act, 1961, accepting the returned income. 3.1 Subsequent....
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....ent, and the receipt of the Escrow amount in the next financial year did not alter the taxability of the entire consideration in A.Y. 2012-13. The AO also dismissed the applicability of the Income Recognition Method (AS-9) in this case, stating that slump sale is not an ordinary business activity and the recognition of capital gains is governed by the date of transfer under the Income Tax Act. 3.4 Consequently, the AO made an addition of Rs. 3,34,37,500/- to the assessee's income as under-declared LTCG and recomputed the total income at Rs. 25,04,43,560/-. Penalty proceedings under Section 271(1)(c) were also initiated for furnishing inaccurate particulars of income. The AO further noted that similar transactions were undertaken by t....
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.... an escrow account, payable only after one year subject to specific conditions. The Ld. CIT(A) observed that the escrow amount was not accrued or receivable by the appellant in A.Y. 2012-13, as it was contingent on future events, such as claims for breach of warranties or arbitral awards. The final amount receivable from the escrow account was indeterminate during A.Y. 2012-13, and the appellant had no enforceable right to it in that year. The CIT(A) rejected the AO's argument that the amount, received in F.Y. 2012-13 before filing the return, should be taxed in A.Y. 2012-13, as this violated accrual-based accounting principles. By relying upon the decision of Bombay High Court in case of CIT Vs. Hemal Raju Shete (2016) 136 DTR 417, the CIT....
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....e to light. In support of this contention, the Ld. AR referred to the appellate order of the Ld. CIT(A) dated 27.02.2015, wherein at paragraph 5.1, it was observed that the reasons recorded for reopening were based solely on the information already on record, and no fresh or tangible material had been brought forth. 6.3 Hence, it is evident that the reassessment is based purely on a change of opinion, which is impermissible under the law. This legal position has been firmly settled by the Hon'ble Supreme Court in the case of CIT, Delhi v. Kelvinator of India Limited [(2010) 2 SCC 723, Compilation pages 3-5]. The Ld. AR also relied on the following judicial precedents, which unequivocally hold that a mere change of opinion cannot constitu....
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..... AR contended that there was no certainty regarding the amount receivable by the assessee in AY 2012-13. Accordingly, it cannot be said that the assessee had acquired an absolute, unfettered, and vested right to receive the entire escrow amount in that year, as held by the Ld. AO. He submitted that the assessee had correctly offered an amount of Rs. 21,73,83,298/- to tax in AY 2012-13. The balance amount became ascertained and crystallized only at the end of the closing date, i.e., in AY 2013-14, when it was offered to tax. This tax treatment is in accordance with well-settled legal principles that deferred consideration under a contractual agreement cannot be subjected to tax in an assessment year in which it has not accrued. 6.8 The L....
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....n in M/s T.A. Taylor Private Limited, Chennai v. The Assistant Commissioner of Income Tax, Corporate Circle 3(1), Chennai [Appeal No. 876 of 2018 & CMP No. 21261 of 2018], where the Hon'ble Madras High Court granted relief in a similar case, observing that the issues had become academic and that taxing the income again in AY 2012-13 was not warranted. The Ld. AR prayed for the dismissal of the appeal filed by the Department. 7. Per contra the Ld. DR relied upon the order of the lower authorities. 8. We have heard the rival contention and perused the material available on the record. In the present case, we find that the reopening of the assessment was not justified, and we also find that the original assessment for Assessment Year 201....