Income Tax Appellate Tribunal - Mumbai
Strides Shasun Ltd, Navi Mumbai vs Dcit Cir 15(3)(2), Mumbai on 9 December, 2020
आयकर अपील य अ धकरण
IN THE INCOME TAX APPELLATE TRIBUNAL
मुंबई पीठ "जी "
MUMBAI BENCH "G", MUMBAI
ी वकास अव थी, या यक सद य एवं
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER &
ी एस. "रफौर रहमान, लेखा सद य के सम)
SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER
C.O.128/MUM/2016
(Arising out of ITA No.726/Mum/2016, A.Y.2005-06)
Strides Shasun Limited,
(Formerly known as Strides Arcolab Limited),
201, Devarata, Sector -17,
Vashi, Navi Mumbai 400 705.
PAN: AADCS8104P ...... Cross Objector
Vs.
The Dy. Commissioner of Income Tax,
Circle 15(3)(2),
Room No.451, 4th Floor,
Aaykar Bhavan, M.K.Road,
Mumbai- 400 020 ........ Appellant in appeal
Assessee by : Shri Nitesh Joshi
Revenue by : Shri Uodal Raj
सन
ु वाई क* त थ/ Date of hearing : 19/09/2020
घोषणा क* त थ/ Date of pronouncement : 09/12/2020
आदे श/ ORDER
PER VIKAS AWASTHY, JM:
The present Cross Objections are arising from the order of Commissioner of Income Tax (Appeals)-24, Mumbai ( in short 'the CIT(A)') dated 30/11/2015 for the assessment year 2005-06.
2C.O.128/MUM/2016(A.Y.2005-06)
2. Before proceeding further to decide the cross objections by the assessee, it is necessary to narrate the background as to why the present cross objections are taken up for adjudication sans appeal. The assessee company is engaged in the business of manufacturing of generic pharmaceuticals and other nutritional products. The assessment under section 143(3) of the Income Tax Act, 1961 ( in short 'the Act') was completed in the case of assessee determining total income at Rs.38,29,29,330/- vide order dated 30/12/2008. Thereafter, the Assessing Officer passed rectification order under section 154 of the Act dated 07/03/2013 whereby assessee's claim of carry forward of Long/ Short Term Capital Loss on sale of shares was disallowed. Aggrieved by the rectification order dated 07/03/2013(supra), the assessee filed appeal before the CIT(A) inter-alia, challenging the validity of Assessing Officer's action in invoking the provisions of section 154 of the Act. The CIT(A) vide impugned order dated 30/11/2015 granted relief to the assessee in respect of carry forward of Long Term Capital Loss but remain silent on the validity of proceedings under section 154 of the Act invoked by the Assessing Officer. Against the findings of CIT(A), the Revenue filed appeal in ITA No.726/Mum/2016 and assessee filed cross objections in the appeal filed by the Revenue. The assessee raised additional grounds in cross objections challenging jurisdiction of Assessing Officer in invoking the provisions of section 154 of the Act. For the sake of completeness, the additional grounds raised by the assessee before the Tribunal in cross objections are reproduced herein below:
"1. In the alternative and without prejudice to the grounds as raised in the cross-objections, the Learned Commissioner of Income Tax (Appeals) -24, Mumbai, ("CIT(A)") ought to have held that denial of carry forward of long term capital loss ("LTCL") of Rs. 1,19,32,012/-, under rectification proceedings under section 154 of the Act, tantamounts to review and raises a debatable issue. Hence, the denial of carry forward of LTCL could not have been made by the AO under the rectification proceedings under section 154 of the Act.
2. The learned CIT(A) ought to have held that denial of carry forward to Short Term Capital Loss("STCL") of Rs. 5,14,68,947/- tantamounts to review and raises a debatable issue. Hence, the denial of carried forward of STCL, by treating it as a sham transaction, could not have been made by the AO under the rectification proceedings under section 154 of the Act"3
C.O.128/MUM/2016(A.Y.2005-06) The Tribunal vide order dated 03/11/2017 reversed the findings of CIT(A) on the issue of assessee's claim of carry forward of Long Term Capital Loss i.e. the claim disallowed by the Assessing Officer in proceedings under section 154 of the Act. In other words, the Tribunal upheld the findings of Assessing Officer on merits. As regards jurisdictional issue raised in the cross objections by the assessee including additional grounds on jurisdiction, the Tribunal held that the cross objections have become infructuous.
2.1 Subsequently, the assessee filed a Miscellaneous Application No.296/Mum/2018 assailing that the legal grounds raised by the assessee in the additional grounds remain to be adjudicated and prayed for recalling the order of Tribunal dated 03/11/2017. The Tribunal vide order dated 08/08/2019 accepted the Miscellaneous Application and partly recalled the order dated 03/11/2017 for the limited purpose to decide the additional grounds raised in the cross objections. The operative part of the order of Tribunal in M.A. No.296/Mum/2018 dated 08/08/2019 is reproduced herein below:-
"5. We notice that the Tribunal has neither discussed the additional ground raised by the assessee in the said order nor disposed of the same. Since, the Bench has not dealt with the additional grounds of cross objection raised, there is merit in the contention of the assessee. We are therefore, of the considered view that the mistake apparent pointed out by the assessee from the record is required to be rectified u/s 254 (2) of the Act.
6. Hence, we partly allow the miscellaneous application filed by the assessee and recall the impugned order dated 03.11.2017 for a limited purpose to decide the additional grounds of cross objection dated 27.09.2016 submitted before the "J" Bench of the Tribunal. We accordingly direct the Registry to post the case before a Regular Bench in the ordinary course for hearing on the additional grounds raised by the assessee before the Tribunal.
7. In the result, misc. application filed by the assessee for assessment year 2005-06 is partly allowed".
In the light of above order of the Tribunal, the present cross objections are listed before the Bench for adjudication of additional grounds only that remain to be adjudicated in the first round.
3. Shri Nitesh Joshi, appearing on behalf of the assessee submitted that the assessee had acquired 263340 equity shares in BDH Industries Ltd in the financial year 1995-96 for a 4 C.O.128/MUM/2016(A.Y.2005-06) total consideration of Rs.10,22,66,770/-. During the period relevant to assessment year under appeal, the assessee sold 229462 shares of the aforesaid company for a consideration Rs.32,89,686/-, thus resulting in long term capital loss of Rs.1,19,32,012/-. The said transaction of sale of shares was carried out through stock exchange. The long term capital loss suffered by the assessee on sale of shares was carried forward in computation of income. In the original assessment order dated 30/12/20, the Assessing Officer allowed carry forward of aforesaid Long Term Capital Loss. However, the Assessing Officer in rectification proceeding under section 154 of the Act denied the benefit of carry forward of long term capital loss invoking the provisions of section 10(38) of the Act. The assessee carried the issue in appeal before the CIT(A) on merits as well as challenging jurisdiction of Assessing Officer under section 154 of the Act. The CIT(A) following the order of Tribunal in the case of Raptakos Brett & Co. Ltd., vs.DCIT, reported as 69 SOT 383(Mum- Trib) allowed assessee's claim of carry forward of long term capital loss on sale of shares. The Revenue challenged the finding of CIT(A) before the Tribunal. The assessee filed cross objections against the order of CIT(A) in not adjudicating the legality of Assessing Officer's action in invoking the provisions of section 154 of the Act. The Tribunal decided the issue on merits against the assessee by following the decision of Hon'ble Gujarat High Court in the case Kishorebhai Bhikabhai Virani vs. ACIT, 367 ITR 261(Guj). However, the assessee's additional ground challenging legality of invoking the provisions of section 154 of the Act to disallow carry forward of long term capital loss was not adjudicated by the Tribunal.
4. The ld.Authorized Representative of the assessee submitted that before deciding any issue on merits, first jurisdictional issue has to be adjudicated. The ld.Authorized Representative of the assessee asserted that the Assessing Officer has erred in invoking the provisions of section 154 of the Act to reject assessee's claim of carry forward of long term capital loss on sale of shares. The issue whether long term capital loss on sale of shares can be carry forward is a substantive issue. The Assessing Officer during scrutiny assessment proceedings allowed carry forward of Long Term Capital Loss. Subsequently, the Assessing Officer on the basis of change of opinion invoked the provisions of section 154 of the Act to 5 C.O.128/MUM/2016(A.Y.2005-06) disallow assessee's claim. The scope of section 154 of the Act is very limited. It is only the mistake apparent from record that can be rectified under section 154 of the Act. The ld.Authorized Representative of the assessee further submitted that where two views are possible on an issue and the Assessing Officer had taken one of the possible views during scrutiny assessment proceedings, later on the Assessing Officer cannot invoke the provisions of section 154 to change his view already taken. The ld.Authorized Representative of the assessee pointed that the Tribunal in the case of Raptakos Brett & Co. Ltd., vs.DCIT (supra) had followed the decision rendered by Hon'ble Calcutta High Court in the case of Royal Calcutta Turf Club vs. CIT, 144 ITR 709 (Cal). The Tribunal had also considered the decision of Hon'ble Gujarat High Court in the case of Kishorebhai Bhikabhai Virani vs. ACIT (supra) and had distinguished the same. Thus, there were two different views from non-Jurisdictional High Courts making the issue debatable. The ld.Authorized Representative of the assessee submitted that Assessing Officer has clearly gone beyond his jurisdiction in invoking the provisions of section 154 of the Act to impose his change of opinion.
5. On the other hand, Shri Uodal Raj, representing the Department vehemently defended the order dated 07/03/2013 passed by Assessing Officer under section 154 of the Act. The ld.Departmental Representative submitted that while passing the order under section 143(3) of the Act, the Assessing Officer inadvertently allowed carry forward of long term capital loss on sale of shares. The said loss falls under the purview of section 10(38) of the Act and hence, was not allowable. The Assessing Officer was justified in invoking the provisions of section 154 and rectifying mistake crept in the assessment order passed under section 143(3) of the Act. The ld.Departmental Representative prayed for dismissing the additional grounds raised by the assessee in cross objections. The ld.Departmental Representative further submitted that the Tribunal has upheld the findings of Assessing Officer in disallowing assessee's claim of carry forward of long term capital loss on sale of shares by following the order of Hon'ble Gujarat High Court in the case of Kishorebhai Bhikabhai Virani vs. ACIT (supra).
6C.O.128/MUM/2016(A.Y.2005-06)
6. We have heard the submissions made by rival sides and have examined the orders of authorities below. The limited issue for adjudication before us is validity of proceedings under section 154 of the Act invoked by the Assessing Officer to rectify alleged mistake in the assessment order.
7. A bare perusal of the provisions of section 154 of the Act would reveal that the Assessing Officer can rectify mistake apparent from the record either suo-motu or on an application by the assessee or the concerned authority. The Assessing Officer does not have unfettered powers to invoke the provisions of section 154 of the Act to review his order. The Assessing Officer can neither adjudicate a debatable issue under the provisions of section 154.
8. In the instant case, the assessee has declared long term capital loss on sale of shares and has carry forward unabsorbed long term capital loss to the succeeding assessment years. In scrutiny assessment proceedings, the Assessing Officer allowed the same. Subsequently, the Assessing Officer invoked the provisions of section 154 of the Act to disallow carry forward of long term capital loss in the light of the provisions of section 10(38) of the Act. The assessee has assailed the action of Assessing Officer in exercising his jurisdiction under section 154 of the Act for making such disallowance.
9. We find that the issue whether long term capital loss arising from sale of shares can be carry forward to subsequent assessment years is debatable. The Hon'ble Calcutta High Court in the case of Royal Calcutta Turf Club vs. CIT(supra) has decided the issue in favour of the assessee by allowing carry forward of such long term capital loss, whereas the Hon'ble Gujarat High Court in the case of Kishorebhai Bhikabhai Virani vs. ACIT(supra) has decided this issue in favour of the Revenue holding that Long Term Capital Loss on sale of shares cannot be allowed to be carry forward. The Co-ordinate Bench of the Tribunal in the case of Rapatakos Brett & Co.Ltd.(supra) after considering catena of judgments including the aforesaid two judgments has followed the ratio laid down by Hon'ble Calcutta High Court . Thus, the issue of carry forward of long term capital loss on sale of shares in the 7 C.O.128/MUM/2016(A.Y.2005-06) light of provisions of section 10(38) of the Act is debatable as two non-Jurisdictional High Courts have taken a divergent view. It would be pertinent to mention here that no decision by Hon'ble Jurisdictional High Court on this issue has been brought to the notice of the Bench by either sides. Thus, the issue being debatable, the Assessing Officer has erred in invoking the provisions of section 154 of the Act in disallowing the benefit of carry forward of long term capital loss.
10. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Eveline International reported as 243 ITR 493 (P&H) has upheld the findings of Tribunal that contentious issues are outside the purview of section 154 of the Act. The relevant extract of the judgment reads as under:-
"11. The question No. 3, as has been correctly pointed out by the learned counsel for the assessee, does not arise out of the order of the Tribunal at all. The Tribunal has nowhere given a finding that the deduction under section 32AB was not required to be deducted from the profits while working out deduction under section 80HHC. All that the Tribunal has held is that this issue was a contentious issue and as such fell beyond the scope of a mistake apparent from the record which could be rectified under section 154. No fault can be found with this finding of the Tribunal also. The Tribunal while deciding this issue has relied on some of its earlier decisions as also on a decision of the Orissa High Court taking a view in favour of the assessee. In such circumstances, it could not possibly be contended that the said view was not a possible view. Once it is found that there could be more than one view on a particular issue, the matter cannot be rectified under section 154 as held by the Apex Court in the case of Volkart Bros. (supra )".
The Hon'ble Calcutta High Court in the case of V.R. Sonti vs. CIT, 117 ITR 838 has held that where there is a divergence of judicial opinion on question of law or two conceivable views are possible/ on a issue, proceedings under section 154 of the Act cannot be taken at all. This view has been reiterated by the Hon'ble High Court in the case of CIT vs. Orient Paper Industries Ltd. 208 ITR 158 (Cal).
8C.O.128/MUM/2016(A.Y.2005-06)
11. The Assessing Officer in the garb of rectification has resorted to review of his order, the same is not permissible. The additional ground No.1 raised by the assessee in cross objections is decided in favour of the assessee .
12. In additional ground No.2 of the cross objections the assessee has assailed the findings of CIT(A) in accepting the denial of carry forward of Short Term Capital Loss treating it to be a sham transaction, in proceedings under section 154 of the Act. After examining the issue we find that the Assessing Officer in rectification proceedings has given a finding of fact that Short Term Capital Loss declared by the assessee on sale of shares is the result of sham transaction and falls within the ambit of provisions of section 47(v) of the Act . The Assessing Officer in proceedings under section 143(3) of the Act accepted the claim of assessee and thereafter on re-appreciation of facts initiated proceedings under section 154 of the Act to disallow assessee's claim of carry forward of Short Term Capital Loss terming the transaction to be sham. The Assessing Officer has revisited the issue and has invoked rectification provision to review his order. As we have pointed earlier that the Assessing Officer has limited scope under section 154 of the Act to rectify any mistake apparent from the record. Substitution of opinion by the Assessing Officer under section 154 of the Act is not permissible.
We may point here that the Act provides safeguards to the Revenue to plug the escapement of any income. The cannons in the form of revision under section 263 of the Act, reassessment under section 147 of the Act and rectification of mistake under section 154 of the Act have to be used appropriately. The remedies available to the Revenue under the Act are not mutually alternate. The right cannon has to be fired at right time depending on facts and circumstances of each case. The Assessing Officer in the present case has over stepped his jurisdiction in exercising his powers u/s. 154 to review his order. Thus, we find merit in the submissions of the assessee. The additional ground No.2 of the cross objections is allowed accordingly.
9C.O.128/MUM/2016(A.Y.2005-06)
13. We are alive to the fact that Co-ordinate Bench of the Tribunal has decided the issue on merits in favour of the Revenue. The road for adjudicating the issue on merits has to cross the barrier of jurisdiction. The Co-ordinate Bench of the Tribunal inadvertently failed to decide the legal issue of jurisdiction raised by the assessee in cross objections. Hence, the Bench recalled its order dated 03/11/2017 partially for the limited purpose of adjudicating the additional grounds (on jurisdiction)raised in cross objections. The relevant extract of the Tribunal order has already been reproduced above in para - 2.
14. The Assessing Officer while giving effect to the orders of the Tribunal has to first decided the issue of jurisdiction before stepping further to decide the issue on merits.
15. The ground No.1 to 4 raised in the cross objections have already been dismissed by the Tribunal vide order dated 03/11/2017. The said order has been recalled for the limited purpose to adjudicate additional grounds raised in the cross objections that have now been adjudicated and allowed.
16. In the light of our above observations, the cross objections raised by the assessee are partly allowed.
Order pronounced in the open court on Wednesday, the 9th day of December, 2020.
Sd/- Sd/-
(S.RIFAUR RAHMAN ) (VIKAS AWASTHY)
लेखा सद य/ACCOUNTANT MEMBER या यक सद य/JUDICIAL MEMBER
मंब
ु ई/ Mumbai, 1दनांक/Dated 09/12/2020
Vm, Sr. PS(O/S)
10
C.O.128/MUM/2016(A.Y.2005-06)
त ल प अ े षतCopy of the Order forwarded to :
1. अपीलाथ2/The Appellant ,
2. 3 तवाद / The Respondent.
3. आयकर आयु4त(अ)/ The CIT(A)-
4. आयकर आयु4त CIT
5. वभागीय 3 त न ध, आय.अपी.अ ध., मुबंई/DR, ITAT,
Mumbai
6. गाड: फाइल/Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar) ITAT,
Mumbai