Income Tax Appellate Tribunal - Ahmedabad
Gccl Construction & Realities ... vs Department Of Income Tax on 5 July, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL,
" B " BENCH, AHMEDABAD
Before Shri T. K. SHARMA, JUDICIAL MEMBER
and Shri A. K. GARODIA, ACCOUNTANT MEMBER
I.T.A. No. 3227/ Ahd/2010
(Assessment year 2004-05
ITO, Ward 4(1), Vs. GCCL Construction &
Ahmedabad Realities Ltd.,
606, SAKAR I,
Ashram Road, Ahmedabad
C.O. No.09/Ahd/2011
(assessment year 2004-05)
GCCL Construction & Realities Vs. ITO, Ward 4(1),
Ltd., Ahmedabad
606, SAKAR I,
Ashram Road, Ahmedabad
PAN/GIR No. : AAACG6547E
(APPELLANT) .. (RESPONDENT)
Department by: Shri Samir Tekriwal, Sr. DR
Assessee by: Shri Vijay Ranjan, AR
Date of hearing: 05.07.2011
Date of pronouncement: _________________
ORDER
PER BENCH:-
This is revenue's appeal and the cross objection is filed by the assessee. Both are directed against the order of Ld. CIT(A) VIII, Ahmedabad dated 20.09.2010 for the assessment year 2004-05. For the sake of convenience, both are being disposed off by way of this common order.2 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010
2. First, we take up the cross objection filed by the assessee because the same is regarding the validity of reassessment proceedings. The ground raised by the assessee in the cross objections is as under:
"On the facts and in the circumstances of the case, the CIT(A) erred in not accepting the assessee's claim that the provisions of section 147 were not applicable to the facts and circumstances of this case and he further erred in not canceling the impugned reassessment order dated 11.12.2009."
3. The brief facts of the reopening issue are that the return of income in the present case was filed by the assessee on 30.10.2004 declaring the income of Rs.43,97,010/-. The assessment was completed by the A.O. u/s 143(3) of the Income tax Act, 1961 on 13.09.2006 determining the income at Rs.46,49,590/-. The A.O. has stated in the reassessment order that subsequently, it was noted that the assessee had wrongly claimed the set off of brought forward long term capital gain/(loss) of Rs.19,36,533/- against the short term capital gain during the present year. The A.O. has further noted that brought forward long term capital loss cannot be allowed to be adjusted against the short term capital gain. The A.O. further noted that the assessee company has incorrectly set off the brought forward long term capital loss of Rs.19,36,533/- and the same has resulted into escapement of income. The A.O. issued notice u/s 148 on 27.6.2008 which was duly served upon the assessee on 01.07.2008 and there is no dispute regarding the service of notice u/s 148. In the reassessment proceedings, no objection has been raised before the A.O. with regard to validity of reassessment proceedings but before the Ld. CIT(A), this ground was also raised that reassessment proceedings are not valid. On this aspect, it was held by the Ld. CIT(A) that reassessment proceedings are valid although he deleted the disallowance and hence, 3 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010 this issue has now been raised by the assessee in the cross objections before us.
4. It is submitted by the Ld. A.R. before us that in the course of original assessment proceedings, detailed questionnaire was issued by the A.O. u/s 142(1) of the Income tax Act, 1961 dated 25.04.2006 and a copy of this is available on pages 2-3 of the paper book. Our attention was drawn to para 11 of Annexure to this notice u/s 142(1) of the Income tax Act, 1961 which is available on page 3 of the paper book as per which the A.O. had asked the assessee to furnish details for set off claimed by the assessee regarding brought forward capital loss of Rs.19,36,533/- against the profit of sale of investment of Rs.67,00,290/-. It was submitted that admittedly, there was a mistake in the computation of income filed along with the return of income in which it was stated by the assessee that brought forward capital loss of Rs.19,36,533/- is short term capital loss but still, it has to be accepted that this aspect has been duly examined by the A.O. and set off was allowed by him after applying his mind and hence, reopening is on mere change of opinion and hence not valid. Reliance was placed by him on the judgment of Hon'ble Delhi High Court rendered in the case of Kelvinator of India Ltd. as reported in 256 ITR 01 and also of another judgment of Hon'ble Delhi High court rendered in the case of CIT Vs Eicher Ltd. as reported in 294 ITR 310.
5. In reply, it was submitted by the Ld. D.R. that in the computation of income filed along with the return of income, the assessee had claimed that the brought forward loss is short term capital loss and hence, it is seen that material facts were not correctly disclosed by the assessee and therefore, the proviso to Section 147 is not applicable. Regarding the judgements of Hon'ble Delhi High Court on which reliance has been placed by the Ld. A.R., it was submitted that these judgments are also 4 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010 not applicable in the present case for the same reason that correct f acts were not disclosed by the assessee in the return of income.
6. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgements cited by the Ld. A.R. the facts are not in dispute in the present case because it is admitted position that the assessee has claimed set off of brought forward long term capital loss against short term capital gain in the present year and in the computation of income filed by the assessee along with the return of income the brought forward loss was stated to be short term capital loss. But this is also admitted factual position that in the notice issued by the A.O. u/s 142(1) on 25.04.2006, in the course of original assessment proceedings, a query was raised by the A.O. as per column 11 of Annexure to such notice u/s 142(1) of the Income tax Act, 1961, the copy of which is available on page 3 of the paper book, that the assessee had to state and explain as to how the assessee has claimed set off of brought forward short term capital loss of Rs.19,36,533/- against the profit on sale of investment of Rs.67,00,290/-. Hence, it has to be accepted that after making inquiry and after applying his mind only, the A.O. has allowed set off of brought forward long term capital loss against the short term capital gain in the present year. Now, in the light of these facts of the present case, we examine the applicability of the judgment of Hon'ble Delhi High Court rendered in the case of CIT Vs Kelvinator of India Ltd. (supra) which has been approved by the Hon'ble Apex Court in its judgment reported at 320 ITR 561. The relevant para of the judgement of Hon'ble Delhi High courted rendered in the case of CIT Vs Kelvinator of India Ltd. (supra) is reproduced below :
"We also cannot accept the submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded an analysis of the materials on the record by 5 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010 itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143, a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause
(e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-
judicial function to take benefit of its own wrong."
7. From the above judgement of Hon'ble Delhi High Court, we find that it is held by the Hon'ble Delhi High Court that when a regular order of assessment is passed in terms of sub-section (3) of Section 143, a presumption can be raised that such an order has been passed on application of mind. It is also noted by the Hon'ble High Court that presumption can also be raised to the effect that in terms of Clause (e) of Section 114 of Indian Evidence Act, judicial and official acts have been regularly performed. On the basis of these reasoning, it was held by the Hon'ble High Court that reopening under those facts on mere change of opinion of the A.O. cannot be a valid ground for reopening of assessment.
8. Similarly, in the case of CIT Vs Eicher Ltd.(supra) also, it was held by the Hon'ble Delhi High Court that if the entire material has been placed by the assessee before the A.O. at the time when the original assessment was made and the A.O. has applied his mind to that material and accepted the view convassed by the assessee, then merely because he did not express in the assessment order that by itself would not give a ground to conclude that income has escaped assessment and therefore, assessment needed to be reopened. It was also held that on the other hand 6 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010 if the A.O. did not apply his mind and commit the lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. This was so held by Hon'ble Delhi High Court in the case of CIT Vs Eicher Ltd. (supra) by applying the principles laid down by full bench of the Hon'ble Delhi High court in the case of Kelvinator of India Ltd. (supra). Against both these judgments of Hon'ble Delhi High Court, appeals were filed by the revenue before the Hon'ble Apex Court, which has been dismissed by the Hon'ble Apex Court as per its judgments reported at 320 ITR 561 (S.C.) and it was held by the Hon'ble Apex Court that reopening is not valid on mere change of opinion. In the present case, there may be a mistake committed by the assessee in stating in the computation of income filed with the original return of income that brought forward capital loss is a short term capital loss whereas, it is in fact long term capital loss but when the A.O. has applied his mind and made inquiry in this regard in the course of original assessment proceedings, it cannot be said that no opinion was formed by the A.O. with regard to allowability of this set off of brought forward capital loss claimed by the assessee. The copy of the original assessment order passed by the A.O. u/s 143(3) on 13.09.2006 is available on pages 7-9 of the paper book and in the same, there is no discussion with regard to allowability of this set off claimed by the assessee of long term capital loss against short term capital gain of the present year. But we have seen that in the questionnaire issued by the A.O. along with the notice issued by him u/s 142(1) of the Income tax Act, 1961 on 25.04.2006, query was raised by the A.O. asking the assessee to state as to how it has claimed set off of brought forward short term capital loss of Rs.19,36,533/- against the profit on sale of investment of Rs.67,00,290/-. Hence, it has to be accepted that the A.O. was very much conscious about the claim of the 7 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010 assessee regarding the set off of brought forward capital loss against short term capital gain of the present year and hence even if a mistake has been committed by the assessee in the computation of income filed along with the return of income, it cannot be accepted that the set off was allowed by the A.O. without verifying the record as to whether there is any brought forward capital loss or not and what is the nature of such brought forward capital loss and whether it is short term or long term and whether set off can be allowed to the assessee or not. Various Tribunal decisions had been brought to our notice by the Ld. A.R. in which for set off of brought forward long term capital loss of a period prior to amendment in the provisions of Section 74(1)(b) w.e.f. assessment year 2003-04, it was held by the Tribunal that such set off is allowable. These rulings of the tribunal are on this basis that the law as amended by the Finance Act 2002 is applicable to the computation of loss under the head capital gain for the assessment year 2003-04 and thereafter, and hence, if the net result of computation was a loss under the head capital gain in earlier assessment years, the law as it stood then, gave a vested right of set off to the assessee against future capital gain income and there is nothing in the amended act 2002, which withdrew this vested right of the assessee. Hence, it may be that even after examining the full facts in the course of original assessment proceedings, the A.O. decided the issue in favour of the assessee on similar logic and hence, it has to be accepted that now, the reopening is on mere change of opinion, which is not permissible as per these two judgments of Hon'ble Delhi High Court, which was approved by the Hon'ble Apex Court. Even if after making enquiry in the original assessment proceedings, the A.O. did not apply his mind on this issue by examining the assessment records of earlier yeas to find out the existence of any brought forward loss and its nature, it is a lapse on the part of the 8 C.O. No.09/Ahd/2011 I.T.A.No. 3227 /Ahd/2010 A.O. because for allowing set off of brought forward loss, it cannot be allowed on the basis of claim in the computation & return by the assessee and the A.O. is to examine the old assessment records. For this lapse of the A.O. also, it is held by the Hon'ble Delhi High Court that the assessee cannot be asked to suffer the consequences of the lapse. This decision of the Hon'ble Delhi High Court is also approved by the Hon'ble Apex Court. Hence, we hold that in the facts and circumstances of the present case, as discussed above and in view of these two judgments of Hon'ble Delhi High Court which are duly approved by the Hon'ble Apex Court, reopening in the present case is not valid.
7. In the result, cross objection filed by the assessee is allowed.
8. In view of our above decision in the cross objection of the assessee as per which it is held by us that the reopening is not valid, reassessment order itself does not survive and as a consequence, the revenue's appeal also does not survive and therefore, no adjudication is called for regarding this appeal of the revenue and the same is dismissed.
9. In the result, cross objection of the assessee is allowed whereas appeal of the revenue is dismissed in terms indicated above.
10. Order pronounced in the open court on 12th Aug., 2011.
Sd./- Sd./-
(T. K. SHARMA) (A. K. GARODIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
th
Ahmedabad; Dated : 12 Aug., 2011
Sp
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
4. The Ld. CIT (Appeals)
5. The DR, Ahmedabad
6. The Guard File
9 C.O. No.09/Ahd/2011
I.T.A.No. 3227 /Ahd/2010
1. Date of dictation.........8/8
2. Date on which the typed draft is placed before the
Dictating Member...9/8 Other Member ........................
3. Date on which the approved draft comes to the Sr. P.S./P.S. 10/8
4. Date on which the fair order is placed before the Dictating Member for pronouncement ......12/8
5. Date on which the fair order comes back to the Sr. P.S./P.S. 12/8
6. Date on which the file goes to the Bench Clerk .........12/8/11
7. Date on which the file goes to the Head Clerk .......................
8. The date on which the file goes to the Assistant Registrar for signature on the order .........................
9. Date of Despatch of the order. .......................