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2018 (9) TMI 68 - AT - Income TaxCIT-A justification in striking down the order passed by the AO u/s 253/143(3) wherein the short term capital gains was brought to tax - whether the CIT-A was justified in passing certain comments about the taxability of short term capital gains after having struck down the addition made by the ld AO in the facts and circumstances of the case? - Held that:- AO did compute the capital gains on conversion of private limited company into LLP at Rs Nil by fixing the consideration at book values as directed by the tribunal. Admittedly, this was computed in the hands of Aravali Polymers LLP (i.e the assessee herein) by treating the assessee LLP in the capacity of successor to private limited company. AO ought to have stopped the proceedings with this action which would be in strict consonance with the directions of the tribunal supra. We are in complete agreement with the arguments of the ld AR that the issue as to whether the sale of 3000000 lakh equity shares of EIH Ltd post conversion into LLP, would result in long term or short term capital gains, was never in dispute in the first round of proceedings. Since this was accepted by the ld AO in the assessment itself, there was no occasion to carry the said issue to the appellate forums such as CITA or the tribunal. Hence the ld AO ought not to have taken a different stand in the proceedings giving effect to the directions of the tribunal by treating the resultant gains on sale of 3000000 equity shares of EIH Ltd as short term capital gains. We find that this action of the ld AO had been rightly struck down by the ld CITA in his order. Accordingly, grounds raised by the revenue are dismissed. But we find that the CIT-A having struck down the action of the AO in taxing short term capital gains, had proceeded to make some observations, to somehow bring to tax the short term capital gains, which in our considered opinion, cannot be done as per law at all. These observations of the CIT-A are totally unwarranted and only reflects the contradictory stand of the CIT-A in as much as, the CIT-A, on the one hand, clearly gives a finding, that the AO cannot travel beyond his jurisdiction and has to strictly abide by the directions of the tribunal, but, on the other hand, the CIT-A decides to travel beyond his jurisdiction to look into issues which were not the subject matter of directions of the tribunal. We hold that the observations of the CIT-A in respect of Ground Nos. 5 & 6 raised before him deserves to be expunged and are hereby directed to be expunged. Accordingly, the grounds raised by the assessee are allowed.
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