TMI Blog2019 (9) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer u/s 154 of the Act which is bad in law and against the principle of natural justice. The Ld. CIT(A), in law and on facts and circumstances of the case, ought to have directed the Assessing Officer to allow the appellant to carry forward long term capital loss of ₹ 3,26,31,579/- as all relevant undisputed facts were on record. 2.1 Facts in brief are that the assessee being resident firm stated to be engaged in investment / trading in shares derivatives was assessed for impugned AY u/s 143(3) on 30/01/2013 accepting the returned Loss of ₹ 216.02 Lacs. Para No.3 of the quantum assessment order record a finding that during the year, the investment in listed shares held by the assessee have been converted into stock-in-trade as on 01/04/2009. 2.2 Subsequently, the assessee filed rectification application u/s 154 on 13/05/2013 by submitting that Long-Term Capital Loss [LTCL] of ₹ 326.31 Lacs remained to be allowed to be carried forward while framing assessment. It was submitted that the aforesaid loss arose as per the provisions of Section 45(2) on conversion of investment into stock-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Under the circumstances AO has rightly not given her consent in regard to claimed relief. Aggrieved, the assessee is in further appeal before us. 3. The Ld. Authorized Representative for assessee [AR], while assailing the stand of lower authorities, placed reliance on CBDT circular No.14(XL-35) dated 11/04/1955 and relied upon following judicial pronouncements for various submissions: - No. Case Law Judicial Authority Citation 1. Sanchit Software and Solutions P. Ltd. Vs. Ld. Commissioner of Income Tax (Appeals)- Mumbai [CIT(A)] Hon ble Bombay High Court [349 ITR 404] 2. CIT V/s Nalwa Investment Ltd. Hon ble Delhi High Court [322 ITR 233] 3. CIT Vs. K.N. Oil Industries Hon ble High Court of Madhya Pradesh [142 ITR 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on record. The fact of conversion has also been noted by Ld. AO in the quantum assessment order. The stated loss on sale of share investment was separately reflected under the head expenditure in the Profit Loss account . The aforesaid loss has also been adjusted from losses in the statement of computation of income. The fact of conversion of investment into stock-in-trade was duly mentioned in assessee s financial statements in Schedule-J Notes forming part of the Accounts as on 31/03/2010. All the above documents were filed by the assessee before Ld. AO during scrutiny assessment proceedings vide submissions dated 11/07/2012. Not only this, specific queries were raised by Ld. AO pertaining to conversion which were duly replied to by the assessee vide submissions dated 03/01/2013. The aforesaid facts would lead us to conclude that the assessee s claim as urged before us was not a new claim but it sprang from existing records as already filed / available before Ld. AO. Therefore, the plea that the claim remained to be made due to inadvertent error was plausible as well as bona-fide one. This being so, the same could be subject-matter of rectification u/s 154 since the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue while administering the said Act. 4.4 The Hon ble Delhi High Court in the case of CIT V/s Nalwa Investment Ltd. [supra], under identical situation, held as under: - We are of the view that the Tribunal correctly appreciated the provisions of section 80 of the Act read with section 139(3) of the Act and allowed the carry forward of loss for the purposes of set off against income of the subsequent year(s). A plain reading of provision of section 80 of the Act permits an assessee to carry forward a loss and seek its set off under section 72(1) or 73(2) or sub-section (1) of section 74 or 74A(3) except when, the loss has not been determined in pursuance of a return filed in accordance with provisions of sub-section (3) of section 139. Section 80 of the Act reads as follows:- Submission of return for losses. -Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal by its order dated 5-6-2000. In view of the said circumstances obtaining in the present case the Tribunal in the second round vide the impugned judgment has correctly held in our opinion, that both the CIT(A) and the Assessing Officer had misdirected themselves in law in preventing the carry forward and the set off of the assessed loss against subsequent profits as the conditions prescribed for triggering the provisions of section 80 of the Act were not present in the instant case. 13. The matter can be looked at from another angle also. It would in one sense turn the law on its head if after the Tribunal vide its order dated 5-6-2000 had allowed the assessee's claim of loss on sale of SRNCDs at the rate of ₹ 111 per SRNCD as a business loss based on the reasoning that the assessments had to be carried out keeping in mind the real effect of a legal transaction notwithstanding the treatment meted out by the assessee, it would then appear anomalous and incongruous if the Assessing Officer while giving effect to the said order would denude the efficacy of the Tribunal's order by, in a manner of speaking, taking away with one hand what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal: if for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him. (p. 712) Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). . . .We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fere under section 154 arose when it was found that there was a mistake apparent from the record in the relevant order and in deciding whether there was an apparent mistake the ITO was not confined to the return and he could look to the entire material available in the record of the assessment. The Tribunal, therefore, held that it was open to the ITO to assume jurisdiction under section 154 if it was apparent from the record of assessment that there was a mistake in not granting relief under section 35B although the said relief was not claimed in the return. It is the correctness of this view which we have to examine in this reference. The learned standing counsel for the Department placed reliance upon Anchor Pressings (P.) Ltd. v. CIT [1975] 100 ITR 347 (All.), Sharda Prasad v. CIT [1975] 100 ITR 373 (All.) and Paramount Trading Corporation v. ITO [1980] 124 ITR 55 (All.), in support of his submission that as no relief under section 35B was claimed by the assessee in the return, the mistake in not granting the relief could not be apparent and could not be corrected under section 154. These cases which were decided by the Allahabad High Court do suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [Supra], taking favorable view in the matter of rectification u/s 154, held as under: - 7. The next question for our consideration is whether assessee could claim depreciation under section 32 by making application for rectification under section 154 of the Act on the ground that it forgot to claim the same. This question came up for consideration before the Hon ble Supreme Court in the case of Anchor Pressings (P.) Ltd. ( supra ). In that case, the assessee was engaged in the business of the manufacture and sale of locks used in suitcases and therefore, was entitled to relief under section 84 of the Act, as it then was. No claim was made by assessee for relief under this section either in the return of income or in the assessment proceedings or before the first appellate authority. Subsequently, the assessee made an application before the Assessing Officer under section 154 praying for rectification of the assessment order by grant of relief under section 84. This application was rejected by ITO. A revision petition filed before CIT has also been rejected. The writ petition moved by the assessee before the High Court was also dismissed. Hence, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as right in coming to the conclusion that the Income-tax Officer could not grant depreciation allowance to the assessee under the Income-tax Act, 1961, when the same was not claimed by the assessee? The High Court answered the question in favour of the assessee. On appeal to the Supreme Court, it was held that in the absence of any claim by assessee, the same could not be forced upon the assessee. Their Lordships at Page 78 of the Report observed as under: The language of the provisions of sections 32 34 of the Income-tax Act, 1961, is specific and admits of no ambiguity. Section 32 allows depreciation as deduction subject to the provisions of section 34. Section 34 provides that deduction under section 32 shall be allowed only if the prescribed particulars have been furnished. Rule 5AA of the Income-tax Rules, 1962, since deleted, provided for the particulars required for the purpose of deduction under section 32. Even in the absence of rule 5AA, the return of income in the form prescribed itself requires particulars to be furnished if the assessee claims depreciation. These particulars are required to be furnished in great detail. There is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the questions involved in the case in which it is rendered and, while applying the decision to a latter case, courts must carefully try to ascertain the true principle laid down by the decision. Keeping in mind the above observations, let us try to understand whether in reality there is any conflict between the two judgments referred to by the parties. After going through both the judgments minutely, we are of the view that both the judgments hold the different fields and cannot be said to be in real conflict with each other. In the former case, the court was concerned with the question whether there was any mistake apparent from record under section 154 in denying relief to assessee under section 84 where assessee omits to claim the same. It is in this context, Their Lordships held that jurisdiction of Income-tax Officer under section 154 is much wider than that provided in Order XLVII Rule 1 of Civil Procedure Code. Considering such scope of section 154, it was held that if on the basis of factual evidence on record, the assessee is entitled to claim a relief, then relief cannot be denied where assessee omitted to claim the same. Impliedly, it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to relief then it would constitute mistake apparent from record and consequently, such relief cannot be denied merely because the assessee omitted to claim by mistake. This is the ratio which has been laid down by the Hon ble Supreme Court in the former case. Hence, the present case would be governed by the ratio laid down by the former case, i.e., Anchor Pressings (P.) Ltd. ( supra ). 4.7 Similarly Mumbai Bench of Tribunal in Asia Pacific Fund Inc. Vs DCIT [supra], held as under: - 4. We find that the mandate of Section 143(1)(a) is quite clear and unambiguous inasmuch as where a return has been made under Section 139, or in response to notice under Sub-section (1) of Section 142,...if any refund is due on the basis of such return, it shall be granted to the assessee... . The only thing which entitles an assessee to refund of excess tax due to him is such a refund being due to him' on the basis of such a return. Now, the question is how this exercise is to be carried out. It presupposes that the AO has to first compute the tax payable by the assessee, and in case the sum so arrived at is in excess of the aggregate of prepaid and self-ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich erodes any taxpayer's faith, and particularly of a non-resident taxpayer's faith which is now so important for attracting the much needed foreign investment, in Indian tax and judicial system does not do any Indian any good. The well meaning advice given by the CBDT must be implemented to the fullest extent. As to what is binding nature of this advice, we may only refer to Section 119 of the Act and Hon'ble Supreme Court's judgment in the case of UCO Bank v. CIT . Hon'ble Supreme Court has time and again held that the circulars of the CBDT are legally binding on the Revenue and that this binding character attaches to the circular even if they be found not in accordance with the correct interpretation of section or they depart or deviate from such construction. The advice contained in the circular, which is reproduced above, is also legally binding on all the field officers. The other decisions also support the same view. 4.8 So far as the contention that the investments were Long Term in nature and the resultant gains thereof were exempt under certain conditions, we find that the same has also been dealt wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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