TMI Blog2020 (4) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of provision of written back is more in nature of misleading than providing proper information. This is because writing off of advances for machinery and claiming the same as long-term capital loss to be carried forward has nothing to do with note on allowability of provision written back . Accordingly, in our considered opinion the submission that there is enquiry and application of mind by the assessing officer is not all sustainable. Hence Ld CIT is quite justified in invoking jurisdiction under section 263 of the income tax act, hence we uphold the order of Id CIT. We note that this is appeal against an order of Ld CIT passed under section 263 of the I-T Act Hence we are confining ourselves to the order passed under section 263 of the I-T Act. - Decided against assessee. - I.T.A. No.1886/Mum/2018 (Assessment Year:2013-14) - - - Dated:- 20-2-2020 - SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM Assessee by: Mr. K. K. Ved Revenue by: Shri Ajay Kumar (DR) ORDER PER SHAMIM YAHYA, AM: This appeal filed by the assessee is directed against the order of the Principal Commissioner of Income Tax-3, Mumbai [hereinafter referred to as the PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is without prejudice to the other. 3. In this case the assessment u/s 143(3) of the I. T. Act, 1961 was completed on 17.03.2016 for A.Y.2013-14 by the Dy. CIT 3(3)(2), Mumbai assessing the total income/loss of the assessee at ₹ 4,76,03,249/- and book loss at ₹ 7,62,34,191/- as against current year s loss of ₹ 6,21,88,565/- and book loss of ₹ 7,62,34,191/- declared by the assessee company. 4. Thereafter Ld. CIT issued the notice to the assessee u/s 263 of the I.T. Act, 1961 dated 20.02.2017 the same read as under.:- During the year under consideration, the assessee has claimed capital loss as Long Term Capita) Loss and carried forward the same for set off against the gains in subsequent years. Allowance of said claim is found to be erroneous as the amount is a mere write off of balances and not a Long Term Capital Loss arising out of a sale of any rights or asset. Therefore, the assessment needs to be revised to deny the claim of assessee for Long Term Capital Loss of ₹ 1,33,76,692/- In view of the above, the assessment order passed u/s 143(3) by the DDT 3(3)(2), Mumbai dated 17/0312016 appears to be erroneous and prejudicial to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail or made necessary inquiries on the issue of Long Term Capital Loss and investigation on such issues which should have been made. As is evident from the records and the assessment order, there was no direct query made by the AO regarding claim of Long Term Capital Loss. The AO accepted assessee's submission and did not make any further queries regarding the ownership, actual transfer, delivery/ handing over possession etc of the said property. Therefore, the undersigned, as Principal Commissioner-3, Mumbai, is within the powers accorded under the provisions under sec 263 as the said section 263 of the I. T. Act, 1963 includes the following: 263. (1) The (Principal Commissioner or] Commissioner may call for an examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried forward. Without due inquiry and verification, the AO allowed the claim. This is erroneous in as much as it is prejudicial to the Revenue, as the Assessee has written off its balance advanced to a party which cannot be categorised as a Long Term Capital Loss. This is because, the amount written off is capital itself which was given as advance and loss has not arisen due to alienation of any capital asset. Reliance is placed on the decision of the ITAT, Mumbai in the case of M/s Tulip Star Hotels Ltd Vs Addl. CIT 114 ITD 202. Reliance is also placed on the decisions in the following cases i) Grindwell Norton Ltd Vs. DOlT ITAT Mumbai -TM - 91 ITD 412 H) CIT Vs Chidambaramnatha Mudaliar Madras - 240 ITR 552 Wherein the concept of Long Term Capital Loss on account of alienation of asset and Loss of Capital is discussed. In the order of the Hon'ble High Court Madras, in the case of CIT Vs Chidambaramnatha Mudaliar Madras - 240 ITR 552, it was held as under: The Tribunal was not correct in ho/ding that the assessee had incurred long term capital loss when the assessee wrote off his unrealized deposit from a wound up company and that the assessee suffered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der u/s 143(3) dated 17/03/2016 for AY. 2013-14 erroneous in so far as it is prejudicial to the interests of revenue. Accordingly, it is required to be set aside u/s 263 of the I. T. Act. Accordingly, I, Principal Commissioner of Income Tax - 3, Mumbai, in exercise of powers conferred upon me u/s 263 of the I. T. Act, 1961, set aside the assessment made u/s 143(3) dated 17/03/2016, for AY. 2013-14 to be made as per directions/observations in above paras after due inquiries and verification. The Assessing Officer is directed to grant sufficient opportunity to the assessee of being heard and examine and consider all the submissions as well as evidences, which the assessee may wish to produce before him, and thereafter decide this issue on merits and complete the assessment as per law. 7. Against the above order assessee is in appeal before the ITAT. We have heard both the counsel and perused the records. Learned Counsel of the assessee reiterated the submission that the AO has duly enquired the matter and after proper inquiry he has taken conscious decision in this regard. The counsel referred to the submission made to the AO dated 17.03.2016 for the following submission before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer has not made any enquiry and the view that the writing off of an advance given for purchase of machinery can give rise to a claim of long term capital loss to be carried forward is erroneous. 12. The contention of the learned counsel of the assessee is that assessing officer has made the necessary enquiry and after being satisfied with the assessee's reply he has passed the assessment order. In this regard we note that no specific enquiry by the assessing officer on the subject has been brought to our notice. The learned counsel of the assessee only states the assessee submission as mentioned above before the assessing officer. The same may be reproduced hereunder even at the cost of repeatation. Note on allowability of provision written back I. During the financial year ended 31 March 2013, the Company has written back a provision of ₹ 1,74,39,520/- in its hooks of accounts. 2. The said provision was suo moto disallowed in the Return of Income filed for the AY 200910, year in which the said provision was created. A copy of the said Computation of total income for AY 2009-10 is attached herewith (or your reference at Annexure 1. 3. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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