TMI Blog2020 (12) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... usion that no depreciation was ever claimed or allowed on the land of building under consideration. Undisputedly, the said property was held by the assessee for more than three years as it was receiving the rent on the said property w.e.f. 1/5/2005 and no depreciation, was claimed thereon. There was true and full disclosure of the facts and no new information came to the knowledge of the assessing officer. On these facts and material already on record, the reopening of the assessment was invalid and the assessment so made on the basis of an invalid notice was correctly quashed by the CIT(A). Thus, ground no. 1 of the department is hereby dismissed. Section 50C Applicability - Documentary evidence clearly shows that the property in question was let out since the date of its acquisition and was never used for the purpose of business by the assessee. On perusal of the returns of income filed for the AY 2006-07 to 2009-10 and the depreciation charts submitted under Rule 5 of the Income-tax Rules, it is clearly evident that no depreciation was ever claimed on the said property since the date of its acquisition. Since no depreciation was claimed by the assessee and allowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this order to avoid undue harassment to the assessee and to refund the incometax paid thereon as per law. Thus, the issue raised in these grounds is decided in favour of the assessee. Mesne profit - As regards the Taxability of the amount of ₹ 36 crores remained with assessee after cancellation of the said sale in terms of the decree order of the Hon ble jurisdictional Delhi High Court, we agree that the same was in the nature of mesne profit and beyond the provisions of section 56(2)(ix) - as explained by the Ld. AR, the said section is also not applicable as the twin conditions mentioned therein have not been met on the facts, because as per the contention of the AR the said amount was in the nature of liquidated damages for affecting the title of the assessee on the property for nearly 7 years. - I.T.As. No.4736/DEL/2017, ITAs No.5237 & 5238/DEL/2017 - - - Dated:- 27-11-2020 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Shri Sanjay Goel, CIT-DR For the Respondent : Shri Vinod Kumar Bindal, CA; Ms. Sweety Kothari CA; and Rinky Sharma ITP ORDER PER AMIT SHUKLA, JM: The aforesaid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IPM) which was later known as Centre for Vocational and Entrepreneurship (COVS) vide two sale deeds dated 24/09/2008 . The details of property were as under: - i. Plot of land with Motel built thereon in Khasra nos. 2, 3, 4, 5, Village Shahurpur, Tehsil Main Chhatarpur Road, District Hauz Khas, New Delhi sold for ₹ 130 Crores ; ii. Plot of land in Khasra no. 584/2, 585, Village Satbari, Tehsil Hauz Khas, New Delhi sold for Rs. 21 Crores. 5. The said property was purchased by the assessee in the F.Y. 2005-06. Admittedly, as per the records the assessee never claimed any depreciation on the said property as the same was never used for its business but was let out from the day one to the purchaser IIPM itself. Accordingly, the assessee declared LTCG of ₹ 143,85,67,404/- on sale of the said property after taking benefit of the indexation as per law in its original return of income. 6. IIPM paid ₹ 21 crores against the sale deed for the property at Plot of land in Khasra no. 584/2, 585, Village Satbari, Tehsil Hauz Khas, New Delhi; and paid ₹ 12 Crores out of ₹ 130 Crores against the sale deed for the Plot of land with Motel built thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee was claiming depreciation on the block of asset which should have been reduced to NIL as per the provisions of the Act. Thus, as per him the assessee failed to disclose the material facts truly and fully as to the fact that the asset on which long term capital gain was declared in AY 2009-10 was included in the block of assets on which depreciation was claimed and thus, the case was reopened by the AO by issuing notice u/s 148 of the Act by recording reasons to believe that income has escaped assessment as short term capital gain taxable @ 30% was taxed as Long term capital gain @ 20% and excess depreciation was claimed. 9. The assessee submitted a letter dated 20/04/2015 to treat the original return of income as return of income filed in response to the notice u/s 148 of the Act. 10. However, during the course of reassessment proceedings when the sale of above property through 2 separate sale deeds as above stood cancelled by the Hon ble Delhi High Court s order dated 05/06/2015, the assessee revised its return of income filed in response to the notice u/s 148 of the Act and filed with it a letter dated 29/02/2016. The assessee explained the sequence of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that in the depreciation chart, the value of said property was shown at ₹ 6,10,00,000/- which was the purchase value of the said property and the same was reflected in the balance sheet. This shows that no depreciation at all was charged on the said property in the periods relevant to the AY 2006-07, 2007-08, 2008-09 and 2009-10. 15. He further observed that, all the said information was available and verified by the assessing officer during the original assessment proceedings from his record. No new information was received by the department for reopening the assessment and reopening was done merely on the basis of change of opinion of the AO on same set of facts which is not permissible in the law. Therefore, the CIT(A) relying on the judgment of the Hon ble Apex Court in the case of CIT Vs Kelvinator India Ltd. 320 ITR 560 held that reopening is invalid and quashed the same. 16. As regards the revised return, the CIT(A) held that the section 147 has been incorporated in the Act for taxing the income which has escaped the assessment and not for giving benefit to an assessee. Therefore, the claim of the assessee that the sale of the said property be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Multi Commodity Exchange of India Ltd. vs. Deputy Commissioner of Income tax, [2018] 91 taxmann.com 265 (Bombay), High Court of Bombay f) Aradhna Estate (P.) Ltd. vs. Deputy Commissioner of Income-tax, [2018] 91 taxmann.com 119 (Gujarat), High Court of Gujarat g) Nickunj Eximp Enterprises (P.) Ltd. vs. Assistant Commissioner of Income-tax, [2014] 49 taxmann.com 10 (Bombay), High Court of Bombay h) Siemens Information Systems Ltd. vs. Assistant Commissioner of Income-tax, [2012] 20 taxmann.com 666 (Bom.), High Court of Bombay i) Sumeru Soft (P.) Ltd. vs. Income Tax Officer, [2017] 82 taxmann.com 5 (Chennai - Trib.), in the ITAT Chennai Bench 'A' 19. The CIT DR submitted that the principle of a mere change of opinion cannot be basis for reopening completed assessment, would be applicable only to the situation where the Assessing Officer had applied his mind and had taken a conscious decision on a particular matter in the issue. It would have no application where the order of the assessment does not address itself to the aspect which was the basis for reopening of the assessment. 20. The ld. AR on behalf of the assessee, Mr. Bindal submitted that the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation chart as per the Income-tax Rules. These documents clearly show that the assessee had never claimed depreciation on the said property till the date of its sale and the property was held for more than three years which has not also been disputed by the revenue. Thus, the assessee had truly and fully disclosed the particulars regarding sale of the said property and depreciation thereon. Even the CIT(A) also verified all these documents himself and came to the conclusion that no depreciation was claimed on the said property. 23. The AR also further submitted that no new information came on the record of the assessing officer. He referred to the reasons recorded for reopening and pointed out that the assessing officer has referred to the record and computation of the AY 2009-10 for forming its opinion regarding escapement of income. The said record and computation of income was already on the record of the assessing officer while passing the assessment order u/s 143(3) of the Act. Thus, it was clearly a change of opinion on the same facts which were already on the record of the assessing officer earlier and therefore the reopening of assessment was invalid as has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has also placed on record all these evidences to show that the information submitted by it were correct, property was held for a period of more than three years, rent was received on the said property and no depreciation at all was claimed on the said property under the Income-tax Act and that the value of the said property remained the same at ₹ 6,10,00,000/- in the Asset chart submitted as per the Income-tax Rules in all the returns of income. All these documents were part of the returns of income and tax audit report filed before the Revenue. Thus, these evidences clearly show that the assessee had made a true and full disclosure of the facts regarding the sale of the asset and depreciation thereon and which were very much part of the assessment records and had also been examined by the assessing officer in the original assessment proceedings. 28. Neither the assessing officer in the assessment order nor the DR during the hearing pointed out any discrepancy in the above mentioned information submitted by the assessee to the Revenue authorities nor they brought any evidence on record to show that the said information was incorrect or to show that depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, the reopening of the assessment was invalid and the assessment so made on the basis of an invalid notice was correctly quashed by the CIT(A). Thus, ground no. 1 of the department is hereby dismissed. 32. Since the reopening of the assessment has been held invalid and no reassessment can be made, ground nos. 2 and 3 become infructuous. However, on merits, Section 50 is applicable only on the block of assets which are used for business and on which depreciation has been claimed under the Income-tax Act / Rules. As mentioned above, the documentary evidence clearly shows that the property in question was let out since the date of its acquisition and was never used for the purpose of business by the assessee. On perusal of the returns of income filed for the AY 2006-07 to 2009-10 and the depreciation charts submitted under Rule 5 of the Income-tax Rules, it is clearly evident that no depreciation was ever claimed on the said property since the date of its acquisition. Since no depreciation was claimed by the assessee and allowed by the department on this property, the provisions of section 50 cannot be invoked in this case. Hence, there would not be any change in the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected or claim relief in respect of items not claimed in the original assessment proceedings unless relatable to the escaped income and therefore cannot re-agitate the concluded matters: a) Sun Engineering Works 198 ITR 297 (SC) b) K.Sudhakar S. Shanbhag Vs ITO (2000) 241 ITR 865 (Bom) that t. c) Metro Ispat (P) Ltd. in ITA no. 2553/Mum/2010 - 37. We have considered the submissions and arguments made by the assessee and the CIT DR. Since we have already held that the reopening of the assessment u/s 147 of the Act for this assessment year as invalid and have confirmed the cancellation of the reassessment order, the return filed cannot be considered as revised return as the entire proceedings are void-ab-initio and therefore, grounds of appeal raised on this score are dismissed. 38. Grounds no. 5 and 6 are general in nature and do not call for any adjudication. 39. The assessee raised two alternative additional ground being ground no. 7 and 8 vide letter dated 19/03/2020 which read as under: 7. Alternatively, the authorities below erred in law and on facts in not considering that the cancellation of sale deed by the consent decree duly confirmed by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rectified u/s 154 of the Act or otherwise can be allowed, therefore, we are admitting the same for adjudication. 43. The AR of the assessee submitted that the assessee vide letter dated 20/04/2015 requested that the original return filed be treated as filed in response to the notice u/s 148 of the Act. The cancellation deeds cancelling the sale of properties by a consent decree of the Hon ble Delhi High Court were executed on 06/06/2015, i.e., two months after filing the return of income in response to the notice u/s 148 of the Act. Thus, the sale transaction got cancelled and the assessee intimated the said fact for rectification with a detailed note supported with the relevant evidence to the assessing officer by way of a revised return of income on 29/02/2016 in view of this subsequent event and repossession of the said property already sold during the relevant period. 44. The AR also submitted that the return of income can be revised u/s 139(5) of the Act only when the assessee discovers omission/wrong statement in the original return. In this case, no omission or wrong statement was discovered in the return of income filed in response to the notice issued u/s 148 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all the subsequent events in the interest of justice and placed reliance on undernoted authorities: (a) MoumitaPoddar v. Indian Oil Corporation Ltd. (2010) 9 SCC 291 (b) KedarNath (2004) 8 SCC 76 (c) Judgment of the Hon ble Supreme Court in Shipping Corporation of India Ltd vs Machado Brothers Ors on 25 March, 2004 in CASE NO.: Appeal (civil) 1855-1856 of 2004 d) Pasupuleti Venkateswarlu vs. The Motor General Traders (1975 1 SCC 770 at para 4) e) J. M. Biswas vs. N. K. Bhattacharjee Ors. (2002) (4) SCC 68. 48. Even, the Act itself provides for rectification when there occur changes in the quantum of capital gains in subsections 7B, 10A, 11,15 16 of the section 155 in this regard. In support of this contention, reliance was placed on the judgment of Shah VrajlalMadhavji [1974] 95 ITR 614 (KER.) holding that the quantum of capital gain can be altered by way of rectification on subsequent change in sale consideration by High Court. Thus, he submitted that, this revised return, in essence, amounted to an application u/s 154 of the Act to correct the mistake apparent on record due to the later judgment of the Hon ble Jurisdictional Delhi High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Container Corporation of India ltd. Vs DCIT (2005) 92 ITD (Delhi) that if an assessee is entitled to relief on the basis of material on record, it would constitute mistake apparent from record and consequently, such relief cannot be denied merely because the assessee has omitted to claim the same. 51. The assessee also placed its reliance on the judgment of Madras High court in Dr. Rajah Sir M.A. Muthiah Chettiar 238 ITR 505 wherein a Supreme Court decision was the cause for rectification. It was held that if allowing an application for rectification would be in accordance with the substantive charging provisions of the Act then such exercise is a permissible exercise of power to rectify the mistake u/s 254(2) of the Act. 52. The AR also submitted that the Article 265 of the Constitution mandates that no tax can be levied or collected except by an express authority of law, which means that tax collected contrary to law has to be refunded. The purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. The right of the revenue to receive and collect tax under the said Act is limited to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The AR also submitted that too hypertechnical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. Further, reliance is placed on the undernoted authorities: a) Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) 2002-TIOL-444-SC-LMT. b) Saroj Aggarwal v CIT 156 ITR 497 SC c) S.R. Koshti v. CIT [2005] 146 Taxman 335/276 ITR 165 d) CIT Vs BehariLall-Ramchandra 5 ITR 417 OUDH e) CIT Vs Relcom [2015] 62 taxmann.com 190 (Delhi) f) CIT Vs Vali Brothers. 282 ITR 149(ALL) g) CIT Vs Lata Mangeshkar Medical Foundation [2019] 410 ITR 347 (Bombay) 55. The assessee further submitted that even in reassessment proceedings, income has to be computed as per the provisions of Act . Reliance was placed on the following authorities: a) United Educational Society [2019] 107 taxmann.com 127 (Delhi - Trib. b) Padinjarekara Agencies (P.) Ltd. [2014] 52 taxmann.com 441 (Cochin - Trib.) 56. It is well accepted law that the Courts have inherent powers to further the cause of substantive justice and make such orders as may be necessary to meet the end of justice or to prevent the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inherent and traceable to the section 143(3) itself and the limitation contained in section 154(7) of the Act would not apply. Reliance was placed on the following authorities: a) Peninsula land Ltd. Vs CIT (2008) 175 Taxman 58 (Bombay) b) L Alagusundaram Chettiar Vs CIT (1994) 210 ITR 614 (Mad) 61. The exercise of power to rectify an error apparent from record is not discretionary and if the conditions for its exercise are shown to exist, ITO cannot decline to exercise the said power as has been held in the case of L. Hirday Narain Vs ITO (1970) 78 ITR 26 (SC). Arguments of the CIT DR 62. The learned CIT DR submitted that u/s 154, only arithmetical mistakes can be rectified, whereas it is a matter of writing off of long-term capital gain on account of order of the Hon ble Jurisdictional Delhi High Court. The assessee has submitted that the Hon ble Delhi High Court approved the scheme of cancellation of earlier sale deeds and therefore, the LTCG admitted earlier should be written off whereas these cancellation deeds were mutually agreed deeds between the assessee and the purchaser with no role played by the Hon ble Delhi High Court in approving these cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 56 crores leaving just ₹ 36 crores with assessee. This fact was very much mentioned in the settlement deed duly decreed by the Hon ble jurisdictional Delhi High Court vide its order dated 05/06/2015 and placed on record before the Assessing Officer and the CIT(A) and has also filed before us in the paper book. 67. The amount of ₹ 36 crores as above remained with assessee in pursuance to the cancelled sale deeds was in the nature of mesne profit for adversely affecting the title on the property of the assessee for almost 7 years being capital in nature, i.e., since September, 2008 when the sale deeds was registered and the possession of the property was handed over to the buyer till cancellation of the sale deeds on 05/06/2015 by the Hon ble Delhi High Court for which no compensation in any manner was received by the assessee from the buyer. The assessee did not have the property including its title for almost seven years and no benefit arose to it for the same. The assessee relied on the Special Bench decision of the Hon ble Tribunal in the case of Narang Overseas (P) Ltd vs ACIT [2008] 111 ITD 1 (Mumbai) (SB) [DoD: 20/02/2008] where the Hon ble Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property for almost 7 years which had already been transferred to the buyer in the year 2008 through registered conveyance deeds and who used it for the said period. Second clause (b) is also not applicable at all on facts as the sale with possession had already been completed. 71. He also stated that this is a peculiar situation and happens rarely and therefore, the legislature has not made any provision for the same as it could not comprehend the same or all such probabilities. It was never a forfeited amount nor was received in the course of negotiation for transfer of a property which was never transferred but a compensation in the nature of mesne profit and a capital receipt. 72. It was further submitted that the Hon ble ITAT is seized with the appeal for the AY 2009-10 and the settlement was arrived at in the period relevant to the AY 2016-17 which is not under consideration and no direction can be given by the Hon ble ITAT in respect of any other assessment year. DECISION 73. We have heard the rival contentions and perused the material on record and duly considered the factual matrix of the case. 74. The only issue remains for consideration here is, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Cancellation deeds dated 06/06/2015 were registered in pursuance of this High Court decree dated 05/06/2015. Once a decree is passed by the High Court under its signature, the settlement gets approved by the High Court and has to be reckoned as an order passed by the Hon ble High Court for all purposes. Hon ble Bombay High Court in the case of Anant Chunilal Kate v. ITO [2004] 267 ITR 482 (Bom) has held as under: The tribunal did not at all treat the compromise decree as a lawful decree. The tribunal was under the impression that the rights and liabilities of the parties were not determined after applying the mind to the contents of the contract and after appreciation of evidence. The tribunal had made a distinction between the decree passed after considering various contentions raised and case law referred to by the parties and a decree passed in accordance with compromise reached by the parities outside the court. The tribunal s decision in that regard was contrary to the well- settled legal position. A decree in terms of settlement arrived at by the parties before the court has the same binding force as any other decree. 78. Thus, it is established beyond d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Appeal (civil) 1855-1856 of 2004 . 8. A similar issue came up in the case of Futura Polyster Ltd. Vs ITO (2020) 118 taxman.com 243 (Mum-Trib.) , where the assessee entered into an agreement to sell dated 19/12/2012 for transfer of a property and declared long term capital gain on that basis in its return of income. However, later on the agreement to sell was cancelled vide cancellation deed dated 28/09/2017 when the appeal was going on before the CIT(A). The assessee raised this issue before the CIT(A) who remanded the matter back to the AO. The AO having rejected the plea of the assessee brought long term capital gain to tax. In view of these facts, the Hon ble Mumbai ITAT Bench observed as under: As a matter of fact, the lower authorities had failed to place on record any material which would rebut the aforesaid claim of the assessee. In fact, it is not even the case of the revenue that the deed of cancellation, dated 28-9-2017 is a sham or a fabricated document. In fact, the subsequent sale of part of the land by the assessee in the period relevant to A.Y 2018-19 and A.Y 2019-20, further fortifies the veracity of the aforesaid claim of the assessee. At this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties under consideration cannot be taxed in the hands of the assessee at all. 82. The AO as well as the Ld. CIT(A) did not grant the claimed relief of excluding the impugned LTCG from taxable income for the A.Y. 2009-10 to the assessee merely on a technical issue that the assessee filed the claim in form of revised return which is not permissible in reassessment proceedings. When the assessee contended that the said letter should be considered as a rectification application u/s 154 of the Act which has been filed in time, i.e., within 4 years from the end of the financial year in which the assessment order u/s 143(3) was passed. The Ld. CIT DR contended that this letter does not mention to be an application u/s 154 of the Act and therefore, cannot be considered as an application u/s 154 of the Act. The Ld. CIT DR further contended that even if it is presumed that this can be rectified u/s 154 of the Act, then no application u/s 154 was filed by the assessee within the prescribed time. Thus, the issue arises as to whether the relief can be allowed to the assessee in the above mentioned circumstances. 83. A lot of emphasis has been placed by the Ld. CIT DR on the technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two views being taken. The expression record has to be construed and understood in which it appears and in context of expression apparent from the record in section 154; record would mean the record of the entire proceedings of the case including the documents and material produced by the assessee and taken on record by the authorities, which were available at the time of passing of the order. All documents establishing the cancellation of sale deeds were placed on the record of the assessing officer who ignored the Jurisdictional Delhi High Court order and cancellation deeds passed in pursuance of the said Delhi High Court order and did not exclude the long-term capital gain while computing the assessed income. Thus, the assessing officer deliberately omitted to take into consideration the Delhi High Court s order as well as other evidences regarding the cancellation of sale deeds and reversion of the possession of the property to the assessee. 86. It is a well establish law that, if on the basis of material on record, the assessee is entitled to a relief, then it would constitute a mistake apparent from record which can be rectified u/s 154 of the Act and such relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the judgment of the Constitutional Bench of 9 Judges of Hon ble Supreme Court in Mafatlal Industries versus Union of India, (1997) 5 SCC 536 / (2002-TIOL-54-SC-CX), and from CIT Vs Shelly Products [2003] 261 ITR 367 (SC), R. Seshammal Vs ITO 237 ITR 185 (Madras), CIT Vs Vali Brothers. 282 ITR 149(ALL), TiamHouse Service Ltd. 242 ITR 539(Mad). The Hon ble Delhi in Sudhir Sareen v CIT 239 ITR 440 Delhi has observed as under: An income which is liable to be taxed should not escape. An income not taxable, erroneously or unwittingly caught in the net of taxability, should be allowed to escape. The tax collector should not hesitate in extending a helping hand to anyone who genuinely intends to pay the tax. 89. Thus, an income liable to be taxed has to be worked out in accordance with the law in force. In this process, it is not open to the Revenue authorities to take advantage of the ignorance of the assessee and tax cannot be levied on an assessee at a higher amount merely because the assessee did not claim the relief due to some error or ignorance. It can only be levied when it is authorized by law as is the mandate of the Article 265 of the Constitution of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove has the power to entertain and decide such claim which otherwise is permissible in law. 93. In view of overall facts and legal position, we are of the opinion that substantive justice must be rendered to the assessee to meet both the ends of law and justice. Thus, we hereby hold that the AO has made a grave error apparent from record by ignoring the documentary evidences including the Hon ble jurisdictional Delhi High Court s order placed on his record for cancellation of the sale even though the same was brought to his notice by the assessee and thereby including the long term capital gain on sale of the property in the taxable income of the assessee. The letter dated 29.02.2016 filed before the AO is to be treated an application u/s 154 to rectify the assessment order passed u/s 143(3) on 28.12.2011 as the application has to be considered in respect of LTCG assessed therein, because the said application was within 4 years as held above. We hold that the long- term capital gain of ₹ 143,85,67,404/- on sale of the said property is not at all taxable in the hands of the assessee as the sale deeds were cancelled. We hereby direct the assessing officer to exclude the long ..... X X X X Extracts X X X X X X X X Extracts X X X X
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