TMI Blog2021 (4) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... of such loss against the Long-Term Capital Gain arising from the Bonds and Right to Property. Claim of the assessee for Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index was disallowed by the Assessing Officer in the order passed under section 143(3) for the year under consideration by relying on the order passed in assessee s own case on the similar issue for A.Y. 2010-11 under section 143(3) read with section 263 - As pointed out by assessee, the said order passed by the Assessing Officer for A.Y. 2010-11 was a subject matter of appeal and the claim of the assessee for Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index was allowed by the Tribunal and following this conclusion drawn in A.Y. 2010-11, the Tribunal has already upheld the appellate order of the ld. CIT(A) dated 28. 02.2019 for the year under consideration allowing the similar claim of the assessee. This issue thus stands decided by the Tribunal on merit in assessee s own case for A.Y. 2010-11 as well as for the year under consideration and we, therefore, do not consider it necessary or expedien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case as discussed above are considered in the light of the decision of the Hon ble Gujarat High Court in the case of R.K. Construction Co. (supra), we find that there was no error in the order of the Assessing Officer on this issue as alleged by the ld. Pr. CIT and the impugned order passed by the ld. Pr. CIT revising the order of the Assessing Officer on this issue is not sustainable. Income and year of taxability of the profit arising to the assessee from sale of right in 37 flats - HELD THAT:- The entire income arising from the sale of right in 37 flats was offered by the assessee in A. Y. 2015-16 under the had long-term capital gain and when the Assessing Officer assessed the same as business income of the assessee, an appeal was filed by the assessee before the ld. CIT(A), who allowed the appeal of the assessee on this issue and directed the Assessing Officer to assess the income arising to the assessee from the sale of flats under the head long-term capital gain . This decision rendered by the ld. CIT(A) has already been upheld by the ITAT [ 2019 (12) TMI 1281 - ITAT KOLKATA] . Keeping in view the same, we find merit in the contention of the ld. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the Assessing Officer under section 143(3) read with section 263 of the Act before the ld. CIT(A), but the same was still pending. Following the stand taken in assessee s own case for A. Y. 2010-11 on a similar issue, the claim of the assessee for Long-Term Capital Loss on the sale of Government Securities by applying Cost Inflation Index was rejected by the Assessing Officer. He also rejected the claim of the assessee for set off of capital gain arising from sale of building against brought forward Long-Term Capital Loss amounting to ₹ 2, 79,36,337/-on the ground that the said asset being depreciable asset forming part of the block of assets building was Short Term Capital Gain in terms of section 50 of the Act and, therefore, the Long Term Capital Loss could not be set off against the same. The Assessing Officer also made further disallowances under sections 14A and 40(a)(ia) of the Act determining the total income of the assessee at ₹ 1,35,48, 59, 800/-in the assessment completed under section 143(3) of the Act vide an order dated 28.12. 2016. 3. The records of the assessment made by the Assessing Officer under section 143(3) of the Act subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act should not be revised by invoking the provisions of section 263. Thereafter another notice was issued by the ld. Principal CIT on 19. 02. 2019 under section 263 of the Act pointing out the further error allegedly committed by the Assessing Officer in the assessment completed under section 143(3) of the Act as under :- During the course of assessment of Return of AY 2015 -16 it was found that Right on Property being 37 flats of different configurations, having an approximate total area of 50051 sqft, in a then upcoming housing project named 4 Sight Manor at Kolkata -700084, was acquired by the assessee upon execution of the Agreement for Sale and MOU on 26.08.2011 and the same Right was transferred to the third party individuals by execution of Tripartite Agreement for Sale in FY 2011 -12, 2012 -13, 2013 -14 and 2014 -15. Since the assessee followed a mercantile method of accounting, the full value of sale to the third-party buyers accrued as a receipt to the assessee as and when the Tripartite Agreement for Sale with the 37 third party buyers happened during the FY 2011 -12, 2012 -13, 2013 -14 and 2014 -15, in the same manner as the right on the 37 flats were acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 /-. The said LTCG of ₹ 1,99,41,088 /-was set off by the assessee against Long Term Capital Loss of ₹ 1,11,33,28,388 /-from sale of Government Securities in the current year. In the notice issued u/ s 263 of the Act, your goodself has mentioned that as per the return of income filed by the assessee, indexation benefit on sale of Government securities was taken which resulted in Long Term Capital Loss (LTCL) of ₹ 1,11,33,28,388 /-. However, indexation benefit should not have been allowed on Government Securities as the same are bonds and debentures and instead, gains of ₹ 16, 17,578 /-, before indexation benefit, should be subjected to tax. The same is tabulated follows: Particulars Sale price Cost Price LTCG before indexation Indexation cost LTCG after indexation Government Securities 1,20,00,00,000 1,19,83,82,422 16,17,578 2,313328388 1,11,33,28,388 The LTCL of ₹ 1,11,33,28,388 /-was not allowed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public loan, and having one of the following forms, namely:- (i) stock transferable by registration in the books of the Bank; or (ii) a promissory note payable to order: or (iii) a bearer bond payable to bearer; or (iv) a form prescribed in this behalf; (b) any other security created and issued by the Government] in such form and for such of the purposes of this Act as may be prescribed; The Government securities which were sold during the year were stocks being of the nature described in clause (i) to section 2 (a) of the Public Debt Act, 1944. The third proviso to section 48 of the Act restricts the indexation in the case of long term capital assets, being bonds or debentures other than Capital Indexed Bonds issued by the Government. The term debenture has been defined in section 2 (30) of the Companies Act 2013 which reads as under: debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not; On a combined reading of the above sections, it emerges that Government Securities are not bonds or debentures and are therefore not covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Burdwan 26,92,609 36,46,400 36,46,400 9,53,791 2 Flat 2, Kalra Road, Burdwan 19,65,132 28,28,800 29,03,940 9,38,808 1 Flat 2A, Kalra Road, Burdwan 26,92,609 36,46,400 44,67,800 17,75,191 TOTAL 36,67,790 As evident from the above table, the assessee in computation of capital gains from sale of the above three properties has considered the Stamp Duty Valuation u/ s 50 C of the Act as the sale consideration to arrive at the STCG of ₹ 36,67,790 /-. The said short term capital gains of ₹ 36,67,790 /-was offered for taxation in the computation of total income. With regard to the 4 th property, being flat at 5, Lala Lajpat Rai Sarani, it was submitted during assessment that the said flat was acquired in the year 1989 and was therefore a Long Term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a period of more than 3 years, the said flat was therefore a Long Term Capital Asset by virtue of section 2 (29 A) of the Act. In support, reliance was placed on the judgment of the Hon ble Bombay High Court in the case of CIT vs Ace Builder (supra). The resultant STCG of ₹ 2,9,36.337 /-was set off with LTCL of the current year. A copy of the original computation is enclosed at page 2 -3. However the same was not allowed in the assessment order on the pretext that STCG from sale of the depreciable assets cannot be set off with the Long Term Capital Loss. The assessee has tiled an appeal before the learned CIT(A) against this disallowance and the same is pending for adjudication. In the notice issued u/ s 263 of the Act, your goodself has raised the ground that the assessee has not considered the Stamp Duty Valuation of ₹ 9,91,43,740 /-in computation of STCG in this case which has resulted in underassessment of income of ₹ 1,89,42,140 /-which has rendered the assessment order as erroneous. In this regard, please note that during assessment, it was submitted before the learned AO that immediately before the sale, the property was valued by M/ s N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) without making any inquiries/ verification which he/ she is required to be made. 2) without making inquiry into a claim which is claimed by assessee and allowed such claim. 3) which is not in accordance with any order/ direction/ instruction (i. e. circulars) issued by CBDT; 4) which is not in accordance with any decision of jurisdictional High Court or Supreme Court which is prejudicial to the assessee or any other person. In other words, where jurisdictional High Court or Supreme Court s decision is against the assessee or any other person and AO passed the order without considering such judgment then such order shall be considered as erroneous and prejudicial to the interest of revenue. Applying this explanation to the facts of the assessee, it is clear that proper enquiries were conducted by the learned AO with regard to the sale of depreciable assets/ flats. The assessee has filed written submissions before the learned AO explaining the reasons as to why the stamp duty valuation should not be considered for computing the Capital Gains with regard to the 4 th property during the course of assessment and the same was duly considered by the ld. AO. As such, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Accounts as Investment in Right to Property under the head Investments -Current and Non-current investments', refer Note II of the audited accounts. The investment in Right to Property was never considered as stock in trade by the assessee. The assessee declared a total receipt of ₹ 16,10,57,288 /-in the assessment year 2015 -16 as sale consideration of the property, being 37 flats. The last date of payment in all the 37 cases was 18 -02 -2015. Rights over the said 37 f lats were transferred after more than three years from the date of its acquisition to respective individuals at a total consideration of ₹ 16,10,57,288 /-after receipt of the f inal instalment of sale consideration on 18.02.2015. Accordingly, the appellant considered the indexed cost of acquisition of the right of respective 37 flats as per provisions of sec. 48 r.w.s. 2 (14), 2 (29 A) and 2 (47) of the Act and computed long term capital loss on transfer of the said rights at ₹ 36,60,000 /-in AY 2015 -16. The said investment being a capital asset and disclosed as such in the audited accounts of the company was duly disclosed before the department in AY 2012 -13, 2013 -14 and 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee went in appeal before the learned CLT(A) on this issue. The learned CLT(A) perused and examined the facts of the case and accepted the claim of the assessee that the impugned transactions is to be treated as Capital Gains and directed the learned AO to assess the income from the sale of Rights to Property under the head Capital Gains The relevant extract of the CITCA) order is reproduced below: 12. In this case 37 f lats were purchased of different configuration. This was validated by an agreement. The approximate total area was 50051 sq. ft. Assessee purchased entire purchase consideration.clt was reflected in the Audited Accounts as wall. It was shown as investment. Assessee declared total receipt of ₹ 16,10,57,228 /-as sale consideration. The last date of payment in all 37 cases/ flats was 18.02.2015. This was after 3 years. This position was accepted in earlier years. Thus following the decision in Radha Soami Satsang. I have no option but to go by the decision: Radha Soami Satsang on the principles of consistency. Reliance is also placed on the decision of Calcutta ITAT in the case of DCIT vs. M/ s. ABCI Infrastructure Pvt. Ltd. (ITA No. 990 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 261 shall extend to such matters only as had not been considered and decided in the appeal-CIT(A) had considered and decided the issue-once the issue was considered and decided by the CIT(A), the remedy of the Revenue cannot l ie in the invocation of the jurisdiction under s. 263 -Revisional order passed by the CIT under s. 263 was not valid where an order passed by the AO is subject to an appeal that has been filed, the power of the CIT to invoke his revisional jurisdiction under s. 263 can only extend to such matters which have l it been considered and decided in the appeal. The words which have been used in Expln. (c) to iub-s. (1) of s. 263 are considered and decided . In other words, it is not merely a consideration that disables, but tile matter has to be considered and decided in the appeal. The submission of counsel appearing on behalf o J the Revenue that the Cf T(A) has not decided the issue, while dealing with the question oJ enhancement, cannot be accepted. The submission which has been urged on behalf of the Revenue is that the CIT(A) was requested to exercise his power of enhancement in pursuance of the request made by the Addl. CIT on 20 th May, 2005 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of holding found to be between 391 to 522 days). In other words, the sale of gold ETF would be STCG instead of LTCG and as a result the indexation benefit would not be available. In this way, the under-assessment was found to be to the tune of ₹ 2,11,99,359 /-as follows: Particulars Sale price Cost price Actual L.T. Capital Gain Remarks Bonds (Long Term) 2,06,79,00,000 205,92,60,976 86,39,024 No tax was levied by the department Govt. Securities 1,20,00,00,000 119,83,82,422 16,17,578 Set off with brought forward L.T. Capital loss Profit on sale right to property 113,02,064 No tax was levied by the Dept . Long term capital gain (Without STT) 199,41,088 86,39,024 plus 1,13,02,064 = &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sec. 48, as against ₹ 8,02,01,600 / -declared by the assessee, thereby attracting the provisions of sec.50 c. The assessee had also claimed depreciation and was allowed as such. To elucidate, except for Flat 2 A at Kalna, the stamp duty valuation of the other three properties were more than the sale consideration. Thus, ensuing STCG should have been determined at ₹ 5,05,46,267 /-instead of ₹ 3,16,04,127 / -as claimed by assessee. Assessee has vehemently disagreed to the above observations. The fact of the matter is the aforesaid details have been obtained from the copies of sale deeds filed by assessee in the course of assessment and which was not looked into by the AO before disposing. Clearly the AO has passed an order without applying his mind on the facts emanating from documents on records which were fi led by assessee. Mechanical claim if assessee without the AO exercise his statutory duties to pass an assessment in accordance with law on the facts of each case has therefore resulted in an erroneous assessment as well as one prejudicial to the interest of revenue. 7. Now coming to the issue raised in the second show cause, it needs to be stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The distinction whether an investment transaction is a mere realisation of the investment on an act done for making profits depends on whether the excess was enhancement of the value by realising a security or a gain in an operation of profit making. Here, the nature of transactions raises a very strong presumption towards acceptable business characters. In other words, the substantial nature of transaction clearly reveal that the venture engaged in by the assessee is clearly in the nature of trade. In its submission, assessee has stated that the CIT(A) having already considered the issue, i t could not be taken up for revision u/ s 263. It would seem from the submission that the appellate order referred to is for A. Y. 2015 -16. However, neither copy of the appeal order nor the grounds raised in Form No.35 have been provided. On a perusal of the impugned assessment records for A. Y. 2014 -15, it is seen that the issue at hand was never examined by the AO. Needless to say, a finding or an opinion recorded by a tax authority for one assessment year has no binding effect on the issues in other assessment years. In this case at hand, it is evident that the issue relates to A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and junction of the Income-tax Officer is very different from that of civil court. The statements made in the pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which come before it. The Income-tax Officer is not only an adjudicator but also an investigator, He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry, It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry, It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the issue in as much as there is no incidence that tax lawfully exigible has not been imposed or a lesser tax has been imposed. (3) That, the Ld. Pr. Cl T has wrongly assumed jurisdiction u/ s.263 of the Act for setting aside the original assessment order with regard to set off of Long Term Capital Gains from sale of bonds and Long Term Capital Gains from sale of Right to Property against Long Term Capital Loss claimed by the assessee on sale of Government securities. (4) That, the Ld. Pr.CIT has wrongly assumed jurisdiction u/ s.263 of the Act for setting aside the original assessment order with regard to applicability of section 50 C read with section 48 of the IT Act on sale of depreciable property. (5) That, the Ld. Pr.CIT has wrongly assumed jurisdiction uls.263 of the Act for setting aside the original assessment order with regard to treatment of the income from sale of right to property under the head Profits from Business in spite of the fact that the said income is assessable under the head Capital Gains as held by the learned CIT(A) in his order dated 04 -03 -2019 for AY 2015 -16 on identical facts of the case. (6) That, the Ld. Pr.CIT has wrongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. He submitted that this factual position was intentionally suppressed by the assessee in order to mislead the ld. Pr. CIT or otherwise the ld. Pr. CIT would have passed an appropriate order taking cognizance of the said appellate order passed by the ld. CIT(A). The ld. CIT, D.R. also raised further contentions in support of the impugned order of the ld. Pr. CIT passed under section 263 on this issue by submitting that the claim of the assessee for Long-Term Capital Loss on sale of Government Securities by applying Cost Inflation Index is wrong on merit in view of the Amendments made in the Government Securities Act. 10. We have considered the submissions made by the ld. Representatives of both the sides and also perused the relevant material available on record. It is observed that the issue relating to the assessee s claim for Long-Term Capital Loss arising from the sale of Government Securities by applying the Cost Inflation Index was disallowed by the Assessing Officer in the assessment completed under section 143(3). However, the set off of such loss to the extent of ₹ 86,39, 024/-and ₹ 1, 13,02,064/-being the Long-Term Capital Gain from Bonds and Right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation Index stood already allowed, we find that there was no error in the order of the Assessing Officer in allowing the claim of the assessee for set off of such loss against the Long-Term Capital Gain of ₹ 86,39, 024/-arising from the sale of Bonds as well as against the Long-Term Capital Gain of ₹ 1, 13,02,064/-arising from Right to property. 11. At the time of hearing before us, the ld. D.R. has alleged that the fact of having passed the appellate order by the ld. CIT(A) on 28. 02. 2019 disposing of the appeal of the assessee filed against the order of the Assessing Officer under section 143(3) was not brought to the notice of the ld. Principal CIT by the assessee during the course of proceedings under section 263 and the same was intentionally suppressed by the assessee. We are unable to accept this contention of the ld. CIT,D.R. First of all, when the order passed by the ld. CIT(A) on this issue was in favour of the assessee allowing its claim for Long-Term Capital Loss arising from the sale of Government Securities, we find no justifiable reason for the assessee to have suppressed this fact and that too intentionally as alleged by the ld. CIT,D. R. Moreover a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 28. 02.2019 for the year under consideration allowing the similar claim of the assessee. This issue thus stands decided by the Tribunal on merit in assessee s own case for A.Y. 2010-11 as well as for the year under consideration and we, therefore, do not consider it necessary or expedient to deal with the argument sought to be raised by the ld. CIT, D.R. on merit of this issue. Ground No. 3 of the assessee s appeal is accordingly allowed. 13. In support of the issue raised in Ground No. 4 relating to the error allegedly pointed out by the ld. Pr. CIT(A) in the order of the Assessing Officer in computing the short-term capital gain arising from the sale of flats without taking into consideration the stamp duty valuation, the ld. Counsel for the assessee submitted that four flats forming part of the block of assets building were sold by the assessee during the year under consideration. He submitted that since the sale consideration of the said four flats was more than the opening W.D. V. of the block and additions made during the year, short term capital gain was computed and offered to tax by the assessee in the return of income for the year under consideration. He s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w was taken by the Assessing Officer, it was not open for the ld. Pr. CIT to take a different view while exercising his powers under section 263. 14. The ld. CIT, D.R., on the other hand, strongly relied on the impugned order of the ld. Pr. CIT passed under section 263 in support of the revenue s case on this issue. He also invited our attention to the order passed by the Assessing Officer under section 143(3) to point out that there is no discussion whatsoever made by the Assessing Officer in the said order on this issue. 15. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the short term capital gain arising from the sale of four flats being the depreciable assets forming part of the block of assets building was computed and offered to tax by the assessee as per section 50 of the Act since the said block of assets was completely exhausted in the year under consideration as a result of sale consideration of the four flats was more than the opening value of the building of the block of assets and the additions made during the year under consideration to the said block. Out of these four flats sold by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that before adopting the stamp duty valuation, you may kindly ref4 er the valuation of this property to the DVO as provided in u/ s 50 C(2) of the I.T. Act . 16. As is evident from the submission made by the assessee before the Assessing Officer during the course of assessment proceedings, the actual sale consideration adopted by the assessee for computation of capital gain arising from the sale of concerned flats which was lower than the stamp duty valuation was duly explained by the assessee and the same was also supported by a valuation report of the registered valuer, which had valued the market value of the flats at ₹ 5. 84 crores just before its sale by the assessee. It is also relevant to note here that a specific request was also made by the assessee to the Assessing Officer to refer the matter relating to the valuation of the property to DVO in terms of section 50C(2) of the Act if the lower sale consideration actually received by the assessee than the stamp duty value as justified by it was not acceptable. No such reference, however, was made by the Assessing Officer and keeping in view the same as well as all the facts of record, we find merit in the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceiving the full payments against the property. Referring to the relevant details of payments placed in the paper book, he pointed out that the full payment from buyers was received in the previous year relevant to A.Y. 2015-16 and accordingly gain arising from the right in sale of 37 flats was offered by the assessee in the return of income filed for A.Y. 2015-16. He submitted that the assessee is a Non-Banking Finance Company and investment made in these flats represented capital asset. He submitted that the said flats purchased by the assessee were shown under the head investment for A.Y. 2012-13, 13-14 2014-15 and this accounting treatment given by the Assessing Officer was accepted by the Assessing Officer. He contended that when the assessee offered this income as long-term capital gain in AY 2015-16, the Assessing Officer did not accept the same and assessed it as business income. He contended that on appeal, the ld. CIT(A) however allowed the claim of the assessee that this income was chargeable to tax in AY 2015-16 as long-term capital gain and the Tribunal has already upheld the order of the ld. CIT(A) on this issue vide his order dated 05. 12.2019 passed in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee from the relevant details, full payments were received by the assessee from the buyers in the previous year relevant to A.Y. 2015-16 and accordingly the income arising from the sale of flats was offered by the assessee to tax as long-term capital gain in A.Y. 2015-16. The ld. CIT, D.R. has not disputed the fact that full payment against the flats were received by the assessee in the subsequent year, i.e. A.Y. 2015-16 and not in the year under consideration. He, however, has pointed out certain facts involved in the assessee s case to contend that the income arising to the assessee as a result of sale of these flats is chargeable to tax as business income in the earlier years including the year under consideration, when the right in the flat was transferred by the assessee to the third party individuals by execution of tripartite agreements. It is, however, observed that the issue relating to the head of income under which this income is chargeable to tax in the hands of the assessee as well as the issue relating to year of taxability of the same are already decided by the Tribunal as pointed out by the ld. Counsel for the assessee. In this regard, it is observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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