DCIT,Circle-7, Kolkata, Kolkata V. Shri Harshavardhan Himatsingka, Kolkata

ITA 1333/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83047 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 08-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2012
• Court: TRIBUNAL
• Department Lawyers: SANJAY MUKHERJEE JDIT
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Capital asset
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI SHAMIM YAHYA, AM ] ITA NOS.1333, 1334 & 1335/KOL/2012 ASSESSMENT YEARS : 2006-07, 2007-08 & 2009-10 ( APPELLANT ) (RESPONDENT) D.C.I.T., CIRCLE-7, -VS- SHRI HARSHAVARDAN HIMAT SINGKA KOLKATA KOLKATA. (PAN : AAOPH 1363 H) FOR THE APPELLANT SHRI SANJAY MUKHERJEE, JDIT, SR.DR FOR THE RESPONDENT SHRI MANOJ KATARUKA DATE OF HEARING : 17.07.2014 DATE OF PRONOUNCEMENT : 05. 08.2014. ORDER PER BENCH THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGA INST RESPECTIVE ORDERS OF THE CONCERNED LD. CIT(A)-VIII, KOLKATA FOR A.YRS.2006-0 7, 2007-08 AND 2009-2010. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMM ON AND THE APPEALS WERE HEARD TOGETHER THESE ARE BEING DISPOSED OFF BY THIS COMM ON ORDER. 2. THE MAIN ISSUE RAISED IN THESE APPEALS IS THAT T HE LD. CIT(A) ERRED IN ALLOWING LOSS IN BUSINESS TO BE CARRIED FORWARD IN THE SUBSE QUENT YEARS BY NOT SETTING OFF AGAINST THE SHORT TERM CAPITAL GAIN. ANOTHER ISSUE RAISED I N THESE APPEALS IS THAT THE LD. CIT(A) ERRED IN TREATING ORDER U/S 154 AS BAD IN LAW. 3. SINCE THE FACTS ARE IDENTICAL WE ADJUDICATE THI S APPEAL WITH REFERENCE TO THE FIGURES CULLED OUT FORM A.YR.2006-07. 4. IN THIS CASE THE AO PASSED ORDER U/S 154 OF THE I.T.ACT BY HOLDING AS UNDER :- IN THE INSTANT CASE ASSESSMENT WAS COMPLETED U/S 1 43(3) ON 17.12.2008 DETERMINING TOTAL INCOME OF RS.6,33,42,670/-. ITA NOS.1333 - 1335/KOL/2012 SHRI HARSHA VARDHAN HIMATSINGKA A.YRS.2006-07,2007 -08&2009-2010 2 WHILE EXAMINING THE RECORD, IT WAS SEEN THA T THE BUSINESS LOSS OF RS.4,19,08,634 WAS NOT SET OFF WITH THE LTCG OF RS.6,26,86,307 IN CURRENT YEAR AND WAS CARRIED FORWARD IN THE SUBSEQUENT YEAR. AS PER INCOME TAX A CT, 1961, SUCH LOSS CANNOT AVOID SETOFF IN CURRENT YEAR U/S 71 SIMPLY BECAUSE CAPITA L GAIN ARE TAXABLE AT LOWER RATE. ACCORDINGLY A NOTICE U/S 154 WAS ISSUED TO THE ASSE SSEE PROPOSING FOR RELEVANT RECTIFICATION OF THE ORDER PASSED U/S 143(3) DATED 17/12/2008 AND FIXING THE CASE ON 14/12/2011 AT 12 NOON. IN RESPONSE TO THE SAID NOTI CE THE ASSESSEE FILED A WRITTEN SUBMISSION STATING THAT THE OPTION FOR SETTING OFF OF THE BUSINESS LOSS WITH SHORT TERM CAPITAL GAIN LIES IN THE HANDS OF THE ASSESSEE. HOW EVER, THE OBSERVATION OF THE ASSESSEE IS NOT CORRECT. AS THE CONTENTION OF THE ASSESSEES REPLY I S NOT CORRECT AND THE MISTAKE IS APPARENT FROM THE RECORD, THE ORDER U/S 143(3) DATED 17/12/2 008 IS RECTIFIED. 5. AGAINST THE ABOVE ORDER THE APPEAL WAS IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONSIDERED THE MERITS OF THE ISSUE BY HOLDIN G AS UNDER : IN THE LIGHT OF THE ABOVE DISCUSSION AND FINDING, AFTER CAREFULLY GOING THROUGH THE PROVISIONS OF SECTION 71 ALONG WITH SECTION 72 OF T HE I.T.ACT AND CAREFULLY CONSIDERING THE DECISIONS OF THE ABOVE REFERRED CASE LAWS, I AG REE WITH THE CONTENTION OF THE A/R THAT THE PRIORITY FOR SET OFF LIES WITH THE ASSESSEE AND WHERE SUCH LOSS IS NOT SET OFF OR IS NOT WHOLLY SET OFF AT THE OPTION OF THE ASSESEE, THE SA ME IS TO BE ALLOWED TO BE CARRIED FORWARD. THUS IN THE INSTANCE CASE OF THE APPELLANT , IT IS HELD THAT THE BUSINESS LOSS OF RS.4,19,08,634/- WHICH HAS NOT BEEN ALLOWED TO BE C ARRIED FORWARD FOR THE SUBSEQUENT A/YS FOR SET OFF WITH THE BUSINESS PROFIT BY THE A. O. IS TO BE ALLOWED TO BE CARRIED FORWARD AND THE ORDER PASSED U/S 154 SETTING OFF OF THE BUSINESS LOSS OF RS.4,19,08,634/- WITH THE SHORT TERM CAPITAL GAIN FOR THE YEAR IS HE REBY DIRECTED TO DELETED. 6. THE ISSUE AS TO WHETHER THE AFORESAID ORDER CAN BE PASSED U/S 154 OF THE IT ACT. THE LD. CIT(A) HELD AS UNDER : I HAVE GONE THROUGH THE CASE LAWS RELIED UPON AND FACTS OF THE CASE AND AS ALREADY DISCUSSED ABOVE, I AM OF THE OPINION THAT AN ORDER U/S 154 CAN ONLY BE PASSED WHEN THERE IS A MISTAKE WHICH IS APPARENT FROM RECORD. A MISTAKE IS NOT APPARENT FROM RECORD WHERE EITHER IT IS AN ISSUE OF DEBATE WHERE TWO VIE WS ARE POSSIBLE OR IT IS NOT A PATENT OR OBVIOUS MISTAKE. IN THE INSTANT CASE OF THE APPELLA NT, RETURN WAS FILED AFTER THE SAME PROCESSED U/S 143(1) AND THEREAFTER SCRUTINY ASSESS MENT WAS UNDERTAKEN AND ORDER PASSED U/S 143(3) AND IN ALL THESE PROCEEDINGS THE BUSINESS LOSS WAS ALLOWED TO BE CARRIED FORWARD. SUBSEQUENTLY, AFTER A LAPSE OF MOR E THAN THREE YEARS, NOTICE U;/S 154 WAS ISSUED PROPOSING TO RECTIFY A MISTAKE OF CARRYI NG FORWARD OF THE BUSINESS LOSS. THE MISTAKE POINTED OUT BY THE ASSESSING OFFICER WHICH ACCORDING TO HIM IS A MISTAKE CANNOT BE ONE WHICH IS PATENT OR OBVIOUS AND IT IS ONE WHICH CALLS FOR TWO VIEWS AND THEREFORE THE MISTAKE POINTED OUT BY THE ASSESSING OFFICER IS NOT A MISTAKE APPARENT FROM RECORD. . AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. ITA NOS.1333 - 1335/KOL/2012 SHRI HARSHA VARDHAN HIMATSINGKA A.YRS.2006-07,2007 -08&2009-2010 3 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. THE LD.DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE ARE CASE LAWS I N FAVOUR OF THE REVENUE. IN THIS REGARD HE PLACED RELIANCE UPON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF MULTI ORGANICS PVT. LTD. VS ACIT VIDE ITA NO.5485/M UM/2010 DATED JULY 31, 2012 AND THE DECISION OF ITAT PUNE IN THE CASE OF COATED FABRICS (P)LIMITED VS JCIT 101 ITD 297. 8. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT THE ISSUE WAS A DEBATABLE ISSUE AND WAS NOT LIABLE TO BE ADJUDICA TED U/S 154 OF THE ACT. IN THIS REGARD THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ON M ERITS ALSO THE ISSUE IS IN FAVOUR OF THE ASSESSEE AS PER THE DECISION OF THE THIRD MEMBE R IN THE CASE OF ADDL.ITO VS C.J.SHAH 10 ITD 151 (BOM). 9. BEFORE PROCEEDING FURTHER WE MAY GAINFULLY REFER TO THE PROVISION OF SECTION 71(1)(2) OF THE ACT WHICH READS AS UNDER :- SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER 71. (1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN CAPITAL GAINS IS A LOSS AND THE ASSESSEE HAS NO INCOME UNDER THE HEAD CAPITAL GAINS, HE SHALL, SU BJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOS S SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN CAPITAL GAINS, IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAINS, SUCH LOS S MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY , ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD CAPITA L GAINS (WHETHER RELATING SHORT- TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS). 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT. THEREAFTER THE AO PASSED ORDER U/S 154 OF THE IT ACT. IN THE SAID ORDER AO NOTED T HAT THE ASSESSEE HAS A BUSINESS LOSS OF RS.4,19,08,634/- WHICH WAS NOT SET OFF WITH THE LONG TERM CAPITAL GAIN OF RS.6,26,86,307/- IN THE CURRENT YEAR AND WAS CARRIE D FORWARD IN THE SUBSEQUENT YEAR. THE AO WAS OF THE OPINION THAT AS PER INCOME TAX AC T, 1961 SUCH LOSS CANNOT AVOID SET OFF IN THE CURRENT YEAR U/S 71 SIMPLY BECAUSE C APITAL GAINS ARE TAXABLE AT LOWER RATES. HENCE AO PASSED ORDER U/S 154 OF THE ACT WHE REIN HE SET OFF THE BUSINESS LOSS ITA NOS.1333 - 1335/KOL/2012 SHRI HARSHA VARDHAN HIMATSINGKA A.YRS.2006-07,2007 -08&2009-2010 4 AGAINST THE SHORT TERM CAPITAL GAIN. WE FIND THAT T HERE ARE CASE LAWS IN SUPPORT AS WELL AS AGAINST THE ABOVE PROPOSITION AS NOTED BY THE LD . CIT(A) AND ALSO AS CANVASSED BY THE LD. COUNSELS. 10.1. WE FIND THAT ORDER U/S 154 OF THE ACT CAN ONL Y BE PASSED WHEN THERE IS A MISTAKE APPARENT FROM RECORD. A MISTAKE CANNOT BE S AID TO BE APPARENT FROM RECORD WHERE EITHER IT IS AN ISSUE OF DEBATABLE IN NATURE OR WHERE TWO VIEWS ARE POSSIBLE OR IT IS NOT PATENT OR OBVIOUS MISTAKE. THIS VIEW WAS WEL L ENSHRINED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THE T.S.BALARA M, ITO VS VOLKART BROTHERS & OTHRS. REPORTED IN 82 ITR 50 (SC). WE FIND THAT IN THE INSTANT CASE THE RETURN WAS FILED AFTER WHICH IT WAS PROCESSED U/S 143(1) OF TH E ACT AND THEREAFTER SCRUTINY WAS UNDERTAKEN AND ORDER WAS PASSED U/S 143(3) OF THE A CT IN ALL THESE PROCEEDINGS THE BUSINESS LOSS WAS ALLOWED TO BE CARRIED FORWARD. 10.2. NOW THE AO U/S 154 OF THE ACT HAS ADJUSTED TH E BUSINESS LOSS AGAINST THE CAPITAL GAIN. NOW THE ISSUE BEFORE US IS WHETHER IN TERMS OF PROVISION OF SECTION 71(1) THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE BUSIN ESS LOSS WITHOUT ADJUSTING THE SAME FROM CAPITAL GAIN OR THE SAME IS MANDATORILY REQUIR ED TO BE ADJUSTED. WE FIND THAT THIS ASPECT OF THE PROVISION OF SECTION 71(1) OF THE AC T IS ALSO THE SUBJECT MATTER OF THE DISPUTE AND THERE ARE CASE LAWS BOTH IN FAVOUR AND AGAINST THE SAID PROPOSITION AS CANVASSED BY THE LD. COUNSELS AND AS NOTED BY THE L D. CIT(A). HENCE THE ISSUE IS DEBATABLE AND IN THESE CIRCUMSTANCES IT CANNOT BE S AID THAT THERE WAS A MISTAKE APPARENT FROM THE RECORD WHICH CAN BE RECTIFIED U/S 154 OF THE ACT. IN THESE CIRCUMSTANCES WE HOLD THAT THE ORDER PASSED BY THE AO U/S 154 OF THE ACT IS NOT SUSTAINABLE. 10.3. AS REGARDS THE ISSUE OF MERITS WE FIND THAT T HE LD. CIT(A) HAS PASSED THE ORDER IN FAVOUR OF ASSESSEE. HOWEVER WE HAVE ALREADY HELD ABOVE THAT THE ISSUE IN DISPUTE CANNOT BE THE SUBJECT MATTER FOR RECTIFICATION U/S 154 OF THE ACT. HENCE ADJUDICATION ON MERITS IS ONLY OF ACADEMIC INTEREST. IN THIS VIEW O F THE MATTER WE HAVE NOT ADJUDICATED THIS ISSUE ON MERITS. IN THESE CIRCUMSTANCES WE UPH OLD THE VIEW OF THE LD. CIT(A) THAT AOS ORDER PASSED U/S 154 IS BAD IN LAW. ITA NOS.1333 - 1335/KOL/2012 SHRI HARSHA VARDHAN HIMATSINGKA A.YRS.2006-07,2007 -08&2009-2010 5 11. IN THE RESULT THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 05.08.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 05.08.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. SHRI HARSHAVARDHAN HIMATSINGKA, 1, SAROJINI NAIDU S ARANI, 9 TH FLOOR, KOLKATA- 700017. 2 D.C.I.T., CIRCLE-7, KOLKATA. 3 . CIT(A)- VIII, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES