M/s Nookambica Cashew Products Pvt. Ltd., Visakhapatnam V. The ACIT, Cir-3(1), Visakhapatnam

ITA 180/VIZ/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2868 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 09-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Capital asset; Depreciation; Source of fund; TDS; Set aside; Capital Gains
• Section: 143(1); 148; 263

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.180/VIZAG/2009 ASSESSMENT YEAR: 2002-03 NOOKAMBIKA CASHEW PRODUCTS (P) LTD., VISAKHAPATNAM VS. ACIT, CIRCLE-3 (1), VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO. AABCN 2172 L APPELLANT BY: SHRI GVN HARI, CA RESPONDENT BY: SHRI SUBRATA SARKAR, DR ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.03.2009 PASSED BY LD CIT-I VISAKHAPATNAM U/S 263 OF THE ACT AND IT RELATE TO THE ASSESSMENT YEAR 2003-03. IN THIS APPEA L, THE ASSESSEE IS AGITATING THE VALIDITY OF ASSUMING JURISDICTION U/S 263 OF THE ACT. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION ON 31.3.2004 DECLARING NIL INCOME AFTER SETTING OFF OF BUSINESS LOSS/DEPRECIATION CARRIED FORWARD FROM EARLIER YEARS. THE RETURN WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. LATER THE ASSESSMENT WAS REOPENE D BY ISSUING NOTICE DATED 8.8.2006 U/S 148 OF THE ACT. THE REASONS FOR REOPENING WERE COMMUNICATED TO THE ASSESSEE AND THEY READ AS UNDER : THE ASSESSEE COMPANY FILED RETURN OF INCOME DECLAR ING NIL INCOME FOR THE ASSESSMENT YEAR 2002-2003, AFTER SET TING OFF OF BUSINESS LOSS/DEPRECIATION LOSS OF EARLIER YEARS. I T IS A CASE PAGE 2 OF 4 WHERE THE ASSESSEE DERIVED INCOME FROM CAPITAL GAIN S FOR THE ASSESSMENT YEAR 2003-2003 AT RS.341502/-. IT IS OBSE RVED THAT THE ACTION OF THE ASSESSEE IN SETTING OFF OF BUSINE SS LOSS PERTAINING TO PREVIOUS YEARS AGAINST THE CURRENT YE ARS CAPITAL GAINS INCOME IS NOT PERMISSIBLE, AS PER THE PROVISI ONS OF SEC.72 OF THE INCOME TAX ACT. (B) THE ASSESSEE COMPANY HAS NOT OFFERED THE INTERE ST RECEIPT TO THE TUNE OF RS.84431/- TO TAX THOUGH THE TDS ON THE SAME WAS ALLOWED CREDIT AT RS.17225/-. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO COMPLETED THE RE-ASSESSMENT ON 23-03-2007 WITHOUT MAKING ANY ADDI TION ON THE ISSUES ON WHICH THE ASSESSMENT WAS REOPENED. THE LD CIT IS SUED A NOTICE DATED 04.02.1997 TO THE ASSESSEE SEEKING TO REVISE THE AS SESSMENT U/S 263 OF THE ACT FOR THE REASON THAT THERE WAS MISTAKE IN TH E COMPUTATION OF CAPITAL GAIN. ACCORDING TO LD CIT, THERE WAS A MISTAKE IN THE COMPUTATION OF LOSS FROM LONG TERM CAPITAL GAIN ON TRANSFER OF LAND AND FURTHER THE LONG TERM CAPITAL LOSS CANNOT BE ADJUSTED AGAINST THE INCOME FROM SHORT TERM CAPITAL GAINS. AFTER CONSIDERING THE OBJECTIONS RAISED BY T HE ASSESSEE, THE LD CIT SET ASIDE THE ORDER OF THE AO AND DIRECTED HIM TO B RING TO TAX THE SHORT TERM CAPITAL GAINS, AS CALCULATED BY LD CIT. AGGRIE VED BY THE ORDER OF THE LD CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD AR BY PLACING HIS RELIANCE ON THE DECISIO N OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. DEVENDR A GUPTA REPORTED IN (2008) 220 CTR 629) SUBMITTED THAT THE INCOME ALLEG ED TO HAVE ESCAPED ASSESSMENT IN THE REASONS RECORDED BY THE AO, NOT H AVING BEEN ACTUALLY FOUND TO HAVE ESCAPED ASSESSMENT IN THE COURSE OF R EASSESSMENT PROCEEDING, THE AO HAS NO JURISDICTION TO ADD OTHER SOURCES OF INCOME EVEN IF THEY ARE FOUND TO HAVE ESCAPED THE ASSESSMENT. HENCE THE ACTION OF THE AO IN NOT DISTURBING THE MISTAKE, IF ANY, IN THE CO MPUTATION OF CAPITAL GAINS IS PERFECTLY IN ACCORDANCE WITH LAW. ALTERNATIVELY THE LD AR SUBMITTED BY PLACING RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN PAGE 3 OF 4 THE CASE OF VIPAN KHANNA VS. CIT (2002) 255 ITR 220 SUBMITTED THAT THE AO HAVING REOPENED THE ASSESSMENT ON DIFFERENT REAS ONS COULD NOT HAVE MADE ROVING INQUIRIES WITH REGARD TO OTHER ITEMS IN RESPECT OF WHICH THERE WAS NO MATERIAL TO SUGGEST ESCAPEMENT OF INCOME. AC CORDINGLY LD AR FURTHER SUBMITTED THAT AO COULD HAVE ADOPTED ONE OF THE POSSIBLE TWO VIEWS STATED ABOVE AND HENCE HIS DECISION CANNOT BE TAKEN AS ERRONEOUS ONE. IN THIS REGARD THE LD AR PLACED HIS RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., VS. CIT (2000) (243 ITR 83). ON THE OTHER HAND THE LD DR RELIED UP ON THE ORDER OF THE LD CIT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PURSUED THE RECORD. FROM THE ORDER OF THE LD CIT, WE NOTICE THA T THE LD CIT WAS OF THE VIEW THAT THE LONG TERM CAPITAL LOSS CANNOT BE SET OFF AGAINST SHORT TERM CAPITAL GAINS DURING THE YEAR UNDER CONSIDERATION A ND ACCORDING TO HIS INTERPRETATION, THE LONG TERM CAPITAL LOSS CAN ONLY BE CARRIED FORWARD. THE RELEVANT YEAR UNDER CONSIDERATION IS THE ASSESSMENT YEAR 2002-03. SEC.70 OF THE ACT DEALS WITH SET OFF OF LOSS FROM ONE SOUR CE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. FOR T HE ASSESSMENT YEAR 2002-03, SEC.70 THAT STOOD AT THE MATERIAL POINT OF TIME READS AS UNDER: 70. SET OFF OF LOSS FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME SAVE AS OTHERWISE PROVIDED IN THIS ACT, WHERE THE NET RESUL T FOR ANY ASSESSMENT YEAR IN RESPECT OF ANY SOURCE FALLING UN DER ANY HEAD OF INCOME IS A LOSS, THE ASSESSEE SHALL BE ENT ITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST HIS INCOME FROM ANY OTHER SOURCE UNDER THE SAME HEAD ON A PLAIN READING OF SEC.70 IT IS NOTICED THAT THE LOSS FROM A SOURCE UNDER ANY HEAD OF INCOME CAN BE SET OFF AGAINST INCOME FR OM ANY OTHER SOURCE UNDER THE SAME HEAD. THE INTERPRETATION GIVEN BY L D CIT IS APPLICABLE PAGE 4 OF 4 FROM THE ASSESSMENT YEAR 2003-04 ONWARDS. HENCE THE BASIC POINT ON WHICH THE LD CIT SOUGHT TO REVISE THE ASSESSMENT IS AGAINST THE PROVISIONS OF THE ACT THAT WAS PREVAILING AT THE MATERIAL POIN T OF TIME. HENCE THE ORDER OF LD CIT PASSED U/S 263 IS LIABLE TO BE SET ASIDE AS THE POINT ON WHICH THE PROCEEDINGS WERE INITIATED WAS NOT IN ACCORDANCE WI TH LAW. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT. SINCE THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE ON THE REASONS STATED ABOVE, WE DO NOT FIND IT NECESSARY TO GO INTO THE LEGAL ISSUES URGED BY THE ASSESSEE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON 11-12-2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 11 TH DECEMBER, 2009. COPY TO 1 M/S. NOOKAMBICA CASHEW PRODUCTS (P) LTD., ZILLEDU PUDI, NATHAVARAM MANDAL, VISAKHAPATNAM 2 THE ACIT CIRCLE - 3 (1), VISAKHAPATNAM 3 THE CIT I, VISAKHAPATNAM 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM