Ashwani Talwar, New Delhi V. ITO Ward 7(1), New Delhi

ITA 2868/DEL/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3347 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-03-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 11-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; Capital Gains
• Section: 147; 263; 154; 143(3); 139(5); 10B; 139(1)

Judgement Text

Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.2868/Del/2023 (Assessment Year: 2015-16) Ashwani Talwar, C/o. Advocate Deepak Kapoor, 59, Nehru apartments, Outer Ringh Road, Kalkaji, New Delhi Vs. ITO, Ward-7(1), New Delhi (Appellant) (Respondent) PAN: AAAPT0920E Assessee by : Shri Deepak Kapoor, Adv Revenue by: Shri Kanv Bali, Sr. DR Date of Hearing 12/03/2024 Date of pronouncement 20/03/2024 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.2868/Del/2023 for AY 2015-16, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. ITBA/NFAC/S/250/2023- 24/1055779355(1) dated 06.09.2023against the order of assessment passed u/s 154 r.w.s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 11.01.2022 by the Assessing Officer, ITO, Ward-7(1), Delhi (hereinafter referred to as „ld. AO‟). 2. The assessee has raised the following grounds of appeal :- “1. BECAUSE on facts and in law, and on grounds taken and basis adopted, the order in First Appeal dated 6-9-2023 against order u/s 154 of the Act ("Impugned Order") is totally illegal, invalid and perverse. ITA No.2868/Del/2023 Ashwani Talwar Page | 2 The assessee's right to carry forward STCL pertains to A.Y. 2014-15 and the issue of carry forward can only be considered in A.Y. 2014-15, when the assessee claimed the carry forward in A.Y. 2014-15. By accepting the revised return for A.Y. 14-15, the department accepted the right of the assessee to carry forward the STCL. The vested right of the assessee u/s 74 to claim set off of such brought forward STCL in A.Y. 15-16 cannot be denied by the department in proceedings for A.Y. 15-16. The right to carry forward and set off cannot be decided by the Ld. AO in A.Y. 2015-16 in which the set off was claimed. Since, the assessment order for A.Υ. 2014-15 has already attained finality on 31-03-2020, no action under section 154 is possible for assessment year 2014-15. In the guise of rectification of assessment year 2015-16, the Ld. AO cannot deny the vested right of the assessee for carry forward 25A.Y. 2014-15. The Ld. CIT(A) in the impugned order is conspicuously silent on this ground of appeal taken by the assessee in First Appeal. 2. BECAUSE the return revised under section 139(5) for A.Y. 2014-15 replaces the IT original return filed dated 31-07-2014 for A.Y. 2014-15. It has been held in plethora of legal cases that the revised return replaces the original return and the original return having been admittedly filed within the time allowed under section 139(1), the loss, will have to be carried forward and set off shall have to be allowed in subsequent assessment year i.e. 2015-16 under mandatory provisions of law u/s 74 of the Act. In first appeal CIT(A) has placed reliance on judgement of Hon'ble Suprane Court in case of M/s Wipro Limited. In fact ratio of decision of the Hon'ble Supreme Court in the case of M/s Wipro Ltd have no application to the facts of the case, as the issue before the Hon'ble Supreme Court was regarding interpretation of the provisions of sub-section (8) of section 10B of the Act. Therefore, Ld. CIT(A) wrongly applied case of M/s Wipro Limited in assessee case. Moreover, vide para 4.9 of the Impugned Order, the Ld. CIT (A) has considered the facts of A.Y.14-15 whereas the first appeal was relating to A.Y. 15-16. In the guise of rectifying the mistake u/s 154 for A.Y. 15-16, the settled facts for A.Y. 14-15 cannot be disturbed. The assessee had vested right to carry forward loss under the mandatory provisions of section 74 of the Act for A.Y. 14-15. This position cannot be reversed in A.Y. 15-16 when the assessee claimed the set off. 3. BECAUSE the condition precedent for invoking jurisdiction under section 154 is that the mistake must be glaring and obvious, question should not be debatable and the point should have been examined on facts and in law. Through the impugned order, the Ld. AO is denying the vested right of the assessee to carry forward short term capital loss for assessment year 2014-15 in rectification proceedings for assessment year 2015-16. This is a hugely debatable issue and the same cannot be allowed to be adjudicated upon any rectification proceedings under section 154. ITA No.2868/Del/2023 Ashwani Talwar Page | 3 In first appeal Ld. CIT(A) has not disposed of this ground of appeal and the Impugned order is conspicuously silent on this ground. 4. BECAUSE the Ld.CIT(A) has failed to appreciate and correct law relating to interpretation of order especially with regard to the rights of assessee not specifically mentioned in the order. According to the Ld. CIT(A), the A.O. (vide para 4.10 of the Impugned order). must have specifically allowed carry forward of capital loss in the Assessment order u/s 143(3) for A.Y. 2014-15. Admittedly, the Ld. AO pass the assessment order u/s 143(3) dated 20-7-2016 on the revised income without mentioning separately and specifically right of the assessee to carry forward STCL. Neither during assessment proceedings nor through any Show Cause Notice, the Ld. AO raised the issue of non-allowance of right of carry forward the STCL The Ld. AO having passed the Assessment Order u/s 143(3) dated 20-07-2016 based on revised return, is deemed to have accepted the right of the assessee to carry forward losses claimed in the revised return. The interpretation has to be beneficial to the assessee especially since there is no law to specifically write the carried forward losses separately in assessment order. 5. That the assessee craves for leave to raise, withdraw, and amend any ground in appeal before or during the hearing of appeal.” 3. We have heard the rival submissions and perused the material available on record. Though, the assessee has raised several grounds, the short issue that arises for our consideration is as to whether the ld AO was justified in denying the set off of brought forward short term capital loss for AY 2014-15 with the short term capital gains assessed in AY 2015-16 in the proceedings u/s 154 of the Act. For this purpose, it would be relevant to address the background of the facts and circumstances that prevailed in AY 2014-15 and AY 2015-16 which are as under:- “1. The assessee filed income tax return under section 139(1) of the Income Tax Act, 1961 ("The Act") for the assessment year 2014-15 on 31-07-2014 vide e- filing acknowledgment no. 311103710310714 showing total income at Rs. 2,19,06,560/-. 2. The original return filed by the assessee was revised u/s 139(5) of the Act on 28-02-2015 vide e-filing acknowledgment no. 492521330280215 for assessment year 2014-15 showing total income at Rs. 2,19,09,470/-and claiming carry forward of loss under the head short term capital gains amounting to Rs. 14,31,40,822/-as the assessee had inadvertently omitted to claim the carry forward of short term capital loss ("STCL") in the original return. ITA No.2868/Del/2023 Ashwani Talwar Page | 4 3. Deputy Commissioner of Income Tax, Central Circle, Noida vide assessment order under section 143(3) of the Act dated 20-07-2016 for A.Y. 2014-15 duly noted the fact of the original return had been revised by the assessee. In the very first para of the assessment order, the deputy of income tax observed as under:- "The return of income for the assessment year 2014-15 was filed by the assessee on 31-07-2014 declaring total income of Rs. 2,19,06,560/-, Further, the assessee has filed a revised return on 28-02-2015 declaring total income of Rs. 2,19,09,470/- and claimed refund of Rs. 4420/-." 4. The assessee furnished all the relevant details/ replies during the assessment proceedings and the same were examined/ verified by the deputy commissioner of income tax. After hearing, the assessment was made on total income of Rs. 2,19,09,470/- as declared by the assessee in the revised return filed on 28-02- 2015. In other words, the revised return was duly taken into consideration and the assessment was made on the basis of Revised Return which substituted the Original Return u/s 139(5) of the Act. 5. The since the revised return was accepted by the income tax department and the assessment was made based on the revised return filed by the assessee, the assessee was duly entitled to carry forward the loss under the head short term capital loss under section 74 of the Act amounting to Rs. 14,31,40,822/-. 6. The assessment for assessment year 2014-15 attained finality and no action under any of the section including under section 154 was initiated by the income tax department. Facts pertaining to Assessment for A.Y. 2015-16 since the carried forward STCL from A.Y.14-15 was claimed as set off u/s 74 of the Act. 7. That for the assessment year 2015-16, the assessee filed income tax return on 31-08-2015 vide e-filing acknowledgment no. 759111930310815 showing total income at Rs. 16,64,940/-. In the original return, the assessee also claimed set off of loss under the head Capital Gains. 8. The original income tax return for assessment year 2015-16 was also revised by the assessee vide e-filing acknowledgment no. 697016050240317 dated 26- 03-2017 showing total income at Rs. 17,56,540/-. In the revised return, the assessee duly claimed set off of brought forward STCL amounting to Rs. 14,31,40,822/-against the Capital Gains arising during A.Y. 2015-16. 9. The case for assessment year 2015-16 was also marked for scrutiny and the assessment was completed under section 143(3) of the Act on 30-12- 2017. In the above assessment order dated 30-12-2017 for A.Y. 2015-16, the Ld. AO ignored the revised return dated 26-03-2017 declaring total income at Rs. 17,56,540/- and claiming refund of Rs. 2,27,820/-. The assessee, therefore, filed application dated 24-01-2018 under section 154 on 22- 02-2018 which has not yet been disposed of by the Ld. AO. ITA No.2868/Del/2023 Ashwani Talwar Page | 5 Proceedings under section 154 of the Act: 10. The Income Tax Officer, Ward 7(1), Delhi ("Ld. AO") issued notice u/s 154 for A.Y. 2015-16 dated 15-12-2021 and proposed to rectify the following mistake:- "2A: the capital loss for assessment year 2014-15 was not available for set off. Since, no claim in original return of income filed on 31- 07-2014 which was subsequently revised on 28-02-2015 and capital loss of Rs. 14,31,40,822/- was claimed to be carried forward. Since, the return of loss was not claimed within time allowed under sub- section 139(1) of the Act, the claim of loss in the revised return was not admissible for carry forward." From the above, it is amply clear that although the Ld. AO issued notice under section 154 for A.Y. 2015-16 yet for reasons best known to the Ld. AO, the issue of carry forward of STCL for assessment year 2014-15 amounting to Rs. 14,31,40,822/-was being questioned. In other words, in the guise of rectifying the assessment for assessment year 2015-16, actually the vested right of the assessee to carry forward STCL for A.Υ. 2014-15 was being questioned. On the date of issuing notice u/s 154 dt. 15-12-2021 more than 4 years had expired from end of the A.Y. 204-15 and no action under section 154 was legally possible for assessment year 2014-15. Therefore, it seems that the Ld. AO erroneously issued notice under section 154 for assessment year 2015-16 denying the vested right of the assessee to carry forward loss in assessment year 2014-15. That the assessee duly filed the reply to the notice under section 154 of the Act and brought all the facts to the of the assessing officer. The assessee also relied on the decision of jurisdiction of high court in case of "PCIT vs. Neeraj Jindal (2017) 313 ITR 1". 12. That in spite of clear position in law, the Ld. AO passed rectification order under section 154 of the Act dated 11-01-2022 for A.Y. 2015-16 denying the assessee carry forward and set off of STCL and thereby making additions under the head Capital Gains to the extent of Rs. 3,99,96,909/- and assessing the income of the assessee at Rs. 4,16,61,849/-(16,64,940+ 3,99,96,909). Prima facie, the Ld. AO clearly ignored the revised return dated 26-03-2017 filed by the assessee. 13. That the assessee uploaded written submissions in first appeal against order raising several grounds namely: i) Vested right of the assessee to carry forward STCL pertaining to AY 14- 15 and relating to validity of order passed u/s 154 of the Act for A.Y. 15- 16 questioning the right of assessee u/s 74 of the Act for A.Y. 14-15. ii) Relating to revised return u/s 139(5) replacing the original return u/s 139(1) ITA No.2868/Del/2023 Ashwani Talwar Page | 6 iii) Non-compliance of condition precedent for invoking jurisdiction u/s 154 However. Ld CIT(A) for reasons best known to him did not pass a speaking order on ground no. (i) & (iii). The Impugned order is conspicuously silent on ground No. (i) and (iii) raised by the assessee.” 4. We find that the ld CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of M/s. Wipro Ltd reported in 140 taxmann.com 223 in support of its contentions. We find that the ld AR sought to distinguish the applicability of the decision of the Hon'ble Supreme Court on facts. We have gone through the decision of the Hon'ble Supreme Court in the case of Wipro Ltd (supra) and we find that the issue before the ld Hon'ble Supreme Court was regarding interpretation of provisions of section 10B(8) of the Act. In that case, the assessee filed a declaration in the original return of income not to claim the benefit of carry forward losses of the eligible unit of deduction u/s 10B of the Act. Then the assessee filed a declaration not to claim deduction u/s 10B of the Act. Later on, in the revised return, the assessee claimed the benefit of carry forward of losses of the eligible unit. The ld AO in that case rejected the deduction u/s 10B of the Act on the ground that declaration was not filed within the stipulated time and also denied carry forward of losses. Infact the decision of the Hon'ble Supreme Court in the case of Wipro Ltd (supra) do permit the assessee to file revised return in order to rectify genuine omissions and arithmetical errors in the original return. In assessee‟s case before us, revised return was filed for AY 2014-15 on 28.02.2015 only to rectify the arithmetical errors. Hence, this is clear case of arithmetical error only on the part of the assessee which could be cured by revised return u/s 139(5) of the Act which has been done by the assessee. On perusal of the decision of the Hon'ble Supreme Court in the case of Wipro Ltd (supra), it is very clear that the said decision has been rendered on those peculiar facts prevailing in that case. Infact as stated earlier, the said decision of the Hon'ble Supreme Court do indeed permit rectification of omission or arithmetical errors by way of revised return u/s 139(5) of the Act. Hence, the decision of the Hon'ble Supreme Court practically supports the case of the assessee herein. We find that the revised return filed by ITA No.2868/Del/2023 Ashwani Talwar Page | 7 the assessee claiming carry forward of short term capital loss of Rs. 14,31,40,822/- has been accepted by the ld AO and assessed as such while completing the scrutiny assessment proceedings u/s 143(3) of the Act on 20.12.2016 for AY 2014-15. Hence, the claim of carry forward of short term capital loss of Rs. 14,31,40,822/- also is indeed allowed to be carry forward to subsequent years even though no specific mention has been made by the ld AO in the assessment order qua the same. In these circumstances, there is absolutely nothing wrong in assessee claiming set off of such brought forward short term capital loss with the short term capital gain in AY 2015-16. We find that the ld DR vehemently relied on the orders of the Delhi Tribunal in the case of RRPR Holding Pvt. Ltd Vs. DCIT in ITA No. 4700/Del/2014 for AY 2010-11 dated 22.06.2023. In that case, the assessee claimed long term capital loss of Rs. 206.25 crores arising on the sale of shares in the revised return. The ld AO did not grant the benefit of carry forward long term capital loss of Rs. 206.25 crores while completing the assessment on the ground that the same was not claimed in original return of income. Accordingly, by considering the provisions of section 80 read with section 139(3) of the Act, the ld AO ignored the claim of long term capital of Rs. 206.25 crores while framing the assessment. In our considered opinion, this decision is factually distinguishable with that of the assessee, since in assessee‟s case, the claim of long term capital loss made in the revised return has been accepted by the ld AO for AY 2014-15 as narrated hereinabove. Hence, the reliance placed on the decision of the Delhi Tribunal (supra) would not advance the case of the revenue. 5. We find that the claim of short term capital loss was indeed made by the assessee in the revised return for AY 2014-15 and the said revised return has been duly accepted by the ld AO while framing the scrutiny assessment u/s 143(3) of the Act on 20.12.2016. Merely because the ld AO had not mentioned the allowability of the assessee to carry forward such short term capital loss in the assessment order, it cannot be said that he has not granted the said benefit to the assessee. It is not in dispute that revised return for AY 2014-15 was filed well within the time limit prescribed u/s 139(5) of the Act and that is why the ld ITA No.2868/Del/2023 Ashwani Talwar Page | 8 AO had indeed taken due cognizance of the said revised return while framing the scrutiny assessment for AY 2014-15. The assessee does not have any control over the manner in which the assessment order is being framed by the ld AO in AY 2014-15. All said and done, this claim of short term capital loss of Rs. 14,31,40,822/- for AY 2014-15 is a legitimate claim made by the assessee since the genuinity of the same had not been doubted by the revenue at all. Moreover, the assessment for the AY 2014-15 had attained finality in as much as there was no reopening proceedings initiated u/s 147 of the Act or revision proceedings initiated by the ld PCIT u/s 263 of the Act for AY 20174-15 to disturb the scrutiny assessment order framed u/s 143(3) of the Act on 20.12.2016. In these circumstances, it would be completely unjust , unfair and illegal to deny the benefit of set off of brought forward short term capital loss of AY 2014-15 with the short term capital gain in AY 2015-16. Accordingly, the grounds raised by the assessee are allowed. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 20/03/2024. -Sd/- -Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:20/03/2024 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi