Vimalarani Britto, CHENNAI V. ACIT Central Circle 2(4), CHENNAI

ITA 2992/CHNY/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6570 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMARCIT
• Assessee Lawyers: ARJUNRAJ CA S SRIDHAR
• Keywords: Rectification of order; Salary income; Principle of natural justice; Set aside; Capital Gains
• Section: 153A; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , . , % BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.2992/CHNY/2019 ( / ASSESSMENT YEAR: 2011-12) SMT. VIMALARANI BRITTO 13, KASTURBA NAGAR, 3 RD MAIN ROAD, ADYAR, CHENNAI-600 020. VS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4) CHENNAI. PAN: AADPV 8816C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. ARJUNRAJ, C.A FOR S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. D.MANOJ KUMAR,CIT /DATE OF HEARING : 02.09.2021 /DATE OF PRONOUNCEMENT : 08. 09.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LEARNED CIT(A)-19, CHENNAI DAT ED 31.07.2019 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) - 19, CHENNAI DATED31.07.2019 IN L.T.A.NO.371/2018-19 FOR THE ABOVEMENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN NOT APPRECIATING T HE NARROW SCOPE OF THE PROVISIONS IN154 OF THE ACT WHILE SUST AINING THE ORDER OF RECTIFICATION MAKING ADJUSTMENTS WHICH DO NOT CONSTITUTE MISTAKE APPARENT RECORD WITHOUT ASSIGNIN G PROPER REASONS AND JUSTIFICATION. 2 ITA NO. 2992/CHNY/2019 3. THE CIT (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ADJUSTMENTS TO THE TOTAL INCOME EMANATED OUT OF THE DEBATABLE ISSUES AND THE SAME CANNOT BE CONSTRUED AS MISTAKE APPARENT FROM THE RECORD FOR THE PURPOSE OF INVOKING THE PRO VISIONS IN SECTION 154 OF THE ACT THUS VITIATING THE IMPUGNED ORDER. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE ADJU STMENT OF BUSINESS LOSS AGAINST LONG TERM CAPITAL GAINS AS AG AINST THE CLAIM OF THE APPELLANT OF SETTING OFF THE SAID LOSS AGAINST HOUSE PROPERTY INCOME, INCOME FROM OTHER SOURCES AND THER EAFTER INCOME FROM CAPITAL GAINS WHICH IS IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 71 OF THE ACT OVERLOOKING THE NARROW SCOPE OF THE PROVISIONS IN SECTION 154 OF THE ACT. 5. THE CIT (APPEALS) ERRED IN NOT ADJUDICATING THE ISSUE RAISED WITH REGARD TO THE NARROW SCOPE OF THE PROVI SIONS IN SECTION 154 OF THE ACT WHILE OVERLOOKING THE PROVIS IONS OF SECTION 71(2) OF THE ACT AND FURTHER OUGHT TO HAVE APPRECIATED THAT THE SEQUENCE PRESCRIBED FOR SET OFF OF LOSS UN DER OTHER/VARIOUS HEADS OF INCOME IS A DEBATABLE ISSUE. 6. THE CIT (APPEALS) ERRED IN RECORDING FINDINGS THAT THE APPELLANT HAS AGREED FOR ADJUSTMENTS CARRIED OUT IN THE RECTIFICATION ORDER WITHOUT APPRECIATING THE FACT T HAT THE PROPOSAL FOR RECTIFICATION BY THE ASSESSING OFFICER WAS ONLY WITH RESPECT TO SETTING OFF OF BUSINESS LOSS AGAINST THE SALARY INCOME AND NOT AGAINST OTHER DEBATABLE ADJUSTMENTS MADE BY THE ASS ESSING OFFICER FOR WHICH NO AGREEMENT WAS PROVIDED BY THE APPELLANT. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT NO OTHER ADJUSTMENTS WERE PROPOSED IN THE NOTICE ISSUED U/S 154 OF THE ACT THUS VITIATING HIS ACTION IN SUSTAINING THE ORD ER OF RECTIFICATION. 8. THE CIT(APPEALS) FAILED APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING THE IMPUGNED ORDER AND OUGHT TO HAVE APPRECIATED THAT ANY ORDER PASSED IN VIOLAT ION OF THE PRINCIPLES OF NATURAL JUSTICE SHOULD BE RECKONED AS NULLITY IN LAW. 3 ITA NO. 2992/CHNY/2019 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT FOR IMPUGNED ASSESSMENT YEAR HAS BEEN COMPLETED U/S.143(3) R.W. S. 153A OF THE INCOME TAX ACT, 1961, ON 31.03.2016 AND DETERM INED TOTAL INCOME AT RS.54,38,08,980/-. THE ASSESSMENT HAS BE EN SUBSEQUENTLY RECTIFIED U/S.154 OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 06.02.2019 ON THE GROUND THAT WHI LE PASSING ORDER U/S.143(3) R.W.S 153A OF THE ACT, BUSINESS L OSS OF RS.30,67,346/- WAS WRONGLY SET OFF AGAINST INCOME UNDER THE HEAD SALARY OF RS.40,35,000/-, WHICH IS NOT ALLOWAB LE AS PER SECTION 71(2A) OF THE INCOME TAX ACT, 1961. THE AS SESSEE HAS CHALLENGED RECTIFICATION ORDER PASSED BY THE ASSES SING OFFICER U/S.154 OF THE ACT DATED 06.02.2019 BEFORE LEARNED CIT(A) AND CONTENDED THAT EVEN THOUGH PROPOSAL FOR RECTIFICATI ON WAS ISSUED TO WITHDRAW SET OFF OF BUSINESS LOSS AGAINS T SALARY INCOME, BUT WHILE PASSING RECTIFICATION ORDER U/S. 154, THE ASSESSING OFFICER HAS SET OFF BUSINESS LOSS AGAIN ST INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN, WITHOUT FO LLOWING PROCEDURE LAID DOWN UNDER SUB-SECTION (2) OF SECTI ON 71 OF THE ACT. 4 ITA NO. 2992/CHNY/2019 4. THE LEARNED CIT(A), AFTER CONSIDERING RELEVANT F ACTS AND ALSO TAKEN NOTE OF PROVISIONS OF SECTION 71(2) AN D 71(2A) OF THE ACT, REJECTED ARGUMENTS OF THE ASSESSEE AND AF FIRMED FINDINGS OF THE ASSESSING OFFICER IN RECTIFYING A SSESSMENT ORDER TO DISALLOW CLAIM OF BUSINESS LOSS AGAINST INCOME UNDER THE HEAD SALARY BY HOLDING THAT THERE IS NO HIERAR CHY PRESCRIBED FOR SETTING UP OFF INCOME AMONGST OTHER HEADS OF I NCOME U/S.71(2) OF THE ACT, BUT WHAT WAS PRESCRIBED IS LOSS FROM ANY HEAD OF INCOME, OTHER THAN CAPITAL GAINS AND BUSINE SS OR PROFESSION CAN BE ADJUSTED AGAINST INCOME FROM OT HER HEAD OF INCOME INCLUDING CAPITAL GAINS IN THE SAME ASSESSM ENT YEAR . THE LEARNED CIT(A) HAD ALSO REJECTED CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS AGREED FOR RECTIF ICATION OF ASSESSMENT ORDER BEFORE THE ASSESSING OFFICER ON T HE GROUND THAT ONCE MATTER WAS AGREED BEFORE THE ASSESSING OFFICER, THE ASSESSEE IS NOT RIGHT IN RAISING MATTER IN APPEAL A GAINST THE ORDER. AGGRIEVED BY THE LEARNED CIT(A) ORDER, THE A SSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED A.R FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ORDER OF THE ASSESSING 5 ITA NO. 2992/CHNY/2019 OFFICER PASSED U/S.154 OF THE INCOME TAX ACT, 1961, WITHOUT APPRECIATING FACT THAT PROPOSAL FOR RECTIFICATION WAS TAKEN UP TO RECTIFY MISTAKE OF SET OFF OF BUSINESS LOSS AGAINS T SALARY INCOME, WHEREAS WHILE COMPUTING TAXABLE INCOME, THE ASSESSING OFFICER HAS ADJUSTED ENTIRE BUSINESS LO SS WITH CAPITAL GAINS AS AGAINST INCOME FROM HOUSE PROPERT Y AND INCOME FROM OTHER SOURCES . THE LEARNED A.R FURTHE R REFERRING TO PROVISIONS OF SECTION 71(2) AND CIRCULAR NO.26 D ATED 7.7.1955 ISSUED BY CBDT SUBMITTED THAT IN ABSENCE OF A PAR TICULAR MODE OF SET OFF, THEN MODE WHICH IS MOST BENEFICIAR Y TO THE APPELLANT SHOULD BE ADOPTED. IN THIS REGARD, RELIE D UPON DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PUNJAB PRODUCE &TRADING COMPANY LTD. (1996) 159 IT R 376. 6. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPP ORTING ORDER OF THE LEARNED CIT(A) SUBMITTED THAT IN ABSEN CE OF ANY SPECIFIC MODE OF SET OFF OF LOSS UNDER THE PROVIS IONS OF SECTION 71(2), THEN THE ASSESSING OFFICER CAN ADJUST LOSS AGAINST GROSS TOTAL INCOME AND THUS, THERE IS NO MERIT IN THE ARG UMENTS OF THE ASSESSEE THAT LOSS SHOULD BE FIRST ADJUSTED AGAINS T INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. 6 ITA NO. 2992/CHNY/2019 7. WE HAVE HEARD BOTH THE SIDES, PERUSED MATERIAL A VAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. ADMITTEDLY, THE ASSESSEE HAS NOT CHALLENGED LEGALIT Y OF RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER U/S.154 OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAD ALSO NOT CHALLENGED REASONS OF THE ASSESSING OFFICER IN NOT ALLOWING SET OFF OF BUSINESS LOSS AGAINST INCOME UNDER THE HEAD SALARY, BECAUSE SUCH ADJUSTMENT IS SPECIFICALLY BARRED BY LAW U/S.71(2A) OF THE INCOME TAX ACT, 1961. THE ONLY GR IEVANCE OF THE ASSESSEE IS MODE AND MANNER OF SET OFF OF LOSS. THE PROVISIONS OF SECTION 71(2) DEALS WITH SET OFF OF L OSS FROM ANY HEAD OF INCOME OTHER THAN CAPITAL GAINS AND BUS INESS OR PROFESSION AGAINST INCOME FROM ANOTHER HEAD OF IN COME INCLUDING CAPITAL GAINS IN THE SAME ASSESSMENT YEAR . ALTHOUGH, THERE IS NO PRECEDENCE OF SET OFF OF LOSS AGAINST E ACH HEAD OF INCOME IS PRESCRIBED, BUT GENERAL RULE PROVIDES FO R SET OFF LOSS UNDER ONE HEAD OF INCOME AGAINST ANY OTHER HEAD OF INCOME EXCEPT INCOME UNDER THE HEAD CAPITAL GAINS AND BU SINESS OR PROFESSION IN THE ORDER OF PREFERENCE, AS PROVIDED UNDER THE INCOME TAX ACT, 1961. ADMITTEDLY, INCOME TAX PROVID ES FOR COMPUTATION OF INCOME IN ORDER OF PREFERENCE STAR TING FROM 7 ITA NO. 2992/CHNY/2019 INCOME UNDER THE HEAD SALARY, INCOME FROM HOUSE PR OPERTY, INCOME FROM BUSINESS OR PROFESSION, CAPITAL GAIN AN D INCOME FROM OTHER SOURCES. IF YOU GO BY SAME LOGIC, THEN L OSS FROM ONE HEAD SHOULD BE SET OFF AGAINST OTHER HEAD OF INCOME EXCLUDING IMPERMISSIBLE SET OFF OF LOSS IN THE ORDER OF PREF ERENCE LIKE COMPUTATION OF INCOME AS PER LAW. IF YOU GO BY THA T MODE, THEN LOSS FROM ONE HEAD SHOULD BE FIRST SET OFF AGAINST INCOME FROM HOUSE PROPERTY, THEN INCOME FROM BUSINESS OR PROFES SION, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOUR CES. IN FACT, THE ASSESSEE HAD ALSO SOUGHT FOR SET OFF OF L OSS FROM BUSINESS AGAINST INCOME FROM HOUSE PROPERTY, THEN I NCOME FROM LONG TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. IN THIS CASE, LOSS FROM BUSINESS IS AT RS.2,16,19,416/ -. FURTHER, THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPER TY IS AT RS.3,69,049/-, AND INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN IS AT RS.54,34,13,229/- AND FURTHER INCOME UN DER THE HEAD INCOME FROM OTHER SOURCES IS AT RS.1,82,83,017/-. THEREFORE, IN OUR CONSIDERED VIEW BUSINESS LOSS OF RS.2,16,19,41 6/- SHOULD BE FIRST SET OFF AGAINST INCOME FROM HOUSE PROPERTY AND THEN FOLLOWED BY INCOME FROM LONG TERM CAPITAL GAIN AND FURTHER STILL UNABSORBED LOSS REMAINS, IT SHOULD BE SET OFF AGAIN ST INCOME 8 ITA NO. 2992/CHNY/2019 FROM OTHER SOURCES. THEREFORE, WE SET ASIDE APPEAL TO THE FILE OF ASSESSING OFFICER AND DIRECT HIM TO RECOMPUTE TOTAL INCOME, AFTER ALLOWING SET OFF OF LOSS UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION IN TERMS OF OUR OBSERVATION S HEREIN ABOVE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH SEPTEMBER, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA ) # & / JUDICIAL MEMBER & / ACCOUNTANT MEMBER # /CHENNAI, ) /DATED 8 TH SEPTEMBER, 2021 DS +, -, /COPY TO: 1. APPELLANT 2. RESPONDENT 3. . () /CIT(A) 4. . /CIT 5. , 2 /DR 6. /GF .