NETSCAPE SOFTWARE LTD, MUMBAI V. ASST CIT CEN CIR 40, MUMBAI

ITA 3846/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9782 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR; VIDISHA KARLA
• Keywords: Reopening of assessment; Rectification of order; Reassessment proceedings
• Section: 143(3); 148; 144; 154

Judgement Text

NETSCAPE SOFTWARE LTD. IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 3846 /MUM/2013 (ASSESSMENT YEAR 200 5 - 0 6 ) M/S. NETSCAPE SOFTWARE PVT. LTD. (FORMERLY KNOWN AS NETSCAPE SOFTWARE PVT. LTD.) BHUPEN CHAM BERS 9, DALAL STREET MUMBAI - 400 023 . VS. ACIT CENTRAL CIRCLE 40 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO.AAACN9129J ASSESSEE BY SHRI NEEL KHANDELWAL DEPARTMENT BY SMT. VIDISHA KARLA & SHRI ABHIJIT P ATANKAR D ATE OF HEARING 11.8.2017 DATE OF PRONOUNCEMENT 23 .8.2017 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 19 - 03 - 2013 PASSED BY LD CIT(A) - 36, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2005 - 06 . THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DISMISSING THE APPEAL OF THE ASSESSEE. THE ASSESSEE HAS URGED FOLLOWING GROUNDS BEFORE US: - (A) VALIDITY OF REOPENING OF ASSESSMENT. (B) DIRECTION TO GIVE SET OFF OF BROUGHT FORWARD SHORT TER M CAPITAL LOSS AGAINST THE SHORT TERM CAPITAL GAIN. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION WAS COMPLETED BY THE AO ORIGINALLY U/S 143(3) OF THE ACT ON 28.12.2007. LATER, THE AO NOTICED THAT TH E ASSESSEE HAS ADJUSTED LONG TERM CAPITAL LOSS ARISING ON SALE OF SHARES AGAINST THE SHORT TERM CAPITAL GAIN ARISING ON SALE OF SHARES AND ACCORDINGLY COMPUTED THE TOTAL INCOME. NETSCAPE SOFTWARE LTD. THE AO NOTICED THAT, AS PER THE PROVISIONS OF SEC. 74(B) OF THE ACT, THE LONG TERM CAPITAL LOSS SHALL BE SET OFF AGAINST INCOME FROM CAPITAL GAIN NOT BEING SHORT TERM CAPITAL GAIN. HENCE THE CLAIM OF SET OFF OF WAS FOUND TO BE NOT IN ACCORDANCE WITH THE LAW AND HENCE THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. SINCE THE ASSESSEE DID NOT COOPERATE WITH THE AO, THE ASSESSING OFFICER COMPLETED THE ASSESS MENT TO THE BEST OF HIS JUDGEMENT U/S 144 OF THE ACT BY DISALLOWING THE CLAIM OF SET OFF. 3. BEFORE LD CIT(A), THE ASSESSEE CHALLENGED THE VALIDITY OF RE OPENING OF ASSESSMENT. IT ALSO CLAIMED THAT IT HAS GOT BROUGHT FORWARD SHORT TERM CAPITAL LOSS AND THE SAME SHOULD HAVE BEEN SET OFF AGAINST THE SHORT TERM CAPITAL GAIN WHILE DETERMINING THE TOTAL INCOME. HOWEVER, THE LD CIT(A) SIMPLY UPHELD THE ASSESSME NT ORDER WITHOUT SPECIFICALLY DEALING WITH THE ISSUES CONTESTED BY THE ASSESSEE BEFORE HIM. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL. 4. THE LD A.R SUBMITTED THAT THE CLAIM OF SET OFF OF LONG TERM CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAIN WA S A MISTAKE APPARENT FROM RECORD AND HENCE THE AO ORIGINALLY INITIATED RECTIFICATION PROCEEDINGS U/S 154 OF THE ACT ON 19 - 06 - 2009. HOWEVER, HE DID NOT PASS THE RECTIFICATION ORDER WITHIN FOUR YEARS AND HENCE HE HAS REOPENED THE ASSESSMENT TO RECTIFY THE M ISTAKE. ACCORDINGLY HE SUBMITTED THAT REOPENING OF ASSESSMENT IS BAD IN LAW. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS GOT BROUGHT FORWARD SHORT TERM CAPITAL LOSS AND THE AO SHOULD HAVE SET OFF THE SAME AGAINST THE SHORT TERM CAPITAL GAIN WHILE DETERMIN ING THE TOTAL INCOME. HE SUBMITTED THAT AN OBLIGATION IS CAST UPON THE AO TO COMPUTE THE TOTAL INCOME IN ACCORDANCE WITH THE LAW. FURTHER THE STATE IS NOT AUTHORIZED TO COLLECT TAX OVER AND ABOVE THAT AUTHORIZED BY THE STATUTE. 5. ON THE CONTRARY, T HE LD D.R STRONGLY SUPPORTED THE ORDER PASSED BY LD CIT(A). NETSCAPE SOFTWARE LTD. 6. WE NOTICE THAT THE AO DID NOT CONCLUDE THE RECTIFICATION PROCEEDINGS INITIATED BY HIM IN 2009. SINCE THE TIME LIMIT ALLOWED FOR THE RECTIFICATION PROCEEDINGS HAS EXPIRED, THE AO HAD NO OTH ER OPTION BUT TO INITIATE REASSESSMENT PROCEEDINGS IN ORDER TO RECTIFY THE MISTAKE THAT OCCURRED IN THE ORIGINAL ASSESSMENT ORDER AND WHICH WAS CONSIDERED AS RESULTING IN ESCAPEMENT OF INCOME . IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD BROUGHT FORWARD SHORT TERM CAPITAL LOSS AND THE SAME HAD BEEN PROPERLY DISCLOSED IN THE RETURN OF INCOME. THERE IS NO DISPUTE THAT THE ASSESSEE IS ENTITLED FOR SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAIN. WE NOTICE THAT T HE BROUGH T FORWARD LOSS AVAILABLE WITH THE ASSESSEE IS MORE THAN THE SHORT TERM CAPITAL GAIN GENERATED DURING THE YEAR. 7. WE NOTICE THAT THE ASSESSEE ORIGINALLY CLAIMED SET OFF OF LONG TERM CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAIN AND IT WAS ACCEPTED IN THE ORIGINAL ASSESSMENT PROCEEDINGS . THE RECTIFICATION PROCEEDINGS AS WELL AS REASSESSMENT PROCEEDINGS WERE INITIATED SINCE SUCH KIND OF SET OFF IS NOT PERMISSIBLE UNDER THE ACT. EVEN THOUGH WE ARE OF THE VIEW THAT THE AO HAS VALIDLY INITIATED BOTH RECTI FICATION AND REASSESSMENT PROCEEDINGS, YET THE PURPOSE OF ASSESSMENT IS TO DETERMINE THE CORRECT AMOUNT OF TOTAL INCOME. IN THAT VIEW OF THE MATTER , WE ARE OF THE VIEW THAT THE AO SHOULD HAVE ALLOWED SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS AGAI NST SHORT TERM CAPITAL GAIN WHILE DETERMINING TOTAL INCOME. THE CASE OF LD A.R IS THAT H AD THE AO COMPLETED THE RECTIFICATION PROCEEDINGS AND ACCORDINGLY REJECTED THE CLAIM OF SET OFF OF LONG TERM CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAIN, THE ASSESSE E WOULD HAVE PUT FORTH ITS CLAIM FOR SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAIN. WE FIND MERIT IN THE SAID CONTENTIONS. 8. IN OUR VIEW, THE AO HAS REOPENED THE ASSESSMENT ON PROPER REASONS AND HENCE WE UPHO LD THE VALIDITY OF REOPENING OF ASSESSMENT. HOWEVER, IN ORDER TO AVOID MULTIPLICITY OF PROCEEDINGS AND TO RENDER JUSTICE, WE DIRECT THE AO TO ALLOW SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS AGAINST THE SHORT NETSCAPE SOFTWARE LTD. TERM CAPITAL GAIN DECLARED BY THE ASSE SSEE FOR THE YEAR UNDER CONSIDERATION. THE ORDER PASSED BY LD CIT(A) STANDS MODIFIED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 23 .8 .2017. SD/ - SD/ - (SANDEEP GOSAIN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 23 /8/ 20 17 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. T HE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI