DCIT 8(3)(1), MUMBAI V. NOSHIR TALATI, MUMBAI

ITA 3856/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0680 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: B V JHAVERI
• Keywords: Procedural lapse; Revised return
• Section: 147; 148; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3856/M/2016 ASSESSMENT YEAR: 2004-05 DY. COMMISSIONER OF INCOME-TAX-8(3)(1), ROOM NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. MR. NOSHIR TALATI, LEVEL 6, CEEJAY HOUSE, SHIVSAGAR ESTATE, DR. A.B. ROAD, WORLI, MUMBAI-400 020 PAN: AAAPT6890R (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI B.V. JHAVERI, A.R. REVENUE BY : SHRI M.C. OMI NINGSHEN, D.R. DATE OF HEARING : 02.01.2018 DATE OF PRONOUNCEMENT : 12.01.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 02.03.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2004-05. 2. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED THE RETURN DECLARING TOTAL INCOME AT RS.67,87,938/-, SUBSEQUEN TLY A REVISED RETURN WAS FILED ON 09.10.2006 DECLARING TOTAL INCO ME AT RS.88,49,940/- AND ASSESSMENT ORDER WAS PASSED UNDE R SECTION 143 ITA NO.3856/M/2016 MR. NOSHIR TALATI 2 READ WITH SECTION 147 OF THE ACT ASSESSING TOTAL IN COME AT RS.88,49,940/-. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: 3.1 LOOKING INTO THE ASSESSMENT ORDER AND SUBMISSI ONS MADE, THE FACTS ARE THAT THE ASSESSEE CLAIMED AND WAS ALLOWED LONG TERM CAPITAL LOSS IN RESPECT OF EQUITY SHARES OF M/S ANKUSH PROPERTIES P . LTD. IN THE ORIGINAL ASSESSMENT ORDER. HOWEVER, THE ALLEGED SHARES OF M/ S ANKUSH PROPERTIES P. LTD WERE NOT HELD AS SHARES AND WAS CONSIDERED AS D EPOSIT TO THE COMPANY AND THEREFORE IN THE REASONS RECORDED U/S 148 OF THE AC T AS REPRODUCED IN THE ASSESSMENT ORDER, THE AO HELD THAT SET OFF LONG TER M CAPITAL LOSS IS INCORRECT AS THESE WERE NOT SHARES AND IN THE NATURE OF DEPOS IT. THE APPELLANT SUBMITTED THAT IN THE ORIGINAL SCRUTINY PROCEEDINGS THIS LOSS WAS ALLOWED. HOWEVER THE ID CIT HAS PASSED AN ORDER U/S 263 OF T HE ACT WHICH WAS QUASHED BY HON'BLE ITAT IN THE COMBINED ORDER IN IT A NO.2712/MUM/2006, AY.2001-02 IN THE CASE OF MR. NOSHIR D TALATI AND I TA NO. 2713/M/2006 FOR A.Y 2001-02 IN THE CASE OF SMT. RASHNA N TALATI, VIDE O RDER DATED 27/9/2007. A COPY OF THE SAID ORDER WAS ENCLOSED WITH THE SUBMIS SION. IT WAS NOTICED THEREFROM THAT ONE OF THE GROUND TAKEN BY ID CIT WA S THAT AS PER AUDITORS REPORT, THE NECESSARY NOTICE FOR INCREASE IN SHARE CAPITAL OF THE COMPANY I.E. M/S ANKUSH PROPERTIES P. LTD AND OTHER RELEVANT FOR MS HAVE NOT BEEN FILED BEFORE THE REGISTRAR OF COMPANIES AND THEREFORE UND ER THESE CIRCUMSTANCES THE COMPANY COULD NOT HAVE ALLOTTED THE SHARES. THE ID CIT WAS THEREFORE OF THE OPINION THAT CLAIM OF LOSS WAS APPARENTLY BOGUS IN NATURE. HON'BLE ITAT IN PARA 14 OF THIS ORDER HELD THAT THE ORDER PASSED BY ID CIT IS WITHOUT JUR ISDICTION AND THEREAFTER ALLOWED THE APPEAL OF THE ASSESSEE. THE APPELLANT IN ITS SU BMISSIONS HAS CONTENDED THAT SUBSEQUENTLY HON'BLE BOMBAY HIGH COURT DISMISSED TH E FURTHER APPEAL OF THE DEPARTMENT IN RESPECT OF APPEAL NO. 262 OF 2000 IN THE CASE OF ASSESSEE MR. NOSHIR TALATI ON SIMILAR FACTS AND A COPY OF THE OR DER IS ENCLOSED. THE SUBSEQUENT ORDER PASSED BY THE AO ON THE BASIS OF THE ORDER U/ S 263 IS CANCELLED BY ID CIT(A)-5 IN THE CASE OF SRI NOSHIR D TALATI IN ORDE R NO.CIT(A)C-V/DCCC-30/449/0607 DATED 14/11/2007 AND FURTHER APPEAL IN THIS MATTER BY THE REVENUE WAS DISMISSED BY HON'BLE ITAT. THESE PROCEEDINGS WERE I N RESPECT OF A.Y 2001-02 WHEREIN THE ASSESSEE HAS SOLD THE SHARES AND INCURR ED LOSS. DURING THE YEAR UNDER CONSIDERATION I.E. 2004-05 ALSO, THE APPELLAN T SOLD THE BALANCE EQUITY SHARES AND INCURRED CAPITAL LOSS DISALLOWED BY THE AO IN THE ASSESSMENT ORDER AGAINST WHICH THE ASSESSEE IS IN APPEAL. AS PER COP Y OF COMPUTATION FILED, THE LONG TERM CAPITAL LOSS HOWEVER IS NOT SET OFF AGAIN ST ANY INCOME. IT IS NOTED ITA NO.3856/M/2016 MR. NOSHIR TALATI 3 FROM THE ASSESSMENT ORDER THAT THE APPELLANT HAS DU LY BROUGHT TO THE KNOWLEDGE OF THE AO THE FACT THAT THE ORDER U/S 263 WAS QUASHED BY HON'BLE ITAT IN A.Y 2001-02 AND SUCH ORDER OF HON'BLE ITAT WAS CONFIRMED BY HON'BLE BOMBAY HIGH COURT. HOWEVER, THE AO CONTENDED THAT T HE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF HON'BLE HIGH COURT IN THE ABOVEMENTIONED CASE AND HAS FILED SLP BEFORE THE HON'BLE APEX COURT ON THIS ISSUE IN A.Y 2001-02 AND THEREFORE LONG TERM CAPITAL LOSS OF THE INSTANT YEA R I.E. 2004-05 IS NOT ALLOWED AS THE SAME IS TREATED AS DEPOSITS BY THE ASSESSEE TO THE COMPANY. AS MENTIONED ABOVE, THE APPELLANT HAS DULY SUBMITTED C OPY OF THE COMBINED ORDER OF THE HON'BLE ITAT IN THE CASE OF THE ASSESS EE MR. NOSHIRTALATI IN APPEAL NO. 2713 AND 2712/M/2006 FOR A.Y 2001-02 AND THE FA CTS ARE DISCUSSED IN THE SUBMISSIONS AND ALSO AS ABOVE. 3.2 LOOKING INTO THE FACTS OF THE CASE, THEREFORE I T IS HELD THAT THE BASIS OF ADDITION IS ORDER U/S 263 PASSED BY ID CIT IN A.Y 2 001-02 WHICH STANDS QUASHED BY HON'BLE ITAT, MUMBAI AND REVENUE'S APPEAL DISMIS SED BY HON'BLE BOMBAY HIGH COURT. SINCE THE ORDER U/S.263 OF THE ACT IS Q UASHED BY ITAT, THEREFORE SUBSEQUENT ASSESSMENT IN PURSUANCE OF ORDER U/S.263 CANNOT SUBSIST AS HELD IN THE CASE OF CIT VS. SHIVABHAI B PATEL, 239 ITR 919 (GUJ). THEREFORE, CONSIDERING THE FACTS, AND RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE BOMBAY HIGH COURT AND HON'BLE ITAT, THE DISALLOWANCE MADE BY TH E AO, CANNOT BE SUSTAINED. THEREFORE, GROUND NOS. 2 TO 6 OF APPEAL ARE ALLOWED. AS THE DISALLOWANCE BY THE AO IS NOT SUSTAINED, THEREFORE GROUND NO. 1 IS NOT ADJUDICATED BEING IRRELEVANT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. WE FIND THAT THE LD. CIT(A) HAS PASSED THE ORDER BY CO NSIDERING THE DEVELOPMENT OF THIS CASE AND LD. CIT(A), CONSIDERIN G THE JUDGMENT OF TRIBUNAL IN ITA NO.2363/M/2016 WHEREIN THE ASSES SEE IS ONE OF THE CO-OWNERS OF THE PROPERTY AND THE TRIBUNAL ON T HE SIMILAR FACTS HAS UPHELD THE ORDER OF THE LD. CIT(A) BY OBSERVING AS UNDER: 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E RECORD. WE NOTICE THAT THE ASSESSEE HAS BEEN ALLOTTED 27.50 LAKHS SHARES BY M/ S ANKUSH PROPERTIES PVT. LTD. OUT OF WHICH 22.50 LAKHS SHARES WERE SOLD BY THE AS SESSEE IN THE YEAR RELEVANT TO AY 2001-02 AND 5.00 LAKHS SHARES WERE SOLD DURING THE YEAR UNDER CONSIDERATION. SINCE THE ABOVE SAID COMPANY HAD NOT FILED RETURN O F ALLOTMENT WITH THE REGISTRAR OF COMPANIES, THE LD CIT REVISED THE ASSESSMENT ORDER AND DISALLOWED THE SHORT TERM CAPITAL LOSS DECLARED BY THE ASSESSEE. WE HAVE NOTI CED THAT THETRIBUNAL HAS TAKEN THE VIEW THAT THE NON-FILING OF RETURN OF ALLOTMENT IS A PROCEDURAL LAPSE, WHICH COULD BE MADE GOOD BY PAYING ADDITIONAL FEE. THE LD A.R SUBMITTED THAT THE ITA NO.3856/M/2016 MR. NOSHIR TALATI 4 ASSESSEE HAS SINCE PAID THE FEE AND REGULARISED THE RETURN OF ALLOTMENT. HE ALSO FURNISHED COPY OF RELEVANT DOCUMENTS FILED WIT H REGISTRAR OF COMPANIES TO SHOW THAT THE RETURN OF ALLOTMENT HAS BEEN FILED AL ONG WITH THE ADDITIONAL FEE. HE SUBMITTED THAT THE ABOVE SAID FACT HAS BEEN TAKEN N OTE OF BOTH BY HON'BLE TRIBUNAL AND HON'BLE HIGH COURT. UNDER THESE SET OF FADS, TH E TRIBUNAL SET ASIDE THE REVISION ORDER PASSED BY LD CIT IN AY 2001-02. 12. WE NOTICE THAT THE AO HAS REOPENED THE ASSESSME NT OF THE YEAR UNDER CONSIDERATION BASED ON THE VIEW TAKEN BY THE TAX AU THORITIES IN AY2001-02, SINCE THE VIEW TAKEN BY THE TAX AUTHORITIES IN THAT YEAR HAS BEEN, SET ASIDE BY THE TRIBUNAL AND SINCE THE ORDER PASSED BY THE TRIBUNAL HAS BEEN UPHELD BY THE HON'BLE BOMBAY HIGH COURT, THE VERY BASIS ON WHICH THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION WAS REOPENED NO LONGER EXISTS. SINCE THE VIEW TAKEN BY THE TRIBUNAL IN RESPECT OF CHARACTER OF SHARES ALLOTTED BY M/S ANKUSH PROPERTI ES PVT LTD HAS BEEN UPHELD BY HON'BLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN FOLLOWING THE ORDER PASSED BY THE TRIBUNAL IN AY 20 01-02 AND DIRECTING THE AO TO ACCEPT THE LONG TERM CAPITAL LOSS DECLARED BY THE A SSESSEE. ACCORDINGLY WE UPHOLD HIS ORDER. 5. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE DEPARTMENTAL APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON 12.01.2018. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.01.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.