The ACIT, Circle-10, Ahmedabad V. Smt. Pushpaben K.Vasa, Ahmedabad

MA 121/AHD/2021

AI Insights

The case revolves around a Miscellaneous Application (MA No. 121/Ahd/2021) filed by the Revenue seeking recall of an earlier Tribunal order dismissing their appeal due to low tax effect. The original appeal contested the assessment of income heads under which the assessee, Smt. Pushpaben K. Vasa, was taxed. The Tribunal had previously dismissed the appeal based on the CBDT Circular No. 17/2019, which set a monetary threshold for tax effect below which appeals would not be entertained. The Revenue argued that the tax effect exceeded Rs. 1 crore, contrary to the Tribunal's assessment. However, after detailed examination, the Tribunal upheld its earlier decision, confirming that the tax effect was indeed below the required threshold, leading to the dismissal of the Revenue's application.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134490 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-07-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2021
• Laws Referred To: CBDT Circular No. 17/2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Tax effect; Date of conversion; Fair market value; Tax effect; Capital Gains; Bogus
• Section: 234B; 54EC

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ायपी ‘बी’ अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MRS. MADHUMITA ROY, JUDICIAL MEMBER MA No. 121/Ahd/2021 (Arising out of ITA No. 1304/Ahd/2011) Assessment Year : 2007-08 The ACIT, Circle-10, Ahmedabad V/s. Smt. Pushpaben K. Vasa, Ashokwadi, Panchvati, Ellisbridge, Ahmedabad PAN : ABPPV 3704 R (Applicant) .. (Respondent) Revenue by : Shri Atul Pandey, Sr DR Assessee(s) by : Shri Biren Shah, AR सुनवाई की तारीख/Date of Hearing : 07/07/2023 घोषणा की तारीख /Date of Pronouncement : 03/10/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The present Miscellaneous Application is directed at the instance of the Revenue for recall of the order dated 19.02.2021 passed by the Tribunal in ITA No. 1304/Ahd/2011, which was dismissed by the Tribunal on account of low tax effect in view of the CBDT Circular No. 17/2019 dated 08.08.2019. 2. The plea of the Revenue is that the tax effect involved in the department’s appeal exceeded Rs. 1 Cr being Rs.1,19,78,510/-, which was above the limit prescribed by CBDT for withdrawal of Revenue’s appeal in its above mentioned circular, and therefore the dismissal of the department’s appeal on account of low tax effect was a mistake apparent from record warranting recall of the Departments appeal for adjudication on merits. 3. The contention of the Ld. Counsel for the assessee was that the appeal of the Revenue was rightly dismissed by the Tribunal on account of low tax MA No 121/Ahd/2021 ACIT Vs. Smt. Pushpaben K. Vasa Assessment Year : 2007-08 - 2 - effect because the only grievance of the Revenue in its appeal related to head in which the income was to be assessed, the tax impact of which was below the limit specified in the CBDT Circular mentioned above. It was pointed out that the relief granted by the Ld. CIT(A) to the assessee was by way of treating income assessed by the AO under the head “Income from Business and Profession” subject to tax @ 30%, as assessable under the head “Income from Long Term Capital Gains “ subject to tax @ 20%. That the department was in appeal on this issue and the disputed tax pertained primarily to the difference in tax leviable under the two heads i.e 10%, which amounted to Rs.43,40,585/-, which was much below the limit of Rs.50 lacs prescribed by CBDT for withdrawal of appeals by Revenue. 4. Various submissions were filed by both the sides before us in support of their respective contentions. 5. We have heard both the parties. To dispose of this application of the Revenue, it is pertinent to first determine the tax effect involved in the department’s appeal since both the parties have come up before us with their respective calculations in support of their contentions. 6. The Ld. Counsel for the assessee had filed a detail before us in tabular form bringing out the fact of income returned by the assessee, assessed by the AO and Income as per the order giving effect to the CIT(A)’s order as under: Particulars Income as per ITR Income assessed in Assessment Order Income as per order giving effect passed to the order of CIT (A)- XVI, Ahmedabad Income from Business NIL 2,93,30,630 NIL Long Term Capital gain NIL 1,08,09,600 3,23,79,586 Short term capital gain 14,73,127 NIL 14,73,127 Income from Other Source 6,40,720 6,40,720 6,40,720 Gross Total income 21,13,847 4,07,80,950 3,44,93,433 Less: Deductions under chapter VI-A 76,292 76,292 76,292 Total Assessed Income 20,37,555 4,07,04,650 3,44,17,140 Gross Tax payable before charging interest 1,24,18,788 75,51,686 MA No 121/Ahd/2021 ACIT Vs. Smt. Pushpaben K. Vasa Assessment Year : 2007-08 - 3 - Less: Credit of prepaid taxes 5,36,517 - Net Tax before interest 1,18,82,271 75,51,686 Interest u/s 234A 2,42,126 1,44,784 Interest u/s 234B 40,34,076 24,11,384 Interest u/s 234C 7,589 7,589 Less: Credit of prepaid taxes - 55,36,517 Net Demand payable - 1,61,66,062 45,78,926 Net Tax Effect (1,18,82,271- 75,51,686) 43,40,585 7. It has been explained to us that the assessee had returned Nil long term capital gain after setting off long term capital loss of Rs.3,73,23,061/- against gain of Rs. 4,15,80,364/- and claiming exemption u/s 54EC on account of investment in REC Bonds of Rs. 50,00,000/-against the net capital gain of Rs.42,57,303/-. These facts were pointed out from the assessment order wherein at para 3 the computation of income returned by the assessee is reproduced as also the fact of assessee claiming long term capital loss set off, on account of sale of shares. 8. We have gone through the assessment order and also the CIT(A) order as also the order passed giving effect to the Ld. CIT(A)’s order and we find all the facts and figures stated in the detail as above to be correct. 9. Perusal of the assessment order reveals that the AO did not agree with the assesses claim of long term and short term capital gain earned on sale of property in entirety, finding the asset to have been converted into stock in trade. That accordingly till the date of conversion, he treated the gains earned by the assessee, computed on the fair market value of the asset on the date of conversion, as long term capital gain which amounted to Rs.1,08,09,600/-. Thereafter he treated all amounts received on sale of property as business income and computed the same at Rs.2,93,30,630/-. The assessee’s claim of capital loss on sale of shares was found bogus by the AO and disallowed. MA No 121/Ahd/2021 ACIT Vs. Smt. Pushpaben K. Vasa Assessment Year : 2007-08 - 4 - Thus the AO computed assesses income at Rs.4.07 Crs comprising of Rs.2.93Crs as business income and Rs.1.08 Crs as long term capital gain. 10. Perusal of the Ld. CIT(A)’s order, reveals that he totally dismissed the AO’s finding of assesses having indulged in business by way of sale of its asset and agreed with the assessee that it only tantamounted to capital gain transaction. He however agreed with the AO that the long term capital loss on sale of shares was bogus. He therefore treated the profits earned by the assessee as taxable under the head capital gains and did not allow set off of losses against the same. Accordingly the Ld. CIT(A) held that the assessee had earned no business income but only capital gains on the transaction of sale of property. The appeal effect order accordingly recomputed the assessee’s income accepting short term capital gains returned by the assessee at Rs.14,73,127/- and computing long term capital gains without giving benefit of long term capital losses at Rs.3,23,79,586/-as under:- Name & address of the assessee Smt.Pushpaben Kalyanbhai Vasa Ashokwadi, Panchvati, Ellis Bridge, Ahmedabad PAN ABPPV3703R Asstt. Year 2007-08 Status Individual Date of Order 21/03/2011 Order Giving Effect to the Order of CIT(A)-XVI, Ahmedabad In view of the Ld.CIT(A)-XVI, Ahmedabad’s order in appeal No. No.CIT(A)- XVI/AC.Cir-10/297/09-10 dated 25/02/2011, the total income of the assessee is recomputed as under:- Capital Gains : Short term Capital gains - as per Statement of Income Rs. 1473127 Short term capital gains Rs. 1473127 Long term Capital gains - as per working below : Sale consideration - as per statement of income 41580364 Less: Long term capital loss - as per statement of 37323061 income ________ 4257303 MA No 121/Ahd/2021 ACIT Vs. Smt. Pushpaben K. Vasa Assessment Year : 2007-08 - 5 - Add : Long term capital loss claimed on sale 34349939 of shares of Abhir Chemicals Ltd. disallowed & confirmed by the Ld. CIT(A) _________ 38607242 Less: Set-off of unabsorbed long term capital loss of 1227656 earlier years _________ 37379586 Less: Deduction u/s.54EC of the Act for 5000000 Rs. 32379586 investment in REC Bonds ___________ Long term capital gains Rs. 32379586 Income from other sources : As per Statement of Income Rs.640720 Income from other sources Rs. 640720 SUMMARY Short term Capital gains Rs.1473127 Long term Capital gains Rs.32379586 Income from Other sources Rs.640720 Gross Total Income ...... Rs. 34493433 Less: Deduction under Chapter VIA of the Act Rs. 76292 Revised Total Income ...... Rs. 34417141 Say ...... Rs. 34417140 2. Assessed u/s.250 of the Act. Calculate tax on LTCG of Rs.3,23,79,586/- and STCG of Rs.14,73,127/- @ 10% and on remaining income of Rs.6,40,720/- at normal rates. Give credit for all the taxes paid. Issue revised demand notice & challan. Sd/- (VAIBHAV JAIN) Asst. Commissioner of Income-tax Circle-10, Ahmedabad We find the detail submitted by the Ld. Counsel for the assessee above therefore to be correct. 11. In view of our finding as above and on going through the detail filed by the assessee, it is crystal clear that the Revenue’s grievance against the Ld. CIT(A)’s order was only with respect to allowing business income computed by the AO to be treated as income from capital gain. Both the authorities had disallowed capital loss on sale of shares. There was no MA No 121/Ahd/2021 ACIT Vs. Smt. Pushpaben K. Vasa Assessment Year : 2007-08 - 6 - grievance of the AO on that count. This tantamounted to tax effect of only 10% since undisputedly business income is taxed at the rate of 30% and capital gain (long term) is taxed @ 20%. Further we find the Ld. CIT(A)’s order has effected increase in Long term capital gain to the tune of Rs.2.15Crs apprx. (Rs.3.23 - Rs.1.08) Crs. The tax effect of the same comes to Rs. 21 lacs approx.. Also while the Ld. CIT(A) has deleted entire addition of business income to the tune of Rs.2.93 Crs, the increase effected in long term capital gain is only Rs.2.15 Crs. Thus balance Rs 78 lacs business income has not been taxed at all resulting in tax relief to the assessee @ 30% thereof of Rs.23 lacs approx. which means that the total tax relief granted to the assessee by way of treating business income assessed by the AO as long term capital gain amounted to Rs.44lacs(Rs.21 + Rs.23) lacs. 12. And it is this relief that the AO has challenged before us in its appeal. It is clear therefore that the tax effect involved in the Revenues appeal was Rs. 44lacs odd and the ITAT therefore had rightly dismissed the appeal as involving low tax effect being below the limit of Rs.50 lacs prescribed by CBDT. 13. The Revenues plea of the tax effect in the appeal of the Revenue being more than Rs. 50 lacs is found to be incorrect. 14. The MA filed by the Revenue is therefore dismissed. Order pronounced in the open Court on 03/10/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 03/10/2023 **bt आदेश की े /Copy of the Order forwarded to : MA No 121/Ahd/2021 ACIT Vs. Smt. Pushpaben K. Vasa Assessment Year : 2007-08 - 7 - 1. / The Appellant 2. / The Respondent. 3. संबंिधत आयकर आय / Concerned CIT 4. आयकर आय ( ) / The CIT(A) 5. िवभ ग य िति िध, आयकर य िधकरण, हमद ब द / DR, ITAT, Ahmedabad 6. ग %& फ ई / Guard file. आदेशानुसार/ BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- .....22.09.2023 2. Date on which the typed draft is placed before the Dictating Member .....22.09.2023 3. Date on which the approved draft comes to the Sr.P.S./P.S.-. ....... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement ...03.10.2023......... 5. Date on which the file goes to the Bench Clerk...03.10.2023.................. 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 8. Date of Despatch of the Order..................