SHUVRO CHATTARAJ,KOLKATA V. PCIT, BURDWAN

MA 9/KOL/2025

AI Insights

The case involves a Miscellaneous Application filed by Shuvro Chattaraj against an ex parte order of the Income Tax Appellate Tribunal, Kolkata, concerning the assessment year 2015-16. The application sought rectification of the sale consideration amount and clarification on the treatment of capital gains assessed in earlier years but chargeable in AY 2015-16. The Tribunal acknowledged the error in the sale consideration amount and corrected it. Furthermore, it addressed the issue of tax paid on capital gains in earlier years, directing that these should be adjusted against the tax demand in AY 2015-16, where the income is now correctly assessable, citing the Supreme Court's decision in Godhra Electricity Co. Ltd. v. Commissioner of Income-tax as a precedent.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47140 (ITAT-KOLKATA)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: Godhra Electricity Co. Ltd. v. Commissioner of Income-tax [1997] 91 Taxman 351 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital Gains; Rectification of order; Deemed to accrue or arise in india
• Section: 254(2); 20

Judgement Text

" आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री प्रदीप क ुमार चौबे, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER M.A. No.: 9/KOL/2025 Arising out of I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj Vs. PCIT, Burdwan (Appellant) (Respondent) PAN: AFMPC9030R Appearances: Assessee represented by : Vinod Jain, AR. Department represented by : Sailen Samadder, Add. CIT, Sr. DR. Date of concluding the hearing : March 7th, 2025 Date of pronouncing the order : April 11th, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: The instant Miscellaneous Application at the instance of the assessee filed u/s 254(2) of the Income Tax Act, 1961 is directed against the order dated 28.08.2024 of the Tribunal in ITA No. 226/KOL/2022 pertaining to AY 2015-16 seeking rectification and clarification on the ex parte order passed by the Tribunal. 2. The contents of the Miscellaneous Application are as under: Page | 2 M.A. No.: 9/KOL/2025 AOO I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj. “This application is moved for seeking rectification and clarification on the impugned order dated 28.08.2024 of Hon'ble Bench. 1. In the order in para 19(b), page no.14, the Hon'ble Bench has mentioned the sale consideration in terms of fresh joint development agreement at Rs.1,92,00,000, whereas the sale consideration in impugned agreement dated 26.09.2014 was Rs.1,62,00,000. This fact is mentioned and referred in several places in this order and have come out of the evidence of impugned agreement submitted before Hon'ble Tribunal, Bench, Kolkata. The appellant pray for rectification of order on such matter. 2 in the order in para 20 page 15-16 of Hon'ble bench stated that the capital gain on receipt of Rs.38,00,000 in A.Y.2013-14 and capital gain on receipt of Rs.24,00,000 in A.Y.2014-15, be taken as chargeable in A.Y.2015-16. Whereas no direction is given for the tax amount paid by the appellant in those years on such amount offered and computed as capital gain in those assessment years. The appellant pray to allow credit of tax paid in those assessment years to assessment year of chargeability i.e. A.Y.2015-16 or a direction be given the Assessing officer to re-compute the assessed income excluding the amount of capital Gains in those years and tax. The appellant pray that otherwise the assesse will suffer loss. 3. The appellant further affirm that no MA is filed by them on the order of Hon'ble Tribunal” 3. Rival submissions were heard and the record and the submissions made have been examined. 4. As regards the issue in para 1 of the MA relating to the sale consideration being Rs. 1,62,00,000/- as per the agreement dated 26.09.2014 in place of Rs. 1,92,00,000/- mentioned in the order of the Tribunal, the contention is found to be correct on perusal of the record. Hence, the figure of sale consideration as per the agreement dated 26.09.2014 may be read as Rs. 1,62,00,000/- in place of Rs. 1,92,00,000/- wherever it occurs in the order of the Tribunal and the order is rectified to this extent. Page | 3 M.A. No.: 9/KOL/2025 AOO I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj. 5. However as regards the issue raised in para 2, we have considered the application. Since the income is assessed in AY 2015-16, the taxes paid inadvertently on account of incorrect appreciation of law are required to be adjusted for AY 2013-14 and AY 2014-15 against the demand arising in AY 2015-16 against the income assessable. We may also observe that this is not a prima facie mistake in the impugned order of the Tribunal which can be rectified. However, the assessee pressed that the taxes paid in AY 2013-14 and AY 2014-15 when capital gains was disclosed by the assessee but which on account of the appeal order of the Tribunal is now admitted to be in AY 2015-16 need to be adjusted in A.Y. 2015-16, therefore, in view of totality of facts the assessee has paid taxes in the year in which the income was not assessable and the same need to be adjusted against the tax due in AY 2015-16 as the income relates to this year. Although no correction in the appeal order of the Tribunal is required as there is no mistake per se in the order which needs rectification, however, in the interest of justice and since the issue raised does impact the liability arising in AY 2015-16 and in view of the decision of Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd. v. Commissioner of Income-tax [1997] 91 Taxman 351 (SC) wherein it has been held that only the income that is received or accrued or arises can be assessed and hypothetical income cannot be assessed, and as the entire capital gains has been held to be assessable in A.Y. 2015-16, the Ld. AO may consider to grant necessary relief as per law in the A.Ys. 2013-14 and 2014-15 in which the income on this account was shown by the assessee and adjust the taxes paid against the demand arising in A.Y. 2015-16 as per law where it is now Page | 4 M.A. No.: 9/KOL/2025 AOO I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj. held to be correctly assessable. The relevant extract from the order of the Hon'ble Supreme Court is as under: Under the Act income charged to tax is the income that is received or is deemed to be received in India in the previous year relevant to the year for which assessment is made or on the income that accrues or arises or is deemed to accrue or arise in India during such year. The computation of such income is to be made in accordance with the method of accounting regularly employed by the assessee. It may be either the cash system where entries are made on the basis of actual receipts and actual outgoings or disbursements or it may be the mercantile system where entries are made on accrual basis, i.e., accrual of the right to receive payment and the accrual of the liability to disburse or pay. In the instant case even though the assessee-company was following the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply made to the consumers, no real income had accrued to the assessee-company in respect of those enhanced charges in view of the fact that soon after the assessee-company decided to enhance the rates in 1963 representative suits were filed by the consumers which were decreed by the trial court and which decree was affirmed by the appellate court and the High Court and it was only on 3-10-1968 that the letters patent appeals filed by the assessee-company were allowed by the Division Bench of the High Court and the said suits were dismissed But appeals were filed against the said judgment by the consumers in the Supreme Court and the same were dismissed by the judgment of the Supreme Court dated 26-2-1969. Shortly thereafter, on 19-3-1969, the Under Secretary to the Government of Gujarat wrote a letter advising the assessee-company to maintain the status quo for the rates to the consumers for at least six months. No doubt, the letter addressed by the Under Secretary to the Government of Gujarat to the assessee-company, had no legally binding effect but one has to look at things from practical point of view that the assessee-company, being a licensee, could not ignore the direction of the State Government which was couched in the form of an advice, whereby the assessee-company was asked to maintain the status quo for at least six months and not to take steps to recover the dues towards enhanced charges from the consumers during this period Before the expiry of the period of six months the subsequent suit had been filed by the consumers and during the pendency of the said suit the undertaking of the assessee-company was taken over by the Government of Gujarat under the Defence of India Rules, and subsequently, it was transferred to the Gujarat State Electricity Board and, as a result, the assessee-company was not in a position to take steps to recover the enhanced charges. Page | 5 M.A. No.: 9/KOL/2025 AOO I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj. In subsequent representative suit the consumers were challenging the enhancement in charges made in 1963 and had sought a declaration that the assessee-company was not entitled to recover more than 31 paise per unit for light and fans and 20 paise per unit for motive power and the trial court, while decreeing the said suit had given a declaration in these terms. Hence, the said declaration was not confined to the period subsequent to 31-3-1969. The question whether there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity had to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter was considered in this light it was not possible to hold that there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity which were added by the AO while passing the assessment orders in respect of the assessment years under consideration. The Tribunal, therefore, had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Assessing Officer did not represent the income which had really accrued to the assessee-company during the relevant previous years. 5. The Ld. AO is thus required to pass necessary remedial order as per law and the refund so arising in those two assessment years may thereafter be adjusted against the demand otherwise the assessee would be subject to levy of tax in those two assessment years which would not be in consonance with Article 265 of the Constitution of India as the tax liability arises only in the year in which the income is liable to be assessed. The issue in para 2 of the MA is disposed accordingly as per the above observation. 6. In the result, the Miscellaneous Application filed by the assessee is partly allowed. Order pronounced in the open Court on 11th April, 2025. Sd/- Sd/- [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Page | 6 M.A. No.: 9/KOL/2025 AOO I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj. Dated: 11.04.2025 Bidhan (P.S.) Page | 7 M.A. No.: 9/KOL/2025 AOO I.T.A. No.: 226/KOL/2022 Assessment Year: 2015-16 Shuvro Chattaraj. Copy of the order forwarded to: 1. Shuvro Chattaraj, C/o Jain Vinod K & Associates, 41 A, AJ.C. Bose Road, Diamond Prestige Nirman, 6th Floor, Suite No. 613, Kolkata, West Bengal, 700017. 2. PCIT, Burdwan. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "