2017 (1) TMI 1449 - AT - Income Tax

Contradicting claim in the computation of income vis-a-vis the amount stated in the Auditors report in Form no. 10B - Held that - In the present case, in the computation of income assessee claimed deduction of an amount of ₹ 79,54,625/- as application of money in terms of clause (ii)(b) of Explanation to Sec. 11(1) of the Act. Also emerging that in the Audit report in prescribed Form no. 10B annexed with the return, said amount was shown as ₹ 75,78,521/-. The explanation of assessee is that the amount stated in Form no. 10B is an inadvertent mistake. It is quite clear that in the subsequent Assessment Year of 2004-05 when assessee actually spent the said sum, the claim made was to the extent of ₹ 79,54,625/-, as is borne out from the copy of statement of total income for Assessment Year 2004-05 placed in the Paper Book at pages 55 to 66. At the time of hearing, the learned representative pointed out that the claim of application of income to the extent of ₹ 79,54,625/- with respect to Assessment Year 2003-04 stands accepted in the assessment for Assessment Year 2004-05, which has been finalized u/s 143(3) of the Act dated 29.12.2006. Therefore, the furnishing of Form no. 10B at an understated figure of ₹ 75,78,521/- is ostensibly a mistake. Having regard to the entirety of facts and circumstances of the case, we find no reason to uphold the stand of Assessing Officer in making addition - Decided in favour of assessee. Set-off of Long Term Capital Gain against the brought forward Long Term Capital Loss and carry forward of the balance unabsorbed Long Term Capital Loss - Held that - CIT(A) has allowed the stand of assessee considering the order of the predecessor CIT(A) in assessee s own case for the instant assessment year dated 18.1.2007, wherein a similar issue was dealt with arising from the regular assessment framed by the Assessing Officer u/s 143(3) of the Act dated 27.3.2006. Before us, the learned representative for the respondent-assessee pointed out that in the original assessment proceedings, appeal of the assessee was allowed by the CIT(A) after receiving a Remand report from the Assessing Officer wherein such a claim was agreed to by the Assessing Officer. It has also been pointed out that against the order of CIT(A) dated 18.1.2007, which has since been followed by the CIT(A) now, the Department had not come in appeal before the Tribunal. The aforesaid factual matrix brought out by the learned representative for the assessee is not disputed by the Revenue. Therefore, in our view, the CIT(A) made no mistake in allowing the claim of assessee and, therefore, the Revenue has to fail in its appeal. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of assessment
2. Treatment of excess application of income on the objects of the trust as income having escaped assessment
3. Allowance of carry forward of long-term capital loss and set-off against income

Issue 1: Validity of reopening of assessment
The case involved cross-appeals by the assessee and the Revenue against the order of CIT(A)-7, Mumbai, for the Assessment Year 2003-04, arising from the Assessing Officer's order under section 143(3) r.w.s 147 of the Income Tax Act, 1961. The primary contention was the validity of reopening the assessment beyond the statutory time limit.

Issue 2: Treatment of excess application of income on the objects of the trust as income having escaped assessment
The dispute centered around the difference in the amount deemed to have been applied as per Form 10B and as per the Return of Income by the charitable trust. The Assessing Officer disallowed a sum of &8377; 3,76,104/-, claiming it as an excess application of income. The trust argued that the difference was an arithmetical error and provided a revised certificate from the auditors to support their claim. The ITAT held that the Assessing Officer's decision was misconceived, as the trust had correctly claimed &8377; 79,54,625/- as the application of money, and the disparity in Form 10B was an inadvertent mistake. Consequently, the ITAT directed the Assessing Officer to delete the addition of &8377; 3,76,104/-.

Issue 3: Allowance of carry forward of long-term capital loss and set-off against income
The Revenue's appeal challenged the CIT(A)'s decision to allow the carry forward of a long-term capital loss and set-off against the current year's income. The CIT(A) had relied on a previous order in the assessee's favor and the lack of appeal by the Revenue against it. The ITAT found no fault in the CIT(A)'s decision, as the Revenue did not dispute the factual matrix presented by the assessee. Therefore, the ITAT dismissed the Revenue's appeal, upholding the allowance of the claim by the assessee.

In conclusion, the ITAT allowed the assessee's appeal regarding the treatment of excess application of income, directed the deletion of the addition made by the Assessing Officer, and dismissed the Revenue's appeal on the carry forward of long-term capital loss. The issue of the validity of reopening the assessment was not adjudicated due to the deletion of the additions, rendering it academic.