2016 (6) TMI 423 - AT - Income Tax

Sale value for the purpose of computation of Short Term Capital Gains - reference to the Valuation Officer so as to determine the FMV of the property - in the second round of proceedings, assessee has taken a new plea that a deduction from the cost should be given on account of transfer fee paid for ₹ 27,200/- - Held that - Plea of the assessee that a deduction from the cost should be given on account of transfer fee paid as stated by the Ld. CIT(A), was neither made by the assessee in the return of income nor before the assessment proceedings before the Assessing Officer. Rather, upto the stage of Tribunal no such claim was made. Once, the matter is set aside by the Tribunal for a limited purpose, then, the assessment has to be framed within the directions of the Tribunal. The determination of income and issue has to be circumscribed strictly in accordance with the order of the Tribunal and it cannot travel beyond. Accordingly, we agree with the conclusion drawn by the Ld. CIT(A) that once such a claim is not arising out of the mandate and directions of the Tribunal, then, the same cannot be raked up or a fresh claim can be made in the second round of proceedings. Accordingly, the order of Ld. CIT(A) is affirmed and the grounds raised by the assessee is dismissed.

Summary

Issues:
1. Disallowance of expenditure of transfer for correct Short Term Capital Gains calculation.
2. Rejection of claim of expenses on transfer due to method of accounting and not being claimed in the original return of income.

Analysis:
1. The appeal was filed against the order passed by CIT(A)-3, Mumbai for the Assessment Year 2003-04 under section 143(3) r.w.s. 254 of the Income Tax Act, 1961. The original assessment computed Short Term Capital Gains on the sale of a clinic Gala using the market value determined by the Stamp Duty authorities. The matter was set aside by the Tribunal for the valuation officer to determine the Fair Market Value (FMV) of the property. The Assessing Officer then calculated the Short Term Capital Gains based on the FMV determined by the valuation officer. The assessee claimed a deduction for transfer fees paid, which was rejected by the Assessing Officer as it was not claimed initially and was made after receiving the valuation report.

2. In the first appeal, the assessee submitted that half of the transfer fee amount was borne by the purchaser and the other half by the seller, hence, it should be allowed as a deduction. Additional evidence regarding the transfer fee was submitted, leading to the matter being sent back to the Assessing Officer. However, the Assessing Officer objected to the additional evidence, citing that it was not claimed in the original return of income and was not part of the accounting for the year under consideration. The Assessing Officer also referred to a Supreme Court decision stating that claims should only be entertained through revised returns. The CIT(A) upheld the Assessing Officer's decision, emphasizing that the claim was not raised earlier and was beyond the Tribunal's mandate.

3. The Tribunal found that the main dispute was the sale value for computing Short Term Capital Gains. The FMV determined by the valuation officer was slightly lower than the Stamp Duty authorities' value. In the second round of proceedings, the assessee introduced a new claim for deduction of transfer fees, which was not raised previously. The Tribunal agreed with the CIT(A) that such new claims cannot be entertained in the second round of proceedings if they do not align with the Tribunal's directions. Therefore, the appeal was dismissed, affirming the CIT(A)'s decision.

In conclusion, the Tribunal upheld the decision to dismiss the appeal, emphasizing that claims made in the second round of proceedings must align with the Tribunal's directions and cannot introduce new claims beyond the original mandate.