2018 (3) TMI 1308 - AT - Income Tax

Reopening of assessment - change of opinion and formation of opinion - slump sale u/s 50B - Held that - In the case of Usha International (2012 (9) TMI 767 - DELHI HIGH COURT), as held that the expression change of opinion postulates formation of opinion and a change thereof and that there is a difference between change of opinion and formation of opinion . In the case of Gujarat Power Corporation Ltd., (2012 (9) TMI 69 - Gujarat High Court) it was held that after 01.04.1989 power for reopening of assessment within four years are much wider. In the case before us, though the assessee has filed the copy of the business purchase agreement, the A.O has not formed any opinion about the nature of the capital gain arising therefrom and therefore, it cannot be a case of change of opinion. Therefore, we do not find any reason to interfere with the order of the CIT(A) on this issue and the cross objection of the assessee is rejected. On reopening of the assessment the entire issue was before the A.O and the assessee had made the alternate claim of applicability of Sec. 50B of the IT Act to the transaction as a slump sale and in support of said claim has filed the Form No. 3CEA. The requirement to file Form No. 3CEA along with the return of income is to substantiate the claim u/s 50B of the Act. In the original return of income, since the assessee has not made the claim, the assessee could not have filed the Form No. 3CEA along with the return of income. Its only during the reassessment proceedings, that the assessee had made an alternate claim and therefore, the CIT(A) has rightly directed the A.O to assess the transaction arising out of the BPA as a slump sale u/s 50B of the IT Act. As regards the consideration towards slum sale, the CIT(A) has not only taken the agreed price of ₹ 4,00,00,000/- but also the additional consideration of ₹ 24,54,056/- as part of the consideration for all the assets listed in BPA. The assessee has not raised any ground of cross objection against treating the additional consideration also as the sale consideration for transfer of business u/s 50B of the IT Act. Therefore, the assessee has accepted the entire sale consideration to be ₹ 4,24,55,056. Since the CIT(A) has only remitted the issue to the file of the A.O for the considering the assessee s alternate claim u/s 50B of the Act, we do not see any reason to interfere with the order of the CIT(A).

Summary

Issues:
1. Validity of reassessment proceedings under Sec. 147 of the IT Act.
2. Treatment of long term capital gains as short term capital gains.
3. Applicability of Sec. 50B of the IT Act to the transaction as a slump sale.

Issue 1: Validity of reassessment proceedings under Sec. 147 of the IT Act:
The appeal and cross objection were against the CIT(A)'s order for the A.Y 2008-09. The Revenue disallowed the claim of exemption u/s 10B of the IT Act, leading to the determination of total income at a different amount. The A.O issued a notice u/s 148 of the IT Act, stating that long term capital gains should be taxed as short term capital gains under Sec. 50 of the IT Act. The assessee challenged the validity of the reassessment proceedings, arguing that the reopening was not valid. The A.O maintained that the reopening was valid, as the long term capital gain was treated as short term capital gain by the assessee.

Issue 2: Treatment of long term capital gains as short term capital gains:
The assessee claimed that an amount was towards goodwill and should be considered as long term capital gain. However, the A.O rejected this claim, stating that the amount was mentioned as sale consideration without any mention of goodwill. The assessee then argued that the transaction falls under Sec. 50B of the IT Act as a slump sale. The CIT(A) accepted this alternate claim, directing the A.O to assess the transaction as a slump sale u/s 50B of the IT Act. The Revenue appealed against this decision, but the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Issue 3: Applicability of Sec. 50B of the IT Act to the transaction as a slump sale:
The Revenue raised grounds of appeal against the CIT(A)'s decision to allow the assessee's claim for determining capital gains u/s 50B of the Act. The Tribunal found that the assessee had made an alternate claim during reassessment proceedings, filing Form No. 3CEA to substantiate the claim u/s 50B. The CIT(A) directed the A.O to assess the transaction as a slump sale u/s 50B of the IT Act, considering the total sale consideration. The Tribunal dismissed both the Revenue's appeal and the assessee's cross objection, upholding the CIT(A)'s decision on the applicability of Sec. 50B to the transaction as a slump sale.