2023 (10) TMI 1429 - AT - Income Tax

Disallowance long-term capital loss from slump sale u/s 50B - Form 3CEA has not been uploaded on the Income Tax Portal - assessee submitted that it mistakenly read Form 3CEB instead of Form 3CEA and also enclosed Form 3CEA prepared by the auditor - HELD THAT - Coordinate Bench, Hyderabad in the case of Nhance Engineering Solutions Pvt. Limited 2019 (2) TMI 2109 - ITAT HYDERABAD dealing with the similar case of capital gain declared u/s 50B and the audit report being not filed with the return of income, allowed the claim of the assessee observing that the same has been filed during the course of assessment proceedings and further filing of report is curable even if it is not submitted along with the return of income. Considering the fact that the assessee has e-filed the income tax return before the due date prescribed u/s 139(1) provided the details of the alleged claim in the Income Tax Return and duly furnished Form 3CEA during the course of assessment proceedings and further an affidavit has also been filed by the auditor mentioning the reason due to which the Form 3CEA was not uploaded on the E-Portal of Income Tax along with the return of income at the time of filing the return of income before the due date u/s 139(1) we are of the view that both the lower authorities ought to have treated the furnishing of Form 3CEA as a sufficient compliance for the purpose of allowing long-term capital loss claimed by the assessee u/s 50B of the Act. Decide in favour of the assessee.

Summary

Issues:
1. Disallowance of Long Term Capital Loss claimed by the assessee.
2. Non-filing of Form 3CEA along with the return of income.
3. Compliance with e-filing requirements under the Income Tax Act.

Issue 1: Disallowance of Long Term Capital Loss claimed by the assessee:
The assessee's appeal was against the disallowance of Long Term Capital Loss claimed of Rs. 6,25,79,960/- by the CIT(A) National Faceless Appeal Centre. The CIT(A) held that the Certificate in Form 3CEA of the Accountant is mandatory to ascertain the correctness of the net worth, and without supporting documentation, the claim was not allowable. The Tribunal observed that the figures of sale consideration and net worth were not disputed by the Revenue, and the disallowance was solely due to the non-filing of Form 3CEA. The Tribunal found that the Form 3CEA was obtained by the assessee but not uploaded due to technical issues. An affidavit from the auditor explained the reason for non-uploading. Citing relevant case laws, the Tribunal held that the furnishing of Form 3CEA during assessment proceedings constituted sufficient compliance. Consequently, the Tribunal set aside the CIT(A)'s finding and decided in favor of the assessee, allowing the Long Term Capital Loss claimed.

Issue 2: Non-filing of Form 3CEA along with the return of income:
The case involved scrutiny assessment under the E-assessment Scheme, 2019, focusing on capital gain/loss from slump sale and sale of property. The assessee failed to upload Form 3CEA along with the return of income, leading to the disallowance of the claimed Long Term Capital Loss. The assessee argued that the form was obtained but not uploaded due to technical reasons. The Tribunal noted that the Form 3CEA provided transaction details and an affidavit from the auditor explained the non-uploading. Relying on legal precedents, the Tribunal concluded that the assessee's actions constituted reasonable compliance, especially as the report was furnished during assessment proceedings. The Tribunal found the non-filing of Form 3CEA to be beyond the assessee's control and allowed the claim based on the provided documentation.

Issue 3: Compliance with e-filing requirements under the Income Tax Act:
The dispute centered on the mandatory requirement of e-filing Form 3CEA along with the return of income. The assessee's failure to upload the form led to the disallowance of the Long Term Capital Loss claimed. The Tribunal considered the technical issues faced by the auditor in uploading the form and the subsequent submission during assessment proceedings. Emphasizing the timely filing of the income tax return and the provision of Form 3CEA, the Tribunal held that the furnishing of the form during assessment proceedings constituted sufficient compliance. The Tribunal's decision was based on the assessee's efforts to meet the requirements despite the initial non-uploading due to technical reasons.

This detailed analysis of the judgment highlights the key issues of disallowance of Long Term Capital Loss, non-filing of Form 3CEA, and compliance with e-filing requirements under the Income Tax Act, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.