1978 (12) TMI 89 - AT - Income Tax

Summary

Issues:
- Assessment of capital gains on the sale of import entitlement certificates.
- Right of the appellant to challenge the assessment of capital gains.
- Estoppel in tax matters and the appellant's denial of liability to be assessed.
- Claim for exemption from capital gains not made before the ITO.

Analysis:
1. The appellant returned capital gains on the sale of import entitlement certificates for two assessment years. The ITO assessed the amounts to capital gains tax based on the appellant's returns. The AAC upheld the assessment, stating that the appellant had admitted the liability for capital gains in the returns. The appellant appealed to the Tribunal, arguing that he can challenge the assessment even if the objection was not raised during the assessment process.

2. The Tribunal referred to past judgments to establish that an assessee can challenge his liability to capital gains even if initially admitted in the returns. The Tribunal highlighted that the fact of receipt does not automatically make it taxable income; it must be determined according to the provisions of the IT Act. The appellant's denial of liability to be assessed under the Act gives him the right to appeal, regardless of the initial admission in the returns.

3. The Revenue contended that as the appellant admitted capital gains in the returns and the ITO accepted them, the appellant cannot appeal the assessment. However, the Tribunal differentiated this case from previous rulings where the assessee's objection or consent played a crucial role in determining the right to appeal. In this case, the appellant did not consent or object to the assessment during the assessment process.

4. The Revenue further argued that since no claim for exemption from capital gains was made before the ITO, the appellant cannot raise this issue before the AAC or the Tribunal. However, the Tribunal found that there were sufficient materials supporting the claim for exemption from capital gains, as evidenced by the appellant's letter to the ITO and relevant case law. Therefore, the appellant was not precluded from raising this issue during the appeal.

5. The Tribunal ultimately held that there was no liability to capital gains on the profits from the sale of import entitlement certificates, citing a Full Bench decision of the Madras High Court. As a result, both appeals were allowed in favor of the appellant, emphasizing the right to challenge the assessment and claim exemption from capital gains, despite initial admissions in the returns.