2017 (2) TMI 1182 - AT - Income Tax

Claim of long term capital gain - examining cost of acquisition, cost of improvement - treatment to sale as giving rise to short term capital gain under section 50A - Held that - As evident from the observations made by the Assessing Officer in the first round of proceedings, the Assessing Officer had accepted the expenses shown by the assessee and there were no disputes in this regard. The short point on which the matter was sent to the file of the Assessing Officer was with respect to verification about depreciation and whether sale in question is to give rise to taxability under section 50A or section 48. Once Assessing Officer holds that the sale gives rise to taxability under section 48 as long term capital gains, the matter ends there. It was no longer open to him to examine the details about cost of acquisition and cost of improvement which were examined and accepted in the first round. In considered view, the Assessing Officer exceeded his brief in this i.e. second round of proceedings. In view of the above discussions, vacate the Assessing Officer s order on these points and, therefore, delete the impugned addition. The assessee gets the relief accordingly.

Summary

Issues:
Challenge to the correctness of the order dated 19th August, 2011, passed by the CIT(A) for the assessment year 2004-05 regarding assessment under section 143(3) r.w.s. 254 of the Income Tax Act, 1961.

Analysis:
1. The appellant challenged the order dated 19th August, 2011, passed by the CIT(A) for the assessment year 2004-05. The appellant disputed the addition of ?17,05,810 on account of long term capital gains, claiming it should be deleted. The Assessing Officer treated the sale as giving rise to short term capital gain under section 50A, rejecting the appellant's claim of long term capital loss. The appellant argued that the Assessing Officer exceeded jurisdiction despite clear directions from the Tribunal in a previous order. The appellant also contested the Commissioner's findings regarding payment to Sterling City Development Co.

2. The Assessing Officer calculated the long term capital gain at ?15,30,100, differing from the appellant's claimed amount. The Assessing Officer held that depreciation was not allowed on the property, leading to the sale being considered income from Capital Gain. The appellant appealed to the CIT(A) without success. The matter was remitted to the Assessing Officer by the Tribunal for verification of depreciation claims and taxability under section 50A or section 48.

3. The Tribunal observed that the Assessing Officer had accepted the expenses shown by the appellant in the first round of proceedings, with no disputes. The matter was sent back to verify depreciation and taxability under specific sections. The Tribunal found that the Assessing Officer exceeded his jurisdiction in the second round by re-examining the cost of acquisition and improvement. Consequently, the Tribunal vacated the Assessing Officer's order and deleted the impugned addition, providing relief to the appellant.

In conclusion, the Tribunal allowed the appeal, setting aside the CIT(A)'s order and providing relief to the appellant on the disputed long term capital gains addition. The Tribunal found that the Assessing Officer had overstepped his authority in re-examining certain aspects in the second round of proceedings, leading to the deletion of the additional amount.