2018 (3) TMI 521 - AT - Income Tax

Revision u/s 263 - not examining the rental receipts understated by the assessee compared to the TDS receipts as per Form No.26AS and the excess depreciation claimed by the assessee in respect of motor cars and long term capital gain loss claimed by the assessee - Held that - The assessee has received the rents as per Form No 26AS a sum of ₹ 25 lakhs, whereas the assessee had admitted a sum of ₹ 12,28,020/- in the return of income and the A.O. has not examined the issue with regard to the remaining amount of ₹ 13,31,800/- which should have been brought to tax by the A.O., similarly, the assessee had claimed the depreciation @ 50%. The A.O. has neither called for the details nor the assessee had demonstrated that the motor cars were used for the purpose of running them on hire. With regard to the capital gains, the assessee had purchased shares at ₹ 10/- per share and sold the same at ₹ 10/- per share and claimed the long term capital loss of ₹ 1,28,65,574/- with indexed cost of acquisition at ₹ 2,48,65,574/-. But there was no valuation report submitted by the assessee to arrive at the market value as required by the Income tax rules. Therefore, the A.O. clearly committed an error which is prejudicial to the interest of the revenue and the Ld.CIT has rightly taken up the case for revision u/s 263. CIT(A) while remitting the matter back to the file of the A.O., had directed the A.O. to disallow the capital loss based on cost of inflation index and remitted the remaining two issues for readjudication. However, we are of the considered opinion that all the three issues required to be remitted back to the file of the A.O. to re-do the assessment afresh on merits. Accordingly, while upholding the order of the CIT passed u/s 263 of the Act, we remit the matter back to the file of the A.O. all the three issues with a direction to re-do the same afresh on merits. - Decided against assessee

Summary

Issues:
- Revision of assessment u/s 263 by CIT for assessment year 2010-11.
- Understated rental receipts, excess depreciation on motor cars, and capital loss claimed by the assessee.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (CIT) passed u/s 263 of the Income Tax Act, 1961. The CIT observed that certain issues were not examined by the Assessing Officer (AO), including understated rental receipts, excess depreciation on motor cars, and capital loss claimed by the assessee.

2. Regarding the understated rental receipts, the assessee argued that the entire receipts were admitted as rental income under different categories, hence there was no under-assessment prejudicial to revenue. However, the CIT directed the AO to disallow the capital indexation loss claimed by the assessee.

3. Concerning the excess depreciation on motor cars, the assessee claimed depreciation at 50% for commercial vehicles used for business purposes. The AO had allowed this depreciation in previous years, and the assessee argued that once assets are included in the block, they cannot be removed. However, the CIT found the AO's actions prejudicial to revenue.

4. On the issue of capital loss claimed by the assessee, related to the purchase and sale of shares, the CIT directed the AO to disallow the claimed indexed cost of acquisition. The assessee failed to provide valuation reports as required by tax rules.

5. The Tribunal upheld the CIT's order u/s 263, remitting all three issues back to the AO for fresh assessment on merits. The Tribunal found errors in the AO's handling of the issues, necessitating a re-examination of the rental receipts, depreciation, and capital loss. The appeal filed by the assessee was dismissed, and the matter was remitted back to the AO for re-assessment.

6. The decision was based on the principle that the AO's failure to adequately address the issues raised by the CIT led to errors prejudicial to revenue. The Tribunal emphasized the importance of thorough assessment procedures and compliance with tax rules in determining taxable income and losses.

7. The Tribunal's decision highlights the significance of accurate financial reporting and compliance with tax regulations to avoid potential tax liabilities and disputes with tax authorities. The detailed analysis of each issue underscores the complexity of tax assessments and the need for meticulous record-keeping and documentation to support tax positions.