2022 (12) TMI 387 - AT - Income Tax

Validity of order of CIT(A) allowing the claim of assessee - Earlier the order of revision made by CIT u/s 263 was quashed by the ITAT - As per CIT transaction of sale of shares was not looked into by the A.O. by not applying his mind and thereby allowing carry forward loss - PCIT remanded the matter to the A.O. to verify the legal tenability of the Special Purpose Vehicle (SPV), the source of evidences of SPV to acquire the shares of ABMWL, the valuation of shares of ABNL IT ITES Limited and sale of shares - HELD THAT - CIT(A) has allowed the claim of the assessee, pertaining to LTCL which is to be carry forward for set off in subsequent years. It is pertinent to point out that the ld. CIT(A) has passed the impugned order by placing reliance on the decision of the co-ordinate bench 2021 (5) TMI 791 - ITAT MUMBAI which has quashed the order passed u/s. 263 on the ground that the assessment order passed u/s.143(3) was made after elaborate enquiry conducted by the A.O. based on which a possible view was taken, wherein the A.O. has stated that there was no misrepresentation of the facts by the assessee. Co-ordinate bench had held that the assessee has furnished all evidences and that section 263 proceeding was only based on borrowed satisfaction, i.e., audit objection and not on independent application of mind by the ld. Pr. CIT. The co-ordinate bench has also placed its reliance on the show cause notice issued by the ld. PCIT, wherein it has emphasized the fact that the language used by the Revenue audit party in it is audit objection was also the same as that which reflected in the show cause notice issued by ld. PCIT u/s.263 of the Act. In the present case, the ld. CIT(A) has held that on quashing of the order passed u/s.263 by the ld. PCIT, the assessment order u/s.143(3) r.w.s. 263 fails to survive on its own. On this ground, the ld. CIT(A) has allowed the impugned claim of the assessee. No infirmity in the order passed by the ld. CIT(A) in allowing the claim of the assessee as per the decision of the co-ordinate bench, quashing the order passed u/s. 263 and the subsequent assessment order u/s.143(3) r.w.s. 263 fails to have a legal sanctity - Appeal filed by the Revenue is dismissed.

Summary

Issues:
Challenge to quashing of order passed u/s.263 of the Act by the ld. CIT(A)
Validity of transaction not satisfying mandatory condition of section 47 of the Act
Allowance of LTCL on sale of equity shares of ABNL

Analysis:
The appeal was filed by the Revenue against the order of the ld. CIT(A) for the Assessment Year 2013-14, challenging the quashing of the order passed u/s.263 of the Act. The Revenue contested the decision of the ld. CIT(A) based on the co-ordinate bench's ruling in the assessee's case for the same year, highlighting that the transaction did not meet the mandatory condition of section 47 of the Act. The facts revealed that the assessee company, M/s. Aditya Birla Housing Finance Limited, was amalgamated with Grasim Industries Ltd. The Revenue argued that the A.O. allowed LTCL for set off in subsequent years without considering the transaction of sale of shares of Aditya Birla Minacs Worldwide Ltd. to ABNL IT & ITES Ltd., leading to the revision proceedings u/s.263 initiated by the ld. PCIT. The co-ordinate bench later quashed the order u/s.263 based on specific grounds, including adequate enquiries by the A.O. and lack of independent application of mind by the ld. PCIT.

The ld. CIT(A) directed the A.O. to allow the claim of LTCL for the impugned year and carry forward the losses in subsequent years following the co-ordinate bench's decision. The Revenue, aggrieved by this order, contended that the Tribunal's decision was based on technical grounds and not on the merits of the case. However, the Tribunal upheld the ld. CIT(A)'s order, emphasizing that the assessment order u/s.143(3) r.w.s. 263 did not survive after the quashing of the order u/s.263 by the ld. PCIT. The Tribunal found no infirmity in the ld. CIT(A)'s decision to allow the claim of the assessee based on the co-ordinate bench's ruling, ultimately dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the ld. CIT(A)'s order, dismissing the Revenue's appeal and affirming the decision to allow the claim of LTCL for the assessee, as per the co-ordinate bench's ruling.