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TMI Blog2018 (7) TMI 1753X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, should be allowed to be carried forward and set off. We direct the AO accordingly. Both the orders of CIT(A) are quashed on the above issue. Ad hoc disallowance - Held that:- AO to restrict the disallowance at a 10% on all the items above mentioned and recompute the disallowance accordingly. For this we are of the view that neither the AO nor CIT(A) has doubted the genuineness of expenses or unreasonableness of expenses. Just to make it reasonable, we cannot rule out some personal element in some of the expenses, hence, a reasonable disallowance of 10% is restricted. This issue of assessee’s appeal is partly allowed. - ITA No. 2099/Mum/2017 And ITA No. 6048/Mum/2017 - - - Dated:- 25-7-2018 - SRI MAHAVIR SINGH, JM AND SRI G MANJUNATHA, AM For The Appellant : Shri Dr. K shivaram, Shri Aditya R. Aigamkar, AR For The Respondent : Shri M.V. Rajguru, Sr. DR ORDER PER MAHAVIR SINGH, JM: Out of these two appeals of assessee, one appeal is arising out of the order of Commissioner of Income Tax (Appeals)-55, Mumbai [in short CIT(A)], in appeal No. CIT(A)-55/IT-42/ACIT.Cir.21(3)/2016-17 dated 30.12.2016. The other appeal is arising out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of indexation in respect of sale of Flat in Netherlands in the two revised returns of income filed on 30/3/2013 irrespective of the status of resident shown first revised return of income tiled on 30/3/013 and the status of non-resident shown and filed by the assessee in second revised return of income on 30/3/2013. Thus it is very flinch evident that when it comes to claiming benefits of beneficial sections of showing losses under the head capital gains' under section 45 to 53 of IT. Act, 1961 including the benefit of indexation under section 45 to 47 of l.T. Act, 1961 , the same is claimed irrespective of the status of resident OR non-resident under the I.T. Act 1961 and/or under the DTAA between India and USA and whether such it claim is admissible or not when the Second Revised Return Of Income was filed in the status of Non-Resident by the assessee. The AO has not made any adverse comments and drawn any adverse inference on the issue of allowability of carry forward of long term capital losses of ₹ 2,56,43,744/ in respect of the flat in Netherlands, however, the AO appears to have accepted. We same even though the computation of long term capital loss tinder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Netherlands loss against Long Term Capital Gain arising in the transaction from properties in India. 5. The learned Counsel for the assessee stated that finally by rectification order passed by CIT(A) under section 154 of the Act dated 10.07.2017 directing the AO by observing as under: - A) Carry forward of Capital Losses During financial year 2010-11, the assessee had claimed carry forward of capital loss of ₹ 2,56,43,744/- arising on account of sate of House Property in the Netherlands. The said capital losses were allowed by the Assessing Officer with the specific mention thereof on Page 8 Para 11 of assessment order which, on translation, reads as under. 11. Assessee is allowed to carry forward Long Term Capital Loss of ₹ 2,56,43,744/. However, in your order, Para 2.5 Page 18, you have observed as under: Prima facie, this is a mistake in law which is apparent from the records crystal clear and there is no ambiguity about it and since the AO appears to have also not allowed the same in the assessment order, since no mention is made in the assessment order and even the assessee has not taken up any ground of appeal. Even of it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iefly sated facts are that the assessee filed his origin return of Income on 22.09.2011 declaring total Income of ₹ 2,40,36,590/-. This does not include any capital gain / loss in the computation of Income. Subsequently, the assessee filed a revised return of Income on 30.03.2012 declaring a total income of ₹. 2,40,36,590/- which included the loss on sale of capital asset as computed under the Act, at ₹ 2,56,43,744/- as per the computation of Income. On the same day, on 30.03.2012, the Assessee filed another revised return of Income showing a residential status of Non-resident, declaring a total income of ₹ 96,24,680/- in the computation of income. This computation includes the loss on sale of capital asset as computed under the Act, at ₹ 2,56,43,744/-. According to AO, the Assessee was not non-resident and hence he was treated as resident Indian as declared in his original return as well as revised return of income. The Assessing Officer allowed the carry forward of loss of ₹ 2,56,43,744/-. The Assessee has not preferred any appeal with respect to the loss offered on the residential house in Netherlands as the same was not disputed by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s need to be taken. However, if the Commissioner intends to enhance the tax liability to the detriment of the assessee, that too in an appeal preferred by the assessee, a notice provided for under sub-section (2) of Section 251 of the Act must be issued requiring the appellant to show cause as to why such a course of action be not taken. The reason is not difficult to see. The assessee approaches the Commissioner ventilating his grievance and expecting some relief. If apart from denying the relief, the Commissioner wants to fasten additional liability, the assessee must be put on notice. For all practical purposes, the appeal in such cases tends to assume the character of suo motu revision of the order of the Assessing Officer. 9. In the instant case, the Commissioner made certain observations, as to why the grievance of the appellant cannot be said to be genuine. Had he stopped at that and dismissed the appeals, there would not have been any other complications. However, he proceeded to issue certain directions, which are certainly detrimental to the interest of the appellant. He could have done that only after issuing a notice under sub-section (2) of Section 251 of the Act. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come filed under section 139(1) of the Act, should be allowed to be carried forward and set off. For this proposition the learned Counsel for the assessee relied on the decision of co-ordinate Bench of this Tribunal in the case of Ramesh R. Shah vs. ACIT (2011) 12 taxman.com 501 (Mumbai), wherein, it is held as under:- 10. In the present case, the Assessing Officer has serious reservation for allowing the assessee to carry forward long-term capital loss by interpreting the provisions of section 80 read with section 139(3). In this background, can it be said that the assessee has not fulfilled conditions laid down in section 80 and hence, it is not permissible to allow to carry forward of the capital loss. In the present case, the assessee filed original return under section 139(1) in which the positive income was declared. Even as per the assessment order positive income is determined as the assessee could not set off the loss on the sale of the shares of Phiolx Pharma Ltd. in the year itself. He claimed the same to be carry forward. In our humble opinion correct interpretation of section 80, as per the language used by the Legislature, condition for filing revised return of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, as the assessee filed its original return declaring the positive income and hence, in our opinion, subsequent revised return is valid return also and the assessee is entitled to carry forward of 'long-term capital loss'. Sub-sections (1) and (3) of section 139 provides for the different situations and in our opinion, there is no conflict in applicability of both the provisions as both the provisions are applicable in the different situations. We are, therefore, of the opinion that there is no justification to deny the assessee to carry forward the loss. We, accordingly, direct the Assessing Officer to allow the assessee to carry forward the loss. 10. On the other hand, the learned Sr. DR heavily relied on the order of CIT(A). 11. We have heard the rival contentions and gone through the facts and circumstances of the case. In view of the above given facts of the present case and precedence cited above, we are of the view that where the assessee has filed a positive return of income, it cannot be said that the return is a loss return and the return of income is to be treated as a return under section 139 of the Act. The long term capital loss has no effect on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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