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TMI Blog2018 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... he first round of proceedings. Since this was accepted by the ld AO in the assessment itself, there was no occasion to carry the said issue to the appellate forums such as CITA or the tribunal. Hence the ld AO ought not to have taken a different stand in the proceedings giving effect to the directions of the tribunal by treating the resultant gains on sale of 3000000 equity shares of EIH Ltd as short term capital gains. We find that this action of the ld AO had been rightly struck down by the ld CITA in his order. Accordingly, grounds raised by the revenue are dismissed. But we find that the CIT-A having struck down the action of the AO in taxing short term capital gains, had proceeded to make some observations, to somehow bring to tax the short term capital gains, which in our considered opinion, cannot be done as per law at all. These observations of the CIT-A are totally unwarranted and only reflects the contradictory stand of the CIT-A in as much as, the CIT-A, on the one hand, clearly gives a finding, that the AO cannot travel beyond his jurisdiction and has to strictly abide by the directions of the tribunal, but, on the other hand, the CIT-A decides to travel beyond his j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the Registrar of Companies. All the assets and liabilities of APPL stood transferred and vested in the assessee LLP at its cost or book value in the hands of APPL. The assessee thus became the owner of 3184807 shares of EIH Ltd at its cost in the books of APPL of ₹ 2,84,37,180/-. Out of the said 3184807 shares so transferred and vested in the assessee, 3000000 equity shares of EIH Ltd were sold by assessee LLP for ₹ 55,20,00,000/- leading to long term capital gains of ₹ 53,56,69,888/-. The assessee offered Long Term Capital Gains accordingly in the return filed by it for the Asst Year 2011-12 arising out of sale of said 3000000 equity shares of EIH Ltd without claiming the benefit of indexation on its cost on conversion from APPL, duly paid the tax leviable u/s 112 of the Act at 10% amounting to ₹ 5,51,73,999/-. Such offer of long term capital gains on sale of said 3000000 equity shares of EIH Ltd by the assessee was duly accepted by the ld AO in the order of original assessment and there was no controversy and / or dispute relating thereto. Infact the said fact was even subjected to detailed verification by the ld AO by posing a specific query as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains of ₹ 53,56,69,888/- on sale of 30 lakh equity shares of EIH ltd post conversion into LLP by the assessee in the original assessment proceedings. In other words, the said issue never travelled to any appellate forums such as CITA or to Tribunal. Hence when the order is passed by the ld AO pursuant to the directions of this tribunal , he could confine himself only with those directions of the tribunal and cannot travel beyond his jurisdiction vested thereon in the second round of proceedings. 7. However, the ld AO while passing the fresh order in the second round of proceedings dated 5.9.2014, proceeded to compute the long term capital gains for conversion of private limited company into LLP as under:- Sale value of shares or assets of the company taken over By the LLP 3,10,92,830 Less: Cost of Acquisition of the assets by the company 3,10,92,830 Long Term Capital Gain NIL 8. The ld AO further proceeded to shift his stand taken by him in the original assessment proceedings, by proceeding to treat the sale of 30 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) erred in strucking down the Order of the AO treating the transfer of EIH shares as short term capital gain. 2. On the facts circumstances of the case and in law, the ld. CIT(A) erred in not appreciating the fact that the Hon ble ITAT has given specific finding that the assessee has not complied with the proviso to section 47(xiiib) is not available to the assessee. 3. On the facts circumstances of the case and in law, the ld. CIT(A) erred in strucking down the Order inspite of the fact that AO has rightly followed the direction of the Hon ble ITAT and treatment of transfer of shares is consequential effect of the order. 4. The appellant craves the leave to made any addition, alteration, modification of grounds at the appellate stage. ITA No. 222/Kol/2015 Assessee Appeal 1. For that various uncalled for, illegal, baseless and perverse observations and findings given in para 2.4 of the Order dated 29 December 2014 passed by the (East India Hotel Ltd.) shares and distribution of gains or profits to the Commissioner of Income Tax (Appeals) are in excess of jurisdiction, erroneous and are liable to be cancelled and/or deleted. 2. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax is legally liable to be paid by the appellant and such guidance and/or observation in para 3 are without jurisdiction, illegal and are liable to be deleted and/or reversed. 5. For That the CIT(A) erred in dismissing the grounds No. 5 and 6 raised by the appellant without any discussion whatsoever and without noting any of the arguments of the appellant and/or giving any finding of his own on such argument. The cryptic order dismissing grounds no. 5 and 6 is without application of mind, erroneous and perverse and is liable to be reversed. 6. For That further and in any event and without prejudice to ground no. 5 above the CIT(A) should have held that the appellant was entitled to the benefit of Explanation 1(b) to Section 2(42A) read with Section 49(1) of the Act. 11. We have heard the rival submissions and perused the materials available on record. The facts narrated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find that this tribunal in the original round of appellate proceedings vide ITA No. 718/Kol/2014 dated 27.6.2014 had observed as under :- 12. A perusal of the provisions of section 45 of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of successor to private limited company. In our considered opinion, the ld AO ought to have stopped the proceedings with this action which would be in strict consonance with the directions of the tribunal supra. We are in complete agreement with the arguments of the ld AR that the issue as to whether the sale of 3000000 lakh equity shares of EIH Ltd post conversion into LLP, would result in long term or short term capital gains , was never in dispute in the first round of proceedings. The assessee LLP had offered the long term capital gains on sale of such shares in the return which has been duly accepted by the ld AO in the original round of proceedings after subjecting the same to detailed enquiry by issuing a specific show cause notice to the assessee as to why the subject mentioned gains should not be treated as short term capital gains. The ld AO on examining the detailed reply given by the assessee both on facts as well as on law, accepted the contentions of the assessee that the resultant gains on sale of 3000000 shares of EIH Ltd would only be long term capital gains. Since this was accepted by the ld AO in the assessment itself, there was no occasion to carry the said i ..... 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