9911796707
TMI Blog2019 (9) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the principle of natural justice. The Ld. CIT(A), in law and on facts and circumstances of the case, ought to have directed the Assessing Officer to allow the appellant to carry forward long term capital loss of ₹ 3,26,31,579/- as all relevant undisputed facts were on record." 2.1 Facts in brief are that the assessee being resident firm stated to be engaged in investment / trading in shares & derivatives was assessed for impugned AY u/s 143(3) on 30/01/2013 accepting the returned Loss of ₹ 216.02 Lacs. Para No.3 of the quantum assessment order record a finding that during the year, the investment in listed shares held by the assessee have been converted into stock-in-trade as on 01/04/2009. 2.2 Subsequently, the assessee filed rectification application u/s 154 on 13/05/2013 by submitting that Long-Term Capital Loss [LTCL] of ₹ 326.31 Lacs remained to be allowed to be carried forward while framing assessment. It was submitted that the aforesaid loss arose as per the provisions of Section 45(2) on conversion of investment into stock-in-trade. The investment so converted into stock-in-trade was already sold during the year and the resultant gains were offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities, placed reliance on CBDT circular No.14(XL-35) dated 11/04/1955 and relied upon following judicial pronouncements for various submissions: - No. Case Law Judicial Authority & Citation 1. Sanchit Software and Solutions P. Ltd. Vs. Ld. Commissioner of Income Tax (Appeals)- Mumbai [CIT(A)] Hon'ble Bombay High Court [349 ITR 404] 2. CIT V/s Nalwa Investment Ltd. Hon'ble Delhi High Court [322 ITR 233] 3. CIT Vs. K.N. Oil Industries Hon'ble High Court of Madhya Pradesh [142 ITR 13] 4. Container Corporation of India Ltd. Vs. DCIT ITAT Delhi Bench [94 TTJ 502] 5. Asia Pacific Fund Inc. Vs. DCIT ITAT Mumbai Bench [96 TTJ 548] 6. ACIT Vs. Rupam Impex ITAT, Rajkot Bench [157 ITD 360] 7. Alka Agarwal V/s ADIT ITAT Delhi Bench [15 Taxmann.com 176] Per Contra, Ld. DR submitted that there was no mistake apparent from record within the meaning of Section 154 and therefore, the assessee's prayer could not be accepted. 4.1 We have carefully heard the rival submissions and perused relevant material on record and deliberated on the judicial pronouncements as cited before us. The undisputed fact that emerges are that that the assessee had filed return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 154 since the revenue would not be justified to take advantage of inadvertent error when material, in that respect, was already available on record. 4.3 The Hon'ble Bombay High Court, in Writ Petition titled as Sanchit Software & Solutions P. Ltd. V/s CIT [349 ITR 404], after considering CBDT Circular No.14 (XL-35) dated 11/04/1955 observed as under: - 5. In any civilized system, the assessee is bound to pay the tax which he liable under the law to the Government. The Government on the other hand is obliged to collect only that amount of tax which is legally payable by an assessee. The entire object of administration of tax is to secure the revenue for the development of the Country and not to charge assessee more tax than that which is due and payable by the assessee. It is in aforesaid circumstances that as far back as in 11/04/1955 the Central Board of Direct Tax had issued a circular directing Assessing Officer not to take advantage of assessee's ignorance and/or mistake. The relevant portion of the above Circular is as under: "3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a return under section 139 of the Act within the prescribed time. It is also not disputed that a loss had been claimed even though the same had been claimed to the extent of ₹ 90 and that too as a capital loss with respect to DWs issued to the assessee, on the assessee investing in the rights issue of JISCO. The assessee carried out a course correction by claiming a loss on sale of SRNCDs to UTI at ₹ 111 per SRNCD as they had sold SRNCDs of a face value of ₹ 500 to UTI at ₹ 389 per SRNCD. The Tribunal in the first round in its order dated 5-6-2000 came to a conclusion based on the judgments of the Supreme Court as well as those of various High Courts that what was important and relevant was the true legal effect of a transaction and in coming to the said conclusion the view that the assessee may take in the return of income or the treatment that is meted out in the books of account or the method of accounting that an assessee uses are not relevant in considering the effect to be given to the transactions which are governed by the provisions of the Act. The Tribunal went on to observe while allowing the claim of loss by the assessee that the fact that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent year(s). Such an approach would in our view be completely contrary to the directions issued by the Tribunal. We are here reminded of the observations of the Supreme Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323 where the Court in respect of an income-tax matter has observed that while equity and taxes are strangers an attempt should be made to bring them nearer. The observations of the case are apposite and extracted hereinbelow:- ". . .Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. . . ." (p. 339) 14. At this stage, it would be pertinent to note the observations of the Supreme Court with respect to the approach that the Income-tax Authorities are required to adopt while assessing the income of an assessee. The relevant observations being apposite are extracted hereinbelow:- CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC). ". . .We do not see any force in this contention. Whether the respondent is entitled to a particular dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im could not be carried forward and set off by the assessee against his future income, we are of the opinion that in view of the line of reasoning taken by us, the Assessing Officer in the second round was required to give full effect to the consequences which flowed from the order of the Tribunal dated 5-6-2000. The Assessing Officer to our minds exceeded his jurisdiction by not applying the provisions of law, keeping in mind the correct perspective of the matter at hand. 16. In view of the discussions above, we answer both the questions in favour of the assessee and against the revenue. In the result the appeal is dismissed. There shall be no orders as to cost. 4.5 The Hon'ble High Court of Madhya Pradesh in the case of CIT V/s K.N.Oil Industries [supra], while interpreting the meaning of Record for the purpose of Section 154, held as under: - The facts briefly stated are that in the assessment proceedings for the assessment year 1972-73 the assessee did not claim export markets development allowance under section 35B of the Income-tax Act, 1961. The ITO started rectification proceedings under section 154 for correcting an error in the grant of rebate under section 80J. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al which forms part of the assessment proceedings and not only the return. It is also not correct to say that if the assessee omits to claim a relief allowable to him under the provisions of the Income-tax Act, he is not entitled to get that relief. It is the duty of the ITO and other officers administering the Act to inform the assessee that he is entitled to a particular relief if it is apparent that he is so entitled from the material available in the proceedings of assessment. This duty has been highlighted by a circular issued by the CBR. For these reasons, the Gujarat High Court in Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.), dissented from the view taken by the Allahabad High Court in the aforesaid cases and held that if it is apparent from the record of assessment that the assessee was entitled to a particular relief, the ITO can rectify that mistake under section 154 although the said relief was not claimed by the assessee in the return. We respectfully agree with the view taken by the Gujarat High Court. The learned counsel for the Department submitted before us that even otherwise the conclusion that the assessee was entitled to the relief under section 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The jurisdiction under section 154 of the Income-tax Act, 1961, to rectify mistakes is wider than that provided in Order XLVII, rule 1, of the Code of Civil Procedure, 1908. Nonetheless, there must be material to support the claim for relief under section 84 and unless such material can be referred to, no grievance can be made if the ITO refused relief. An obligation is imposed on the Income-tax Officer by section 84 of the Income-tax Act, 1961, to grant relief thereunder and the relief cannot be refused merely because the assessee had omitted to claim the relief, but the mere existence of such an obligation on the Income-tax Officer is not sufficient. Precise factual material and clear data must be contained in the record sufficient to enable the Income-tax Officer to consider whether the relief should be granted under section 84. In the absence of such material, no fault can be found with the Income-tax Officer for not making an order under section 84 favouring the assessee." 8. In view of above observations, we are of the view that assessee was legally entitled to claim depreciation in the rectification proceedings under section 154. But the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. It does not place any mandatory duty on the officer to allow depreciation if the assessee does not want to claim that. The provision for claim of depreciation is certainly for the benefit of the assessee. If he does not wish to avail of that benefit for some reason, the benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage." [Emphasis supplied] 9.1 There appears to be some conflict between these two judgments inasmuch as in former case it was held that an obligation is imposed on the Income-tax Officer to grant relief if all factual material is available on record while in latter case, it has been held that there is no mandatory duty on the officer to allow the depreciation in the absence of assessee's claim. Both these judgments were delivered by Bench of two Judges and the judgment in the former case was not brought to the notice of Their Lordships in the latter case. At this stage, it would be appropriate to refer to the judgment of the Apex Court delivered by Bench of three judges in the case of Sun Engg. Works (P.) Ltd. (supra) wherein it was held that judgment of a Court has to be understood in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were subject to the provisions of section 34 which provided the furnishing of prescribed particulars for claiming such deduction. Their Lordships also considered a circular which provided that without furnishing of such particulars, deduction under section 32 could not be allowed. In view of such provi-sions and circular, Their Lordships observed "The Income-tax Officer in such cases is required to compute the income without allowing deprecia- tion allowance." [Emphasis supplied] After making such observations, Their Lordships clarified another circular dated 11-4-1955 and said that role of ITO was advisory and there was no mandatory duty to allow the claim if the assessee does not want to claim. So the entire context was with regard to the provisions of section 32 as then existed which provided allowance and depreciation subject to furnishing of prescribed particulars. It is in this context, decision was rendered that if assessee did not avail the deduction by not furnishing the particulars then ITO was not bound to allow the same. So, it was a case where assessee deliberately did not avail the deduction. 9.3 In view of above discussions, we are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, but it is the minimum civilized behaviour that is required to be extended to the taxpayers. If authority is needed even for justifying this basic civilized behaviour towards the taxpayers, one need not look beyond the circulars issued by the CBDT itself. In Circular No. 14, which has been taken note of by the Hon'ble jurisdictional High Court in the case of Dattatraya Gopal Bhotte v. CIT , the Board has these words of advice for the field officers : "...Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist taxpayer in every reasonable way, particularly in the matter of claiming and securing any relief and in this regard the officers should take initiative in guiding the taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would in the long run benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Government...." It is heartening to note that the CBDT has given such humane guidance to the field officers. The best thing that the field officers can do to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the scheme of the provisions of conversion of capital asset into stock-in-trade as also the liability towards the capital gains tax on sale of shares held as capital asset which has suffered STT. Nowhere on the date of actual sale, the assessee was holding the impugned securities as a part of capital asset. They have already become the stock-in-trade of the business. So, we do not agree with the assessee as regards the total exemption from capital gains tax in respect of the capital assets which were converted into stock-in-trade as on 1st April, 2005 merely because on the date of sale such stock-in-trade the assessee was required to pay STT on them. We agree with the departmental stand in respect of this issue as we do not find any merit in such contentions of the assessee. 4.9 In the background of above facts and circumstance, we set-aside the impugned order and direct Ld. AO to consider the aforesaid claim u/s 154 as urged by assessee before us. The Ld. AO is directed to allow the carry forward of the losses, if found admissible as per law, after due verification. The assessee is directed to substantiate the same including quantification thereof. 5. The appeal stands allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
