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TMI Blog2017 (5) TMI 1698X X X X Extracts X X X X X X X X Extracts X X X X ..... s) erred in confirming the reopening the assessment u/s 147 by issuing notice u/s 148 on 31.03.2012. 2.1* The Commissioner of Income tax (Appeals) ought to have appreciated that the erstwhile partnership firm was dissolved during the year 2005; hence no return was filed for this assessment year. Issuing notice u/s 148 in the name of dissolved firm which was not served on assesse as per the time limit prescribed u/s 149 is bad in law and deserved to be quashed. 3. The Commissioner of Income tax (Appeals) erred in holding that amount of Rs. 49,42,821 / - would be taxable as short term capital gain and there will be no cost of acquisition being bonus units. 3.1 The Commissioner of Income tax (Appeals) ought to have appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that investment of Rs. 49,42,821/- made in M/s.Sundram Mutual Fund during the relevant previous year was by exercise of ''Switch-in Switch Out'' option of a primary investment made during the preceding financial year. However, ld. Assessing Officer took a view that assessee was unable to support its claim with any evidence. An addition of Rs. 49,42,821/- was made u/s. 69 of the Act considering the units as unexplained investments. 3. Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). Contention of the assessee was that reopening done was invalid. According to the assessee, notice on the dissolved firm was not issued and served within the time prescribed u/s. 149 of the Act. On merits, it was argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the ld. Commissioner of Income Tax (Appeals) submitted that notice u/s.148 of the Act was issued on 31.03.2012 which was the last day of the six year period allowed u/s. 149 of the Act. As per ld. Authorised Representative the said notice was never served on the assessee. Service affected by affixture was after 31.03.2012 and hence according to him, reopening was done after statutorily allowed period. According to him the reopening done for the impugned assessment year was invalid. 6. Viz-a-viz treatment for the sum of Rs. 49,42,821/-, as short term capital gains, contention of the ld. Authorised Representative was that though the assessee had switched out of M/s. Sundraram Bond Saver Inst (Bonus units) on 28.09.2004, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i P. Patel (supra) and holding that notice having issued within statutorily allowed time period, the reassessment was valid. 9. Coming to the merits of the addition sustained by the ld. Commissioner of Income Tax (Appeals) under short term capital gains, though originally done by the ld. Assessing Officer u/s. 69 of the Act, assessee has filed copy of the accounts statement for its investment in Sundaram Bond Saver Inst Bonus (Principal units) as well as Sundaram Bond Saver Inst. Bonus (Bonus Units). There is no dispute that bonus units were issued to the assessee on 23.03.2004. There is also no dispute that ld. Assessing Officer had applied Sec. 94(7) of the Act in the assessment year 2004-2005. The relevant para of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2005 by Finance Act No.2, 2004. Obviously, ld. Assessing Officer could not have applied the said clause in assessment year 2004-2005. It may be true that the assessee had not filed any appeal against such order for assessment year 2004-05, nor Revenue initiated any rectification proceeding. Nevertheless, application of a provision which is not in the statute will not in my opinion cloth, the bonus units allotted on 22.03.2004 with any value. At this juncture, it will be apposite to reproduce Sec. 55(2) sub clause (aa) of the Act. ''(aa) in a case where, by virtue of holding a capital asset, being a share or any other security, within the meaning of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ;
Where a financial asset is allocated to a assessee without any payment, on the basis of holding of any other asset, the cost of the former has to be taken as Nil. In such circumstances, cost of the units received as bonus on 23.03.2004 was rightly considered by the ld. Commissioner of Income Tax (Appeals) as Nil. Since assessee switched out of the said units on 22.09.2004 and received a sum Rs. 49,48,821/-, the said sum was, in my opinion rightly considered as short term capital gains. I do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals).
10. In the result, the appeal of the assessee stands dismissed. Order pronounced on Wednesday, the 31st day of May, 2017, at Chennai. X X X X Extracts X X X X X X X X Extracts X X X X
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