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TMI Blog2020 (12) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... in its order. Even, we have verified the said information from the documents placed in the paper book and have come to a conclusion that no depreciation was ever claimed or allowed on the land of building under consideration. Undisputedly, the said property was held by the assessee for more than three years as it was receiving the rent on the said property w.e.f. 1/5/2005 and no depreciation, was claimed thereon. There was true and full disclosure of the facts and no new information came to the knowledge of the assessing officer. On these facts and material already on record, the reopening of the assessment was invalid and the assessment so made on the basis of an invalid notice was correctly quashed by the CIT(A). Thus, ground no. 1 of the department is hereby dismissed. Section 50C Applicability - Documentary evidence clearly shows that the property in question was let out since the date of its acquisition and was never used for the purpose of business by the assessee. On perusal of the returns of income filed for the AY 2006-07 to 2009-10 and the depreciation charts submitted under Rule 5 of the Income-tax Rules, it is clearly evident that no depreciation was ever claimed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2009-10 by passing an order u/s 154 of the Act within a period of three months from the receipt of this order to avoid undue harassment to the assessee and to refund the incometax paid thereon as per law. Thus, the issue raised in these grounds is decided in favour of the assessee. Mesne profit - As regards the Taxability of the amount of 36 crores remained with assessee after cancellation of the said sale in terms of the decree order of the Hon ble jurisdictional Delhi High Court, we agree that the same was in the nature of mesne profit and beyond the provisions of section 56(2)(ix) - as explained by the Ld. AR, the said section is also not applicable as the twin conditions mentioned therein have not been met on the facts, because as per the contention of the AR the said amount was in the nature of liquidated damages for affecting the title of the assessee on the property for nearly 7 years. X X X X Extracts X X X X X X X X Extracts X X X X ..... entre for Vocational and Entrepreneurship (COVS) vide two sale deeds dated 24/09/2008. The details of property were as under: - i. Plot of land with Motel built thereon in Khasra nos. 2, 3, 4, 5, Village Shahurpur, Tehsil Main Chhatarpur Road, District Hauz Khas, New Delhi sold for ₹ 130 Crores; ii. Plot of land in Khasra no. 584/2, 585, Village Satbari, Tehsil Hauz Khas, New Delhi sold for Rs. 21 Crores. 5. The said property was purchased by the assessee in the F.Y. 2005-06. Admittedly, as per the records the assessee never claimed any depreciation on the said property as the same was never used for its business but was let out from the day one to the purchaser IIPM itself. Accordingly, the assessee declared LTCG of ₹ 143,85,67,404/- on sale of the said property after taking benefit of the indexation as per law in its original return of income. 6. IIPM paid ₹ 21 crores against the sale deed for the property at Plot of land in Khasra no. 584/2, 585, Village Satbari, Tehsil Hauz Khas, New Delhi; and paid ₹ 12 Crores out of ₹ 130 Crores against the sale deed for the Plot of land with Motel built thereon in Khasra nos. 2, 3, 4, 5, Village Shahurpur, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock of asset which should have been reduced to 'NIL' as per the provisions of the Act. Thus, as per him the assessee failed to disclose the material facts truly and fully as to the fact that the asset on which long term capital gain was declared in AY 2009-10 was included in the block of assets on which depreciation was claimed and thus, the case was reopened by the AO by issuing notice u/s 148 of the Act by recording reasons to believe that income has escaped assessment as short term capital gain taxable @ 30% was taxed as Long term capital gain @ 20% and excess depreciation was claimed. 9. The assessee submitted a letter dated 20/04/2015 to treat the original return of income as return of income filed in response to the notice u/s 148 of the Act. 10. However, during the course of reassessment proceedings when the sale of above property through 2 separate sale deeds as above stood cancelled by the Hon'ble Delhi High Court's order dated 05/06/2015, the assessee revised its return of income filed in response to the notice u/s 148 of the Act and filed with it a letter dated 29/02/2016. The assessee explained the sequence of events and submitted all the documents to explain its case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said property in the periods relevant to the AY 2006-07, 2007-08, 2008-09 and 2009-10. 15. He further observed that, all the said information was available and verified by the assessing officer during the original assessment proceedings from his record. No new information was received by the department for reopening the assessment and reopening was done merely on the basis of change of opinion of the AO on same set of facts which is not permissible in the law. Therefore, the CIT(A) relying on the judgment of the Hon'ble Apex Court in the case of CIT Vs Kelvinator India Ltd. 320 ITR 560 held that reopening is invalid and quashed the same. 16. As regards the revised return, the CIT(A) held that the section 147 has been incorporated in the Act for taxing the income which has escaped the assessment and not for giving benefit to an assessee. Therefore, the claim of the assessee that the sale of the said property be treated as null and void and necessary income-tax paid on the declared capital gain on the said property and so assessed should be refunded cannot be accepted under reopening proceedings. By relying upon the judgment of the Apex court in Sun Engineering Works (P) Ltd. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eximp Enterprises (P.) Ltd. vs. Assistant Commissioner of Income-tax, [2014] 49 taxmann.com 10 (Bombay), High Court of Bombay h) Siemens Information Systems Ltd. vs. Assistant Commissioner of Income-tax, [2012] 20 taxmann.com 666 (Bom.), High Court of Bombay i) Sumeru Soft (P.) Ltd. vs. Income Tax Officer, [2017] 82 taxmann.com 5 (Chennai - Trib.), in the ITAT Chennai Bench 'A' 19. The CIT DR submitted that the principle of a mere change of opinion cannot be basis for reopening completed assessment, would be applicable only to the situation where the Assessing Officer had applied his mind and had taken a conscious decision on a particular matter in the issue. It would have no application where the order of the assessment does not address itself to the aspect which was the basis for reopening of the assessment. 20. The ld. AR on behalf of the assessee, Mr. Bindal submitted that the assessment of the AY 2009-10 was completed u/s 143(3) vide order dated 29/12/2011. The assessment was reopened on 30/03/2015, i.e., beyond the period of four years from the end of the relevant assessment year. As per the proviso to section 147 of the Act, the assessment can be reopened after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had truly and fully disclosed the particulars regarding sale of the said property and depreciation thereon. Even the CIT(A) also verified all these documents himself and came to the conclusion that no depreciation was claimed on the said property. 23. The AR also further submitted that no new information came on the record of the assessing officer. He referred to the reasons recorded for reopening and pointed out that the assessing officer has referred to the record and computation of the AY 2009-10 for forming its opinion regarding escapement of income. The said record and computation of income was already on the record of the assessing officer while passing the assessment order u/s 143(3) of the Act. Thus, it was clearly a change of opinion on the same facts which were already on the record of the assessing officer earlier and therefore the reopening of assessment was invalid as has been held by the Apex Court in the case of CIT Vs Kelvinator India Ltd. 320 ITR 560. 24. He also submitted that it is not necessary that the assessing officer should mention each and everything verified by him in the assessment order. What the AO has verified has to be seen from the entire assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the said property remained the same at ₹ 6,10,00,000/- in the Asset chart submitted as per the Income-tax Rules in all the returns of income. All these documents were part of the returns of income and tax audit report filed before the Revenue. Thus, these evidences clearly show that the assessee had made a true and full disclosure of the facts regarding the sale of the asset and depreciation thereon and which were very much part of the assessment records and had also been examined by the assessing officer in the original assessment proceedings. 28. Neither the assessing officer in the assessment order nor the DR during the hearing pointed out any discrepancy in the above mentioned information submitted by the assessee to the Revenue authorities nor they brought any evidence on record to show that the said information was incorrect or to show that depreciation was actually allowed under the Income-tax Act on the said property but incorrectly shown by the assessee. 29. Further, on perusal of the reasons recorded, the contention of the assessee has been found correct. The assessing officer has referred to the record and return of income filed for the AY 2009-10 for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 3 become infructuous. However, on merits, Section 50 is applicable only on the block of assets which are used for business and on which depreciation has been claimed under the Income-tax Act / Rules. As mentioned above, the documentary evidence clearly shows that the property in question was let out since the date of its acquisition and was never used for the purpose of business by the assessee. On perusal of the returns of income filed for the AY 2006-07 to 2009-10 and the depreciation charts submitted under Rule 5 of the Income-tax Rules, it is clearly evident that no depreciation was ever claimed on the said property since the date of its acquisition. Since no depreciation was claimed by the assessee and allowed by the department on this property, the provisions of section 50 cannot be invoked in this case. Hence, there would not be any change in the value of the block of assets as shown by the assessee as on 31/03/2009. Hence, the action of the assessing officer to assess the said surplus as Short-Term Capital Gain against the law and otherwise is not sustainable and the assessee is entitled to depreciation claimed on value of the block of assets as declared and the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 - 37. We have considered the submissions and arguments made by the assessee and the CIT DR. Since we have already held that the reopening of the assessment u/s 147 of the Act for this assessment year as invalid and have confirmed the cancellation of the reassessment order, the return filed cannot be considered as revised return as the entire proceedings are void-ab-initio and therefore, grounds of appeal raised on this score are dismissed. 38. Grounds no. 5 and 6 are general in nature and do not call for any adjudication. 39. The assessee raised two alternative additional ground being ground no. 7 and 8 vide letter dated 19/03/2020 which read as under: "7. Alternatively, the authorities below erred in law and on facts in not considering that the cancellation of sale deed by the consent decree duly confirmed by the Hon'ble jurisdictional Delhi High Court, tantamount to a mistake apparent on record which must have been rectified u/s 154 of the Act by following the judgment and for which necessary directions must be issued: a) M. K. Venkatachalam, ITO vs Bombay Dyeing & Mfg. Co. Ltd [1958] 34 ITR 143 (SC). b) L.HridayNarain vs ITO [1970] 78 ITR 26 (SC) c) CIT vs K. N. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere executed on 06/06/2015, i.e., two months after filing the return of income in response to the notice u/s 148 of the Act. Thus, the sale transaction got cancelled and the assessee intimated the said fact for rectification with a detailed note supported with the relevant evidence to the assessing officer by way of a revised return of income on 29/02/2016 in view of this subsequent event and repossession of the said property already sold during the relevant period. 44. The AR also submitted that the return of income can be revised u/s 139(5) of the Act only when the assessee discovers omission/wrong statement in the original return. In this case, no omission or wrong statement was discovered in the return of income filed in response to the notice issued u/s 148 of the Act. Thus, the said revised return was not filed u/s 139(5) of the Act but it was filed on the basis of events happened beyond the prescribed time limit u/s 139(5) of the Act and also beyond control of the assessee due to a decree order passed by the Hon'ble Jurisdictional Delhi High Court. 45. The assessee submitted that this revised return filed on the basis of equity, justice and the well settled law that only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975 1 SCC 770 at para 4) e) J. M. Biswas vs. N. K. Bhattacharjee & Ors. (2002) (4) SCC 68. 48. Even, the Act itself provides for rectification when there occur changes in the quantum of capital gains in subsections 7B, 10A, 11,15&16 of the section 155 in this regard. In support of this contention, reliance was placed on the judgment of Shah VrajlalMadhavji [1974] 95 ITR 614 (KER.) holding that the quantum of capital gain can be altered by way of rectification on subsequent change in sale consideration by High Court. Thus, he submitted that, this revised return, in essence, amounted to an application u/s 154 of the Act to correct the mistake apparent on record due to the later judgment of the Hon'ble Jurisdictional Delhi High Court in the case of the assessee cancelling the sale deed executed earlier. In case of the assessee, non-acceptance of the revised return in any manner even as an application u/s 154 of the Act would tantamount to taxing an income which never accrued/ received. Though the Act has multiple provisions to mitigate hardship and unlawful taxation against an assessee, but the Legislature cannot provide for all possible and peculiar situations and it is mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt decision was the cause for rectification. It was held that if allowing an application for rectification would be in accordance with the substantive charging provisions of the Act then such exercise is a permissible exercise of power to rectify the mistake u/s 254(2) of the Act. 52. The AR also submitted that the Article 265 of the Constitution mandates that no tax can be levied or collected except by an express authority of law, which means that tax collected contrary to law has to be refunded. The purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. The right of the revenue to receive and collect tax under the said Act is limited to what is properly due and payable as tax. The amounts collected in excess thereof are not to be treated as tax and retained by the State. That amount is required to be refunded to the person from whom or on whose behalf it had been collected. Reliance was placed on the undernoted authorities: a) The Constitutional Bench decision of 9 Judges of Hon'ble Supreme Court in Mafatlal Industries versus Union of India, (1997) 5 SCC 536 / (2002-TIOL-54-SCCX) b) CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elcom [2015] 62 taxmann.com 190 (Delhi) f) CIT Vs Vali Brothers. 282 ITR 149(ALL) g) CIT Vs Lata Mangeshkar Medical Foundation [2019] 410 ITR 347 (Bombay) 55. The assessee further submitted that even in reassessment proceedings, income has to be computed as per the provisions of Act. Reliance was placed on the following authorities: a) United Educational Society [2019] 107 taxmann.com 127 (Delhi - Trib. b) Padinjarekara Agencies (P.) Ltd. [2014] 52 taxmann.com 441 (Cochin - Trib.) 56. It is well accepted law that the Courts have inherent powers to further the cause of substantive justice and make such orders as may be necessary to meet the end of justice or to prevent the abuse of the process of the Court. The Tribunals are also vested with these inherent powers as has been held in the undernoted authorities: a) Ajay Gandhi vs B. Singh [2004] 134 Taxman 537 (SC)[DoD: 05/01/2004] b) CIT Vs Walchand & Co 65 ITR 381(SC) c) Mafatlal Securities Ltd. [2009] 119 ITD 444 (Mum.) d) Rojer Mathew vs South Indian Bank Ltd And Ors Chief ... on 13 November, 2019 Civil Appeal No. 8588 of 2019 [Arising out of Special Leave Petition (Civil) No.15804 of 2017] 57. The assessee furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rday Narain Vs ITO (1970) 78 ITR 26 (SC). Arguments of the CIT DR 62. The learned CIT DR submitted that u/s 154, only arithmetical mistakes can be rectified, whereas it is a matter of writing off of long-term capital gain on account of order of the Hon'ble Jurisdictional Delhi High Court. The assessee has submitted that the Hon'ble Delhi High Court approved the scheme of cancellation of earlier sale deeds and therefore, the LTCG admitted earlier should be written off whereas these cancellation deeds were mutually agreed deeds between the assessee and the purchaser with no role played by the Hon'ble Delhi High Court in approving these cancellation deeds. The CIT DR submitted that the Hon'ble Delhi High Court has merely approved an out of court settlement which was arrived at between the parties without any intervention of the High Court. Thus, these cancellation deeds cannot be made the basis for rectifying the assessment order passed earlier u/s143(3) of the Act by invoking provisions of the section 154 of the Act. 63. Further, there is no whisper in the settlement agreement as to what happened to the previous part payments received by the assessee and how the same was to be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs being capital in nature, i.e., since September, 2008 when the sale deeds was registered and the possession of the property was handed over to the buyer till cancellation of the sale deeds on 05/06/2015 by the Hon'ble Delhi High Court for which no compensation in any manner was received by the assessee from the buyer. The assessee did not have the property including its title for almost seven years and no benefit arose to it for the same. The assessee relied on the Special Bench decision of the Hon'ble Tribunal in the case of Narang Overseas (P) Ltd vs ACIT [2008] 111 ITD 1 (Mumbai) (SB) [DoD: 20/02/2008] where the Hon'ble Tribunal held that mesne profits are capital receipts where it has also been held that a consent decree order of the High Court holds the same force as any other order of the High Court and the contrary contention of the revenue has no strength. 68. The AR further submitted that the section 56(2)(ix) of the Act introduced w.e.f. AY 2015-16 is otherwise not applicable to the facts of the case as any amount therein can be taxed only when the twin conditions mentioned therein are applicable. The said section reads as below: (ix) any sum of money received as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty which was never transferred but a compensation in the nature of mesne profit and a capital receipt. 72. It was further submitted that the Hon'ble ITAT is seized with the appeal for the AY 2009-10 and the settlement was arrived at in the period relevant to the AY 2016-17 which is not under consideration and no direction can be given by the Hon'ble ITAT in respect of any other assessment year. DECISION 73. We have heard the rival contentions and perused the material on record and duly considered the factual matrix of the case. 74. The only issue remains for consideration here is, whether the long-term capital gain on sale of two properties declared by the assessee in its return of income has to be excluded from taxable income of the assessee for this assessment year in view of the cancellation of sale deeds of the said property in pursuance of the decree order passed by the Hon'ble Delhi High Court. 75. The assessee had filed a letter dated 29/02/2016 before the assessing officer during the reassessment proceedings (placed at pages 14-20 of the PB) wherein the assessee filed a revised return as well as computation of income and reasons for revising the return. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er applying the mind to the contents of the contract and after appreciation of evidence. The tribunal had made a distinction between the decree passed after considering various contentions raised and case law referred to by the parties and a decree passed in accordance with compromise reached by the parities outside the court. The tribunal's decision in that regard was contrary to the well- settled legal position. A decree in terms of settlement arrived at by the parties before the court has the same binding force as any other decree." 78. Thus, it is established beyond doubt that the cancellation deeds were executed as per the decree of the Hon'ble jurisdictional Delhi High Court and under its approval resulting into cancelling the sale of the said property. Even, the AO or the CIT DR did not challenge the authenticity of these documents nor can it be challenged. Once the sale transaction is reversed and the asset is owned and held by the assessee being the seller, ostensibly no capital gain can be said to have accrued to the assessee at all. The Hon'ble Gujarat High Court has observed in the case of CIT vs. Vithalbhai P. Patel (1999) 102 Taxman 36 (Guj) as under: "Admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of these facts, the Hon'ble Mumbai ITAT Bench observed as under: "As a matter of fact, the lower authorities had failed to place on record any material which would rebut the aforesaid claim of the assessee. In fact, it is not even the case of the revenue that the deed of cancellation, dated 28-9-2017 is a sham or a fabricated document. In fact, the subsequent sale of part of the land by the assessee in the period relevant to A.Y 2018-19 and A.Y 2019-20, further fortifies the veracity of the aforesaid claim of the assessee. At this stage, we may herein observe that the revenue by assessing the LTCG in the hands of the assessee had sought to tax a hypothetical income, which finds its roots in a transaction which had never fructified into a sale transaction. As observed by the Hon'ble Apex Court in the case of CIT v. Shoorji Vallabhdas and Co., [1962] 46 ITR 144 (SC), income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that this letter does not mention to be an application u/s 154 of the Act and therefore, cannot be considered as an application u/s 154 of the Act. The Ld. CIT DR further contended that even if it is presumed that this can be rectified u/s 154 of the Act, then no application u/s 154 was filed by the assessee within the prescribed time. Thus, the issue arises as to whether the relief can be allowed to the assessee in the above mentioned circumstances. 83. A lot of emphasis has been placed by the Ld. CIT DR on the technical issue that the letter filed on 29/02/2016 cannot be considered as a revised return or an application u/s 154 of the Act. It is a trite law that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. When the substantive law confers a benefit on the assessee under a statute, it cannot be taken away by the adjudicatory authority on mere technicalities. In holding so, we draw strength from the judgment of the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) 2002-TIOL-444-SC-LMT and Saroj Aggarwal v CIT 156 ITR 497 SC, wherein it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long-term capital gain while computing the assessed income. Thus, the assessing officer deliberately omitted to take into consideration the Delhi High Court's order as well as other evidences regarding the cancellation of sale deeds and reversion of the possession of the property to the assessee. 86. It is a well establish law that, if on the basis of material on record, the assessee is entitled to a relief, then it would constitute a mistake apparent from record which can be rectified u/s 154 of the Act and such relief cannot be denied even if the assessee omitted to claim the same by mistake. The Hon'ble Supreme Court in the case of Anchor Pressings (P) Ltd. Vs CIT (1986) 161 ITR 159 (SC) held that the jurisdiction u/s 154 to rectify the mistake is much wider than provided in Order XLVII, rule 1 of the CPC, 1908, and therefore, relief could be allowed in the rectification proceedings if all the factual material necessary for allowing the relief were available on record and such relief could not be denied merely because the assessee omitted to claim the same. This view has been upheld in the case of Lustre Tiles Ltd. Vs. Addl. CIT (2007) 108 ITD 35 where reliance has been placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uinely intends to pay the tax." 89. Thus, an income liable to be taxed has to be worked out in accordance with the law in force. In this process, it is not open to the Revenue authorities to take advantage of the ignorance of the assessee and tax cannot be levied on an assessee at a higher amount merely because the assessee did not claim the relief due to some error or ignorance. It can only be levied when it is authorized by law as is the mandate of the Article 265 of the Constitution of India. A sense of fair play by the field officers towards the tax payers is not an act of benevolence by the filed officers but it is call of duty in a socially accountable governance. In view of the above settled position of law, we are of the opinion that if a legitimate and bona fide claim is available to the tax payer then it cannot be ignored or be taxed in the absence of any authority. 90. In this regard an old circular no. 14(XL35) dated 11th April 1955 issued by the CBDT in the context of refunds and reliefs due to the assessee can be referred to wherein CBDT has instructed that, " …..Officers of the department should not take advantage of the ignorance of an assessee as to his ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 filed before the AO is to be treated an application u/s 154 to rectify the assessment order passed u/s 143(3) on 28.12.2011 as the application has to be considered in respect of LTCG assessed therein, because the said application was within 4 years as held above. We hold that the long- term capital gain of ₹ 143,85,67,404/- on sale of the said property is not at all taxable in the hands of the assessee as the sale deeds were cancelled. We hereby direct the assessing officer to exclude the long term capital gain on sale of the said property from the computation of taxable income for the A.Y. 2009-10 by passing an order u/s 154 of the Act within a period of three months from the receipt of this order to avoid undue harassment to the assessee and to refund the incometax paid thereon as per law. Thus, the issue raised in these grounds is decided in favour of the assessee. 94. Further, as regards the taxability of the amount of ₹ 36 crores remained with assessee after cancellation of the said sale in terms of the decree order of the Hon'ble jurisdictional Delhi High Court, we agree that the same was in the nature of mesne profit and beyond the provisions of section 56(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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