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Income Tax Appellate Tribunal, HYDERABAD ‘ A ‘ BENCH, HYDERABAD.
Before: SHRI S.S. GODARA & SHRI L. P. SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ‘ A ‘ BENCH, HYDERABAD.
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER (Through Virtual Hearing) ITA Nos.255 & 256/Hyd/2017 (Assessment Year : 2005-06)
M/s. Gajanan Financial Services Pvt. Ltd., Hyderabad. PAN AABCG 4528M …..Appellant. Vs. Asst. Commissioner of Income Tax, Circle 2(3), Hyderabad. …..Respondent. Appellant By : Shri P. Murali Mohana Rao. Respondent By : Shri Y.V.S.T. Sai. (D.R.) Date of Hearing : 7.4.2021. Date of Pronouncement : 18.08.2021.
O R D E R Per Shri S.S. Godara, J.M. : These assessee’s appeals for Asst. Year 2005-06 arises from the Commissioner of Income Tax (Appeals)-2, Hyderabad’s different orders dt.30.11.2016 & 29.07.2019 passed in case Nos.0031/2012-13 and 0056/2012-13 in
2 ITA Nos.255 & 256/Hyd/2017 proceedings under Section 143(3) and 271(1)(c) of Income Tax Act, 1961 (‘the Act’); respectively.
Heard both the parties. Case files perused.
We come to the assessee's quantum appeal ITA 256/Hyd/2017. Its twin main substantive grounds seek to challenge validity of the impugned reopening followed by set off of short term capital gain amounting to Rs.16,70,179 against its long term capital loss of Rs.5,01,39,325; respectively; it has also filed additional ground(s) as well regarding the former issue of validity of reopening assessment undersection 148/147 mechanism taken recourse to the Assessing Officer and upheld in the CIT(A)’s order. The same stand admitted since going to root of the matter.
We advert to the basic facts qua assessee's former ground of appeal. There is no dispute that it had filed its return for the impugned assessment year 2005-06 on 30.10.2005 declaring long term capital loss of
3 ITA Nos.255 & 256/Hyd/2017 Rs.5,01,39,325 as accepted in 143(3) regular assessment framed on 20.12.2007.
The Assessing Officer thereafter formed reasons to believe that the assessee's taxable income liable to be assessed had escaped assessment. He issued 148 notice dt.31.03.2010 served on 24.04.2010. The assessee thereafter reiterated its earlier return vide letter dt.7.12.2011. All this lead to the impugned reassessment framed on 16.12.2011 disallowing/adding the short term capital gains of Rs.16,70,179 as not eligible to be set off against long term capital loss of Rs.5,18,09,507 (supra) under section 70(3) of the Income Tax Act (in short 'the Act') and upheld in the lower appellate order.
Learned counsel’s only argument in view of the foregoing factual background is that the Assessing Officer had issued notice(s) under section 143(2) / 142(1) dt.10.07.2007 and 7.5.2017 in first round. And that he had already examined the issue of set off of loss and therefore, his action under challenge invoking 148/147 mechanism
4 ITA Nos.255 & 256/Hyd/2017 amounts to change of opinion not permissible in law in view of CIT Vs. Kelvinator India Ltd. 320 ITR 561 (SC); Parasuram Pottery Works Co. Ltd. Vs. ITO 106 ITR 1 and Mahalakshmi Motors Limited 134 Taxman 219 (A.P.). We find no merit in the assessee's instant legal arguments since the fact remains that not only its claim seeking to set off of short term capital gain against long term capital loss is unallowable u/s. 70(3) of the Act but also the issue of appropriate computation of the former head of short term capital gain had nowhere been examined during the course of scrutiny assessment in the first round. We also quote section 147 Expln. 2 that a wrong claim of loss which is not allowable under law had been accepted by the Assessing Officer. This ultimately led to formation of the Assessing Officer’s reasons to believe that the assessee's taxable income had escaped assessment. We thus reject the assessee's challenge of validity of the impugned reopening of its substantive as well as additional grounds to this effect.
5 ITA Nos.255 & 256/Hyd/2017 6. Next comes equally important issue of computation of assessee’s short term capital gains as well as long term capital loss. After giving our thoughtful consideration to rival pleadings, we observe tht the Assessing Officer needs to finalise afresh computation after taking into consideration all the relevant details of assessee's short term capital gains and long term capital loss(es) as per law within three effective opportunities of hearing. We order accordingly. This latter substantive ground as well as the instant quantum appeal is partly accepted for statistical purposes.
Next comes the assessee's penalty appeal ITA 255/Hyd/2017 pertaining to the foregoing set off of short term capital gain against long term capital loss. Suffice to say, it transpires at the outset that the Assessing Officer’s corresponding penalty show cause notice dt.15.12.2011 nowhere indicated so specify as to whether the assessee had concealed particulars of taxable income or it had furnished inaccurate particulars of income; as the case may be.
6 ITA Nos.255 & 256/Hyd/2017 Hon’ble jurisdictional high court in PCIT Vs. Smt. Baisetty Revathi (2017) 398 ITR 88 (A.P) and Mohd. Farhan A Sheich Vs. DCIT (2021) 125 taxmann.com 253 (Bom) (FB) hold that such a failure on the assessing authority’s part renders the entire penal mechanism as invalid. We, therefore, direct the Assessing Officer to delete the impugned penalty for this precise reason alone. Ordered accordingly. This latter appeal ITA 256/Hyd/2017 is accepted.
We lastly acknowledge that although the instant appeals are being decided after a period of 90 days from the date of hearing as per Rule 34(5) of the IT(AT) Rules 1963, the same however, does not apply in the covid lockdown situation as per hon'ble apex court's recent directions dated 27-04-2021 in M.A.No.665/2021 in SM(W)C No.3/2020 'In Re Cognizance for extension of limitation' making it clear that in such cases where the limitation period (including that prescribed for institution as well as
7 ITA Nos.255 & 256/Hyd/2017 termination) shall stand excluded from 14th of March, 2021 till further orders.
To sum up, the assessee's former appeal 256/Hyd/2017 is partly allowed for statistical purposes and penalty appeal ITA 255/Hyd/2017 is allowed. A copy of this common order be placed in the respective files.
Order pronounced in the open court on 18th Aug., 2021.
Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) Accountant Member Judicial Member
Hyderabad, Dt.18.08.2021. * Reddy gp Copy to : 1. M/s. Gajanan FinancialServices Pvt. Ltd., 8-2-268/2/B/ 1, Road No.2, Banjara Hills, Hyderabad-500 034 2. ACIT,Circle 2(3), Hyderabad. 3. Pr. C I T-2, Hyderabad. 4. CIT(Appeals)-2, Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File.
By Order
Sr. Pvt. Secretary, ITAT, Hyderabad.