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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 19/12/2022 passed under section 250 of the income tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2011-12.
In its appeal, the assessee has raised following grounds:–
“1. THAT the Commissioner of Income tax (Appeals) has erred in law as well as under the circumstances of the case in not rectifying the error of the Assessing Officer in Shri Ajay Jain ITA no.473/Mum./2023 assessing your Appellant under the status of Resident as against the Return of Income filed under the status of Non-Resident.
2. THAT the Commissioner of Income tax (Appeals) has erred in law as well as under the circumstances of the case in accepting the cost value of shares of Devashish Builders Private Limited at Rs. Nil as taken by the Assessing Officer which is arbitrary and against the fact of the case.
3. THAT the Commissioner of Income tax (Appeals) has erred in law as well as under the circumstances of the case in accepting the long-term capital gain liable to tax wrongly determined by the Assessing Officer at Rs. 1,78,60,000/- as against Rs. 97.55,788/- as disclosed by your Appellant.
4. THAT the Commissioner of Income tax (Appeals) has erred in law as well as under the circumstances of the case in not accepting the balance sheet and capital accounts of financial years 2005-06 to 2010-11 filed with the Assessing Officer and also clearly communicating to the Assessing Officer that the assessment for the assessment year 2008-09 was made u/s 143(3) of the Income tax Act, 1961 wherein the copies of the balance sheet and capital account were duly filed at the time of assessment by your Appellant which clearly mention the cost value of the said shares.
THAT the Commissioner of Income tax (Appeals] has erred in law as well as under the circumstances of the case in passing the Order without going through the records of the case and seeing that an application under Rule 46A of Income tax Rules, 1962 was already filed by your appellant wherein all the records and documents mentioned by the Assessing Officer were already produced and submitted.
6. THAT the Commissioner of Income tax (Appeals) has erred, in law as well as under the Circumstances of the case in not mentioning about any Remand Report received from the Assessing Officer in his Order and inspite of communication from the old incumbent Commissioner of Income tax (Appeals) that further notices would be issued after receipt of Remand Report from the Assessing Officer.
7. THAT the Commissioner of Income tax (Appeals) has erred in law as well as under the circumstances of the case in wrongly mentioning in the Order that the Appellant did not attend to the notices whereas in fact the appellant had continuously enquired about the Remand Report and had submitted all the documents required and was ready to come for personal hearing also with any other documents required.
8. THAT Your appellant craves to modify, delete or make additional grounds of appeal at the time of meaning of appeal.”
The brief facts of the case as emanating from the record are: The assessee is an individual and has derived income from house property, capital gain and other sources. For the year under consideration, the assessee filed his return of income on 26/09/2011 declaring a total income of Rs.99,18,740. During the assessment proceedings, upon verification of the computation of income, it was observed that the assessee has shown long-term capital gain of Rs.97,55,788 on the sale of shares. Accordingly, the assessee was asked to Page | 2
Shri Ajay Jain ITA no.473/Mum./2023 furnish details of long-term capital gains. In response thereto, the assessee furnished the following details:-
Date of Name of Qty Amount Date of Sale Amount LTCG Purchase Script Devashish Builder 24/05/2005 1,88,000 81,04,212 30/03/2011 1,78,60,000 97,55,788 Private Limited Total 97,55,788
The assessee submitted that it has offered long-term capital gains of Rs.97,55,788 to tax @10% under section 112 of the Act, as an off-market transaction took place and no Securities Transaction Tax was paid on the same. The assessee was asked to prove the cost of acquisition of shares of M/s Devashish Builders Private Ltd at Rs.81,04,214. In response thereto, the assessee submitted the balance sheet from the assessment years 2005-06 to 2011-12 reflecting the investment in shares of M/s Devashish Builders Private Ltd made from the financial year 2005-06. The assessee also furnished copy of the confirmation of purchase of shares and copy of the bank statement reflecting the amount received of Rs.1,78,60,000 on the sale of shares. The Assessing Officer (“AO”) vide order dated 18/03/2014 passed under section 143(3) of the Act did not agree with the submissions of the assessee regarding the cost of acquisition of shares and accordingly, computed the long-term capital gains of Rs.1,78,60,000. Further, the AO passed the aforesaid assessment order by treating the assessee as a „Resident’.
5. In appeal before the learned CIT(A), the assessee raised grounds challenging the assessment by treating the assessee as „Resident’ as against
Shri Ajay Jain ITA no.473/Mum./2023 the return of income filed in the status of „Non-Resident‟. The assessee also challenged the computation of long-term capital gains by treating the cost of acquisition of shares as Nil. In order to substantiate the cost of acquisition of shares at Rs.81,04,212, the assessee also furnished additional documents, which could not be filed during the assessment proceedings, along with an application under Rule 46A of the Income Tax Rules, 1962. However, the learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on both issues. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. It is the plea of the assessee that the assessee is a non-resident for the past 10 years and has been filing its return of income in the status as „non-resident‟. Further, as per the assessee, he was in India, during the year under consideration, only for 65 days. Even in the year under consideration, the assessee filed its return of income as „non-resident’. However, the AO without giving an opportunity to the assessee on this issue and without making any enquiry passed the assessment order by treating the assessee as „resident’. In support of its submission, the assessee has placed on record an acknowledgement of return of income for the year under consideration, wherein his residential status is mentioned as „NRI’. Further, the assessee has also furnished the copy of his passport issued by United States of America and his return of income for the financial year 2010-11 filed with the Department of Treasury, Internal Revenue Service, USA.
Shri Ajay Jain ITA no.473/Mum./2023
In support of its claim regarding the cost of acquisition of shares at Rs. 81,04,212, the assessee has placed on record its application filed under Rule 46A of the Income Tax Rules, 1962 along with the following documents:-
Sr. PARTICULARS no. Declaration from Saroj Bardiya stating the amount 1. received on sale of her shares 2. Ledger of Saroj Bardiya in our books.
3. Ledger of Shares of Devashish Builders P. Ltd. Copy of Annual Return of Devashish Builders Private 4. Limited Copy of Minutes of the Meeting of Board of Directors 5. of Devashish Builders Private Limited 6. Copies of concerned share certificates Copies of Balance Sheet for the financial years 2004- 7. 05 to 2009-10 clearly mentioning the holding of shares Copy of Assessment order for the assessment year 2008-09 passed under section 143(2) of the Income tax Act, 1961 on 13th December, 2010 clearly 8. mentioning that the assessee has filed the Balance Sheet and Capital Account for the year ended 31st March, 2008. Copy of Acknowledgement of Return of Income filed 9. for the assessment year 2006-07 filed by Smt. Saroj Bardiya Copy of Capital Account for the year ended 31st 10. March, 2006 and Balance Sheet as at 31st March, 2006 of Smt. Saroj Bardiya Copy of Computation of Income of Smt. Saroj Bardiya 11. for the assessment year 2006-07 The details of Residential status of your appellant had already been provided to the Assessing Officer vide 12. our letter filed on 27th January, 2014 a copy of which is attached herewith for your perusal.
As per the assessee, since he is settled in the USA, therefore during the assessment proceedings the aforesaid documents/information could neither be collected nor submitted before the AO. Only during the appellate proceedings
Shri Ajay Jain ITA no.473/Mum./2023 before the learned CIT(A), the assessee collated the aforesaid information/documents and furnished before the learned CIT(A) along with an application seeking admission of same. From the perusal of the impugned order, it is evident that the learned CIT(A) neither sought any remand report from the AO nor considered any of the aforesaid documents while dismissing the assessee‟s appeal in respect of the computation of long-term capital gains at Rs.1,78,60,000. Further, there is no examination of the correct residential status of the assessee by any of the lower authorities. Therefore, in view of the above and in the interest of justice, we deem it appropriate to restore both issues to the file of the AO for de novo adjudication after considering the details filed by the assessee pertaining to his residential status as well as the documents/information furnished before the learned CIT(A) as additional evidence. The assessee is also directed to fully cooperate and comply with all the notices and furnish all the details as sought by the AO without any default. As a result, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 24/05/2023