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Income Tax Appellate Tribunal, ‘C’ BENCH, KOLKATA
Before: Dr. Manish Borad & Shri Sonjoy Sarma
Per Dr. Manish Borad, Accountant Member:- This appeal at the instance of assessee for assessment year 2018-19 is directed against the order of
(A.Y. 2018-19) Wellman Coke India Limited ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, all dated 10.03.2023, which is arising out of the order under section 143(3) of the Act on 27.04.2021 framed by ld. ITO, Income Tax Department, National e-Assessment Centre, Delhi.
The assessee has raised the following grounds of appeals:-
(1) The order of the CIT(A) National Faceless Appeal Centre u/s.250 in appeal No. NFAC/2017-18/10007003 dated 10.03.2023 is against law and facts of the case. (2) The CIT(A) National Faceless Appeal Centre erred in confirming the disallowance of the Long Term Capital Loss claimed of Rs.6,25,79,960/-. (3) The CIT(A) National Faceless Appeal Centre erred in not appreciating the fact that while submitting Form 3CEA on 25.04.2021 the appellant had stated that the report had been obtained before filing the return of income but was omitted to be filed with the return of income then, as attachments were not allowed, that it was not filed when asked for it, as the company is closed and defunct and there was no staff to look after the income tax matters and when the appellant came to know about the non filing, the appellant submitted the same immediately and requested to condone the delay in filing Form 3CEA. (4) The CIT(A) National Faceless Appeal Centre erred in not appreciating the fact that the following decisions were applicable to the appellant’s case wherein It has been held that if Form 10CCB is not filed within the due date for filing the return of income but filed in the course of assessment proceedings the assessee is entitled to deduction u/s.80IB. (i)CIT Vs GM Knitting Industries P Ltd (376 ITR 456 ) SC (ii) CIT Vs AKS Alloys P Ltd (18 Taxmann.com25) Mad HC (5) For these and other grounds that may be adduced before or at the time of hearing, the Income Tax Appellate Tribunal may be pleased to delete the disallowance of Long Term Capital Loss claimed of Rs.6,25,79,960/- 2
(A.Y. 2018-19) Wellman Coke India Limited
Facts in brief are that the assessee is a Limited Company and its case was selected for complete scrutiny assessment under E-assessment Scheme, 2019 on the issue of capital gain/loss from slump sale and capital gain/income on sale of property. NIL income was declared for A.Y. 2018-19 in the e-return filed on 16.10.2018. Notices under section 143(2) and 142(1) were issued through e-filing Portal and were duly served upon the assessee. On going through the details filed by the assessee, the ld. Assessing Officer observed that the tax at source at Rs.13,25,000/- has been deducted under section 194IA of the Act by Mahalaxmi Wellman Fuel LLP on the sale consideration of immovable property sold by the assessee. Further ld. Assessing Officer noticed that Schedule CG of the Income Tax Return, long- term capital loss from slump sale is declared at Rs.6,25,79,960/- . Thereafter ld. Assessing Officer perused the provision of section 50B of the Act, which is a special provision for computation of capital gain in case of slump sale read with section 2(42C) of the Act. For falling under this section, assessee has to obtain Form 3CEA as provided in Rule 6H of the Income Tax Rules and the said Form 3CEA needs to be filed along with the return of income. The ld. Assessing Officer noticed that the Form 3CEA has not been uploaded on the Income Tax Portal. The assessee filed reply dated 23.10.2020 stating that there is no Form 3CEA and enclosed the Business Transfer Agreement dated 29.03.2018. The ld. Assessing Officer before disallowing the claim of long-term capital loss from slump sale issued a final show- cause notice to the assessee. The assessee submitted that it 3
(A.Y. 2018-19) Wellman Coke India Limited mistakenly read Form 3CEB instead of Form 3CEA and also enclosed Form 3CEA prepared by the auditor namely CA R. Madhumitha It was submitted that the report, which is required to be furnished along with the return of income was not filed with the return of income as it could not be uploaded by the Auditor on the Income Tax Portal due to technical reason. The assessee annexed Form 3CEA and requested to condone the delay in filing the said form and accept the long-term capital loss claimed in the return. However, the ld. Assessing Officer was of the view that Form 3CEA was to be filed before the due date of filing of the return as specified under section 139(1) of the Act along with the return of income using a Digital Signature Certificate and in absence thereof, the long-term capital gain/ loss from slump sale claimed under section 50B of the Income Tax Act was disallowed and added to the income of the assessee.
Aggrieved, the assessee preferred appeal before the ld. CIT(Appeals) but failed to succeed. The ld. CIT(Appeals) held that the Certificate in Form 3CEA of the Accountant is mandatory to ascertain the correctness of the net worth and in absence of supporting and mandatory documentation, the claim of the appellant is not allowable.
Aggrieved, the assessee is now in appeal before the Tribunal.
(A.Y. 2018-19) Wellman Coke India Limited 6. Ld. Counsel for the assessee submitted that it is an admitted fact that the Form 3CEA was not uploaded alongwith the return of income before the due date of filing of the return of income. The said form was duly placed before the ld. Assessing Officer as well as ld. CIT(Appeals) and even though reliance was placed on various decisions, where it has been consistently held that the requirement of declaration was mandatory in nature but the time limit within which the declaration was to be filed is directory in nature. Reliance was placed on the judgment of the Hon’ble Supreme Court in the case of CIT –vs..- G.M. Knitting Industries Pvt. Limited reported in 376 ITR 456 (Civil Appeal No. 10782 of 2013 dated 24th July, 2015) and the recent decision of the Hon’ble ITAT, Hyderabad in the case of Nhance Engineering Solutions Pvt. Limited –vs.- DCIT in ITA No. 1522/HYd./2018 dated 20.02.2019. During the course of hearing, direction was given to ld. Counsel to place an affidavit of the auditor, who has prepared the said Form 3CEA stating the reasons for not e-filing the report on the Portal. From the record, we notice that the said affidavit issued by the Chartered Accountant R. Madhumita, B.Com, FCA, Membership No.229192 dated 28.08.2023 has been received by the Registry on 31.08.2023 and is placed on record for our consideration.
On the other hand, ld. D.R. vehemently argued supporting both the lower authorities and stated that e-filing of report was mandatory falling which alleged long-term capital loss deserves to be disallowed.
(A.Y. 2018-19) Wellman Coke India Limited 8. We have heard the rival contentions and perused the relevant record placed before us. The assessee is aggrieved to the finding of ld. CIT(Appeals) disallowing the long-term capital loss from slump sale under section 50B of the Act at Rs.6,25,79,960/- for the sole reason of not e-filing form 3CEA along with the income tax return. We notice that the present case is not of assessment under section 143(1)(a) of the Act where prima facie adjustments are made by the Computer System based on the directions and instructions given therein. The case before us is a case where the assessee’s case has been picked up for complete scrutiny for examining the issue of capital gain from slump sale and capital gain on sale of property. We observe that during the year under consideration, the assessee sold immovable property to Mahalakshmi Wellman Fuel LLP for a total consideration of Rs.13,25,00,000/-. Net worth of the undertaking or division, which was sold to M/s. Mahalakshmi Wellman Fuel LLP was Rs.19,50,79,960/-. The assessee suffered a long-term capital loss at Rs.6,25,79,960/-. The assessee has duly claimed loss as long-term capital gain from slump sale. The ld. Assessing Officer has examined this transaction and so far as the figures of sale consideration and the net worth of the undertaking or division are concerned, there is no dispute at the end of Revenue. The only reason for denying the said claim of the assessee is for non-filing of form 3CEA. Admittedly when the return of income was filed electronically on 16.10.2018 in Form 3CEA, which the assessee was required to obtain from the auditor as per Rule 6H read with section 50B(3) of the Act and the same was required to be uploaded on E-Portal under PAN of the assessee by the (A.Y. 2018-19) Wellman Coke India Limited auditor. The said report was not available on the E-Portal. When the assessee was confronted with this fact, he stated that Form 3CEA was duly obtained on 16.10.2018 but the same was not uploaded with the return filed on 16.10.2018. During the course of assessment proceeding itself, the assesese filed the copy of Form 3CEA and stated that the same could not be uploaded at that point of time by the auditor and now there is no mechanism to file such report on the E-Portal at this stage. Even though, the copy of Form 3CEA was furnished before the ld. Assessing Officer, he failed to take the cognizance of the same, merely for the reason that it was not e-filed. The same view was taken by the ld. CIT(Appeals).
We find that Form 3CEA obtained by the assessee is dated 16.10.2018 and the same provides complete details about the alleged transactions including the sale consideration from slump sale and the net worth of the Undertaking or Division. An affidavit issued by the auditor namely R. Madhumita, Chartered Accountant, B. Com FCA, Membership No. 229192 has also been filed stating the reason for not uploading Form 3CEA on 16.10.2018 and the same reads as under:-
(A.Y. 2018-19) Wellman Coke India Limited
(A.Y. 2018-19) Wellman Coke India Limited
3.
The above affidavit itself provides the reason and the same was on account of technical issues faced by the auditor in uploading the form 3CEA on the Income Tax Portal. It is also an admitted fact that such reports/Forms are to be uploaded by the auditor and not the assessee. We find the same to be a reasonable cause and thus beyond the control of the assessee to have furnished the form 3CEA. The best, the assessee could do, was to furnish the copy of the audit report on Form 3CEA before the ld. Assessing Officer during the course of assessment proceedings and the same was duly complied. Hon’ble Supreme Court in the case of CIT –vs.- G.M. Knitting Industries (P) Limited dealing with similar issue where Form 3AA was not furnished 9
(A.Y. 2018-19) Wellman Coke India Limited along with the return of income, but admittedly it was submitted during the course of assessment proceedings, the Hon’ble Court affirmed the view of the Hon’ble High Court and held that even if Form 3AA was not filed along with the return of income but same was filed during assessment proceedings before final order of assessment was made, then, the same would tantamount to sufficient compliance. We find that the Coordinate Bench, Hyderabad in the case of Nhance Engineering Solutions Pvt. Limited (supra) dealing with the similar case of capital gain declared under section 50B of the Act and the audit report being not filed with the return of income, allowed the claim of the assessee observing that the same has been filed during the course of assessment proceedings and further filing of report is curable even if it is not submitted along with the return of income. Considering the ratio of decision referred hereinabove and also observing the fact that the assessee has e-filed the income tax return before the due date prescribed under section 139(1) of the Act, provided the details of the alleged claim in the Income Tax Return and duly furnished Form 3CEA during the course of assessment proceedings and further an affidavit has also been filed by the auditor mentioning the reason due to which the Form 3CEA was not uploaded on the E-Portal of Income Tax along with the return of income at the time of filing the return of income before the due date under section 139(1) of the Act, we are of the view that both the lower authorities ought to have treated the furnishing of Form 3CEA as a sufficient compliance for the purpose of allowing long-term capital loss claimed by the assessee under section 50B of the Act. We, therefore, set aside
(A.Y. 2018-19) Wellman Coke India Limited the finding of ld. CIT(Appeals) and decide in favour of the assessee. Thus all the effective grounds of the assessee raised on merits are allowed.
Others grounds being general and consequential in nature need no adjudication.
In the result, the appeal of the assessee is allowed as per terms indicated hereinabove. Order pronounced in the open Court on 3rd October, 2023. Sd/- Sd/- (Sonjoy Sarma) (Manish Borad) Judicial Member Accountant Member Kolkata, the 3rd day of October, 2023 Copies to :(1) Wellman Coke India Limited, Boscon Futura SV, 4th Floor, Venkatnarayana Road, Thyagaraya Nagar, Chennai, Tamil Nadu-600017, India
(2) Deputy Commissioner of Income Tax, Circle-5(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069
(3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi;