ASSISTANT COMMISSIONER OF INCOME TAX 14(1)(2), MUMBAI, MUMBAI vs. VALVAYA CAPITAL PRIVATE LIMITED, MUMBAI

Being aggrieved, the assessee filed an appeal before ld. First appellate authority.

After considering the submissions of the assessee, in the context of facts and materials available on record, ld. First appellate authority held that there was no need to file a revised return of income as the assessee had already offered the capital gain computed u/s. 50B of the Act in the original return of income. He submitted, the revised computation filed by the assessee was with reference to the computation of capital gain in the original return of income and not a new claim which would have necessitated filing a revised return of income. Ultimately, he held, since the assessee had inadvertently left out the capital work-in-progress of Rs.5,70,31,124/-, while computing the capital gain, such mistake should not come in the way of assessee offering the correct income. Accordingly, he allowed assessee’s claim.

Per contra, ld. Counsel appearing for the assessee submitted that through the revised computation, the assessee did not make any fresh claim of deduction before the A.O. He submitted, while computing capital gain on slump sale in terms with section 50B of the Act, since the assessee had left out one item of capital work-in-progress, revised computation correctly computing capital gain was filed. Thus, he submitted, ld. First appellate authority was justified in allowing assessee’s claim. He submitted, the A.O. rejected assessee’s claim only for the reason that it was not made through a revised return of income. Otherwise, he submitted, the A.O. has not adversely commented upon the allowability of assessee’s claim. He submitted, the capital work-in-progress was reflected in the balance sheets of the past years, hence, there cannot be any doubt regarding the authenticity of assessee’s claim.

We have considered rival submissions and perused the materials on record. Undisputedly, in the previous year relevant to the assessment year under dispute, the assessee sold out its undertaking as a going concern with all assets and liabilities by way of slump sale vide agreement dated 18.12.2014 and transfer was completed in all respect by 11.03.2015. In the return of income filed for the year under dispute, the assessee had offered capital gain in terms with section 50B of the Act. Post filing of return of income, the assessee discovered that while computing the capital gain on slump sale u/s. 50B of the Act, an amount of Rs.5,70,31,124/- representing the work-in-progress was left out and not reduced from the sale consideration. Accordingly, the assessee filed a revised computation of income, recomputing the capital gain at a revised figure of Rs.28,86,78,997/-. In this Asst. CIT vs. Valvaya Capital Private Limited context, reply dated 29.11.2017 of the concerned Chartered Accountant explaining the mistake was furnished before the A.O. It is a fact on record that the A.O., though, acknowledged the fact that the assessee had furnished the revised computation of income in course of assessment proceeding, however, he has not commented upon acceptability or otherwise of assessee’s claim in the revised computation. Merely because the claim was not made through revised return of income, for that reason alone the A.O. has rejected assessee’s claim.

On perusal of the impugned order of ld. First appellate authority, it is evident that through written submission, the assessee had explained in detail the necessity of filing the revised computation of income to rectify the mistake committed in the original return of income qua computation of capital gain u/s. 50B of the Act. After appreciating assessee’s explanation upon examining the facts and materials brought before him, ld. First appellate authority had allowed assessee’s claim. On perusal of the original computation of income, as also the revised computation of income placed in the paper book along with other documentary evidences, such as, balance sheets of preceding assessment years, it is quite clear that the capital work-in-progress has been reflected in the accounts all through. Thus, it is not a fact that the assessee has suddenly manufactured a claim out of thin air. The schedule of fixed assets forming part of balance sheet of the preceding years bear testimony to the correctness of the assessee’s claim. No contrary material has been brought on record by the department to controvert the aforesaid factual position. In view of the aforesaid, we do not find any infirmity in the decision of the ld. First appellate authority. Grounds are dismissed.