P. ANANTHRAM,COIMBATORE vs. ACIT, NON-CORPORATE CIRCLE-2, COMBATORE MAIN BUILDING, 63, RACE COURSE ROAD, COIMBATORE

आदेश / O R D E R

Per Mahavir Singh, Vice President : This appeal by the assessee is arising out of the revision order of Principal Commissioner of Income Tax, Coimbatore-1, in Revision

No.PCIT, Coimbatore-1/Revision-263/100000195680/2021 passed u/s. 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) dated 30.03.2021 for Assessment Year 2016-17. The Assessment was framed by Asst. Commissioner of Income Tax, Non Corporate Circle-2, Coimbatore u/s. 143(3) of the Act vide order dated 07.11.2018.

ITA No.155/Chny/2021 :- 2 -:

by 09 days. The assessee has filed condonation petition along with

affidavit stating that the assessee sent the appeal papers to ITAT,

Chennai by post on 08.05.2021, but it was not delivered to the

addressee in time due to Covid-19 Pandemic. However, the appeal

papers were delivered to ITAT, Chennai on 07.06.2021. It means that

there is a delay of 09 days. The ld.AR before us stated that this delay

is due to pandemic period of Covid-19 and subsequent events and the

Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021

vide order dated 23.03.2020 has given directions that the delay are to

be condoned during this period 15.03.2020 to 14.03.2021 and they

have condoned the delay up to 28.02.2022 in Miscellaneous

Application No.21 of 2022 vide order dated 10.01.2022. Since the

Hon’ble Supreme Court has condoned the delay during the said

period, respectfully following the same we condone the delay and

admit the appeal.

order of PCIT revising the assessment which is already been

examined by the A.O during the course of assessment proceedings

i.e., deduction claimed by the assessee on long term capital loss/gain.

ITA No.155/Chny/2021 :- 3 -:

For this, the assessee has raised various grounds which are

argumentative in nature hence, need not to be reproduced.

and assessment was completed by the A.O u/s. 143(3) of the Act vide

order dated 07.11.2018 in a limited scrutiny assessment.

Subsequently, the PCIT issued show cause notice u/s. 263 of the Act

by observing that the assessment framed by the A.O is erroneous

insofar as prejudicial to the interest of Revenue due to following

reasons:

“2.1 During the FY 2015-16 relevant to AY 2016-17, you have sold 7200 shares of M/s. Suryaprabha Mills Pvt Ltd to Best Corporation Limited for a consideration of Rs.3,37,99,032/-. However, it is verified from records that long term capital loss claimed by you is incorrect. 3. Thereby the AO has failed to verify the above mentioned issue during the assessment proceedings for the AY 2016-17. 4. For the above mentioned reason, the assessment order made for the A.Y.2016-17 is found to be erroneous and prejudicial to the interests of the revenue as the order has been passed without making enquiry or verification which ought to have been made. Hence necessitating invoking the provisions of the Section 263 of the IT. Act, to remedy the loss of the revenue. It is therefore, proposed to invoke the provisions of the Sec. 263 of the I.T. Act, 1961” 5. Accordingly, the PCIT noted in his revision order that the

assessee has sold the shares in two lots, one being shares received

prior to rights issue and the second one being shares received in rights

issue. Therefore, according to him for claiming deduction u/s. 54 of

the Act, the long term capital gain or loss should be calculated in two

ITA No.155/Chny/2021 :- 4 -:

slots and he recomputed the claim of long term capital gain and

worked out that the carry forward of long term capital loss of Rs.

1,02,16,820/- allowed by A.O during assessment, is not in order. He

asked the A.O to re-do the assessments in term of above direction

after verification of facts. Aggrieved, the assessee came in appeal

before the Tribunal.

circumstances of the case. Admittedly, the A.O framed assessment

for a limited scrutiny for the reason that “whether deduction from

capital gains has been claimed correctly”. The assessee replied the

same vide letter dated 26.05.2018 by filing the details as under:

6) Explanations for the reasons Limited scrutiny reason is whether mentioned in notice u/s. 143(2) deduction from capital gains has been along with supporting evidence claimed correctly. Copy of NHAI and REC Bonds for Rs.50,00,000/- is attached. Copy of Sale deed for purchase of residential house for claim of deduction u/s. 54F is enclosed. 7. The assessee also filed complete details of claim of deduction

u/s. 54F of the Act and also computed capital gain on sale of shares in

Form No.SH 4 and filed all the details before A.O during the course of

original assessment proceedings. The relevant details filed vide letter

dated 31.10.2018 along with Annexures reads as under;

ITA No.155/Chny/2021 :- 5 -:

“2. Annexure to computation of Capital Gains on sale of shares, as per the return of income, is enclosed herewith along with Fair market value calculation as on 1.4.1981. Copy of share transfer Form SH 4 for transfer of 7200 shares is enclosed. In this Form SH 4, the total sale consideration is shown as Rs. 337,99,032. However, out of this, a sum of Rs. 17,99,098 is not realizable from the buyer due to disputes only Rs. 319,99,934 as the actual consideration accruing from the transfer (Rs. 337,99,032 - Rs. 17,99,098] For the information of the Assessing Officer, two separate Annexures to computation of Capital Gains, one taking the sale consideration as Rs. 337,99,032 and another taking the sale consideration as Rs. 319,99,934 are enclosed. The amount of deduction u/s. 54F has been worked out based on the respective total sale values. We request that the computation showing sale consideration of Rs. 319,99,934 be accepted, since that only represents the actual consideration accruing on transfer and not Rs. 337,99,032 shown in the share transfer Form SH 4.” It means that the A.O has examined the issue of assessment of

long term capital gain/loss and consequent claim of deduction u/s. 54

of the Act. According to PCIT only claim of deduction is to be

computed by separating two lots and which should not have been

clubbed. As relied on by the Ld. counsel for the assessee, the

decision of Hon’ble Madras High Court in the case of CIT vs. Vijay M.

Mahtaney [2013] 217 Taxman 0015 (Mad.) clearly in favour of

assessee that the computation of working on long term capital gain is

to be done on loss that has to be looked at first is not with reference to

the loss arising in respect of any new capital asset, but in the totality of

loss suffered on the sale of capital asset chargeable to tax u/s. 45 of

the Act. Further Hon’ble Madras High Court has considered that it is

ITA No.155/Chny/2021 :- 6 -:

not necessary that one should first apply s. 70(3) of the Act and

thereafter only, the assessee could invest the capital gains arising

from the long term capital asset to any specified bond as specified u/s.

54EC of the Act. For this, the Hon’ble Madras High Court considered

the issue in para 8 to 10 as under:

“8. Contrast this with Section 54 which deals with capital gains arising on sale of property used for residence. Section 54 specifically provides that in the case of capital gains arising from the transfer of long term capital asset, being a residential house, exemption would be available if the assessee has purchased within a period of one year before or two years after the date on which the transfer took place, a residential house or within a period of three years after that date, constructed the residential house. Section 54(2) provides that the amount of capital gains not appropriated by the assessee towards the purchase of the new asset or purchase and construction of the new asset before the date specified in Section 54(1), shall be deposited in the specified Bank or institution and utilised in accordance with any scheme which the Central Government may notify. Section 54B deals with capital gain on transfer of land used for agricultural purposes not to be charged. Section 54D deals with Capital gain on compulsory acquisition of lands and buildings not to be charged. Section 54E deals with capital gain on transfer of capital assets not to be charged. Section 54EA deals with Capital gain on transfer of long-term capital assets not to be charged in the case of investment in specified bonds or debentures and Section 54EB deals with capital gain on transfer of long-term capital assets not to be charged. 9. A reading of Section 54EC shows that it replaced Sections 54EA and 54EB by the Finance Act, 2000 with effect from 01.04.2001, with the result that the benefit of Section 54EA and 54EB ceased to be available with reference to transfer of long term capital assets before 01.04.2000. Thus relief of transfer under Section 54EC is available in respect of transfers from the accounting year relevant to the assessment year 2001-02 to preserve the continuity of the benefit of deduction with the only difference that Section 54EC limits the available bonds for purposes of reinvestment benefit with the minimum lock in the period of three years. The bonds available for benefit under Section 54E are part of the statute itself. Thus Section 54EA and 54EB would have relevance to the transfer of long term capital before 01.04.2000 and Section 54EC, to the transfer made on or after 01.04.2001.

ITA No.155/Chny/2021 :- 7 -:

capital gain or loss arising out of the same and done computation as

per the provisions of the Act. There is no error or any prejudice course

to the Revenue by this assessment order and hence, the revision

carried out by the PCIT is without any basis and hence deserves to be

quashed. Thus, we quash the revision order and allow the appeal of

the assessee.

ITA No.155/Chny/2021 :- 8 -:

आदेश क� �ितिलिप अ�ेिषत/Copy to: