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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI PROMOD KUMARAND MS. SUCHITRA KAMBLE
ORDER
PER MS. SUCHITRA KAMBLE, JM
1. This appeal is filed by the Revenue for assessment year 2013-14 against the order dated 21.12.2020 passed by the Ld. Commissioner of Income (Appeals)-48, Mumbai [in short ‘CIT(A)’].
The grounds raised by the Revenue is as under :
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing assesee's claim to carry forward Long Term Capital Loss of Rs. 4,86,36,248/ - arising from sale of equity shares listed on recognized stock exchange on which STT is paid and to set off this loss in any subsequent assessment
Gauri A. Bhosale 2 ITA No. 244/M/2021 year, although such long term capital loss is a "dead loss" not forming part of the total income as per the provision of section10(38) of the Income Tax Act.
2. On the fact and circumstances of the case the Ld.CIT(A) erred in deleting the disallowance u/s 14A for A. Y. 2015-16 without appreciating the fact that circular no. 5 of 2014 dated 11th February, 2014, issued by the Central Board of Direct Taxes Clearly provides for disallowance of the expenditure even where taxpayer in particular year has not earned any exempt income.
The assessee has filed application under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 thereby submitting the following ground and prayed that the same ground may be admitted :
1. The learned CIT (A) ought to have held that disallowance of claim of carry forward of long-term capital loss and disallowance u/s 14A of the Act by the Assessing Officer are bad in law since no incriminating material pertaining to the same was found during the course of search from the premises of assessee and the relevant assessment year is an unabated year.
2. The appellant craves leave to add to, amend or alter, the foregoing ground of appeal
4. A search and seizure action u/s. 132(1) of the income Tax Act. 1961 were initiated on ABIL Group of cases on 21.07.2017 which included the residences of partners/ directors of the group as well as business premises situated at Mumbai and Pune. The assessee, Mrs. Gauri Avinash Bhosale belongs to the Group and was covered by search action. The assessee filed original return of income on 30.07.2013, declaring a total income of Rs.26,48,211/-. The return of income was processed u/s. 143(1) of the Act. Thereafter, the assessment u/s. 143(3) of the Act was completed on 14.01.2016 assessing total income at Rs.5,24,32,459/- after making addition of Rs.4,86,36,248/-which had been set-off against wrongly brought forward capital loss of A.Y. 2012-13 as per the observations of the Assessing Officer. Consequent upon search action, the case was centralized and a notice u/s 153A of the Act dated 04.09.2018 was issued and served upon the assessee. In Gauri A. Bhosale 3 ITA No. 244/M/2021 response to this notice, the assessee filed her return of income on 17.10.2018 declaring total income of Rs.37,96,210/-. In the F.Y. 2010-11 relevant to the A.Y. 2011-12, the assessee incurred long term capital loss of Rs. 8,67,51,997/- on sale of shares, which was brought forward in AY 2013-14 and Long term capital gain of Rs.4,86,36,248/- on sale of house property was set-off against the same. During the earlier assessment u/s.143(3), the Assessing Officer rejected the set-off of LTCG for A.Y 2013-14 against the capital loss from AY. 2011-12 as Long Term Capital loss from shares is considered to be a dead loss. The Assessing Officer observed that it can neither be adjusted nor carried forward because Long term capital gains from shares are exempt. In view of this, the Assessing Officer rejected the claim of the assessee and the assessment was completed on 22.05.2019 thereby assessing total income at Rs.5,29,04,260/-.
Being aggrieved by the assessment order, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) partly allowed the appeal of the assessee. 5.1 The Ld. AR submitted that the assessee has filed application under Rule 27 thereby contesting the legal aspect which was not put up before the CIT(A) by the assessee for the reason that the same was not advised at the stage of filing appeal before the CIT(A) by the assessee’s representative at that point of time. The Ld. AR submitted that the assessee is an individual. A search action u/s 132 of the Act was carried out in the premises of the assessee on 21.07.2017. During the course of search, no incriminating material was found from the premises of the assessee. But even in the absence of any Gauri A. Bhosale 4 ITA No. 244/M/2021 incriminating material, the Assessing Officer passed order u/s 143(3) r.w..s 153A of the Act thereby making disallowances. The CIT(A) has deleted certain disallowances, the crucial legal issue is that there was no incriminating material found during the search from the premises of the assessee and thus the proceedings u/s 153A along with 143(3) does not sustain in the eyes of law as held by the various High Courts including the jurisdictional High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645. Thus the Ld. AR submitted that before taking the grounds of appeal
contested by the Revenue this issue needs to be decided first as assessment itself becomes invalid/bad in law as no incriminating material found during the search.
6. The Ld. DR submitted that the search took place and the Assessing Officer has made disallowance u/s 14A r.w.r 8D as well as rejected the claim of set off of LTCG of the assessee. The Ld. DR further submitted that the assessee’s contention related to no incriminating material found, does not sustain. The Ld. DR relied upon the assessment order.
7. We have heard both the parties and perused all the material available on record. The application filed under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 by the assessee has raised a legal aspect which raises the issue whether the assessment itself is valid or not as there was no incriminating material found during the search proceedings in assessee’s case. It is pertinent to note that from the perusal of the assessment order, there is no mention that any material was found. In fact, the very basis of the disallowance u/s 14A r.w.r. 8D and rejecting the claim of assessee related to Gauri A. Bhosale 5 ITA No. 244/M/2021 set off of LTCG was not part of the reopening and the observation by the Assessing Officer was totally afterthought. In fact, the entire assessment order is based on a totally different facts and not at all based on any incriminating material as alleged by the Revenue. The decision of the Hon’ble Bombay High Court relied by the Ld. AR that of Continental Warehousing (supra) is very apt in the present case. The Hon’ble High Court held that “in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.” In the present assessee’s case there were no books of account or other documents found during the search which were not produced by the assessee in original assessment. There was no mention of any undisclosed income or property discovered during the course of search as per the requirement of Section 153A of the Act. Thus, the invocation of Section 153A is not proper on part of the Revenue authorities. Therefore, the assessment itself is void ab initio and cannot sustain. Hence, application filed under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 by the assessee is hereby allowed. 8 Since the legal issue is answered in favour of the assessee, the very basis of the assessment does not sustain in the light of the decision of the Continental Warehousing (supra), therefore, the grounds raised by the Revenue on merit will not survive.
Gauri A. Bhosale 6 ITA No. 244/M/2021
Thus appeal of the Revenue is dismissed.