PRADEEP KISANLAL BOOB,NASHIK vs. ACIT, CIRCLE 1, NASHIK, NASHIK

The learned CIT(A) ought to have appreciated that the adjustment of Rs.94,03,288 was not justified on merits since the impugned issue was squarely covered in favour of the assessee by the decision of Hon'ble Jurisdictional Bombay High Court in case of PCIT V. Alcon Developers [432 ITR 277] as well as by Hon'ble Karnataka High Court in Nandi Steels Ltd. v. ACIT [436 ITR 238] and therefore, the said adjustment made in the intimation u/s 143(1) should have been deleted.

The appellant craves, leave to add, alter, amend and delete any of the above grounds of appeal.”

On the other hand, ld. Departmental Representative vehemently argued supporting the orders of the lower authorities.

We have heard the rival contentions and perused the record placed before us. Apropos to Ground No.3 through which the assessee has contended that the alleged adjustment made by CPC was not permissible u/s.143(1) of the Act as the issue is debatable one, we notice that the short term capital gain of Rs.94,03,288/- from sale of capital asset has been arrived at as per the provisions of section 50 of the act as there is a gain from sale of asset forming part of the block of assets which ceased to exist after the sale of asset and therefore the gain from sale of such business asset is a short term capital gain u/s.50 of the Act. Since there is no dispute Pradeep Kisanlal Boob to this extent, and in the details filed in the income-tax return, the gain is offered as short term capital gain. Now when we move on to the provision it provides for carry forward and set off of business losses provided u/s.72 of the Act, and Section 72(1)(i) provides that brought forward business losses can be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year. Section 72(1)(ii) provides that losses which cannot be wholly so set off the amount of losses not so set off shall be carry forward to the following assessment years which shall not exceed eight assessment years subject to the proviso to section 72(1) of the Act.

Now in the income-tax return prepared by the assessee and furnished online the informations are filled in the computer system separately for the brought forward business loss as well as the short term capital gain. Once the assessee has business income during the year, it get automatically set off against the brought forward business loss as per the provisions of section 72 of the Act. There is no column provided in the income-tax return where the short term capital gain from sale of depreciable asset can be set off against the brought forward business losses. Once there is no mechanism available in the income-tax return and the applicable section provides for set off of brought forward business losses against the profits and gains from business during the year, computer system cannot work beyond the commands given in the computer software by the Central Processing Unit. Now since the income-tax returns are processed by CPC and without human intervention it automatically works on the guidelines provided in the computer system, does not allow set off of Pradeep Kisanlal Boob short term capital gain against the brought forward business losses. It is also noticed that there is no bifurcation in the income-tax return about the nature of short term capital gain whether it has arisen from sale of capital asset or from sale of depreciable asset as provided in section 50 of the Act.

Before us, Ld. Counsel for the assessee has contended the issue of set off of brought forward business losses against the short term capital gain from sale of assets used for business is a debatable issue and therefore such prima-facie adjustments cannot be made in the returns processed u/.s.143(1)(a) of the Act. We fail to find any merit in such contention of ld. Counsel for the assessee for the reason that there are numerous cases where due to interpretation by the Hon’ble Courts divergent views on same issue are available along with change of facts. It is not possible for the CPC to give command for each and every type of such debatable issues in the computer system to prevent the prima-facie adjustments. Returns processed by CPC are governed by the provisions of section 143(1)(a) of the Act and in case there is any issue and the assessee is aggrieved with the adjustments made by CPC then the assessee is not left remediless as the option is very much available to the assessee to file appeal before ld.CIT(A) and raise relevant grounds. In case, income assessed u/s.143(3) of the Act, then the assessee has proper opportunity to make submissions before Assessing Authority and the issue can be decided by the Assessing Authority as per the judicial precedents. In view thereof, the ground No.3 raised by the assessee is dismissed.

Now we take up Ground No.4 in which the assessee on the strength of judgment of Hon’ble Jurisdictional High Court Pradeep Kisanlal Boob in the case of PCIT Vs. Alcon Developers (supra) and that of Hon’ble Karnataka High Court in the case of Nandi Steels Ltd.Vs. ACIT (supra) has contended that the assessee’s claim of setting off of brought forward business losses against the short term capital gain from sale of business asset is allowable. We notice that the said adjustment was made by CPC in the return processed u/s.143(1)(a) of the Act. Further, when the assessee’s appeal before ld.CIT(A) reliance was placed only on the judgment of Hon’ble Jurisdictional high Court in the case of PCIT Vs. Alcon Developers (supra). However, ld.CIT(A) in the finding has not dealt with the said judgment. We also observe that in the case of PCIT Vs. Alcon Developers (supra) the issue was regarding the revisionary proceedings u/s.263 of the Act and that whether the AO has taken one of the permissible view whereas in the instant case facts are different as it is merely a return processed u/s.143(1)(a) of the Act.

So far as the judgment of Hon’ble High Court of Karnataka in the case of Nandi Steels Ltd.Vs. ACIT (supra) is concerned, assessee has not placed reliance on the said judgment before ld.CIT(A).

We observe that there are no specific provisions under the Act which clearly provides that the short term capital gains assessable u/s.50 of the Act can be set off against the brought forward business losses because if claim of assessee is considered, then the question will arise whether short term capital loss u/s.50 of the Act can be set off against the business income. It will further question the intent of section 50 of the Act which deals with the special provisions for computation of capital gains in case of depreciable assets. Question will also arise about section 71(3) of the Act which Pradeep Kisanlal Boob provided that if the net result of the computation under the head capital gain is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against the income under the other head.

Under these given facts and circumstances and considering all the aspects discussed in para 10, 11 and 12 (supra), we deem it proper to remit back this issue to the file of Jurisdictional Assessing Officer before whom assessee shall file requisite details. Jurisdictional Assessing Officer is directed to dispose of the issue in light of our directions and in accordance with law after affording reasonable opportunity of hearing to the assessee. Ground No.4 raised by the assessee is allowed for statistical purposes.

Ground No.5 is general in nature which needs no adjudication.

In the result, appeal of the assessee is partly allowed for statistical purposes.