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Facts
M/s. Triple S Stock & Shares (P.) Ltd. (assessee) claimed a short-term capital loss of INR 1,01,50,000/- from the sale of shares of M/s. Magnum Steel Ltd. and M/s. Magnum International Ltd. for AY 2006-07. The Assessing Officer deemed the transaction non-genuine and disallowed the loss, which the CIT(A) subsequently confirmed.
Held
The Tribunal held that the assessment order under s. 143(3) for AY 2006-07, passed on 29.12.2008, did not abate upon a subsequent search initiated on 26.03.2010 under s. 132(1). Citing Pr. CIT v. Abhisar Buildwell (P.) Ltd., the Tribunal clarified that the assessment stood concluded before the search, and the mere pendency of an appeal does not cause abatement. The assessee did not argue the merits of the disallowance before the Tribunal.
Key Issues
Whether an assessment order passed under section 143(3) abates upon a subsequent search under section 132(1) if an appeal against that assessment is pending.
Sections Cited
143(3), 153A, 132(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “F” BENCH: NEW DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI VIMAL KUMAR
The instant appeal has been filed at the instance of the assessee seeking to assail the First Appellate order dated 20.03.2014 passed by Ld. Commissioner of Income Tax (A)-XXXII, New Delhi [“Ld.CIT(A)”] arising from the assessment order dated 29.12.2008 passed u/s 143(3) of the Income Tax Act, 1961 [“the Act”] pertaining to assessment year 2006-07.
2. The assessee has raised following grounds of appeal:- 1. “That the learned Commissioner of Income Tax (Appeals)-XXXII, New Delhi has grossly erred both in law and on facts in upholding disallowance of short term capital loss of Rs. 1,01,50,000/- incurred on sale of shares of M/s Magnum Steel Ltd. and M/s Magnum International Ltd.
2. That the disallowance has been sustained by the learned Commissioner of Income Tax (Appeals) on complete misconception of facts, misinterpretation of provisions of law, and, overlooking the documentary evidence on record including submissions of the appellant and as such the same is untenable. 2.1 That the learned Commissioner of Income of Income Tax (Appeals) has failed to appreciate that once the transaction of purchase and sale of shares was not disputed by the learned Assessing Officer, the disallowance made on subjective and irrelevant considerations was illegal, invalid and untenable.
M/s. Triple S Stock & Shares (P.) Ltd. vs ITO 2.2 That adverse findings recorded by the learned Commissioner of Income Tax (Appeals) to sustain the disallowance are factually incorrect, contrary to record, legally misconceived and as such untenable. 2.3 That the learned Commissioner of Income Tax (Appeals) has overlooked the pertinent fact that subsequent to the impugned order of assessment, an order dated 26.12.2011 for the instant assessment year u/s 153A/143(3) of the Act was made wherein the claim made by the appellant stood accepted and as such confirmation of disallowance in disregard of the aforesaid fact is misconceived, misplaced and untenable. 2.4 That the order so made by the learned Commissioner of Income Tax (Appeals) upholding the disallowance is based on surmises, conjectures and suspicion and as such, disallowance so confirmed is based on arbitrary considerations which are wholly irrelevant and as such, the disallowance so made in unwarranted. It is therefore prayed that, it be held that, disallowance made by learned Assessing Officer and, sustained by the learned Commissioner of Income Tax (Appeals) may kindly be deleted and appeal of the appellant be allowed.”
As per grounds of appeal
, the assessee has challenged the disallowance of Short Term Capital Loss of INR 1,01,50,000/- arising on sale of shares of M/s. Magnum Steel Ltd. and M/s. Magnum International Ltd.
3. As per the facts emerging from assessment order framed under s.143(3) of the Act dated 29.12.2008 for AY 2006-07 in question, the assessee filed return of income at INR 4,51,313/-. The assessee inter alia claimed short term capital loss of INR 1,01,50,000/- which was set off short term capital gains of INR 1,05,72,796/-. The AO in the course of assessment found that the short term capital loss arising on sale of two unlisted companies namely M/s. Magnum Steel Ltd. and M/s. Magnum International Ltd. are not genuine. The AO accordingly, disallowed the short term capital loss claimed amounting to INR 1,01,50,000/-. The return income was accordingly enhanced to this extent.
4. Aggrieved, the assessee preferred appeal before the Ld.CIT(A). However, the Ld.CIT(A) did not find any merit in the plea of the assessee and accordingly confirmed the action of the AO.
5. Further aggrieved, the assessee preferred appeal before the Tribunal.
M/s. Triple S Stock & Shares (P.) Ltd. vs ITO 6. When the matter was called for hearing, the Ld. Counsel for the assessee pointed out at the outset that in the instant case, the assessment was framed under s. 143(3) vide order dated 29.12.2008 against the disallowances of short term capital loss made by the AO for which the assessee preferred appeal before the Ld.CIT(A) on 29.12.2008. During the pendency of the first appellate proceedings before the Ld.CIT(A), a search was initiated under s. 132(1) of the Act on 26.03.2010. In this backdrop, the Ld. Counsel for the assessee pointed out that in view of the search carried out, the assessment order passed under s. 143(3) of the Act stands abated since the appeal proceedings, which is continuation of assessment proceedings, was pending at the time of search. The Ld. Counsel for the assessee referred to the judgement by Hon’ble Supreme Court referred in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxman.com 399 (SC) to contend that the assessment framed under s. 143(3) required to be set aside and the additions if any, can be possibly made only in the proceedings under s. 153A of the Act since AY 2006-07 falls within six years period of the date of search. The Ld. Counsel for the assessee thus urged for appropriate relief in the matter. On being inquired by the Bench, the Ld. Counsel for the assessee submitted that he does not have anything to say to controvert the action of AO towards disallowances of short term capital loss on the aspects of merits.
The Ld. CIT DR for the Revenue relied upon the first appellate order and submitted that the ratio of Pr. CIT v. Abhisar Buildwell (P.) Ltd. (supra) does not apply in the facts of the case since the assessment should completed at the time of search and thus the action of the AO is accord with provisions of the Act.
We have carefully considered the rival submissions and perused the material available on record. The assessee has challenged the jurisdiction of the AO to make additions in the proceedings under s. 143(3) in the wake of search carried out under s. 132 of the Act and subsequent proceedings under s. 153A coming into the motion. 8.1. It is the case of the assessee that as a result of search under s. 132 of the Act, the assessment order passed under s. 143(3) ceases to exist in view of the