SUNDEEP MUKHERJEE ,KOLKATA vs. ITO, WARD - 22(3), KOLKATA , KOLKATA

The assessee in the present case is an individual who filed his return of income for the year under consideration on 15.07.2005 declaring a total income of Rs. 1,63,230/-. In the assessment completed originally u/s 143(3) vide an order dated 26.12.2007, the total income of the assessee was determined by the AO at Rs. 10,84,370/- after making addition inter alia on account of short term capital gain amounting to Rs. 6,97,716/- and tax @ 10% was calculated on such short term capital gain as per section 111A of the Act. Against the order passed by the AO u/s 143(3), an appeal was filed by the assessee before the Ld. CIT(A) who disposed of the same

Sundeep Mukherjee by an ex-parte order dated 17.06.2009 giving a part relief to the assessee. There was however no relief given by the Ld. CIT(A) on the issue of addition made on account of short term capital gain and accordingly the AO vide an order dated 19.06.2012 passed u/s 143(3)/251/154 again calculated the tax on short term capital gain @ 10% in accordance with section 111A of the Act. Meanwhile, the assessee preferred an appeal before the Tribunal against the order of the Ld. CIT(A) dated 17.06.2009. The Tribunal remitted the matter back to the Ld. CIT(A) for disposing of the appeal of the assessee afresh. In pursuant to the direction of the Tribunal, the Ld. CIT(A) disposed of the appeal of the assessee afresh vide its order dated 21.06.2016 restricting the addition made by the AO on account of short term capital gain to Rs. 2,41,568/-. While giving effect to the said order of the Ld. CIT(A) dated 21.06.2016, the Assessing Officer calculated the tax payable by the assessee on short term capital gain @ 20%. According to the assessee, there was a mistake on the part of the AO in calculating the tax on short term capital gain @ 20% instead of 10% and he, therefore, filed an application u/s 154 seeking rectification of the said mistake. In support of the said application filed u/s 154, the following submissions inter alia were made on behalf of the assessee: “i. That vide order u/s 250 dated 21.06.2016, passed by the Ld. CIT(Appeals)-6, Kolkata deleted some additions amounting to Rs. 4,64,881/- and vide para 1 of page 8 directed the AO to restrict the addition made in the assessment order on account of short term capital gains to Rs. 2,41,568/-, which in turn forms part of the reassessed total income of Rs. 5,07,080/- vide order u/s 251 dated 13.07.2016 and subjected to special rate of @ 10% as also duly pointed out vide my letter to AO dated 11.07.2016. ii. That paying no heed to my submission the AO passed on order u/s 251 dated 13.07.2016 on correct income of Rs. 5,07,080/- but without Sundeep Mukherjee applying section 111A, wrongly going beyond the powers to rectify a mistake, if any, which is otherwise barred by limitation and also is a debatable matter of change of opinion, outside the purview of section 154. iii. That in the order passed u/s 143(3), short term capital gain was added back and tax was computed on the entire STCG by application of section 111A and such application was applied in all subsequent orders. iv. That now suddenly when such addition has been partly reduced by the Ld. CIT(A), application of section 111A cannot be denied by a change of opinion of a complete assessment, that too, on a debatable issue outside the permissible years or rectification of any mistake, which passing an order u/s 251 and such order is bad in law and needs to be corrected by passing fresh order u/s 154/251/143(3). v. That it needs to be seen that during passing of an order u/s 251 giving effect to the Appellant Order, there is no scope for fresh enquiry or reassessment and only direction of Appellate Authority needs to be followed...”

The Assessing Officer did not find merit in the application filed by the assessee u/s 154 for the following reasons: i. The order u/s 251 dated 13.07.2016 was passed complying the direction of Ld. CIT(A)-6, Kolkata vide his kind order dated 21.06.2016 and revised total income was determined at Rs. 5,07,080/- allowing relief (a) STCG of Rs. 4,56,148/- (b) Telephone Expenses of Rs. 8,733/-. ii. Nowhere in the aforesaid order of Ld. CIT(A)-6, Kolkata there was a direction to compute balance short term gain 2,41,570/- to be taxed @ 10%. Hence there is no infringement to the direction of higher authority. iii. Tax is calculated on the revised total income on the basis of provisions of section for year under assessment and as applicable in your case. iv. You are specifically requested vide order sheet noting dated 03.02.2017 to give submission regarding the tax rate applicable quoting the section of the I.T. Act and you mentioned in your petition the application of the section 111A of the I.T. Act, 1961. v. Section 111A(1)(a) of the I.T. Act, 1961 reads as under: ‘the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and’

Against the order passed by the A.O. u/s 154, an appeal was preferred by the assessee before the Ld. CIT(A) who dismissed the said appeal and upheld the order passed by the A.O. u/s 154 by observing that the order passed by the A.O. u/s 154 by applying his mind was fair and just. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the Assessing Officer in the order originally passed u/s 143(3) vide an order dated 26.12.2007 had made the addition of Rs. 6,97,716/- on Sundeep Mukherjee account of short term capital gain and tax thereon was calculated by him @ 10% by applying section 111A of the Act. As submitted by the learned counsel for the assessee, only the quantum of addition made on account short term capital gain was disputed by the assessee in the appeal filed before the Ld. CIT(A) as well as the Tribunal and the tax rate of 10% charged by the A.O. on such short term capital gain by applying section 111A was never in dispute at any stage either before the Ld. CIT(A) or even before the Tribunal. This position clearly evident from the material placed on record is not disputed even by the learned DR. It is also observed that while disposing of the appeal of the assessee, the quantum of short term capital gain was reduced and while giving effect to the order of the Ld. CIT(A), the Assessing Officer for the first time charged the tax rate of 20% on short term capital gain on the ground that there was a mistake in the order originally passed u/s 143(3) in charging the tax rate at 10%.As rightly submitted by the learned counsel for the assessee, the scope of the order passed by the A.O. while giving effect to the order of the Ld. CIT(A) was limited and he should have confined himself to the direction and decision given by the Ld. CIT(A) on the issues raised by the assessee in the appeal. Since the issue relating to tax rate applicable to the short term capital gain was not involved in the appeal filed by the assessee before the Ld. CIT(A) and there was no decision or direction given by the Ld. CIT(A) on the said issue, the A.O., in my opinion, was not justified in changing the tax rate applicable to the short term capital gain while giving effect to the order of the Ld. CIT(A). There was thus a mistake in the order of the A.O. passed while giving effect to the order of the Ld. CIT(A) and the Sundeep Mukherjee same being apparent from record, I am of the view the Assessing Officer should have rectified the same by accepting the application filed by the assessee u/s 154. In that view of the matter, I set aside the impugned order passed by the Ld. CIT(A) and direct the A.O. to accept the application filed by the assessee under section 154.