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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI RAJESH KUMAR
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 02.03.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2004-05.
The short facts of the case are that assessee has filed the return declaring total income at Rs.67,87,938/-, subsequently a revised return was filed on 09.10.2006 declaring total income at Rs.88,49,940/- and assessment order was passed under section 143
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the appeal by observing as under:
“3.1 Looking into the assessment order and submissions made, the facts are that the assessee claimed and was allowed long term capital loss in respect of equity shares of M/s Ankush Properties P. Ltd. in the original assessment order. However, the alleged shares of M/s Ankush Properties P. Ltd were not held as shares and was considered as deposit to the company and therefore in the reasons recorded u/s 148 of the Act as reproduced in the assessment order, the AO held that set off long term capital loss is incorrect as these were not shares and in the nature of deposit. The appellant submitted that in the original scrutiny proceedings this loss was allowed. However the Id CIT has passed an order u/s 263 of the Act which was quashed by Hon'ble ITAT in the combined order in AY.2001-02 in the case of Mr. Noshir D Talati and ITA No. 2713/M/2006 for A.Y 2001-02 in the case of Smt. Rashna N Talati, vide order dated 27/9/2007. A copy of the said order was enclosed with the submission. It was noticed therefrom that one of the ground taken by Id CIT was that as per auditors report, the necessary notice for increase in share capital of the company i.e. M/s Ankush Properties P. Ltd and other relevant forms have not been filed before the Registrar of companies and therefore under these circumstances the company could not have allotted the shares. The Id CIT was therefore of the opinion that claim of loss was apparently bogus in nature. Hon'ble ITAT in para 14 of this order held that the order passed by id CIT is without jurisdiction and thereafter allowed the appeal of the assessee. The appellant in its submissions has contended that subsequently Hon'ble Bombay High Court dismissed the further appeal of the Department in respect of appeal no. 262 of 2000 in the case of assessee Mr. Noshir Talati on similar facts and a copy of the order is enclosed. The subsequent order passed by the AO on the basis of the order u/s 263 is cancelled by Id CIT(A)-5 in the case of Sri Noshir D Talati in order No.CIT(A)C-V/DCCC-30/449/0607 dated 14/11/2007 and further appeal in this matter by the revenue was dismissed by Hon'ble ITAT. These proceedings were in respect of A.Y 2001-02 wherein the assessee has sold the shares and incurred loss. During the year under consideration i.e. 2004-05 also, the appellant sold the balance equity shares and incurred capital loss disallowed by the AO in the assessment order against which the assessee is in appeal. As per copy of computation filed, the long term capital loss however is not set off against any income. It is noted
3 Mr. Noshir Talati from the assessment order that the appellant has duly brought to the knowledge of the AO the fact that the order u/s 263 was quashed by Hon'ble ITAT in A.Y 2001-02 and such order of Hon'ble ITAT was confirmed by Hon'ble Bombay High Court. However, the AO contended that the department has not accepted the decision of Hon'ble High Court in the abovementioned case and has filed SLP before the Hon'ble Apex Court on this issue in A.Y 2001-02 and therefore long term capital loss of the instant year i.e. 2004-05 is not allowed as the same is treated as deposits by the assessee to the company. As mentioned above, the appellant has duly submitted copy of the combined order of the Hon'ble ITAT in the case of the assessee Mr. NoshirTalati in appeal No. 2713 and 2712/M/2006 for A.Y 2001-02 and the facts are discussed in the submissions and also as above. 3.2 Looking into the facts of the case, therefore it is held that the basis of addition is order u/s 263 passed by Id CIT in A.Y 2001-02 which stands quashed by Hon'ble ITAT, Mumbai and revenue's appeal dismissed by Hon'ble Bombay High Court. Since the order u/s.263 of the Act is quashed by ITAT, therefore subsequent assessment in pursuance of order u/s.263 cannot subsist as held in the case of CIT vs. Shivabhai B Patel, 239 ITR 919 (Guj). Therefore, considering the facts, and respectfully following the decision of Hon'ble Bombay High Court and Hon'ble ITAT, the disallowance made by the AO, cannot be sustained. Therefore, ground nos. 2 to 6 of appeal are allowed. As the disallowance by the AO is not sustained, therefore ground no. 1 is not adjudicated being irrelevant.”
We have heard the rival contentions of both the parties. We find that the Ld. CIT(A) has passed the order by considering the development of this case and Ld. CIT(A), considering the judgment of Tribunal in wherein the assessee is one of the co-owners of the property and the Tribunal on the similar facts has upheld the order of the Ld. CIT(A) by observing as under: “11. We have heard rival contentions and perused the record. We notice that the assessee has been allotted 27.50 lakhs shares by M/s Ankush Properties Pvt. Ltd. out of which 22.50 lakhs shares were sold by the assessee in the year relevant to AY 2001-02 and 5.00 lakhs shares were sold during the year under consideration. Since the above said company had not filed return of allotment with the Registrar of companies, the Ld CIT revised the assessment order and disallowed the short term capital loss declared by the assessee. We have noticed that theTribunal has taken the view that the non-filing of return of allotment is a procedural lapse, which could be made good by paying additional fee. The Ld A.R submitted that the 4 Mr. Noshir Talati assessee has since paid the fee and regularised the return of allotment. He also furnished copy of relevant documents filed with Registrar of Companies to show that the Return of Allotment has been filed along with the additional fee. He submitted that the above said fact has been taken note of both by Hon'ble Tribunal and Hon'ble High Court. Under these set of fads, the Tribunal set aside the revision order passed by Ld CIT in AY 2001-02.
We notice that the AO has reopened the assessment of the year under consideration based on the view taken by the tax authorities in AY2001-02, Since the view taken by the tax authorities in that year has been, set aside by the Tribunal and since the order passed by the Tribunal has been upheld by the Hon'ble Bombay High Court, the very basis on which the assessment of the year under consideration was reopened no longer exists. Since the view taken by the Tribunal in respect of character of shares allotted by M/s Ankush Properties Pvt Ltd has been upheld by Hon'ble Bombay High Court, we are of the view that the Ld CIT(A) was justified in following the order passed by the Tribunal in AY 2001-02 and directing the AO to accept the long term capital loss declared by the assessee. Accordingly we uphold his order.”
Respectfully following the same, we dismiss the Departmental appeal.
Order pronounced in the open court on 12.01.2018.