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Income Tax Appellate Tribunal, SMC “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV
This appeal is preferred by the assessee against the order of CIT(Appeals), Hubli dated 03.11.2015 for the assessment year 2003-04 inter alia on the following grounds:-
“1.1 The learned CIT(A), Hubli has erred in passing the order in the manner passed by him. The order passed being bad in law liable to be quashed.
2.1 The learned CIT(A), Hubli has erred in confirming the action of the learned Income Tax Officer, Ward 2(2), Hubli in adding long term capital gains on the basis of returned income filed on 14.10.2005 pursuant to an invalid notice issued under section 148. 2.2 The notice issued u/s 148 being void ab initio, the order passed pursuant the invalid notice is also bad in law, liable to be quashed. 3.1 Even otherwise, the learned CTT(A) has erred in confirming the order of the AO assessing the AOP on the same income which had been offered to tax in the individual hands of the members of the AOP. 4.1 The learned CIT(A), Hubli and Income Tax Officer, Ward 2(2), Hubli has erred in not following the clarification (at para 2) of Hon'ble tribunal in its Miscellaneous Petition order in Misc No. 26/Bang/2009 dated 12.06.2009 or the finding on merits in the main order of ITAT. 5.1 The learned CTT(A) has erred in confirming that the three co-owners constituted an AOP. On the facts and in the circumstances of the case, the property was owned not by the AOP but by the individual members. 6.1 The learned CIT(A), Hubli has erred in confirming the action of the learned Income Tax Officer, Ward 2(2), Hubli in not refunding the self assessment tax of Rs 96,195/- paid on returned income filed against a invalid notice issued under section 148 for the AY 2003-04. 7.1 The learned CIT(A), Hubli has erred in concluding that in the event of assessment being annulled the refund shall be only of the amount of taxes paid in excess of tax chargeable for the total income returned by the assessee. 8.1 In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT(A) be quashed or in the alternative refund for the self assessment tax of Rs 96,195 paid on returned income for the AY 2003-04 be granted.” The appellant prays accordingly.”
During the course of hearing, the ld. counsel for the assessee invited my attention that the AO has made an addition on account of long term capital gain earned by the Members of the AOP in the hands of Members as well as the AOP i.e., the assessee after reopening the assessment. Reopening of the assessment in the hands of AOP was knocked down by the order of the Tribunal dated 18.8.2006. Even on merits, the addition made on account of capital gain was also deleted by the Tribunal. Thereafter, the AOP approached the Assessing Officer for the refund of income-tax paid by the assessee on the capital gain earned by it in the return of income. The request was turned down by the AO, against which an appeal was filed and the CIT(Appeals) has also confirmed the additions, against which an appeal was filed before the Tribunal.
The ld. counsel for the assessee has contended that since the individual members of the AOP have already paid the income tax on the capital gain earned by them, the same income-tax cannot be charged from the AOP or the assessee. If it is allowed, it will amount to double taxation.
The ld. DR has placed reliance upon the provisions of section 240(b) of the Income-tax Act, 1961 [“the Act”] with the submission that income-tax paid on the returned income cannot be refunded.
Having carefully examined the order of lower authorities, I find that undisputedly the members of the AOP have already paid the taxes on the capital gain earned by them. Under misconception, the AOP has already paid the taxes on the same capital gain earned by its members while filing the return of income. Therefore, it amounts to double taxation. Moreover, the assessment in the case of the assessee has already been quashed by the Tribunal, therefore there is no liability of tax upon the assessee.
I have also carefully examined the provisions of section 240 of the Act and I find that as per clause (b), the refund of any amount which become due to the assessee shall be paid by the AO, provided where the assessment is annulled, the refund shall become due only on the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee. No doubt, the assessee has offered the tax on the capital gain earned by its members while filing the return of income.
But after the decision of this Tribunal, the assessee was not liable to pay tax on the capital gain earned by its members, as it was charged from the individual members of the AOP. In light of these facts, I am of the view that there should not be double taxation in the hands of the assessee, as individual members have already paid the taxes. I therefore set aside the order of the CIT(Appeals) and direct the AO to make the refund of excess tax paid by the assessee on the capital gain earned by its members. While doing so, the Assessing Officer may verify from the records as to whether the due tax on the capital gain has already been recovered from the members of the AOP.
In the result, the appeal of the assessee is allowed for statistical purposes.
Pronounced in the open court on this 5th day of July, 2016.