LAXMI VENTURES (INDIA) LTD,MUMBAI vs. ASST CIT CIR 6(3), MUMBAI

In this appeal, the preliminary grievance of the assessee is that the CIT(A) upheld the order passed by the Assessing Officer u/s 154 of the Act in an ex parte proceeding without considering the stand of the assessee.

In brief, the relevant facts are that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in various activities, viz., solvent extraction plant, refinery and dealing in oil seeds, running of hotels, manufacture of cigarettes, etc. For Assessment Year 2008-09, it filed a return of income declaring income of Rs.3,85,09,286/-, which was subject to scrutiny assessment u/s 143(3) of the Act dated 24.12.2010 whereby the income was assessed at Rs.3,91,34,764/-. In determination of the total income the Assessing Officer computed income under the head ‘Business’ as also under the head ‘Capital Gains’ by way of Short Term Capital Gains on sale of shares and mutual funds and also Long Term Capital Gains on shares. Subsequently, the Assessing Officer issued notice u/s 154 of the Act on 26.2.2013 proposing to rectify a mistake apparent from record. According to the Assessing Officer, the loss from investment activity debited to the Profit & Loss Account of Rs.62,48,724/- was required to be added back to arrive at the correct business income whereas in the assessment finalized u/s 143(3) of the Act, the capital gain of Rs.1,13,37,962/- was deducted to arrive at the business income. On this basis, the Assessing Officer passed an order u/s 154 of the Act dated 25.3.2013 whereby the revised total income was computed at Rs.5,67,21,450/-. The said action of the Assessing Officer was carried in appeal before the CIT(A). The assessee contended in its memo of appeal filed before the CIT(A) that the addition of Rs.1,13,37,962/- made by the Assessing Officer towards capital gains being wrongly deducted from business income was unjustified as such amount included long term as well as short term capital gains which had been reduced by the assessee from its business income in the return of income filed by it, but the same were offered for taxation under the head ‘Income from Capital Gains’. Further, another addition of Rs.62,48,724/- representing loss from investment activity was also wrongly made by the Assessing Officer against the said amount representing net amount of Future & Options loss (i.e. business loss) after adjusting short term and long term capital gains declared. The aforesaid aspects had been canvassed by the assessee in its Grounds of appeal filed before the CIT(A).

On this aspect, the Ld. DR has not seriously opposed the plea of the assessee.

Having considered the rival stands, we find that the order of CIT(A) is otherwise also unsustainable in view of the provisions of Sec. 250(6) of the Act which lays down that order of the Commissioner (Appeals) disposing of an appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for such decision. In the impugned order passed by the CIT(A), the aforesaid approach is conspicuous by its absence. Notably, the CIT(A) has not applied his mind towards the plea of the assessee manifested in the Grounds of appeal raised before him, though briefly. The CIT(A) has also not provided his independent reasoning in order to justify the rectification carried out by the Assessing Officer in the order passed u/s 154 of the Act. Therefore, on this count itself, the impugned order of CIT(A) is unsustainable. Be that as it may, we deem it fit and proper to set-aside the impugned order of CIT(A) and remand the appeal back to his file for adjudication afresh as per law after allowing the assessee a reasonable opportunity of being heard.

In the result, appeal of the assessee is allowed, as above.