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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM & SHRI AMIT SHUKLA, JM
सुनवाई क� तार�ख / : 26.11.2015 Date of Hearing घोषणा क� तार�ख / : 24.02.2016 Date of Pronouncement आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Mumbai (‘CIT(A)’ for short) dated 11.2.2004, dismissing the Assessee’s appeal contesting its assessment u/s.143(3) r/w s. 148 of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 1994-95 vide order dated 31.3.2003.
2 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT 2. Per Ground 1, the assessee challenges the reopening of its assessment, finalized u/s. 143(3) of the Act on 14/3/1997, vide notice u/s. 148 dated 29/5/2001, i.e., raises a jurisdictional issue. The reassessment being initiated beyond four years from the end of the relevant assessment year, the ld. Authorized Representative (AR) would, with reference to each of the four reasons recorded for the issue of notice u/s. 148 (PB pgs. 20-21), argue that there has been full and true disclosure of all material facts necessary for assessment, with there being also a consideration of the assessee’s claims, so that the initiation is bad in law. The fourth reason is toward disallowance u/s. 14A (in view of the assessee earning tax-free income at Rs. 786.51 lacs), which, even as noted in the (re)assessment order itself, could not form a basis for reassessment in view of proviso to s. 14A itself. This leaves us with three reasons, as under: (i) Deduction u/s. 35(1)(ii) is claimed @ 100% at Rs. 2 lacs qua a donation for like amount, while the same is deductible u/s. 80-G, i.e., @ 50% only, so that there has been an excess allowance by Rs. 1 lac.
(ii) The assessee had claimed 100% depreciation on the following assets; the prescribed rate per Appendix I to the Act being 40%, so that there has been an excess allowance for the balance amount of Rs. 6,05,512/- : Battery operated forklift - Rs. 7,22,058/- Forklift and Battery charger - Rs. 2,87,129/- Rs. 10,09,187/-
(iii) The assessee had claimed set off of long-term capital loss (Rs. 32,87,128/) against short-term capital gain, even as it has income assessable as long- term capital gain at Rs. 64,96,899/- for the year, resulting in short assessment of short-term capital gain.
The assessee’s contention is that there has been in fact consideration of the assessee’s claims in the original assessment proceedings, i.e., it is a case of change of opinion, precluding reassessment on those grounds. Toward this, the ld. AR would
3 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT take us through the assessee’s letter dated 20/2/1997 to the Assessing Officer (A.O.) (PB pgs. 26-27), which, vide serial nos. 8, 9 & 13 thereof, contains the following: a) Receipt of donation made during the year and claimed as deduction – Ann. VIII, b) Schedule of fixed assets capitalized during the year and qualifying for 100% depreciation – Ann. IX, c) Submissions regarding setting off the Long Term Capital Loss against the Short Term Capital Gains – Ann. XV
The set off of long-term capital loss against short-term capital gain was even subsequently explained by the assessee vide it’s letter dated 10.3.1997 (PB pg. 36), annexing the same as Ann-V (PB pg. 37) thereof. The allowance of this claim would thus amount to a change of opinion. As regards disclosure, he would take us to the assessee’s claim, preferred per its original return (PB pgs. 1-2), which was revised by claiming deduction on donation u/s. 35(1)(ii) (as against u/s. 80G earlier) as well as adjustment of long-term capital loss against short-term capital gains despite sufficient income assessable as long-term capital gains (PB pgs.3-5). Qua the claim for depreciation, the same was on forklift, which, as apparent from the reasons recorded, clearly exhibits the machinery to be an electrically operated vehicle, eligible for 100% depreciation under Entry III(3)(xiii)(o) of Appendix-I of the Income Tax Rules, 1962.
We have heard the parties, and perused the material on record. 3.1 We shall consider the aspect of true and full disclosure first in-as-much as a finding as to it being not so qua any one (or more) of the three grounds would validate initiation of reassessment proceedings. The true and full disclosure may not be limited to the assessee’s return; the same being subject to verification, so that the assessee could for the purpose rely on any material furnished even subsequently, forming part of the assessment record. This is so as the reason to believe is to be formed on the basis of material on record. With regard to the vehicle (forklift), the same is stated to 4 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT be battery operated, depreciation on which has been clarified to be with reference to a particular entry, reading as – “(o) Electrically operated vehicles including battery powered or fuel-cell powered vehicles.”
There is, accordingly, no basis to state of this disclosure being not true and full qua this claim. The assessee’s revised return (filed on 17/8/1995) clearly exhibits all the facts, i.e., long-term capital loss; short-term capital gain; and long-term capital gain (at correct amounts), even as the original return did not. We say so as while the assessee states that the short-term and long-term capital assets constitute the same source of income, the Revenue states of the two being different, though falling under the same head of income, i.e., ‘Capital Gains’. The manner of claim per the revised return clearly brings out both, the relevant sources and the heads of income against which the set off could be exercised, bringing out the conscious decision by the assessee in preferring adjustment of long-term capital loss against short-term capital gain, as against long-term capital gains. There is no question of disclosure of facts in relation to this claim being not full and true. As regards the third ground, the relevant entry in the revised return (per which the deduction u/s. 35(1)(ii) stands claimed) clearly states of the donation being given for medical research, eligible for deduction u/s. 35(1)(ii) (as against u/s. 80G earlier), claim under which stands correspondingly revised (for the same reason) (PB pgs.3-4). The question is whether the disclosure is full and true. If the impugned donation is for medical research, which stands notified u/s. 35(1)(ii), it surely is. The only material furnished in the assessment proceedings is receipt of the donation dated 04.2.1994 (PB pg. 29), which clearly certifies it to be eligible for deduction u/s. 80G (specifying the relevant Order No. as well as its validity period). There is no reference to either it (donation) being for medical research or as eligible for deduction u/s. 35(1)(ii). Even in the objections (to the reasons recorded) raised, vide its letter dated 6.2.2003 (PB
5 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT pgs. 22-25), the assessee-company could not exhibit as to how the disclosure was true in material respects, i.e., of the donation being toward medical research and, further, eligible for deduction u/s. 35(1)(ii), and for which we have perused the letter dated 20.2.1997 to the AO in the assessment proceedings (PB pgs. 26-27), referred to therein, vide which the receipt u/s. 80G dated 4.2.1994 (PB pg. 29) was furnished. The truth of a disclosure can only be with reference to the facts borne out or evidenced by the material on record. The disclosure per the return is, in the facts of the case, rather inconsistent with the material on record. The Hon’ble Court in Indian Hume Pipe Co. Ltd. v. ACIT [2012] 348 ITR 439 (Bom), relied upon by the Revenue, following CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC), held as under:
“Full and true disclosures must mean what the statute says. These disclosures cannot be garbled or hidden in the crevices of the documentary material which has been filed by the assessee with the Assessing Officer. The assessee must act with candour and the disclosure must be full and true. A full disclosure is a disclosure of all material facts which does not contain any hidden material or suppression of fact. A true disclosure is a disclosure which is truthful in all respects. Just as the power of the revenue to reopen an assessment beyond a period of four years is restricted by the conditions precedent spelt out in the proviso to section 147, equally an assessee who seeks the benefit of the proviso to section 147 must make a full and true disclosure of all primary facts.”
This, thus, is a case of a patently wrong (untrue) disclosure of facts and, in any case, not a full and true disclosure.
3.2 There is, further, no whisper of donation in the body of the assessment order (dtd. 14.3.1997), exhibiting any consideration of the said claim and, consequently, of formation of opinion by the AO in its respect. How could, one wonders, a receipt u/s. 80G evidence the assesseee’s claim u/s. 35(1)(ii), which rather exhibits the untruthfulness of the disclosure, and of it being a wrong claim. This is, in fact, the foremost query which should have arisen, i.e., upon observing the receipt to be u/s. 6 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT 80G as against the claim preferred u/s. 35(1)(ii). We observe no query by the AO in this respect, and neither has any been pointed out to us. The AO has clearly omitted to examine the assessee’s claim - a question or a matter of fact. The Hon’ble Court in Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT [2013] 350 ITR 651 (Bom), relied upon by the Revenue, has in this regard held as under: “To hold that the Assessing Officer must be deemed to have accepted what he has plainly overlooked or ignored in the assessment order would be to stretch the interpretation of section 147 to a point where the provision would cease to have meaning and content. Such an exercise of excision by judicial interpretation is impermissible.”
Even the letter dated 4.2.1994 by the donor (Ramakrishna Seva Pratishthan) accompanying the receipt u/s. 80G (PB pg. 28), which appears to have been furnished along-with the letter dtd. 6.2.2003 (supra), clearly states the donation to be towards hospital, eligible for deduction u/s. 80G.
3.3 The Revenue’s action in initiating reassessment proceedings shall thus survive on the basis of this reason, i.e., qua donation, and the assessee fails on it’s Ground 1.
On merits, Ground 2 impugns the disallowance of claim u/s. 35(1)(ii). The material furnished in the instant assessment proceedings further confirms the assessee’s claim as factually incorrect. We have already noted the letter dated 4.2.1994 supra, per which the receipt was communicated to the assessee, confirming it to be for a hospital for the reception and medical treatment of poor patients, eligible for deduction u/s. 80G. The assessee has before us also relied on a set of papers titled ‘An Appeal’ (PB pgs. 30-34), which lists the various programs being carried out by the Mission. The same is neither qua the assessee or the donation by it. The reference therein to the research carried out by the research institution, donations to which are entitled to deduction u/s. 35(1)(ii) (@ 100%), would therefore be of no consequence. If anything, it only establishes the assessee’s claim there-under as de hors any 7 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT material and/or without basis. The ld. CIT(A) discusses this issue vide paras 5 to 8 of his order, rendering his findings at para 5, which we find to be in conformity with the said material, i.e., the letter dated 4/2/1994 and the brochure titled ‘An Appeal’ issued by the donor. The contribution (donation) to its research institution is in fact to be made to a different account, which is entitled to deduction u/s. 35(1)(ii). We, in fact, also do not observe any explanation furnished by the assessee in this regard at any stage of the instant proceedings. The assessee’s claim stands rightly denied. We uphold the impugned disallowance, and the assessee fails on its Ground 2.
Ground 3: The assessee has been denied set off of long-term capital loss against short-term capital gain, following the decision in Ravindrakumar K. Mariwala v. JCIT, reported at [2003] 86 ITD 35 (Mum) (pg. 9 of the impugned order). However, before we may consider the issue on merits, we note that the AO has already considered this aspect while framing the impugned assessment. The claim is legal, with all the material facts on record. Though, true, there is no discussion in the matter in the body of the assessment order, the submissions by the assessee before the assessing authority vide its letters dated 20.2.1997 and 10.3.1997, which would without doubt only be in response to his queries in the matter, clearly show of the same having been considered. Merely because he chooses not to discuss the same in the assessment order would not imply that the same has not been considered. Rather, a non-mention would indicate his satisfaction therewith. At this stage, we may contrast this with the assessee’s claim u/s. 35(1)(ii), which elicited no query by the AO despite the receipt furnished by the assessee being u/s. 80G, i.e., inconsistent with the claim made. Further, the law as it stood at the relevant time, did not carve out any specific exclusion for the adjustment of loss on a capital asset, other than a short-term asset, where there is a capital gain on such other capital asset, i.e., as cast by sec. 70(3) of the Act as it now stands (i.e., w.e.f. 1.4.2003). The assessee’s view, which found acceptance by the AO, was thus a plausible view. In fact, even if regarded as 8 (A.Y. 1994-95) SBI Capital Markets Ltd. vs. Dy. CIT mistaken, the same cannot be disturbed beyond four years, as clarified by the Apex Court in Dy. CIT v. Simplex Concrete Piles Pvt. Ltd. [2013] 358 ITR 129 (SC). Reassessment does not entitle the AO to review his order. Accordingly, no adjustment to the returned income on this score could be made. Consequently, the assessee succeeds on its Ground 3.
Vide Ground 4, the assessee states of the ld. CIT(A) as having erred in not deciding its’s Grounds 5 to 8 raised before him. Though no submissions were made before us in this regard, there is no express concession for not pressing the same. We accordingly deal with the same on merits. In-as-much as the said Grounds were raised before him, which we have found as a fact (from Form-35), the ld. CIT(A) ought to have disposed the same. At the same time, it may well be that, as before us, the assessee did not make any submissions qua the same, which could also be for the reason that the matter, as it appears, had also been simultaneously taken up u/s. 154, with the ld. CIT(A) directing the AO to consider the assessee’s claim (i.e., in accordance with law) vide his order u/s. 154 dtd. 26.8.2003 (PB pg. 49). Be that as it may, we consider the stated Grounds as outstanding before him and, accordingly, direct for their disposal, after affording the assessee a reasonable opportunity to state its’ case before him. We decide accordingly.
In the result, the assessee’s appeal is partly allowed. प�रणामतः �नधा�रती आं�शक �वीकृत क� जाती है । Order pronounced in the open court on February 24, 2016