Commissioner Of Income Tax, ... vs Sashi Prakash Khemka
2011 Latest Caselaw 2002 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                             ITA No.720 of 2006

%                            DECISION DELIVERED ON: 6TH APRIL, 2011


       COMMISSIONER OF INCOME TAX, DELHI-III
                                          . . . APPELLANT

                           through :         Mr. N.P. Sahni, Sr. Standing
                                             Counsel.

                                 VERSUS

       SASHI PRAKASH KHEMKA                            . . .RESPONDENT

                           through:          Mr. Satyen Sethi with Ms. A.T.
                                             Panda, Advocates.

CORAM :-
    HON'BLE MR. JUSTICE A.K. SIKRI
    HON'BLE MR. JUSTICE M.L. MEHTA

       1.      Whether Reporters of Local newspapers may be allowed
               to see the Judgment?
       2.      To be referred to the Reporter or not?
       3.      Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. This appeal pertains to the Assessment Year 1993-94. The

respondent/assessee had filed return of income for that year in

the status of individual on 29.10.1993. He owned 70,000

shares of a company named M/s NEPC Micon Ltd. „Rights

issue‟ was floated by the said company offering two equity

shares per every share held by the existing shareholders at a

premium of `30 per share. The assessee renounced this right

in favour of third parties and had received a sum of `36 per

share. This renunciation of his right resulted in short term

capital gain of `36 per share, which was clearly shown as such

in the income tax return filed by him amounting to

`25,20,000/-. Simultaneously, the assessee also claimed that

because of the increase in share capital of the company and

the dilution of their holding of shares of the company, the

value of the shares already held by him diminished and he

suffered capital loss consequent to the „rights issue‟. It was

claimed as short term capital loss which was worked out by

him at `65,10,000/- After adjusting the short term capital

gain, which the assessee absorbed in the short term capital

loss declared by him, the assessee went in appeal which was

heard by the CIT (A). We may point out here that in a similar

manner other family members of the assessee (Khemka

Family) who had held shares in the company M/s NEPC Micon

Ltd. had renounced the right arising out of „rights issue‟ to third

parties and in identical manner, they had shown capital gain as

well as capital loss. Since the capital loss was higher, each of

this family member adjusted capital gain from the capital loss

showing net short term capital loss like the assessee herein.

Appeal of one such family member, viz., Smt. Shivani Devi in

respect of Assessment Year 1993-94 itself was heard by the

CIT (A), which was allowed by the CIT (A) holding that the

claim for short term capital loss was to be allowed. In the said

appeal, another issue relating to interest under Section 234A of

the Income Tax Act (for brevity „the Act‟) was also dealt with.

This issue of computation of penal interest under Section 234A

of the Act arose, as the AO had held that the return ought to

have been filed on or before 30.06.1993, whereas it was filed

on 29.10.1993. Therefore, the AO had calculated penal

interest under the aforesaid provision from 01.07.1993. The

contention of Shivani Devi was that in the income tax return,

she had admitted business income and therefore, the income

tax return was required to be filed on or before 31.10.1993,

which was field before that date and therefore, no interest was

chargeable.

2. The CIT (A) set aside this order of the AO also in respect of

Shivani Devi on the ground that in the impugned order passed

by the AO, there was no reference to any income of business at

„NIL‟, though in the return, she did disclose the fact of being a

partner in the firm and thus, return was due on or before

31.10.1993.

3. While hearing the appeal of the assessee herein, the CIT (A)

followed the aforesaid order passed in the case of Shivani Devi

and allowed the same reliefs to the assessee also. It would be

relevant to point out here that in the appeal filed by the

assessee before the CIT (A), nobody had appeared on behalf of

the Department and the same was allowed ex parte. Order of

the CIT (A) dated 28.11.1995 in the case of the assessee

reveals that out of 4 Paragraphs, the first three Paragraphs are

devoted the non-appearance of the departmental

representative in spite of various opportunities and in the last

Paragraph, appeal was allowed in the following terms:

"4. It may be mentioned here that this appeal is identical with the appeals in ITA Nos.37, 40, 44, 46, 48, 50, 52, 56, 58, 62, 64 and 68/95-96, as has been discussed in detail in my order dated 13.11.1995 in ITA No.37/95-96 in the case of Smt. Shivani Devi for A.Y. 1993-94. On identical facts and in similar circumstances as dealt with the said order dated 13.11.1995, therefore, this appeal is also partly allowed."

4. Though in the end, it is said that the appeal is „partly allowed‟,

that is because of the reason that appeal in the case of Shivani

Devi was also partly allowed inasmuch various grounds were

raised by Shivani Devi and all of them were not accepted.

However, insofar as two issues with which we are concerned,

viz., short term capital loss claimed by Shivani Devi as well as

challenge to the computation of penal interest under Section

234A of the Act, these two grounds of Shivani Devi were

allowed.

5. Not only this, the order of the CIT (A) was not challenged by

the Revenue. On the contrary appeal effect was given by the

AO pursuant to the aforesaid order of the CIT (A). The AO, in

this behalf, passed orders dated 28.11.1995. By this order, he

deleted the addition of `25,20,000/- on account of short term

capital gain. Thereafter, he passed another order dated

27.01.1197 under Section 154 of the Act, consequent to the

CIT (A)‟s order whereby short term capital loss of `25,20,000/-

was carried forward to the subsequent year. The dispute,

which has now arisen, emanates from subsequent order dated

14.03.1997 passed by the AO under Section 154 of the Act. By

this order, the AO has withdrawn the benefit of carry forward

of short term capital loss in terms of orders dated 27.01.1997.

It is primarily on the premise that the assessee was not

deriving any income from business and therefore, due date of

filing the income tax return under Section 139(1) of the Act for

the Assessment Year 1993-94 was 30.06.1993 and the same

was filed only on 29.10.1993. Since the return was not filed by

the specified/due date, the assessee was not eligible for the

benefit of the loss to be carried forward.

6. The assessee challenged this order by preferring the appeal

before the CIT (A) who confirmed the order of the AO.

7. Not satisfied with the above outcome, the assessee approached

the Income Tax Appellate Tribunal (hereinafter referred to as

„the Tribunal‟) by way of second appeal. This time, the

assessee succeeded. The Tribunal has held that the due date

of return in case of the assessee had already become final by

virtue of CIT (A)‟s order in the appeal filed by the assessee

against the order of the AO under Section 143(3) of the Act

and therefore, the AO could not exercise his powers of

rectification under Section 154 of the Act.

8. The question that falls for consideration is as to whether the

Tribunal was right in holding that in the case of this assessee,

the question of fixing the due date by which the assessee was

required to file the income tax return had become final by

virtue of the order of the CIT (A) in appeal filed by the

assessee against the order of the AO under Section 143(3) of

the Act. As pointed out above, for this purpose, the Tribunal

has referred to the earlier order passed by the CIT (A) in the

case of Shivani Devi. The copy of the order of the CIT (A) in

Shivani Devi case was produced before us. In that case, as

noted above, the CIT (A) deleted the penalty interest charged

under Section 234A of the Act holding that the income tax

return was required to be filed on or before 31.10.1993 and it

was filed in time as the same was filed on 29.10.1993. In

arriving at this conclusion, the CIT (A) had stated that even if

the business income stated in the income was returned „NIL‟,

that would not make any difference because of the reason that

Shivani Devi did disclose the fact that she was a partner in the

firm and the return was filed in that category. It was, thus, on

this basis that the due date of income tax return in case of

Shivani Devi was fixed 31.10.1993.

9. In the case of the assessee herein, nothing has been brought

on record to find out as to whether the assessee was also a

partner in the firm. As stated above, the Tribunal has simply

followed the orders in the case of Shivani Devi. However, in

order to draw the parity, it was also necessary to find out as to

whether there was complete unanimity of fact and especially as

to whether the assessee was also a partner in the firm. Since

this aspect is totally glossed over and ignored by the Tribunal,

we are of the opinion that the case of Shivani Devi could not

have been blindly followed without ascertaining the aforesaid

fact.

10. For the above reason alone, we set aside the orders passed by

the Tribunal and remit the case back to the Tribunal to arrive

at a finding to the aforesaid effect and then consider as to

whether the case of Shivani Devi is applicable to the facts of

this case or not.

11. This appeal is disposed of in the aforesaid terms.

(A.K. SIKRI) JUDGE

(M.L. MEHTA) JUDGE APRIL 06, 2011 pmc