RRPR Holding Private Limited Vs DCIT (ITAT Delhi)
ITAT Delhi held that revised return cannot be filed to cover up deliberate omission etc. in the original return. Thus, claim of the Assessee towards incurring impugned capital loss and carryforward thereof vide the revised return is unsustainable.
Facts- The assessee is an Investment Holding Company set up to acquire and hold shares of NDTV Ltd. and its Group Cos. Pending completion of the assessment u/s. 143(3), the assessee filed revised return u/s. 139(5) of the Act. As per the revised return, the assessee claimed Long Term Capital Loss(LTCL) of Rs.206.25 crore arising on sale of shares together with Income Rs.4,17,005/- under the head “ income from other source” declared earlier in the original return.
AO also noted that as per section 139(3), for entitlement of carry forward of losses arising in the current assessment year, the loss return has to be necessarily filed within the time allowed for filing return under S 139(1) whereas in the instant case, the capital transactions resulting in huge loss has been claimed for the first time in the revised return filed beyond the time limit stipulated under S. 139(1) of the Act. The AO thus denied claim of LTCL for carry-forward and set off in subsequent assessment years.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- In Kumar Jagdish Chandra Sinha vs. CIT it is held that revised return cannot be filed to cover up deliberate omission etc. in the original return. Thus, from this perspective also, phraseology of S. 139(5) does not permit claim of capital loss by way of a revised return. The claim of the Assessee towards incurring impugned capital losss and carry-forward thereof fails on this count too.
The Assessee has failed to furnish any explanation whatsoever on the nature and character of transactions resulting in such capital loss. An unsubstantiated and uncorroborated claim is thus, in any case, untenable in law. Hence, on this score too, the claim does not meet the ingredients of provisions of S. 139(5) of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-XVIII, New Delhi [‘CIT(A)’ in short] dated 26.06.2014 arising from the assessment order dated 30.03.2013 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
2. The grounds of appeal raised by the assessee read as under:
“1. That the disallowance of carry forward of long term capital loss claimed on the sale of shares in the revised return of Rs.206,25,53,801/- as sustained by the Hon’ble CIT(Appeals) is arbitrary, unjust, unwarranted and untenable on various factual and legal grounds.
2. That the disallowance of interest / financial charges to the extent of Rs.26,44,176/-, incurred by the appellant company for acquiring the shares in NDTV Limited as sustained by the Hon’ble CIT(Appeals) is unjust, unwarranted and untenable on various factual and legal grounds
3. That the disallowance of interest to the extent of Rs.26,44,176/- by AO/CIT(Appeals) on the funds borrowed for the purpose of acquiring controlling stake in the Company, is not in accordance in law and the interest received on bank FDs has to be adjusted against the interest paid on borrowed funds, having a direct nexus and the remaining if any only can be taxed.”
3. Ground No.1 concerns eligibility of Long Term Capital Loss (LTCL) on sale of shares claimed by way of revised return filed under S. 139(5) of the Act.
4. Briefly stated, the assessee is an Investment Holding Company set up to acquire and hold shares of NDTV Ltd. and its Group Cos. The Assessee, in the instant case, filed its original return of income under S. 139(1) of the Act on 15.10.2010 declaring total income at Rs.4,17,005/- concerning Assessment Year 2010-11 in question. The original return so filed by the assessee was subjected to scrutiny assessment by issuance of notice under Section 143(2) dated 29.08.2011. Pending completion of the assessment under Section 143(3), the assessee filed revised return under S. 139(5) of the Act on 02.02.2012. The assessee claimed that it has filed revised return of income within the time limit prescribed under S. 139(4) of the Act and original return within the time limit prescribed under S. 139(1) of the Act. As per the revised return, the assessee claimed Long Term Capital Loss(LTCL) of Rs.206.25 crore arising on sale of shares together with Income Rs.4,17,005/- under the head “ income from other source” declared earlier in the original return. The assessee has thus claimed a carry forward of capital loss of Rs.206.25 crore as reported in the revised return. The Assessing Officer inter alia noted that no such loss arising on sale of share were claimed in the original return filed by the assessee. Subsequently, inquiries in respect of certain transactions entered into by the assessee were carried out by the Investigation Wing Delhi. Following the same, the assessee revised its return of income after lapse of 17 months and filed revised return of 02.02.2012 whereby the impugned Long Term Capital Loss (LTCL) was claimed. The Assessing Officer observed that such revised return is not a valid return and thus nonest in the eyes of law. The Assessing Officer made reference to Sections 80, 139(3) and other provisions of the Act and refused to admit the claim of Long Term Capital Loss and consequently carry forward thereof for set off against the income of the later years was denied. The AO noted that there is not even an iota of reference of any transaction involving any capital gains or capital loss in the original return. The AO also noted that as per section 139(3), for entitlement of carry forward of losses arising in the current assessment year, the loss return has to be necessarily filed within the time allowed for filing return under S 139(1) whereas in the instant case, the capital transactions resulting in huge loss has been claimed for the first time in the revised return filed beyond the time limit stipulated under S. 139(1) of the Act. The AO thus denied claim of LTCL for carry-forward and set off in subsequent assessment years.
5. Aggrieved by the non-admission of claim of Long term Capital Loss presented in the revised return, the assessee preferred appeal before the CIT(A). Before the CIT(A) as well, the assessee contended that once the assessee has filed original return on due date as prescribed under Section 139(1) of the Act, the assessee is entitled to file the revised return within the time limit prescribed under Section 139(5) of the Act. It was contended that revised return filed within time limit prescribed under Section 139(5) of the Act will substitute the original return filed earlier and the claim made in the revised return resulting in losses cannot be brushed aside. It was contended that the view taken by the Assessing Officer that the loss return must be necessarily filed within time limit allowed under Section 139(1) as provided in S. 139(3), to enable the assessee to claim carry forward thereof, is misdirected in law as a consequence of misconstruction of the provisions of the Act.
6. The CIT(A) however did not find merit in the plea of the assessee and determined the issue against the assessee and consequently confirmed the action of the Assessing Officer. The CIT(A) reiterated the conclusion of the Assessing Officer that in order to be entitled to carry forward the losses, the return has to be necessarily filed within time limit prescribed under Section 139(1) of the Act. However, the loss in the instant case, has been claimed by filing revised return under Section 139(5) of the Act, beyond the time limit prescribed under Section 139(1).
7. Further aggrieved, the assessee preferred appeal before the Tribunal. The ld. counsel for the assessee broadly reiterated the submissions made before the lower authorities and contended that where the original return albeit has been filed on or before the due date under Section 139(1) of the Act, the assessee is entitled in law to revise the return under Section 139(5) of the Act within due date prescribed therein. The assessee in the instant case has filed the original return as well as the revised return within due date prescribed under Section 139(1) and Section 139(5) respectively. Thus, the loss arising on sale of shares claimed as Long Term Capital Loss is not hit by the embargo placed under Section 80 of the Act. The ld. counsel relied upon the judgments rendered in the case of Pr.CIT vs. Babubhai Ramanbhai Patel (2017) 84 taxman.com 32 (Guj.); Dharampur Sugar Mills Ltd. vs. CIT, 90 ITR 236 (Alld) and the decision of the Co-ordinate Bench rendered in Ramesh R. Shah Vs. ACIT, ITA No.4312/MUM/2009 order dated 29.07.2011 to buttress the aforesaid proposition. The ld. Counsel thus submitted that the denial of carry forward of losses claimed in the revised return is opposed to the scheme of the Act as interpreted by the judicial dicta and hence requires to be reversed and the claim made towards Long Term Capital Losses by way of revised return requires to be admitted and the loss be directed to be carry forward for set off in accordance with law against the income arising in the subsequent assessment years.
7. The ld. CIT-DR on the other hand strongly relied upon the assessment order and the first appellate order. The ld. CIT-DR submitted that the loss return under Section 139(3) must be necessarily filed within the due date prescribed under Section 139(1) of the Act to avoid the rigors of Section 80 of the Act. In the instant case, the assessee has not claimed the losses in the original return at all. The losses claimed has come into vogue by virtue of revised return which was filed subsequent to the due date prescribed under Section 139(1) of the Act and thus the revised return seeking to make a new claim giving rise to losses cannot be allowed in defiance of the provisions of the Act regardless of the fact that revised return has been filed within the due date prescribed under Section 139(5) of the Act.
8.1. The ld. CIT-DR next submitted that the claim of capital loss has been made for the first time in the revised return and it is not a case where the claim of loss made in the original return has been modified in the revised return. The ld. CIT-DR referred to and relied upon the following decisions to support the addition of the Revenue.
