Adjust of one block of Fixed Asset against other cannot be said to be a arithmetical mistake

CA Sandeep Kanoi

Assessing Officer added last amount of short term capital gains to the tune of Rs. 54,67,547/- under section 50 of the Act. This comprised of a sum of Rs. 4,86,650/- qua factory building and Rs. 49,80,897/- relating to plant and machinery. The assessee sold the above stated assets, reduced sale consideration against WDV of the respective block of asset resulting in surplus which in turn was further adjusted against WDV of other blocks of assets. The Assessing Officer accordingly framed a regular assessment making all above stated disallowances/additions. He initiated impugned penalty proceedings as well alleging concealment and furnishing of inaccurate particulars of income against the assessee.

The CIT(A)’s findings under challenge qua this issue read as follows:

“6.4. The last ground on which penalty has been levied relates to computation of short term capital gain. It was noted by the Assessing Officer that the assessee had sold assets falling in block of building, plant and machinery and vehicles. After reduction of sales consideration out of WDV of respective block, there was surplus of sales consideration. The assessee adjusted surplus to the WDV of other block of assets instead of showing the same as short term capital gain. He held that as per the provisions of section 50 of the Income tax Act, if sales consideration of any assets exceeds full value of the particular block; such excess amount would be short term capital gain. The assessee had adjusted WDV of other block also against the surplus amount of sales consideration of assets falling in these blocks of assets which was out of the ambit of the provisions of section 50. As the assessee could not offer any explanation in this regard, the Assessing Officer computed the short term capital gain at Rs 54,67,547/-.

6.4.1 The appellant has submitted during the course of appellant proceedings that this was a mistake while computing the short term capital gains. It is not a case of suppression of short term capital gains but a bonafide mistake which had kept in while preparing the return of income.

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