COMMISSIONER OF INCOME TAX Vs. MYSORE CEMENT LTD

JUDGEMENT

(1.) THE Revenue has preferred this appeal against the order dated 09 -06 -2006 passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') which has upheld the order of the First Appellate Authority which in turn has set aside the reassessment order on the ground of limitation.

(2.) THE assessee is a Company engaged in the business of manufacturing of cements. The assessment under Section 143(3) of the Income Tax Act, 1961 (for short, hereinafter referred to as 'the Act') was completed on 28 -3 -1997 on the basis of return of income filed on 28 -11 -1996 declaring the loss of Rs.34,60,75,700/ - which included a sum of Rs.5,98,50,000/ - being long term capital loss. The assessee's case is that this capital loss is incurred on extinguishment of rights on warrants of M/s. Biria VXL Ind. The said capital loss was accepted in the scrutiny assessment and accordingly the assessment order was passed. Subsequently, the loss claimed as 'long term capital loss' was found to be incorrect and not in accordance with law, as there was no transfer of any capital asset as defined under the Income Tax Act, 1961 .The loss incurred is in respect of the subscription money paid and not on account of capital asset that was acquired and the same having been transferred during the previous year. Therefore, a notice under Section 148 of the Act was issued on 28 -3 -2022 which was duly served on the assessee.

(3.) LEARNED counsel for the Revenue assailing the impugned order contends that the amount claiming as long term capital loss is the amount paid by the assessee for purchase of shares. Only share warrant has been issued and no asset in law had been acquired and therefore, any loss sustained in the transaction would not constitute a long term capital loss. Though in the original proceedings, this amount was mentioned and claimed as particulars had not been furnished, the Revenue was unable to apply its mind and record its finding. It is the case of the assessee that there was no failure on their part to disclose fully and truly all material facts necessary for assessment and therefore limitation of 4 years period is applicable. The case falls under the First part of the proviso to Section 147 of the Act. Therefore, he submits that the case for interference is made out.