COMMISSIONER OF INCOME TAX Vs. SASHI PRAKASH KHEMKA

JUDGEMENT

(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 Rs. 30 per share. The Assessee renounced this right in favour of third parties and had received a sum of Rs. 36 per share. This renunciation of his right resulted in short term capital gain of Rs. 36 per share, which was clearly shown as such in the income tax return filed by him amounting to Rs. 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 Rs. 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: