Anant Raj Ltd. v. Dy. CIT [ITAs No. 4736/DEL/2017, ITAs No. 5237 & 5238/DEL/2017, dt. 27-11-2020] : 2020 TaxPub(DT) 5007 (Del-Trib)

Cancellation of property sale agreement and assessee claiming refund of paid taxes by filing a revised return arising out of a reassessment and claiming it as a rectification petition

Facts:

Assessee sold certain properties and was in receipt of part consideration. Subsequently the sale agreement did not materialize as buyer was unable to pay the balance consideration. Meanwhile the assessee had returned the capital gains and the said capital gains/return was assessed in a scrutiny assessment. Assessee filed a suit and by means of a court settlement the said transfer was cancelled and the monies paid to the assessee were decreed to be retained by them. Mean while the revenue reopened the assessee's case citing that the property transferred was a depreciable asset and thus the entire consideration was subject to capital gains and not on indexed basis as erroneously claimed by the assessee. Assessee's plea was this was not a depreciable asset and no depreciation was claimed on the same. While filing the return for the reassessment assessee attached all the documents manually and filed a revised return whereby they withdrew the capital gains offered to tax assailing that the said agreement itself was cancelled and the monies which were decreed to be retained by court were Mesne profits for the deprivation of the said property by the buyer and thus is a capital receipt exempt from tax and whatever tax was paid on the said transfer was also claimed as refund. This reassessment on appeal was held to be incorrect by the Commissioner (Appeals). Besides this the Commissioner (Appeals) also held that since the reassessment itself was cancelled and held to be incorrect the revised return filed also cannot be considered and the only route to file revised return was under section 139(5) for which it was belated now. The plea of the assessee was this revised return may be considered as a rectification petition under section 154 was also not accepted by the Commissioner (Appeals). Aggrieved both parties appealed to ITAT -- revenue pleaded that the reassessment was erroneously struck down while assessee's claim was that the revised return filed pursuant to notice under section 147/148 be treated as rectification request and thus when no tax payable was actually payable and the compensation awarded was Mesne profits nothing can be taxed and they cannot be deprived of their equitable right to get refund of the wrongly paid taxes. On appeal --

Held in favour of the assessee that the reassessment deserved to be cancelled and thus the order of Commissioner (Appeals) required no interference. As regards the rectification request, the fact of the cancellation of the agreement by the court was all filed and since section 154 does not prescribe any format or applicable form the request of the assessee to retract the capital gains offered should have been considered by the Commissioner (Appeals) on principles of equity. To this extent they had a right of rectification and it is not necessary that it has to be an arithmetical mistake to fall in the scope of rectification all the time. Even non-heeding a court decreed judgment of cancelling a property agreement deserves rectification as mistake apparent from record. Thus the case was remanded to assessing officre to pass the rectification order and grant assessee refund of the wrongly paid taxes within 3 months from the ITAT order.