KAMLESH BAHEDIA Vs. THE A.C.I.T.
INCOME TAX APPELLATE TRIBUNAL
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J.S.Reddy, Member (A) -
(1.) ITA No. 5328/Del/2010 filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), Ghaziabad dated 03.09.2010 for the A.Y. 2001 -02. ITA No. 5329/Del/2010 is filed against the order of the ld. Commissioner of Income Tax (Appeals), Ghaziabad dated 03.09.2010 for the A.Y. 2005 -06. In both these appeals, the First Appellate Authority confirmed the order passed by the Assessing Officer under Section 144(1)/147 of the I.T. Act for the A.Y. 2001 -02 and order under Section 143(3) for the A.Y. 2005 -06. ITA No. 5376/Del/2010 is filed against the order of the ld. Commissioner of Income Tax (Appeals), Ghaziabad dated 03.09.2010 wherein he dismissed the appeal of the assessee against an order passed under Section 154 by the Assessing Officer on 21.03.2005 on the ground that the appeal is infructuous.
(2.) FACTS in brief: The assessee is employed with M/s. Adobe Systems (India) Pvt. Ltd. The parent company M/s. Adobe Systems Inc has granted ESOP (Employees Stock Option Plan) to the assessee per terms of the employment. The assessee had sold the stock options in question on various dates. The details are given below: -
The assessee filed his return of income for the A.Y. 2001 -02 on 27.07.2001 showing taxable income of Rs. 24,62,455/ - which included long term capital gain of Rs. 19,70,467/ - on the alleged sale of the said shares, on which he paid at the rate of 10%. The Assessing Officer processed the return under Section 143(1) on 30.08.2002, wherein he treated the long term capital gain declared by the assessee at Rs. 19,70,470/ -, as short term capital gain, on the ground that, the said shares had not been listed in any of the recognized Stock Exchanges in India. The assessee filed an application under Section 154 and contended that the gain in question as long term capital gain. After considering the details submissions filed by the assessee, the Assessing Officer passed an order under Section 154 of the Act treating the gain in question as long term capital gain, which is taxable at the rate of 20% under section 112 of the I.T. Act.
(3.) THEREAFTER , notice under Section 148 of the Act was issued on 17.01.2006 reopening the assessment under Section 147 of the Act. The assessee objected to the reopening. The Assessing Officer completed the assessment under Section 144 read with Section 147 by computing the income of Rs. 24,62,455/ - on 25.07.2006. In this reassessment order, the Assessing Officer treated the gain in question a short term capital gain. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority rejected the contentions of the assessee on the issue of reopening, as well as on merits. He relied upon the decision of the Delhi Bench of the ITAT in the case of Ajay Pandey and held that the date of exercising option in the instant case was the same date as the date of sale of shares. He concluded that the period of holding is less then 12 months and hence the gain in question is short term capital gain. He further held that consequently, the assessee is not entitled for deduction under Section 54F and under Section 54EC. Aggrieved the assessee has filed appeal for the A.Y. 2001 -02. The grounds of appeal are as follows: -
"1. (i) The lower authorities had erred in not appreciating the facts and circumstances of the case or the submissions of the appellant and had further erred in treating the long term capital gain on the sale of the equity shares, which had been allotted under the Employees Stoci Option Plan to the employees of Adobe Systems of India Pvt. Ltd. by the parent company in the name of Adobe Systems Incorporated, USA at the then market rate as being the short term capital gain.
(ii) The lower authorities had erred in not appreciating that the said shares had been granted in October, 1998 as well as in August and November, 1999 and had been sold after one year in April, September, October and December, 2000 and as such the capital gain therefrom represented the long term capital gain rather than being the short term capital gain.
2. (i) The Assessing Officer had erred in issuing notice under section 148 of the Income Tax Act on 17.1.2006 without appreciating that his predecessor had held after appreciating the detailed submissions of the appellant to the effect that the capital gain on this account represented the long term capital gain liable to be taxed at the rate of 20% under section 112 of the Act vide his order dated 28.10.2002 under section 154 of the Act.
(ii) The Assessing Officer had erred in issuing the notice under section 148 of the Act on a mere change of opinion and as such the said notice was illegal, null and void.
(iii) The Assessing Officer had erred in issuing the notice under section 148 of the Act without there being any prima facie material in support thereof.
(iv) The Assessing Officer had erred in issuing notice under section 148 of the Act contrary to the settled position in law in the light of a number of High Court and Supreme Court judgments.
(v) The CIT (A) had erred without appreciating the true position in upholding the stand of the Assessing Officer.
3. The Assessing Officer had erred in passing the order under section 144/147 of the Act on 25.7.2006 without disposing of the objections which the appellant had filed against the reasons recorded for the issue of the notice and as such the assessment order was illegal in the light of the judgment of the Supreme Court of India in the case of GKN Driveshafts (India) Ltd. v. ITO : (2003) 259 UR 19 (SC).
"4 (i) The CIT(A) had erred in passing the order on 03.09.2010 even when the appellant was required to file submissions in respect of the order of Delhi Bench 'A' of the Income Tax Appellate Tribunal in the case of Ajay Pandey within a week's time after the copy of that order was given to the appellant on 07.09.2010 even the page No. 2 of the said appellate order was missing.
(ii) The CIT(A) had erred in passing the order on 03.09.2010 even when the appellant prepared the detailed submissions in respect of the order in the case of Ajay pandey in his reply of 13.09.2010.
(iii) The CIT (A) had erred passing the order without appreciating that Hyderabad Bench of the Tribunal in the case of Assistant Commissioner of Income Tax Vs. Dr. Dhurjati Gupta : (2010) 127 TTJ (Hyd.) 356 had held the stock option grants were capital assets and consequently capital gains therefrom after the period of four yeas were to be assessed as long term capital gains.";
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