Form 3CEA not filed with ITR, but filed before Final Order: ITAT allows Claim of long-term capital loss u/s 50B of Income Tax Act [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) allowed the claim of the long-term capital loss under Section 50B of the Income Tax Act, 1961 when the Form 3CEA was not filed with the income tax return (ITR) but was filed before the final order.

The assessee is a Limited Company and its case was selected for complete scrutiny assessment under the E-assessment Scheme, 2019 on the issue of capital gain/loss from slump sale and capital gain/income on the sale of the property. NIL income was declared in the e-return filed. Notices under Sections 143(2) and 142(1) of the Income Tax Act were issued through the e-filing Portal and were duly served upon the assessee.

The Assessing Officer observed that the tax at source at Rs.13,25,000/- has been deducted under Section 194IA of the Income Tax Act by Mahalaxmi Wellman Fuel LLP on the sale consideration of immovable property sold by the assessee.

It was noticed that Schedule CG of the Income Tax Return, long-term capital loss from slump sale is declared at Rs.6,25,79,960/-. The Assessing Officer perused the provision of Section 50B of the Income Tax Act, which is a special provision for computation of capital gain in case of slump sale read with Section 2(42C) of the Income Tax Act. For falling under this section, the assessee has to obtain Form 3CEA as provided in Rule 6H of the Income Tax Rules and the said Form 3CEA needs to be filed along with the return of income.

The Assessing Officer was of the view that Form 3CEA was to be filed before the due date of filing of the return as specified under section 139(1) of the Act along with the return of income using a Digital Signature Certificate and in the absence thereof, the long-term capital gain/ loss from slump sale claimed under Section 50B of the Income Tax Act was disallowed and added to the income of the assessee.

The counsel submitted that it is an admitted fact that Form 3CEA was not uploaded along with the return of income before the due date of filing of the return of income. The said form was duly placed before the Assessing Officer as well as Commissioner of Income Tax (Appeal) [CIT(A)] and even though reliance was placed on various decisions, where it has been consistently held that the requirement of declaration was mandatory in nature but the time limit within which the declaration was to be filed is directory in nature.

The Departmental Representative argued supporting both the lower authorities and stated that e-filing of the report was mandatory falling which alleged long-term capital loss deserves to be disallowed.

In the case of CIT vs. G.M. Knitting Industries (P) Limited the Supreme Court held that even if Form 3AA was not filed along with the return of income but same was filed during assessment proceedings before final order of assessment was made, then, the same would tantamount to sufficient compliance.

The Two-member bench comprising of Manish Borad (Accountant member) and Sonjoy Sarma (Judicial member) held that the assessee had e-filed the income tax return before the due date prescribed under Section 139(1) of the Income Tax Act, provided the details of the alleged claim in the Income Tax Return and duly furnished Form 3CEA during the course of assessment proceedings.

Further an affidavit has also been filed by the auditor mentioning the reason why the Form 3CEA was not uploaded on the E-Portal of Income Tax along with the return of income at the time of filing the return of income before the due date under Section 139(1) of the Income Tax Act.

The bench was of the view that both the lower authorities ought to have treated the furnishing of Form 3CEA as sufficient compliance for the purpose of allowing long-term capital loss claimed by the assessee under Section 50B of the Income Tax Act. Therefore, the findings of the CIT(A) was set aside and the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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