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Income Tax Appellate Tribunal, ALLAHABAD BENCH, ALLAHABAD
Before: SHRI ABY T. VARKEY & SHRI RAMIT KOCHAR
PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER:
This appeal filed by assessee, arising out of the appellate order passed by learned Commissioner of Income-tax(Appeals) (National Faceless Appeal Centre (NFAC))(Din & Order No. ITBA/NFAC/S/250/2022-23/1045998109(1)), dated 27.09.2022 , for assessment year 2008-09, which appeal in turn has arisen out of the order dated 04.08.2016 passed by ld. Assessing Officer(hereinafter called “the AO”) u/s 154 of the Income-tax Act, 1961. 2. The assessee has raised following grounds of appeal in Memo of Appeal filed with Income Tax Appellate Tribunal, Allahabad, which reads as under:- 1 Dr. Aroti Ghosh “1. BECAUSE the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in dismissing the appeal filed against order dated 04.08.2016 passed under section 154 of the Income Tax Act, 1961 on the ground that, the appellant has not accepted the assessment order and filed an appeal against the order sought to be rectified, therefore he cannot ask for rectification of assessment order, hence the AO has rightly dismissed the rectification request.
2. BECAUSE the learned Commissioner of Income Tax (Appeals) has failed to appreciate the facts that appellant has filed the petition for rectification of mistake born out from the assessment order itself, the learned assessing officer has summarily rejected the application without considering the merit of the application.
3. BECAUSE the order appealed against is contrary to the facts, law and principle of natural justice.”
3. The brief facts of the case are that the assessee case was selected for framing scrutiny under AIR regarding investment amounting to Rs. 59,84,641/- in purchase and sale of shares. The return of income was filed on 30.09.2008 declaring total income of Rs. 5,82,850/- . The reassessment proceedings were initiated by Revenue u/s 147, and notice u/s 148 was issued. Statutory notices were also issued. During reassessment proceedings u/s 147, it was observed by AO that the assessee has not declared transactions in the shares with Kotak Securities. The date wise transactions of equity and derivative segment were called by the AO from the Kotak Securities, which revealed that the assessee has made profit of Rs. 39,67,163/- towards long term capital gain on sale and purchase of shares through Kotak Securities . The said transactions were not reported by the assesse in the return of income filed with Revenue. The assesse has also not shown bank accounts in which aforesaid transactions were made . The AO made additions of Rs. 39,67,163/- as income in the hands of the assesse towards long term capital gains, vide reassessment order dated 31.03.2016 passed u/s 143(3) read with Section 148 of the 1961 Act.
Dr. Aroti Ghosh 4. The assessee filed rectification application under section 154 of the Act , which was dismissed by AO vide rectification order dated 4.8.2016 passed u/s 154 , by holding as under:- “In this case, the assessee has filed an application u/s 154 of I.T. Act, 1961 stating therein that the income arising from transfer of equity shares are not liable to be included to the total income of the assessee and requested to rectify the order passed u/s 148/143(3) dated 31.03.2016. Aggrieved from the order passed u/s 143(3) of 1.T. Act, 1961, the assessee filed an appeal before the C.I.T.(A) vide receipt no 000062 dated 26/04/2016 which is pending before the Learned C.I.T.(A), Allahabad. It is not out of place to mention here that during the course of assessment proceeding and also at the time of filing of application u/s 154 of I.T. Act, 1961 no documentary evidence in respect of her claim has been filed/produced before the undersigned. Therefore, the application filed u/s 154 is being rejected for want of verification.”
Still aggrieved, the assessee filed first appeal with ld. CIT(A) which was 5. dismissed by ld. CIT(A) , vide appellate order dated 27.09.2022, by holding as under:- “3. In this case return of income was filed on 30.09.2008 declaring total income of Rs.5,82,850/- Assessment was completed u/s.143(3) r.w.s.147 dated 31.03.2016 on total income of Rs.50,73,010/- Aggrieved with this order, appellant filed an appeal before CIT(A) and also filed a rectification application u/s.154 before the AO. The Assessing Officer rejected the application filed u/s.154 for want of verification. The appellant filed an appeal before CIT(A) against this order u/s.154. The present appeal is against rejection of this rectification order. The issues emanate from order u/s.143(3) r.w.s.147, which is pending for consideration. The appellant has not accepted the assessment order passed by AO, therefore, appellant cannot take this ground and ask for rectification on the basis of assessment order. The AO has rightly dismissed the rectification request.
In the result the appeal is dismissed.”
Still Aggrieved, the assessee filed second appeal before the Tribunal. At the outset, learned counsel for the assessee submitted that appeal against the reassessment order under section 143(3) / 148 is still pending with ld. CIT(A). It was further stated that this appeal has arisen from appellate order passed by ld. CIT(A) , dated 27.09.2022 which has arisen from rectification order under Section 3 Dr. Aroti Ghosh 154 r.w.s. 148/143(3) of the Act. The main grievance of the assessee is that it has earned long term capital gain of Rs. 39,67,163/- from the sale of shares which has been brought to tax by the AO , and as per ld. counsel for the assessee, the same ought not to have been taxed because the said income is exempt under section 10(38) of the Act. The ld. Sr. DR, on the other hand , submitted that the assessee has not produced any detail before the authorities below . It was submitted that exemption u/s 10(38) can be granted to the assessee provided Securities Transaction Tax(STT) has been paid on the sale of shares. Both the rival parties fairly agreed that the matter has to be restored back to the file of the AO for fresh consideration , and the assessee will submit complete detail/evidences of sale and purchase of the shares before the AO evidencing that the shares / securities sold were subjected to Securities Transaction Tax(STT), and the assesse has complied with all the conditions as stipulated u/s 10(38).
After hearing both the parties and considering the material on record as culled out above in this orde, we are of the considered view that this matter need to go back to the file of AO for fresh consideration of the matter, and assessee is directed to produce all the relevant records/evidences to prove that the assesse is entitled for exemption from tax on long term capital gains earned on the sale of shares as is stipulated u/s 10(38). Thus, without commenting on the merits of the issue, the matter is restored back to the file of AO for fresh consideration of the entire matter, after giving proper opportunity of hearing to the assessee. The assesse is directed to furnish all relevant evidences/ explanations before the AO in support of her claim for exemption of long term capital gains on sale of shares . The assesse is claiming exemption, and hence the onus is on the assesse to prove that she has earned long term capital gains on sale of shares , and she meets all the conditions for claiming exemption. Thus, the matter is restored back to the file of AO for fresh consideration of the entire issue denovo. Section 10(38) clearly lays down conditions for exemption ,and if the assessee fulfills all the conditions , then the assesse is entitled 4