SMITA JAWAHARLAL SHAH,MUMBAI vs. I.T.O., WARD-19(3)(3), MUMBAI

The assessee is an individual deriving income from business, capital gains and other sources. The assessee filed the return of income for the AY 2015-16 on 31.08.2015 declaring a total income of Rs. 2,96,940/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. In the return of income the assessee has declared a Long Term Capital Gain (LTCG) of Rs. 9,97,28,981/- and claimed the same as exempt under section 10(38) of the Act. The Assessing Officer (AO) called on the assessee to furnish the details pertaining to the LTCG. After perusing the details furnished by the assessee the AO noticed that a transaction amounting to Rs. 23,74,520/- carried out through broker code 11815 (M/s Harley Securities Pvt. Ltd.) whereof sale of shares of various companies and that the assessee has not included the gain from the said transaction in the return of income. The AO issued a notice to show-cause as to why the above transaction can not be treated as unexplained in the hands of the assessee. The assessee in response filed a detailed reply along with the documentary evidences and submitted that due oversight the transaction through the M/s Harley Securities Pvt. Ltd. was omitted to be included in the return of income. The assessee further submitted that the LTCG is exempt under section 10(38) and prayed that the impugned transactions may be added to the income of the assessee and the exemption be granted under section 10(38) of the Act. The AO after perusing the details furnished by assessee held that the assessee cannot claim exemption otherwise than by way of filing the revised return of income. In this regard the AO placed reliance on the decision of the Hon'ble Supreme Court in the case of Goetz India vs. CIT 244 ITR 323 (SC). Accordingly, the AO added the amount of Rs. 23,74,520/- as LTCG in the hands of the assessee. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) pass an ex-parte order confirming the addition made by the AO stating that the assessee has not responded to the various notices issued by the CIT(A).

The ld. AR submitted that the assessee is a senior citizen aged about 86 years and was not fully aware of the appellate proceedings pending before the CIT(A). The ld. AR further submitted that the appeal was filed way back in 2017 and only when the Chartered Accountant (CA) was checking the ITBA Portal came to know that the appeal has been disposed of by the CIT(A). Accordingly, the ld. AR submitted that the non-appearance before the CIT(A) was not intentional. On merits the ld. AR submitted that the assessee has furnished all the relevant details including the broker note etc. before the AO and the only reason for denying the exemption under section 10(38) was that the same cannot be claimed without filing a revised return. The ld. AR submitted a Paper Book containing all the relevant details evidencing the transaction (page 1 to 16 of PB) and prayed that the same may be considered for allowing exemption under section 10(38).

The ld. DR on the other hand vehemently argued that the assessee has been non-cooperative and does not responded to the notices issued by the CIT(A). The ld. revised return of income and accordingly supported the order of the AO.

We heard the parties and perused the material on record. The assessee omitted to include the following transaction while filing the return of income towards LTCG.

We notice that the transactions in the above table are supported by the Contract Notes (page 2 to 9 of PB) and that the assessee has paid STT on all the transactions. From the perusal of the AO's order we notice that the AO has made the addition under the head "LTCG" and has denied the benefit under section 10(38) only for the reason that the same cannot be done without filing a revised return. We further notice that the AO has not recorded any adverse findings with regard to the documents filed by the assessee with regard to the LTCG. Therefore, considering the facts and circumstances of the case and the material submitted before us, we are of the view that the transactions towards which the addition is made by the AO under the head LTCG are eligible for exemption under section 10(38). Accordingly, we direct the AO to allow the exemption to the assessee.

In result, the appeal of the assessee is allowed.