SAMBHAVNATH INFRABUILD AND FARMS PVT. LTD,MUMBAI vs. DCIT CENT. CIR7(3), MUMBAI
What did the Tribunal hold?
The Tribunal held that a fresh claim made during assessment proceedings without filing a revised return cannot be entertained by the AO. However, the CIT(A) erred in not admitting the fresh claim made before him, as appellate authorities have the power to entertain such claims. The issue was remanded to the AO for examination.
What were the facts?
The assessee company inadvertently offered long-term capital gains of Rs. 4,58,20,496 as taxable, instead of claiming it as exempt under Section 10(38). The assessee requested the Assessing Officer (AO) to correct this mistake during assessment proceedings, but the AO rejected the claim as it was not made via a revised return. The CIT(A) upheld the AO's decision.
What were the issues?
Whether a claim for exemption inadvertently omitted in the original return can be allowed during assessment proceedings without a revised return, and whether appellate authorities can entertain such fresh claims.
Which sections of the Income-tax Act were involved?
Section 10(38),Section 143(3),Section 139(5),Section 251(1),Section 119(2)(b)
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Cases cited in this judgment(2)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- Goetze (India) Ltd. v. CIT1,842 citing284 ITR 323 · 2006 · SC
- 154 of the Act. (iii) ACIT v. Rupam Impex6 citing66 Taxmann.com 181 · 2016 · HC
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
This appeal is filed by Sambhavnath infrabuild and farms private limited [ Assessee/ Appellant] for assessment year 2017 – 18 against the order passed by The Commissioner of Income Tax, Appeals – 49, Mumbai [ The Ld CIT (A)] dated 30/9/2021 wherein appeal filed by the assessee against the order passed u/s 143 (3) of The Income Tax Act, 1961 (The Act) dated 25/11/2019 passed by the Asst Commissioner of Income Tax, Central Circle – 7 (3), Mumbai (The Ld AO) was dismissed.
“1. On the facts and circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) -49, Mumbai erred in upholding the action of the Learned Assessing Officer ('Ld AO') by not granting exemption under section 10(38) of the Income tax Act, 1961 ('Act') in respect of an amount earned of Rs. 4,58,20,496 which was inadvertently offered to tax in the return of income filed by the appellant.
On the facts and circumstances of the case and in law, the Hon'ble Commissioner of Income Tax(Appeals) -49, Mumbai erred in upholding the action of the Ld AO by not granting exemption under section 10(38) of the Act in respect of an amount earned of Rs. 4,58,20,496 by treating the same as fresh claim instead of revised claim.
3) The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
Fact shows that assessee is a company engaged in the business of construction of real estate. It filed return of income on 31/10/2017 at a total income of Rs 4 69,43,850/– Under normal provision and computed book profit u/s 115JB at ₹ 89,456,046/–.
Case of the assessee was selected for limited scrutiny Under CASS scrutiny system for two reasons (1) claim of any other amount allowable as deduction in schedule BP, 2) expenses incurred for earning exempt income.
During assessment proceedings, assessee submitted a letter on 10/10/2019 stating that out of inadvertent mistake, assessee has treated the long-term capital gain as taxable and offered to tax it in computation of income. Assessee requested that long-term capital
Assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT – A stating that long-term capital gain which is exempt has wrongly been offered by the assessee as a taxable, therefore, the learned AO should have reduced the income accordingly. Assessee further submitted even otherwise the appellate authorities have the power to allow fresh claim made during the assessment proceedings. The learned CIT – A held that it is an admitted fact that the assessee has not claimed the exemption in original return of income and neither filed any revised return of income. He further held that the claim that the impugned income was exempt from taxation within the meaning of Section 10 (38) of the act made by the assessee is a fresh claim and not a revised claim. The assessee has not claimed the said exemption in the return of income and neither filed any revised return and therefore acceptance of claim of the assessee tantamount to revision of the return of income itself. Accepting the submission of the assessee will amount to circumventing the provisions of the revision of the return of income and further assessee to a position of advantage against other assessees having made mistakes but there cases are not covered under scrutiny, which would not be proper. He further advised assessee to approach the central board of direct taxes u/s 119 (2) (b) of the act. He therefore held that additional claim of the
Aggrieved with that order assessee is in appeal before us. The learned authorised representative submitted a paper book containing 67 pages. He referred to page number one, which is the computation of the total income. He demonstrated that assessee has offered long-term capital gain of ₹ 45,820,496 however while claiming exemption u/s 10 (38), it did not mention any amount in that column inadvertently and therefore the total capital gain of ₹ 45,820,496 was included in the total income. He submitted that this mistake was an inadvertent mistake. He referred to page number 7 – 9 of the paper book wherein a letter dated 10 October 2019 is placed for making requests to the learned assessing officer to correct the mistake while limited scrutiny assessment proceedings were going on. He submitted the tax could not be levied on assessee at a higher amount or at a higher rate merely because assessee under a mistaken belief due to an error offered income for taxation at that amount or at that rate. For this proposition he relied upon the decision of the coordinate bench in case of ACIT versus Roopam Impex (2016) 66 taxmann.com 181 he submitted that the fact that mistake has occurred is beyond doubt and the lower authorities have also not doubted the same. By a mistake it is also, a fact that assessee has been charged at the higher rate of taxes. He also referred to the administrative instructions for guidance of income tax officers on matters pertaining to assessment dated 11/4/1955 wherein it has been stated that revenue should not take advantage of an assessee’s ignorance to collect more tax out of him then is legitimately due from him. He further submitted that the limited scrutiny methodology restricts the power of the assessing officer against making undue enquiries however fresh claim can be raised, as there is no bar.
He therefore submitted that the lower authorities are not justified in not granting the benefit of long-term capital gain which is wrongly offered by the assessee in its taxable income though exempt u/s 10 (38) of the act.
The learned departmental representative vehemently supported the orders of the lower authorities. He submitted that it is a case of a limited scrutiny; therefore, the assessing officer could not have looked into any other aspect of the assessment. He further stated that assessee had an option to file the revised return, which he did not of, and therefore merely by filing a letter, a claim cannot be entertained by the AO, as it is not in accordance with the law. He submitted that the honourable Supreme Court has already considered this aspect. He further submitted that even otherwise there is no evidence that the above sum is exempt u/s 10 (38) of the act. He therefore submitted that there is no infirmity in the orders of the lower authorities.
The reliance placed by the learned authorised representative on the decision of coordinate bench in case of ACIT versus Rupam Impex (supra) does not help the case of the assessee, as the facts of that case did not relate to the fresh claim made by the assessee during the course of assessment proceedings without filing revised return. It was a case of rectification application u/s 154 of the Act. Even in the present case, the administrative instructions dated 11/4/1955
Accordingly, ground number 1 of the appeal is dismissed.
Ground number 2 is with respect to the fresh claim before the learned CIT – A. As per page number 11 of the order of the learned CIT – A at serial number 2.6 the assessee has made without prejudice to the claim rejected by the learned assessing officer during the assessment proceedings, requested the learned CIT – A allow its claim. Naturally, the authority of the appellate authorities are not restricted to not to allow/entertain such a claim. In the present case assessee made such a request before the learned CIT – A who did not permit such additional claims because of the reason that according to him there is an alternative mechanism of recourse is available to the assessee by filing a petition before the authority u/s 119 (2) (b) of the act. No doubt, it is the discretion of the appellate authority whether to permit or not to permit such additional claims. However exercise of such discretion should be reasonable and in accordance with the law. According to the provisions of Section 251 (1) of the act, the learned Commissioner (appeals) has been granted the power of reducing the assessment. Merely directing assessee to relegate to an alternative remedy at the highest forum of CBDT is not proper by refusing to exercise his authority. It is also not certain whether the assessee is eligible to approach CBDT in the facts of this case or not. In fact, the redressal of the grievance of the assessee, if it is genuine, all authorities are duty-bound to redress it at first instance, if they are empowered to do so. We find that in this case,
We find that adequate details with respect to the earning of long- term capital gain by the assessee has been narrated by the learned CIT – A at paragraph number 2.2 of his order. However neither the AO nor the learned CIT – A has examined the same. Therefore, in the interest of justice, we direct the assessing officer to examine the nature of long-term capital gain earned by the assessee as well as its taxability and then decide the issue in accordance with the law.
Accordingly, ground number 2 of the appeal is allowed.
In the Result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 26.07.2022.
More judgments on Section 10(38)
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- Hetal Vinodchandra Sheth, Ahmedabad vs The ITO, Ward-5(3)(1), AhmedabadITA 2370/AHD/2025[2014-15]Status: Disposed16 Oct 2026AY 2014-15
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- Karan Dilipkumar Patel L/H of Late… vs Dy. Commissioner of Income Tax, Vapi…ITA 353/SRT/2024[2011-12]Status: Disposed14 Oct 2026AY 2011-12
- Jay Patel, Raipur vs ITO, Ward-3(1), RaipurITA 684/RPR/2026[2015-16]Status: Heard12 Oct 2026AY 2015-16
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