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Facts
The assessee appealed an order confirming the disallowance of a claim for exemption under Section 10(38) of the Income Tax Act, concerning the sale of 70,000 shares of Kailash Auto. The assessee claimed exemption on Rs. 14,42,732/- out of the sale consideration of Rs. 15,82,745/-.
Held
The Tribunal held that the issue is covered by previous decisions of coordinate benches, the Jurisdictional High Court, and the Supreme Court, which allowed similar claims for exemption under Section 10(38) in cases involving shares of Kailash Auto. The revenue did not challenge the factual findings in prior proceedings, leading to the acceptance of the assessee's claim.
Key Issues
Whether the assessee is eligible for exemption under Section 10(38) of the Income Tax Act on the sale of shares, and if the disallowance by the lower authorities was justified.
Sections Cited
10(38)
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
(�नधा�रण वष� / Assessment Year : 2015-2016) Shweta Agarwal, Vs ITO, Ward-1, Rourkela O-18, Civil Township, Rourkela Odisha-769004 PAN No. :AUHPA 4567 D (अपीलाथ� /Appellant) (��यथ� / Respondent) .. �नधा�रती क� ओर से /Assessee by : Shri Jaish Joshi, AR राज�व क� ओर से /Revenue by : Shri Vijay Singh, Sr. DR सुनवाई क� तार�ख / Date of Hearing : 01/12/2025 घोषणा क� तार�ख/Date of Pronouncement : 01/12/2025 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order passed by the ld. Addl/JCIT(A)-2, Mumbai, dated 17.12.2024 for the assessment year 2015-2016.
It was submitted by the ld. AR that the only issue in the assessee’s appeal is against the actin of the ld. CIT(A) in confirming the disallowance of the claim of the assessee u/s.10(38) of the Act in respect of 70,000 shares of Kailash Auto sold on 14.11.2015 for a consideration of Rs.15,82,745/- and a claim of exemption u/s.10(38) of the Act to an extent of Rs.14,42,732/-. It was submitted by the ld. AR that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in the case of Ridhi Bagaria, passed in order dated 18.05.2023. It was also submitted that very same issue has been upheld by the Hon’ble Jurisdictional High Court in the case of Depansu Mohapatra, in of 2022 along with other connected appeals vide order dated 08.02.2023.
In reply, ld. Sr. DR vehemently supported the orders of the AO and ld. CIT(A).
We have considered the rival submissions. A perusal of the order of the coordinate bench of the Tribunal in the case of Ridhi Bagaria, referred to supra, shows that the said decision is in regard to the shares of Kailash Auto and the coordinate bench of the Tribunal has followed the decision in the case of Mr. Ramprasad Agarwal also the decision in the case of Deepanshu Mohapatra & Ors and has held as follows :- 6. Now, I am faced with the decision of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra, referred to supra, wherein the coordinate bench of the Tribunal in the case of that assessee has also dealt with the shares in the case of M/s Kailash Auto Finance Ltd. and has been held to be eligible for exemption u/s.10(38) of the Act. In the said decision, there was another issue also considered insofar as in the course of survey the assessee therein had surrendered the claim of deduction u/s.10(38) of the Act and the coordinate bench had held that the retraction from the surrender was permissible. When the revenue filed appeal against the said decision of the coordinate bench of the Tribunal before the Hon’ble Jurisdictional High Court of Orissa, the question was raised as to whether after making certain statements in the survey the Assessee not claiming exemption under Section 10(38) of the income Tax Act, 1961 at the stage of the assessment proceedings, could the Assessee turn around and make such claim of wanting to cross-examine persons make adverse statements against the Assessee at the stage of the appeal before the ITAT?” The revenue did not challenge the factual finding of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra (supra) in regard to the claim of deduction/s.10(38) of the Act. By not challenging the merits of the addition, the revenue has accepted the decision of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra & Others (supra). Following the decision rendered in the case of Deepansu Mohapatra & Others (supra), the Single Member Bench of this Tribunal has decided the issue in the case of Rashi Agrawal, passed in order dated 04.05.2023 after having the following observations :-
7. I have considered the rival submissions. At the outset, the argument of the ld. Sr.DR that opportunity of cross- examination need not be granted, does not come out of the order of the AO or the CIT(A). Neither of the lower authorities have relied upon any statement or any investigation report for the purpose of the making the addition or confirming the same. It is an admitted fact that the assessee is doing the business of purchase and sale of shares. As pointed out by the ld. Sr. DR the assessee is doing purchases in IPOs. Thus, there is no dispute that the assessee earns her income from transaction in shares. Just because the assessee has shifted from the IPOs and has made a purchase of the shares in M/s Panchshul Marketing Ltd., would not shift the head of income from “capital gains” to the “Adventure in the nature of trade”, insofar as the assessee is an investor in the shares and is not in the business of dealing in shares. This being so, the decision relied on by the ld. Sr. DR would no more survive for consideration.
Now, I am faced with the decision of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra, referred to supra, wherein the coordinate bench of the Tribunal in the case of that assessee has also dealt with the shares in the case of M/s Kailash Auto Finance Ltd. and has been held to be eligible for exemption u/s.10(38) of the Act. In the said decision, there was another issue also considered insofar as in the course of survey the assessee therein had surrendered the claim of deduction u/s.10(38) of the Act and the coordinate bench had held that the retraction from the surrender was permissible. When the revenue filed appeal against the said decision of the coordinate bench of the Tribunal before the Hon’ble Jurisdictional High Court of Orissa, the question was raised as to whether after making certain statements in the survey the Assessee not claiming exemption under Section 10(38) of the income Tax Act, 1961 at the stage of the assessment proceedings, could the Assessee turn around and make such claim of wanting to cross-examine persons make adverse statements against the Assessee at the stage of the appeal before the ITAT?” The revenue did not challenge the factual finding of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra (supra) in regard to the claim of deduction u/s.10(38) of the Act. By not challenging the merits of the addition, the revenue has accepted the decision of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra & Others (supra). In these circumstances, the decision of the coordinate bench of the Tribunal on merits in the case of Deepansu Mohapatra (supra) have become final and binding on a Single Member Bench of the Tribunal as the said decision has been rendered by a Division Bench of this Tribunal. In view of the above, respectfully following the decision of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra (supra), which has also been affirmed