2013 (12) TMI 122 - AT - Income Tax

Reassessment u/s 147 - Escaped Income - Held that - The assessee has earned profit on sale of shares which is exempt under section 10(38) which was the part of profit and loss account - The failed to mention this amount in the schedule of exempted income - This cannot be the income escaped from assessment - This was claimed in the return of income, but, there was only a mistake in the code under which the claim was made - Assessee had not made any claim unconnected with the item of income alleged to have been concealed by it, nor it had raised a fresh claim genetically different from one which was made in the return of income - Exemption under Section 10(38) is a statutory allowance for long term capital gains arising out of sale of listed equity shares on which securities transaction tax have been paid - It is not a case of claim for deduction by way of expenditure - Assessee was entitled to such claim and it could not have been denied for a technical reason that the serial number against which the claim was made in the return of income was incorrect - None of the authorities had verified whether the amount effectively represented sale proceeds of listed securities - The issue was remitted back to the file of the Assessing Officer for fresh decision.

Issues Involved:

1. Validity of the addition of Rs. 12,64,99,367/- made by the Assessing Officer.
2. Whether the claim of exemption under Section 10(38) of the Income-tax Act, 1961 was validly made by the assessee.
3. The procedural correctness of making a fresh claim during the assessment proceedings without filing a revised return.

Detailed Analysis:

1. Validity of the Addition of Rs. 12,64,99,367/-:

The assessee, a company engaged in the travel service business, filed its return declaring NIL income. The return was processed under Section 143(1) of the Income-tax Act, 1961. Subsequently, a notice under Section 148 was issued for reopening the assessment on the grounds that the assessee had deleted a sum of Rs. 12,64,99,367/- instead of adding it back in the profit and loss account. The Assessing Officer considered this amount as "escaped income" and added it to the assessee's taxable income.

2. Claim of Exemption under Section 10(38):

The assessee argued that the amount of Rs. 12,64,99,367/- represented the profit on the sale of shares of South India Corporation (A) Ltd., which was exempt under Section 10(38) of the Act. The assessee claimed that the amount was included in the profit and loss account and the error was only in deducting it against the wrong code number in the return form. The CIT(Appeals) rejected this argument, stating that the assessee had not claimed any exemption under Section 10(38) in the original return and that a fresh claim could not be made other than through a revised return.

3. Procedural Correctness of Making a Fresh Claim:

The CIT(Appeals) held that the assessee's claim was a fresh one and could not be entertained without a revised return, relying on the decision of the Hon'ble jurisdictional High Court in CIT v. Shriram Investments. The assessee contended that the claim was not fresh but was erroneously shown against a different serial number in the return. The Tribunal observed that the return showed NIL income, indicating that the claim was indeed there but was shown against the wrong code number. The Tribunal concluded that the claim was not fresh and was erroneously shown under a different serial number.

Tribunal's Decision:

The Tribunal noted that the assessee had provided sufficient records to show that the income arose from the sale of listed shares, which were exempt under Section 10(38). The Tribunal held that the claim was not fresh and the mistake was only in the code number. The Tribunal set aside the orders of the authorities below and remitted the issue back to the Assessing Officer for verification of whether the amount represented long-term capital gains from the sale of listed securities on which securities transaction tax had been paid. If verified, the assessee would be eligible for the exemption under Section 10(38).

Conclusion:

The appeal filed by the assessee was allowed for statistical purposes, and the matter was remitted back to the Assessing Officer for verification of the claim under Section 10(38) of the Income-tax Act, 1961.

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