2023 (2) TMI 1277 - HC - Income Tax

Exemption u/s 10(38) claimed in revised return - scrutiny assessment - bogus LTCG on shares - revised return was filed by the Assessee claiming the above exemption which was denied - whether Revenue debarred from obtaining admissions/ statements during the course of a survey? - denial of an opportunity to cross examine the entry providers - CIT(A) was satisfied that the purchase of liquid shares have been made through Account Payee Cheques and the shares themselves were held in Demat Account for more than 12 months - ITAT noted the settled position in law that if an Assessee has wrongly offered an item of income or omitted to make a claim of deduction in the return, he was entitled to correct such a mistake by making a request to the AO to that effect - HELD THAT - ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO. In the considered view of the Court, the ITAT committed no error in concurring with the view of the CIT(A) and in dismissing the Revenue s appeal.

Summary

Issues:
1. Claim of exemption under Section 10(38) of the Income Tax Act, 1961.
2. Denial of opportunity to cross-examine entry providers.

Analysis:
1. The appeal by the Revenue was against the ITAT's order dismissing the appeal against the CIT(A)'s order for the AY 2014-15. The main issue was whether the Assessee could claim exemption under Section 10(38) after not doing so during assessment proceedings but seeking it during the appeal before the ITAT. The CIT(A) allowed the claim after considering the purchase of shares, holding period, and compliance with tax regulations. The ITAT highlighted the Assessee's right to correct mistakes in the return and the CBDT circular preventing obtaining statements during surveys.

2. The ITAT also found fault with the AO for relying on statements of entry operators to justify additions under Sections 68 and 69 of the IT Act. These statements were made in unrelated proceedings before the survey on the Assessee, depriving the Assessee of a chance to challenge or cross-examine the providers. The Court agreed with the ITAT that the principles of natural justice were violated, and the AO failed to consider the CBDT circular allowing revised returns for omitted claims. The ITAT's decision to dismiss the Revenue's appeal was upheld as no substantial legal question warranted interference by the Court.

In conclusion, the Court affirmed the ITAT's decision, emphasizing the Assessee's right to correct mistakes in returns and the importance of adhering to natural justice principles. The Revenue's appeal was dismissed, and no legal grounds were found to overturn the ITAT's ruling in favor of the Assessee.