2021 (8) TMI 974 - HC - Income Tax

Revision u/s 263 - assessee had omitted to disclose the long term capital gain - AO had failed to examine and consider the fact that the assessee had omitted to disclose the long term capital gains while computing his income - HELD THAT - By referring to the returns submitted by the assessee available a submission is made that the aforesaid conclusion is arrived at by the Principal Commissioner that there is merit in the claim that the Assessing Officer failed to examine and consider that the assessee had omitted to disclose the long term capital gains amounting to ₹ 5,30,257/- . Accordingly a submission is made that the conclusion of there being an erroneous assessment is absent. Counsel also raises the submission that the aforesaid items are covered under the provisions of Section 10(38) of the IT Act wherein itself there is a provision that the aforesaid items are exempted from payment of income tax and even if there is any discrepancy in the return submitted by the assessee, the same would not be prejudicial to the interest of revenue. We find that a prima facie case has been made out by the petitioner. Considering the balance of convenience and irreparable loss that the petitioner may suffer, further process pursuant to the order dated 24.03.2021 under Section 263 of the IT Act shall remain stayed until further order(s).

Summary

Issues:
Notice under Section 263 of the Income Tax Act 1961 regarding alleged erroneous assessment and prejudicial interest of revenue.

Analysis:
The petitioner received a notice dated 24.03.2021 for a revision proceeding under Section 263 of the Income Tax Act, claiming the assessment made on 28.12.2018 was erroneous and prejudicial to the interest of revenue. The notice highlighted a discrepancy in the long term capital gains (LTCG) from the sale of shares, indicating an amount of ?5,30,257 not brought to tax. The petitioner argued that this amount was clearly stated in the income tax return submitted, and the Principal Commissioner concluded that the Assessing Officer failed to consider this omission. Furthermore, the petitioner contended that the items in question were exempted under Section 10(38) of the IT Act, and any discrepancy would not be prejudicial to revenue.

The petitioner's counsel, Dr. Saraf, referred to the return submitted by the petitioner, emphasizing the LTCG loss of ?5,30,257, which, when deducted from the total LTCG, resulted in a balance of ?31,58,782. Dr. Saraf pointed out that the Principal Commissioner's conclusion was based on the absence of an explanation from the assessee regarding the discrepancies, leading to a decision to rely on available records. The counsel argued that the assessment should not be deemed erroneous as the LTCG amount was disclosed in the return, and the Assessing Officer's failure to consider this fact was highlighted.

The High Court acknowledged the prima facie case made by the petitioner, considering the balance of convenience and the potential irreparable loss the petitioner might face. Consequently, the court ordered a stay on further proceedings pursuant to the Section 263 order until further directives. The respondents were directed to file an affidavit explaining the submissions made by the petitioner's counsel within six weeks for the next hearing.