2022 (9) TMI 979 - HC - Income Tax

Revision filed u/s 264 - petitioner had filed a return of income within time wherein it claims to have inadvertently failed to seek exemption u/s 10 (38) in respect of shares sold in the stock exchange through recognised stock exchange brokers - HELD THAT - The conclusion of the revisional authority in this matter is erroneous in law. The claim of the petitioner under Section 10(38) is liable to be accepted subject to the claim being in order. Impugned order is set aside for the limited purpose of enabling R1 to call for a report from R2, and decide the question of exemption claimed, on merits.

Summary

Issues:
- Challenge to order rejecting application for revision under Section 264 of the Income Tax Act, 1961 for assessment year 2012-13.
- Claim of exemption under Section 10(38) for shares sold in the stock exchange.
- Rejection of application for revision on grounds of delay and merits.
- Misconceived reliance on a judgment regarding assessing officer's powers.
- Comparison with a previous case regarding the power of Commissioner under Section 264.
- Analysis of the power under Section 139(5) for filing a revised return.
- Conclusion on the erroneous decision of the revisional authority.

Analysis:
The judgment by the Madras High Court dealt with the challenge against an order rejecting an application for revision under Section 264 of the Income Tax Act, 1961 for the assessment year 2012-13. The petitioner had filed a return of income on time but failed to seek exemption under Section 10(38) for shares sold in the stock exchange. The petitioner claimed that the entire capital gain should be exempt as the required security transaction tax had been paid. However, the Principal Commissioner of Income Tax rejected the revision application citing delay and merits issues.

The court noted that the rejection on the ground of delay was incorrect as an application for condonation of delay had been submitted along with the revision petition. Additionally, the Commissioner had also rejected the claim on merit, referring to a judgment regarding the powers of an assessing officer in considering amendments to a return of income. The court clarified that the judgment relied upon was misconceived and did not apply to the Commissioner's powers under Section 264.

Furthermore, the court compared the present case with a previous matter where the power of the Commissioner under Section 264 was discussed. It was highlighted that the power under Section 264 is broader than that under Section 139(5) for filing a revised return. The court emphasized that the choice between the two remedies depends on the facts and legal position of each case.

Ultimately, the court found the conclusion of the revisional authority to be erroneous in law. The petitioner's claim under Section 10(38) was deemed acceptable, subject to the claim being in order. The impugned order was set aside to enable further consideration by the authority. The writ petition was allowed, and no costs were imposed in the matter.