2023 (11) TMI 636 - AT - Income Tax

Admission of additions evidences - Claim of exemption u/s 10(38) - Long term capital gain (LTCG) is arising on sale of listed equity shares - Production of additional evidence before the JCIT (Appeals) / CIT(Appeals) - Non-submission of the evidence supporting the sale of shares before the Assessing Officer since the notices were not sent to the functional email ids - HELD THAT - We see merit in the contentions of the AR since at an overall level, the evidences furnished by the assessee supports that there has been an investment and that the same is sold during the year for a consideration and the AO should have called for further details if not satisfied with evidences already furnished by the assessee. Therefore in our considered view the non-admission of additional evidence for the reason that the assessee did not furnish the documentary evidence in spite of giving several opportunities is not correct. Before the CIT(A) the assessee filed a petition for condonation of delay and also for admission of additional evidence. The assessee in both the petitions had stated that the notices being sent to the non-functional email id as the reason for delay in filing the appeal and for delay / non-submission of details before the AO - CIT(A) while condoning the delay has accepted the said submissions but did not consider same reason as sufficient cause for admission of additional evidence and has in the order has given a detailed finding in this regard - CIT(A) also relied on the remand report of the Assessing Officer where it is mentioned that the assessee despite having the evidences at their disposal wontedly did not submit the same. We are unable to appreciate this contention since there is no reason for the assessee to withhold submitting the required the details more so when the impugned addition is significant resulting in huge demand. In this regard we are also bound to take cognizance of the fact that the Hon'ble Bombay High Court has given a direction to decide the application under rule 46A which the CIT(A) has not considered in his order. In view of these discussions we are of the view that the CIT(A) is not correct in not admitting the additional evidence while upholding the addition made by the Assessing Officer. The matter remanded back to the AO with a direction to admit the additional evidences submitted by the assessee in connection with the sale of shares and allow the claim of exemption accordingly. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Converting limited scrutiny to complete scrutiny.
2. Non-admission of additional grounds by CIT(A).
3. Treatment of long-term capital gain on transfer of shares as unexplained cash credit under section 68.
4. Levy of tax under section 115BBE.
5. Levy of interest and initiation of penalty proceedings.

Summary:

1. Converting Limited Scrutiny to Complete Scrutiny:
The assessee's case was initially selected for limited scrutiny to examine expenses incurred for earning exempt income. However, the Assessing Officer (AO) expanded the scope to complete scrutiny, questioning the exempt income from the sale of listed shares. The Tribunal noted that the AO should have confined the scrutiny to the specified issues unless there was credible information to justify a wider inquiry.

2. Non-admission of Additional Grounds by CIT(A):
The assessee contended that the CIT(A) erred in not admitting additional evidence under Rule 46A. The Tribunal observed that the CIT(A) condoned the delay in filing the appeal but did not accept the additional evidence, citing ample opportunity given to the assessee during the assessment. The Tribunal found this inconsistent, especially since the assessee had provided a reasonable explanation for the delay, including non-functional email communication.

3. Treatment of Long-Term Capital Gain on Transfer of Shares as Unexplained Cash Credit under Section 68:
The AO treated the entire sale consideration of Rs. 393,39,28,268/- from the sale of Wockhardt shares as unexplained income under section 68, due to the assessee's failure to substantiate the acquisition, holding, and sale of shares with documentary evidence. The Tribunal noted that the assessee had provided substantial evidence, including demat statements and broker notes, which the AO did not adequately consider. The Tribunal directed the AO to admit the additional evidence and reassess the claim of exemption under section 10(38).

4. Levy of Tax under Section 115BBE:
The AO levied tax under section 115BBE on the unexplained income. Given the Tribunal's direction to reassess the evidence and the nature of the income, this issue would also be reconsidered in light of the new assessment.

5. Levy of Interest and Initiation of Penalty Proceedings:
The Tribunal did not specifically address the issues of interest and penalty, as these would be contingent on the revised assessment following the admission of additional evidence.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding the case back to the AO to admit the additional evidence and reassess the claim of exemption under section 10(38). The Tribunal emphasized the need for a fair examination of all relevant documents to ensure a just determination of the assessee's tax liability.