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2024 (8) TMI 1498 - AT - Income TaxRevision u/s 263 - Disallowance of LTCG - HELD THAT - Admittedly, the appeal against the main addition on account of disallowance of LTCG is pending before the CIT(Appeals) and therefore in view of the decision rendered in the case of Smt. Renuka Philip 2018 (12) TMI 129 - MADRAS HIGH COURT wherein it was held that the assumption of jurisdiction u/s 263 of the Act on a smaller issue, based on the larger issue is un-sustainable, the impugned order is un-sustainable . Even from the statement and relevant answers given by the Assessee, it clearly appears that the Assessee is well acquainted with the investment in shares and regularly investing in the share market and sold the shares when the price of the shares were increased substantially. Nowhere from the statement recorded u/s 131 of the Act, it appears that the Assessee has ever paid any commission/expenses as alleged by the PCIT for obtaining the said bogus LTCG. Considering in totality specifically the statement of the Assessee recorded by the AO u/s 131 of the Act as re-produced in the original assessment order and the fact that the main/larger issue/addition on the basis of which the Ld. PCIT has alleged that the Assessee has paid commission, is pending for adjudication before the Ld. CIT (A), we are inclined to set aside the impugned order, consequently the same is set aside. Appeal filed by the Assessee stands allowed.
Issues:
Challenge to order under section 263 of the Income Tax Act for disallowance of Long Term Capital Gain (LTCG) claimed under section 10(38). Analysis: The appeal was filed against the order dated 30.10.2023 by the Ld. Principal Commissioner of Income Tax under section 263 r.w.s. 254 of the Income Tax Act, 1961 for the A.Y. 2011-12. The Assessing Officer made an addition on account of disallowance of LTCG claimed u/s 10(38) of the Act related to a share transaction. The Ld. PCIT held the assessment order as erroneous under section 263 without verifying the commission expenses allegedly paid by the Assessee for obtaining the LTCG. The Ld. PCIT directed the AO to examine the issue of commission expenses and make necessary disallowance/addition after conducting proper inquiries and giving the Assessee a chance to be heard. The Assessee contended that the Ld. PCIT's order was unsustainable citing judgments from the Hon'ble High Courts of Madras and Delhi. The Assessee emphasized being a regular investor in shares, not monitoring individual company finances, and not paying any commission for earning the LTCG. The Ld. D.R. supported the Ld. PCIT's order. After hearing both parties and reviewing the material, the Tribunal noted that the appeal against the main addition was pending before the CIT(Appeals). Citing the decision in the case of Smt. Renuka Philip, the Tribunal found the assumption of jurisdiction under section 263 on a smaller issue based on the larger issue as unsustainable. The Tribunal observed that the Assessee was well-versed in share investments, did not appear to have paid any commission for the LTCG, and the main issue was pending adjudication before the CIT(A). Consequently, the Tribunal set aside the Ld. PCIT's order, allowing the Assessee's appeal. In conclusion, the Tribunal allowed the appeal filed by the Assessee, setting aside the Ld. PCIT's order dated 30.10.2023. The order was pronounced in open court on 26.08.2024.
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