2024 (6) TMI 1062 - AT - Income Tax

Intimation order u/s 143 for Denial of exemption u/s 10(38) - claim not made in proper column of return of income - as contended that law is well-settled that AO is required to grant deduction/exemption if law so mandates - basis of dismissal of appeal is stated that the assessee ought to have filed application u/s 119(2)(b) if the return of income had been processed u/s 143(1) HELD THAT - The inadvertent mistake of the assessee should not fasten it with liability of tax qua gains which is otherwise, not-taxable under law. Therefore, CIT(A) ought not to have dismissed the appeal on hyper technical basis. The impugned order is hereby, set aside and the assessment is restored to the file of AO for verification. If the AO finds that the capital gains is exempt under law, he would allow the claim of the assessee. Grounds raised by the assessee are accordingly, allowed for statistical purposes.

Summary

Issues:
- Appeal against order passed by Ld.CIT(A)/ADDL/JCIT(A)-2, Pune dated 19.01.2024 for AY 2018-19.
- Disagreement over the adjustment of Rs. 23,44,048 made by CPC under section 143(1).
- Claim of long term capital gain exempt under section 10(38) disputed.
- Allegation of illegal adjustment without opportunity to assessee.
- Dispute over taxation of exempt income due to inadvertent mistake in ITR.
- Challenge to dismissal of appeal by Ld.CIT(A) for not filing application under section 119(2)(b).
- Interpretation of law regarding granting of deductions/exemptions mandated by law.
- Assessment restored to AO for verification of exemption claim.

Analysis:

The appeal was filed against the order passed by Ld.CIT(A)/ADDL/JCIT(A)-2, Pune dated 19.01.2024 for the Assessment Year 2018-19. The primary issue revolved around the adjustment of Rs. 23,44,048 made by the CPC under section 143(1) of the Income Tax Act. The assessee contended that the adjustment was in relation to a claim of long term capital gain exempt under section 10(38) of the Act. The grounds of appeal highlighted the alleged illegal, arbitrary nature of the adjustment without proper appreciation of facts and opportunity to the assessee.

The facts leading to the appeal indicated that the appellant, a real estate development company, inadvertently made a mistake in choosing the group for exempt capital gain while filing the Income Tax Return. This mistake led to the CPC processing the return and making an adjustment of Rs. 23,44,048 under the head income from business and profession, resulting in the erroneous taxation of the exempt capital gain. The Ld.CIT(A) dismissed the appeal, stating that the assessee should have filed an application under section 119(2)(b) if the return had been processed under section 143(1) of the Act.

During the appeal before the Tribunal, the Ld. Counsel for the assessee argued that it was a mere mistake in filing the ITR and that the gains from the sale of equity oriented mutual fund were exempt under section 10(38) of the Act. The Ld. Sr. DR for the Revenue opposed these submissions, asserting that the assessee should not benefit from its own lapse. The Tribunal, after hearing the arguments, set aside the Ld.CIT(A)'s order, emphasizing that the AO should grant deduction/exemption mandated by law and that the assessee should not be held liable for tax on gains that are otherwise non-taxable.

In conclusion, the Tribunal allowed the appeal for statistical purposes, restoring the assessment to the AO for verification of the exemption claim under section 10(38) of the Income Tax Act. The judgment highlighted the importance of correctly applying tax laws and ensuring that inadvertent mistakes do not result in undue tax liabilities for taxpayers.