2023 (9) TMI 796 - AT - Income Tax

Rectification u/s 154 - main grievance of the assessee is that it has earned long term capital gain from the sale of shares which has been brought to tax by the AO, and as per assessee, the same ought not to have been taxed because the said income is exempt u/s 10(38) - dismissal of appeal against order passed u/s 154 as appellant has not accepted the assessment order and filed an appeal against the order sought to be rectified, therefore he cannot ask for rectification of assessment order - HELD THAT - We are of the considered view that this matter need to go back to the file of AO for fresh consideration of the matter, and assessee is directed to produce all the relevant records/evidences to prove that the assessee is entitled for exemption from tax on long term capital gains earned on the sale of shares as is stipulated u/s 10(38). Thus, without commenting on the merits of the issue, the matter is restored back to the file of AO for fresh consideration of the entire matter, after giving proper opportunity of hearing to the assessee. Section 10(38) clearly lays down conditions for exemption, and if the assessee fulfills all the conditions, then the assessee is entitled for exemption on submission of relevant evidences, and it does not requires long drawn reasoning, and hence it could not be said that the issue cannot be adjudicated u/s 154. Thus, the appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
The issues involved in this case are the dismissal of the rectification application under section 154 of the Income Tax Act, 1961 by the Assessing Officer and the subsequent dismissal of the appeal by the Commissioner of Income Tax (Appeals) against the rectification order.

Issue 1: Dismissal of Rectification Application under Section 154
The assessee filed a rectification application under section 154 of the Act, which was dismissed by the Assessing Officer on the grounds that no documentary evidence was provided to support the claim. The AO rejected the application for want of verification, stating that the income arising from transfer of equity shares should be included in the total income of the assessee. The AO noted that no documentary evidence was submitted during the assessment proceedings or with the application. The rectification request was dismissed for lack of verification.

Issue 2: Dismissal of Appeal by Commissioner of Income Tax (Appeals)
The assessee then filed an appeal before the Commissioner of Income Tax (Appeals) against the dismissal of the rectification application. The Commissioner dismissed the appeal, stating that the appellant had not accepted the assessment order passed by the AO, and therefore could not seek rectification based on that order. The Commissioner held that since the issues emanated from the assessment order which the appellant had not accepted, the rectification request was rightly dismissed. The appeal was dismissed by the Commissioner of Income Tax (Appeals).

Judgment:
The Tribunal directed the matter to go back to the file of the Assessing Officer for fresh consideration. The Tribunal noted that the assessee claimed exemption under section 10(38) of the Act for long term capital gains earned on the sale of shares. Both parties agreed that the matter should be reconsidered by the AO, with the assessee providing complete details and evidence of the sale and purchase of shares, including compliance with Securities Transaction Tax (STT) requirements. The Tribunal ordered the assessee to furnish all relevant records and evidence to prove eligibility for exemption from tax on long term capital gains. The Tribunal allowed the appeal for statistical purposes, directing the AO to reexamine the issue and consider the assessee's claim for exemption under section 10(38). The appeal of the assessee was allowed for statistical purposes, and the matter was restored back to the file of the AO for fresh consideration.