The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) quashed the order of the assessing officer (AO) for rejecting the claim of long-term capital gain (LTCG) under section 10(38) of the Income Tax Act,1961 on grounds of non-submission of documents.
Ahmednagar Investments Pvt. Ltd, the appellant assessee filed two appeals against the order passed by the Commissioner of Income Tax (Appeals) for confirming the rejection of the claim of Long-Term Capital Gains (LTCG) by the assessing officer under section 10(38) of the Income Tax Act.
Neelkanth Khandelwal, the counsel for the assesseecontended that the scope of rectification of mistake under Section 154 of the Income Tax Act was limited to “mistake apparent from the record.” The AO cannot add new sources of income in the proceedings under this section and the Act provides canons for the reassessment and revision to address errors and income escaping assessment.
It was also submitted that the department must invoke the right provisions to ensure tax-liable income does not escape the tax net and that the provisions under different sections of the Act are not interchangeable. Also, the rejection of the claim of LTCG was not as per the law and is liable to be deleted.
The revenue department’s counsel, Ashok Kumar Kardam, fiercely opposed the contested order and asserted that the Commissioner had co-terminus authority with the AO. Any matter that the AO neglected to look over can be examined by the Commissioner of Income Tax (Appeals).
It was further submitted that the order passed under section 143(3) of the Income Tax Act merged with the order under section 154 of the Income Tax Act. Therefore, the Commissioner had rightly invoked the powers of enhancement and the rejection of the claim of LTCG was as per the law. Thetwo-member panel comprising Vikas Awasthy(Judicial) and S Rifaur Rahman (Accountant) held that the Commissioner’s exercise of the power of enhancement made an addition in respect of business income by disallowing the losses holding them to be fictitious and bogus and also made an addition in respect of the Long-Term Capital Gains which otherwise are exempted under the provisions of section 10 (38) of the Income Tax Act. Thus, liable to be deleted while allowing the appeal filed by the assessee.
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