The Supreme Court dismissed the Special Leave Petition ( SLP ) filed by the Income Tax Department regarding the Long Term Capital Gain ( LTCG ) on shares. The apex court refused to condone the delay of 273 days.
The bench of Justices B V Nagarathna and Augustine George Masih has stated that “There is gross delay of 272 days in filing the special leave petition. The explanation offered is not sufficient in law to condone the delay. Hence, the application seeking condonation of delay is dismissed.”
The SLP stemmed from the judgment passed by the Orissa High Court on 8th February 2023. The bench heard the appeal with other similar cases. The crux of the matter revolved around the claim of LTCG on shares under Section 10(38) of the Income Tax Act. Initially, the assessee refrained from claiming this exemption during the assessment proceedings.
However, during the scrutiny assessment, a revised return was filed, seeking the aforementioned exemption. Despite the Assessing Officer’s rejection of the plea, the assessee pursued the matter before the CIT(A).
The CIT(A) meticulously examined the facts and found merit in the assessee’s claim. It was established that the shares were acquired through legitimate means, held for over 12 months, and subsequently sold through recognized stock exchanges, complying with all relevant regulations. Moreover, reference was made to a CBDT circular, which prohibited the revenue department from obtaining admissions or statements during surveys.
One of the key contentions before the ITAT was the reliance on statements from a purported “entry operator” to justify additions under Sections 68 and 69 of the Income Tax Act. These statements were recorded in unrelated proceedings and predated the survey on the assessee. Significantly, the department failed to provide the assessee with an opportunity to challenge these statements or cross-examine the individuals involved.
The ITAT’s decision highlighted the importance of adhering to the principles of natural justice. It held that denying the assessee the opportunity to rebut adverse statements infringed upon their rights and compromised the integrity of the assessment process. Furthermore, the ITAT emphasised the right of the assessee to rectify any mistakes in their returns, as per the CBDT circular.
Upon careful consideration of the arguments and reviewing the orders of the AO, CIT(A), and ITAT, the Orissa High Court concurred with the lower tribunals’ findings. It observed that both the denial of the opportunity to cross-examine witnesses and the failure to consider the CBDT circular were centred in the case. Consequently, the High Court upheld the ITAT’s decision, dismissing the Revenue’s appeals.
Following this, the Income Tax department lodged an SLP ( Special Leave Petition ) before the Supreme Court, accompanied by an application to excuse the 273-day delay, which was ultimately rejected. As a result, the special leave petition was also dismissed, with the question of law, if any, left open for future consideration.
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