2023 (11) TMI 636 - AT - Income Tax

Appeal allowed remanding matter to AO for admitting additional evidence on equity shares sale and LTCG exemption under section 10(38) (38)

Humuza Consultants Versus The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi

Humuza Consultants Versus The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi - TMI Issues Involved:1. Converting limited scrutiny to complete scrutiny.2. Non-admission of additional grounds by CIT(A).3. Treatment of long-term capital gain on transfer of shares as unexplained cash credit under section 68.4. Levy of tax under section 115BBE.5. Levy of interest and initiation of penalty proceedings.Summary:1. Converting Limited Scrutiny to Complete Scrutiny:The assessee's case was initially selected for limited scrutiny to examine expenses incurred for earning exempt income. However, the Assessing Officer (AO) expanded the scope to complete scrutiny, questioning the exempt income from the sale of listed shares. The Tribunal noted that the AO should have confined the scrutiny to the specified issues unless there was credible information to justify a wider inquiry.2. Non-admission of Additional Grounds by CIT(A):The assessee contended that the CIT(A) erred in not admitting additional evidence under Rule 46A. The Tribunal observed that the CIT(A) condoned the delay in filing the appeal but did not accept the additional evidence, citing ample opportunity given to the assessee during the assessment. The Tribunal found this inconsistent, especially since the assessee had provided a reasonable explanation for the delay, including non-functional email communication.3. Treatment of Long-Term Capital Gain on Transfer of Shares as Unexplained Cash Credit under Section 68:The AO treated the entire sale consideration of Rs. 393,39,28,268/- from the sale of Wockhardt shares as unexplained income under section 68, due to the assessee's failure to substantiate the acquisition, holding, and sale of shares with documentary evidence. The Tribunal noted that the assessee had provided substantial evidence, including demat statements and broker notes, which the AO did not adequately consider. The Tribunal directed the AO to admit the additional evidence and reassess the claim of exemption under section 10(38).4. Levy of Tax under Section 115BBE:The AO levied tax under section 115BBE on the unexplained income. Given the Tribunal's direction to reassess the evidence and the nature of the income, this issue would also be reconsidered in light of the new assessment.5. Levy of Interest and Initiation of Penalty Proceedings:The Tribunal did not specifically address the issues of interest and penalty, as these would be contingent on the revised assessment following the admission of additional evidence.Conclusion:The Tribunal allowed the appeal for statistical purposes, remanding the case back to the AO to admit the additional evidence and reassess the claim of exemption under section 10(38). The Tribunal emphasized the need for a fair examination of all relevant documents to ensure a just determination of the assessee's tax liability.