9911796707
TMI Blog2023 (11) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... estment consultants, stock brokers, under writers and to invest or subscribe for purchase or otherwise acquire or sale, etc. in shares or other securities issued by company or LLP or government body, etc. The assessee filed the return of income for A.Y. 2017-18 on 28/07/2017 wherein the assessee has declared an income of Rs. 68,43,07,135/- and an exempt income of Rs. 39,75,96,305/- as per below breakup:- Particulars Amount (INR) Income offered for tax 1. Interest income 2. Dividend income as per Section 15BBDA 2,53,29,565 65,89,77,570 Total income 68,43,07,135 Exempt Income 1. Capital gains on sale of listed shares 2. Dividend income as per Section 115O read with section 10(34) 39,65,96,306 10,00,000 Total Exempt Income 39,75,96,306 3. The return of the assessee was processed under section 143(1) of the Income Tax Act (the Act) and a tax demand was raised by CPC of Rs. 175,52,26,440/-. Subsequently, the case was selected for scrutiny for examination of expenses incurred for earning exempt income by issue of notice under section 143(2) dated 09.08.2018. The assessment was completed under section 143(3) where the income was assessed at Rs. 461,72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence to show as to why the profit on sale of shares is exempt under any section of the Act and as per the submissions of the assessee section 10(34) under which assessee claimed the exemption deals with dividends and not profit on sale of listed shares. Accordingly, the Assessing Officer treated the entire consideration of Rs. 393,39,28,268/- as unexplained income under section 68 of the Act. 6. Aggrieved, the assessee filed appeal before the CIT(A). There was a 68 days of delay in filing of appeal before the CIT(A). The assessee submitted before the CIT(A) that out of the two email ids given while filing the return of income only the email id [email protected] is only functional and that the other email id [email protected] was not functional. The assessee further submitted that the notices and the final order of assessment had been sent to the non-functional email id due to which the assessee was not aware that the assessment has been completed. It is only when the assessee received a call from the department regarding the outstanding demand the assessee came to know that the assessment order has been passed. It was also submitted that as soon as the assessee came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt from sale of shares of lNR 393,39,38,268 as Annexure 7 (at pages 25 to 27). The amount of consideration credited to the bank account of the assessee is exactly equal to the amount of net consideration indicated in the broker's note. 5. The Appellant prays that the additional evidence filed by it should be admitted on the following grounds: During the year under consideration, i.e. AY 2017-18, 54,00,000 shares of Wockhardt Ltd. were sold by the Appellant on Bombay Stock Exchange at the rate of Rs. 730/- per share. The Appellant received a total consideration of INR 393,39,28,267 on sale of 54,00,000 shares (after deduction of brokerage, taxes etc.). In the books of account of for the year under consideration, the aforesaid amount was credited to the Profit & Loss account since there was no cost of acquisition recorded by the Appellant in respect of those shares as the shares were received by way of gift. The equity shares of Wockhardt Ltd. were shown under the head "Investments" and, apart from the investment in preference shares of Wockhardt Hospitals Ltd., this is the only investment held by the Appellant. The Appellant filed its return of income for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emails became non-functional is devoid of reason 10. The CIT(A) dismissed the appeal by stating that - 6.9.11 Therefore, considering the totality of facts and circumstances of the case, the application for admission of additional evidence u/r 46A made by the appellant before the undersigned is hereby rejected. 6.9.12 Consequently, since the application for admission of additional evidence u/r 46A has been found to be wanting and the same has been rejected above, an adjudication on issues of merit on grounds of appeal related to addition of Rs. 393,39,28,262/- is not possible for the undersigned. In the absence of any additional fact/piece of evidence to be considered by the undersigned, the decision of the AO made at the assessment stage seems reasonable and the undersigned do not see sufficient reasons to interfere with that at this stage. Accordingly, the appeal of the appellant is dismissed." 11. The Ld.AR submitted that the assessee's case was taken up for limited scrutiny and in this regard drew our attention to page 131 of paper book where the notice under section 143(2) dated 09/08/2018 is placed which states that limited scrutiny for verification of expenses incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the stay also directed admission of additional evidence disposal of appeal. On merits, the Ld.AR drew our attention to the financial statement of the assessee (pages 2 & 3 of paper book) where the shares of Wockhardt Ltd have been reflected as investments under Schedule III to evidence that the share sold during the year under consideration is part of investments and that the gain on sale of the same is a long term capital gain exempt under section 10(38). The Ld.AR, therefore, submitted that the CIT(A) is not correct in rejecting the admission of additional evidence and making addition under section 68 merely for the reason that the document evidencing the sale of shares was not furnished before the Assessing Officer. 12. The Ld.DR, on the other hand, vehemently argued that there was a substantial delay in filing the details by the assessee before the AO that the notices sent to non-functional email id cannot be quoted as the reason as the assessee could have verified from the ITBA portal. The Ld.DR further submitted that all the details called for by the assessee pertained to the exempt income and, therefore, there is no conversion of limited scrutiny to full scrutiny. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a delay has filed the response on 17/12/2019 furnishing the details as have been called for. It is relevant to note that in the notices issued under section 142(1) the details called for, with regard income claimed as exempt, are details of investments made as on 31.03.2016 and 31.03.2017, exempt income earned during the year and the expenditure incurred to earn such exempt income. The assessee has furnished the said details twice once on 12/06/2019 and again on 17/12/2019 when the same details were called for by the Assessing Officer due to change in incumbent. Further the assessee had filed the bank statement as evidence for earning exempt income. Now coming to the additional evidences, the assessee filed the petition under rule 46A to produce additional evidences such as copies of delivery instructions slip for transfer of shares by the transferor to the assessee, declaration before SEBI that the assessee has acquired the said shares, Demat account statements evidencing holding of shares, broker note evidencing sale of shares and payment of STT, Demat account statement evidencing sale of shares. It is noticed that the Assessing Officer in the remand report stated that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under rule 46A which the CIT(A) has not considered in his order. In view of these discussions we are of the view that the CIT(A) is not correct in not admitting the additional evidence while upholding the addition made by the Assessing Officer. 16. The Assessing Officer in the assessment order has mentioned that the assessee has not disclosed the sale of shares under the head capital gains in Schedule CG of the ITR. On perusal of the records, we notice that though the assessee while disclosing the business income has excluded the capital gains, had not disclosed the same under the heard capital gains and the exemption under section 10(38) separately in the return of income. The lower authorities while denying the claim of the assessee that the gain arising is exempt under section 10(38) has not gone into the merits of the impugned transaction to examine computation of capital gains i.e. the sale consideration, period of holding, cost of acquisition etc. Further the additional evidences submitted by the assessee have also been not examined. Therefore we remand the issue back to the Assessing Officer with a direction to admit the additional evidences submitted by the assessee in co ..... 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