PCIT Vs Kishore Kumar Mohapatra (Supreme Court of India)
The Supreme Court considered a Special Leave Petition (SLP) arising from the Orissa High Court’s judgment concerning the Revenue’s challenge to an order of the Income Tax Appellate Tribunal (ITAT). The Supreme Court heard the petitioner’s senior counsel, condoned the delay, but found no grounds to interfere under Article 136 of the Constitution. The SLP was therefore dismissed, and all pending applications were disposed of. This left the High Court’s judgment intact.
Read Orissa High Court Judgment: Appeal Dismissed as Assessment Ignored Evidence of Genuine Share Transactions
The Orissa High Court’s decision related to the Revenue’s appeal against the ITAT order for Assessment Year 2014-15. The primary question presented by the Revenue was whether an assessee who made certain statements during a survey and who did not initially claim exemption under Section 10(38) during assessment proceedings could later make such a claim before the ITAT, including requesting cross-examination of persons whose statements were relied upon by the Assessing Officer (AO).
The High Court reviewed the ITAT’s findings and noted that the Tribunal had thoroughly considered the factual matrix regarding the assessee’s claim for long-term capital gains exemption under Section 10(38) of the Income Tax Act. During scrutiny assessment, the assessee filed a revised return claiming this exemption. The AO rejected the claim, but the Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee’s position. The CIT(A) found that the shares were purchased through account payee cheques, held in a demat account for more than twelve months, and sold through a recognised stock exchange after payment of securities transaction tax. The CIT(A) also referred to a CBDT circular that prohibited the Revenue from obtaining admissions or statements during a survey.
The ITAT further relied on settled legal principles allowing an assessee to correct an error where income was mistakenly offered or where a deduction was omitted in the original return. The Tribunal held that an assessee may request the AO to rectify such mistakes, and the AO should consider such requests.
A second major issue concerned the AO’s reliance on statements of alleged “entry operators” to make additions under Sections 68 and 69. These statements were recorded on different dates in unrelated proceedings and significantly, were recorded well before the survey conducted on the assessee. The Department could not dispute that the assessee had no opportunity to challenge or cross-examine the persons whose statements were used to justify additions. The ITAT held that this constituted a breach of the principles of natural justice.
The High Court, after hearing the Revenue’s counsel and examining the orders of the AO, CIT(A), and ITAT, concluded that both core issues—the assessee’s claim under Section 10(38) and the denial of an opportunity to cross-examine entry providers—were fact-based matters. The ITAT had validly accepted the assessee’s arguments, including that non-adherence to natural justice affected the root of the case. Additionally, the AO had overlooked the CBDT circular permitting revised returns when a claim was omitted.
The High Court found no infirmity in the ITAT’s reasoning and upheld the CIT(A)’s conclusions. It held that no substantial question of law arose from the ITAT order requiring judicial intervention. Consequently, the High Court dismissed the Revenue’s appeal.
Since the Supreme Court declined to interfere with the High Court’s judgment, the findings of both the CIT(A) and ITAT remain undisturbed, affirming that:
