PCIT Vs Kishore Kumar Mohapatra (Orissa High Court)
The Revenue filed an appeal challenging the order dated 21 December 2021 of the Income Tax Appellate Tribunal (ITAT), Cuttack Bench, which had dismissed the Revenue’s appeal concerning Assessment Year 2014-15. The core issue sought to be raised was whether an assessee who made certain statements during a survey and did not claim exemption under Section 10(38) of the Income Tax Act during assessment could later seek such exemption at the appellate stage and request cross-examination of persons whose statements were used against him.
Read SC Judgment: SC Rejected Appeal as Findings on Section 10(38) exemption Were Purely Factual
The High Court noted that the ITAT had examined the factual background in detail. The dispute related to the assessee’s claim of long-term capital gains exemption under Section 10(38). During scrutiny assessment, the assessee filed a revised return claiming exemption. The Assessing Officer (AO) rejected the claim, after which the assessee appealed. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee’s position, holding that the purchase of shares was made through account-payee cheques, the shares were held in a demat account for more than twelve months, and the sale occurred on a recognised stock exchange after payment of securities transaction tax. Reference was made to a CBDT circular that prohibited the Revenue from obtaining admissions or statements during a survey. The ITAT also relied on the settled legal position that an assessee who wrongly offered income or omitted to claim a deduction in the return could correct such a mistake by requesting the AO to do so.
The ITAT further held that the AO’s reliance on statements of a “so-called entry operator” to make additions under Sections 68 and 69 was unsustainable. These statements were recorded on various dates in unrelated proceedings that had no connection with the assessee and were recorded prior to the survey conducted on the assessee. It was not disputed that the assessee had no opportunity to challenge or cross-examine the individuals whose statements were used against him.
After reviewing the submissions and the orders of the AO, CIT(A), and ITAT, the High Court held that both key issues—eligibility for Section 10(38) exemption and denial of opportunity to cross-examine—were factual matters. The Court agreed that violation of principles of natural justice affected the core of the assessment. It also observed that the AO had not considered the CBDT circular that allowed an assessee to file a revised return if a claim had been omitted.
The High Court concluded that the ITAT had committed no error in upholding the order of the CIT(A) and dismissing the Revenue’s appeal. Since no substantial question of law arose from the ITAT’s order, the High Court declined to interfere and dismissed the appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
