No appeal lies u/s. 260A against an order passed u/s. 254(2) of Income Tax Act

Orissa High Court held that order passed under Section 254 (2) of the Income Tax Act, 1961 cannot be construed to be an order within the meaning of Section 260A to make it appealable before this Court.

Facts-

The respondent-assessee, who is an individual, filed its return of income by e-mode for the Assessment Year 2014-15 on 07.10.2014 by disclosing total income at Rs.15,19,420/-. Later on, a special survey was conducted u/s. 133A in the business premises of Shri Kishore Kumar Mohapatra and group of assessees on 22.07.2015. As a result of such survey, return of the respondent-assessee was selected for scrutiny of assessment under CASS.

Notably, family members of Shri Kishore Kumar Mohapatra featured in the list of beneficiaies who had taken accommodation entries from Kolkata based companies. Consequently, the respondent-assessee filed a revised return of income, on 24.09.2015, wherein the original claim of exemption u/s. 10(38) in respect of Long Term Capital Gain (LTCG) on shares was withdrawn and the entire income was offered for taxation as “Income From Other Sources”.

AO rejected the plea of the assessee and rejected the claim of exemption u/s. 10(38) on the LTCG on transfer of shares and proceeded to treat the same as “Income from Other Sources”, as the root of the issue, i.e., “share” issued by a bogus company was an instrument used only to colour the money as capital gain through accommodation entry, confirmed on the basis of statement given by the Directors of that bogus company. Mere payment of STT and holding of a piece of paper for more than 12 months can never justify earning as LTCG.