G.S. Pannu, Accountant Member - The captioned appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as 'the CIT(A)'] dated 19-07-2013, which in-turn has arisen from an order passed by the Assessing Officer u/s 154 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') dated 19-5-2010 pertaining to assessment year 2008-09.
2. In this appeal, assessee has raised the following Grounds of appeal:—
| "(1) |
On the facts and in the circumstances of the case and in law the learned Assessing Officer has erred in passing a rectification order u/s.154 of The Income tax Act, 1961 by taxing the Short Term Capital Gains on Sale of Equity Shares on which Securities Transaction Tax is suffered at Normal Rate instead of Special Rate as specified u/s. 111A of the Act. On the facts and in the circumstances of the case, the Short Term Capital Gains of Rs 4,20,550/- arising out of Sale of Equity Shares through a recognized Stock Exchange and on which Securities Transaction Tax (SIT) is suffered and thus should be taxed at Special Rate as specified under the Section 111A of the Income tax Act. Thus the appellant is appealing for relief against the unlawful act of the Assessing Officer (A.O.) by taxing the Short Term Capital Gains on which Securities Transaction tax is already suffered at the Lower Rate of 10% as per Section 111A of the Income tax Act, 1961 instead of the Normal Rates applicable to Individual as applied by the learned Assessing Officer. |
(2) |
On the facts and in the circumstances of the case and in law the learned Assessing Officer is unjust in taxing the Short Term Capital Gains on Sale of Equity Shares on which Securities Transaction Tax is suffered at Normal Rates instead of the Special Rates as specified under Section 111A of the Income tax Act, 1961 on the grounds that the Return of Income in Form ITR-4 had stated the "Nil" under item no.4(A) of the Part-B in the Computation of Total Income, which requires to state the Short Term Capital Gains on which the Special Rate of Income tax U/s.111 A is applicable. However, the Assessing Officer has conveniently ignored the fact that the said figure of Short Term Capital Gains on Sale of Equity Shares on which Securities Transaction Tax is suffered and thus is eligible for the Special Rates as applicable under Section 111A of the Income tax Act, 1961 was mentioned in Item No.2 of Schedule S1 - Income Chargeable to Income Tax at Special Rate and also the Rate of the Income tax applicable on such transaction in the same Return of Income in Form ITR-4 filed with the Assessing Officer. The Assessing Officer is unjustified in laying emphasis on the error that has been committed in filling the Return of Income while ignoring the correct tax treatment of such Income claimed by the appellant in the same Return of Income in Form ITR-4 filed by the appellant with the department. A copy of the Return of Income in Form ITR-4 as filed with the department is enclosed herewith for your ready reference. |
(3) |
On the facts and in the circumstances of the case and in law the learned Assessing Officer is unjustified in not giving appellant an opportunity to substantiate and/or prove that the Securities Transaction tax was suffered on the Sale of Short Term Capital Asset - Equity Shares. The Assessing Officer was determined to tax the Short Term Capital gains at Normal Rates without giving any opportunity to hear the appellant. Thus, the appellant appeals for an opportunity to be heard. |
(4) |
The benefit of Lower rate of tax on Short Term Capital Gains on Sale of Equity Shares on which Securities Transaction tax is suffered is provided because the Act does not intend to tax such transaction twice, once as Securities Transaction tax when the sale of Equity Shares are effected on a Recognized Stock Exchange and further as Capital gains while filing the Return of Income. So by taxing such gains at Normal Rates the appellant is paying double taxes firstly SIT when the Sale is affected on the recognized Stock Exchange and further when the Normal Rate of Tax which in case of the appellant is 33.99%, is applied on such Short Term Capital Gains. Thus, the appellant appeals against the unlawful act of the Assessing Officer. |
(5) |
The act of taxing Short Term Capital Gains on Sale of Equity Shares on which Securities Transaction Tax is suffered is devoid of any merit, arbitrary, uncalled for and bad in law, the appellant be given such relief or reliefs as prayed for." |
3. In this appeal, the only grievance of the assessee is that the short term capital gain of Rs. 4,20,550/- arising on sale of equity shares through a recognized stock exchange on which Securities Transaction Tax (STT) was levied has been wrongly taxed at normal rate, whereas, it should be taxed at special rate of 10% as specified u/s 111A of the Act.
4. The assessee had moved an application u/s 154 of the Act, seeking rectification of the aforesaid mistake but the same was rejected by the Assessing Officer vide order dated 11.08.2010. The plea of assessee did not find favour with the CIT(A) also and accordingly, assessee is in further appeal before us.
5. A perusal of the orders of authorities below reveal that the impugned income earned by the assessee has been subject to the normal rate of tax instead of concessional rate of tax provided u/s 111A of the Act on the ground that the return of income in Form No. ITR-4, furnished by the assessee did not contain such a claim in item no. 4) a) i) of the Part-B, in the computation of total income. The assessee does not dispute that such a mistake has occurred in the return of income but in the application moved u/s 154 of the Act, he pointed out that it was an inadvertent error because in the same return form while enumerating computation of tax liability on total income, assessee had calculated and paid tax on such income at concessional rate. Secondly, assessee also pointed out item no. 2 in schedule - S1, of the income tax return form, wherein, short term capital gain chargeable to concessional tax rate u/s 111A of the Act of Rs. 4,20,550/- has been filled up by the assessee. In the course of hearing before us. The Ld. Representative for the assessee has taken us through the various columns in the return of income Form ITR-4 and pointed out that stating of 'Nil' in item no. 4)a)i) of Part-B, of computation of total income was a mistake. Even otherwise, a reference has been made to page 36 to 49 of the Paper Book to point out the details of short term capital gain arising out of sale of equity shares through a recognized stock exchange on which STT has been paid. It is canvassed that such details clearly establish earning of short term capital gain of Rs. 4,20,550/-, which deserves to be taxed at the rate of 10% in terms of section 111A of the Act.
6. The aforesaid factual case set up by the assessee is not disputed by the Revenue. The order of the CIT(A) reveals that the claim has been rejected primarily on the ground that the short term capital gain of Rs. 4,20,550/- has been wrongly stated in the main portion of the return of income Form ITR-4, in part-B computation of total income, though the same has been correctly depicted in the annexures and other schedules annexed to the return of income Form ITR -4. The plea of the Revenue is that the information furnished in the schedules and annexures to the return cannot override the declaration made in the return form.
7. In our considered opinion, the approach adopted by the income tax authorities in the present situation is quite myopic and deserves to be repelled. The statutory provision of section 111A of the Act providing for a concessional tax rate on short term capital gain arising out of sale of equity shares through a recognized stock exchange on which STT has been paid, is not in dispute. It is also not in dispute that the assessee has successfully proved before the lower authorities that he has earned the income of Rs. 4,20,550/- which deserved to be taxed in terms of section 111A of the Act. In our view, the aforesaid undisputed features does not justify the stand of the Revenue in taxing such income under the normal rate of tax. Furthermore, the non mentioning of such income in one of the columns of the income tax return is to be understood as an inadvertent mistake because in the same form of return of income, at more than one place, assessee has shown such income to be entitled for concessional rate of taxation. In the aforesaid light, in our view, the CIT(A) erred in not allowing the claim of assessee for taxing the short term capital gain of Rs. 4,20,550/- as per the special rate specified u/s 111A of the Act. Accordingly, the order of CIT(A) is set aside and the Assessing Officer is directed to re-work the tax liability of the assessee after considering the short term capital gain of Rs. 4,20,550/- to be an income liable to be taxed in terms of section 111A of the Act.
8. In the result, appeal of the assessed is allowed.