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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
The captioned appeal preferred by the assessee is against the order of the learned Commissioner of Income Tax, Appeals Addl/JCIT(A)-7, Mumbai dated 28.10.2025 arising out of rectification order passed under section 154 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 11.12.2019 by the AO, CPC, Bengaluru concerning of the Assessment Year 2018-19.
Brief facts of the case are that the assessee is a private company, filed its original income tax return for the A.Y. 2018-19 on 29.10.2018, declaring a total income of Rs.21,62,580/-. The return was processed under section 143(1) of the Act on 23.10.2019, wherein the total income was enhanced to Rs.1,05,75,190/- by treating long-term capital gains of Rs.84,12,609/- on the sale of securities as business income, which was claimed as exempt under section 10(38) of the Act. The assessee filed a rectification application on 29.11.2019, but no relief was granted vide order dated 11.12.2019. Being aggrieved by addition, the assessee has preferred the appeal before CIT(A) who dismissed the appeal of the assessee by observing that the enhancement of income by treating the long-term capital gains as business income is justified and in accordance with the provisions of the Act and held that the rejection of the rectification application under section 154 of the Act is proper.
Aggrieved, assessee is in appeal before the Tribunal with the following grounds :
1.“The Ld. CIT(A) has erred both in law and in facts in upholding the validity of order passed by CPC u/s 143(1), based on the observations submitted by the JAO since the said Order has been passed ignoring the fact that rectification u/s 154 is applicable in the matter under consideration and the application was outrightly rejected.
2.The Ld. CIT(A) has erred both on facts and in law and in the circumstances of the case in confirming the addition of Rs.84,12,609/- by treating Long Term Capital Gain on sale of shares exempt u/s 10(38) as business income instead of exempt LTCG as per relevant provisions of the Act.
3.In order to rectify our clerical mistake in filing original ITR-6 wherein we inadvertently declared LTCG exempt u/s 10(38) under Sch-BP at Sl. No. 3(b) instead of Sl. No.5(c) we filed revised ITR-6 along with filing rectification application u/s154, however, the same have not been considered either by the Ld. CIT(A) or by Ld. JAО.
4.Further, the Ld. CIT(A) has erred on facts of the case by ignoring that we have duly disallowed the expense relating to exempt income in both, original as well as revised ITR filed by us, which has been used by the tax authorities as a basis to treat the disputed income as business income instead of LTCG exempt u/s 10(38).
5.The appellant craves leave to add, delete, modify / amend the above grounds of appeal with the permission of the Hon'ble appellate authority.”
At the outset, learned Counsel for the assessee submitted that assessee had claimed Long Term Capital Gain on sale of shares as exempt u/s 10(38) which was treated by the AO as business income instead of exempt LTCG. It is submitted that the said addition is on account of assessee’s clerical mistake in filing original ITR-6 wherein it inadvertently declared LTCG exempt u/s 10(38) under Sch-BP at Sl. No. 3(b) instead of Sl. No.5(c). It is submitted that the Ld. CIT(A) or by Ld. JAО did not the consider the revised ITR-6 along with rectification application u/s154.
Per contra, learned DR relied upon the order of AO.
We have heard the rival submissions and perused the material available on record. We find that the assessee before us has pleaded that there was a clerical mistake in filing the original ITR-6 wherein inadvertently, the LTCG was declared exempt u/s 10(38) of the Act under Schedule business profit at Sl. No.3(b) instead of Sl. No.5(c). The assessee has pleaded that the it has filed revised ITR-6 along with rectification application u/s 154 of the Act which was neither considered by the CIT(A) nor by the AO. Considering the facts of the case, we are of the considered view that in the interest of justice, the issue of claim of exemption u/s 10(38) of the Act, be set aside to the file of the AO. We therefore, direct that the revised ITR-6 along with the rectification application u/s 154 of the Act, may be considered afresh by the AO. The AO is directed to afford three effective opportunities to the assessee to file the evidence/documents and the assessee is also directed to avail opportunities as provided by the authorities below.
In the result, appeal filed by the assessee is allowed for statistical purposes.