Exempt income not disclosed in ITR vis a vis
revision under section 263
CA V.K. Subramani
For the taxpayers when the income admitted is accepted by
the Department it provides relief for the reason that there is no uncertainty
with regard to tax liability. It may so happen that the case is selected for
scrutiny under section 143(3) and it amplifies the tension and anxiety of the
taxpayer. However, where the assessment is completed under section 143(3) it
provides again a big relief in case the returned income is accepted or a meagre
addition to the returned income is made. However, the disappointment may happen
when the higher authority upon seeing the assessment under section 143(3)
invokes revisionary jurisdiction contained in section 263.
The Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner may invoke jurisdiction under section
263. He may call for and examine the record of any proceeding under the Act in
the process. If such authority considers the order passed therein by the
Assessing Officer or the Transfer Pricing Officer (TPO) is (i) erroneous; and
(ii) prejudicial to the interests of revenue, he may pass an order as he deems
necessary including (a) enhancing or modifying the assessment or cancelling the
assessment and directing a fresh assessment; (b) modifying the order under
section 92CA i.e. order of the TPO; and (c) cancel the order passed under
section 92CA and directing a fresh order thereon.
The time limit for passing the order of revision is 2 years
from the end of the financial year in which the order sought to be revised was
passed.
In Karan Jain v. Union of India & Ors (2024) 465 ITR
1 (Gauhati) : 2024 TaxPub(DT) 2442 (Gau-HC) the assessee for the assessment
year 2017-18 filed ITR which was selected for limited scrutiny under Computer
Assisted Scrutiny Selection (CASS). The returned income was accepted
subsequently. Later, the Commissioner invoked section 263 for the reason that a
higher sum was shown as long-term capital gain in the capital account and
whereas it was disclosed less in the computation sheet. The income was
nevertheless exempt under section 10(38) of the Act. The assessee challenged
the revision proceedings under section 263 by filing a writ.
The court held that a revision under section 263 can be
initiated when the order passed by the Assessing Officer is erroneous and
prejudicial to the interests of revenue. Both the conditions have to be
satisfied for doing revision. The long-term capital gain is an exempt income
and the non-disclosure of the same would not result in prejudice to the
revenue. The net long-term capital gain was however shown in the ITR. There is
no tax liability in respect of such exempt income and there is no loss of
revenue. Accordingly, it was held that the invocation of power under section
263 is not tenable in law.