2019 (11) TMI 1530 - AT - Income Tax

Bogus LTCG - Deduction under Section 10(38) denied - company in which the assessee invested is a penny stock company - HELD THAT - It is not brought on record how the assessee is involved in promoting the penny stock company and how the assessee involved in inflating the shares of the company. Moreover, the copy of the investigation report said to be received from the Investigation Wing of the Department at Kolkata was not furnished to the assessee. On identical circumstances, this Tribunal in the case of Kanhaiyalal Sons (HUF) 2019 (2) TMI 1640 - ITAT CHENNAI has remitted back the matter to the file of the Assessing Officer for reconsideration. This Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue raised by the assessee with regard to deduction under Section 10(38) of the Act is remitted back to the file of the Assessing Officer. Appeal of assessee is allowed for statistical purposes

Summary

Issues:
Appeal against order of Commissioner of Income Tax - Exemption claimed under Section 10(38) - Disallowance of long term capital gains - Reliance on investigation report - Opportunity to assessee - Remand to Assessing Officer.

Analysis:
The appeal pertains to the assessment year 2015-16 where the assessee claimed exemption under Section 10(38) of the Income-tax Act, 1961 for long term capital gains from the sale of shares. The Assessing Officer disallowed the claim based on the investigation report of Directorate of Investigation, Kolkata, which was not provided to the assessee. The counsel for the assessee requested an opportunity for the assessee to be heard by remitting the matter back to the Assessing Officer. On the other hand, the Departmental Representative relied on the orders of the Assessing Officer and CIT(Appeals.

The tribunal considered the submissions and found that the Assessing Officer disallowed the claim without establishing how the assessee was involved in promoting or inflating the shares of the penny stock company in which the investment was made. Citing a similar case, the tribunal decided to remit the issue back to the Assessing Officer for reconsideration. The tribunal emphasized the importance of providing the assessee with the investigation report and other relevant materials before deciding on the matter again. Therefore, the orders of both authorities were set aside, and the issue was remitted back to the Assessing Officer for a fresh decision after due consideration.

In conclusion, the tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to re-examine the matter following the guidelines set in the previous case. The decision was pronounced in court on 20th November 2019 in Chennai.