2019 (9) TMI 1473 - AT - Income Tax

Bogus LTCG - company in which the assessee invested is a penny stock company - HELD THAT - 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 u/s 10(38) of the Act is remitted back to the file of the AO. AO shall examine the matter as directed by this Tribunal in the case of Kanhaiyalal Sons (HUF) 2019 (2) TMI 1640 - ITAT CHENNAI and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

Summary

Issues:
Appeal against order of CIT(A) regarding exemption under Section 10(38) for long term capital gains from sale of shares.

Analysis:
The appellant claimed exemption under Section 10(38) of the Income-tax Act for long term capital gains from the sale of shares. The Assessing Officer disallowed the claim based on an investigation report from the Directorate of Investigation, Kolkata, regarding the shares purchased in a penny stock company. However, the appellant was not provided a copy of this report, leading to a lack of clarity on the involvement of the appellant in promoting or inflating the shares of the company. The Tribunal referred to a similar case where the matter was remitted back to the Assessing Officer for reconsideration due to insufficient evidence and lack of opportunity for the appellant to respond to the allegations. Consequently, the Tribunal set aside the orders of the lower authorities and remitted the issue back to the Assessing Officer for a fresh examination.

The Tribunal emphasized the need for the Assessing Officer to establish the appellant's role in promoting the company, any relationship with the promoters, and involvement in inflating share prices. It directed the Assessing Officer to furnish the investigation report from Kolkata and any other relevant materials before deciding the issue afresh. The Tribunal's decision was based on the principle of providing a reasonable opportunity to the appellant to address the allegations and for the Assessing Officer to reconsider the matter with complete information.

Ultimately, the Tribunal allowed the appeal filed by the appellant for statistical purposes, indicating that the matter was being sent back to the Assessing Officer for a thorough re-examination. The decision was pronounced in court on September 4th, 2019, in Chennai.