2019 (3) TMI 637 - AT - Income Tax

Addition u/s 68 - Penny Stocks involving the shares of Mishika Finance - addition as documentation is self-serving - HELD THAT - Matter should be remanded to the file of the CIT(A) for examining the facts of the said cases and consider the submission of the ld. AR for the assessee. There is need for finding of fact on (i) the nature of the shares transactions; (ii) make-believe nature of paper work; (iii) Camouflage the bogus nature; and, (iv) the relevance of human probabilities etc. Thus, ld. AR mentioned that all the judgements are distinguishable on facts. The CIT(A) needs to compare the facts of all these cases under consideration and others, if any. Hence, the issue is required to be remanded to the file of the CIT(A). With these directions, the CIT(A) is directed to pass a speaking order after granting a reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues involved: Addition on account of Penny Stocks involving the shares of "Mishika Finance" for the assessment year 2015-16.

Detailed Analysis:

1. Issue of Addition on Account of Penny Stocks:
- The assessee raised a solitary issue in all four appeals regarding the addition on account of Penny Stocks involving the shares of "Mishika Finance". The shares were purchased from a company that was delisted long ago, and the share value had substantially increased. The Assessing Officer made additions in all four cases due to the off-market nature of the transactions. The CIT(A) confirmed these additions, citing the test of human probability applied in similar cases by the Hon'ble Punjab & Haryana High Court. The CIT(A) dismissed the appeal, concluding that the capital gain was manipulated and bogus, done only to claim exemption under Section 10(38).

2. Grounds of Appeal:
- The assessee appealed to the Tribunal, challenging the addition made by the Assessing Officer and the CIT(A). The grounds of appeal included disputing the addition under Section 68 as income from an undisclosed source, denial of exemption under Section 10(38), and asserting that the capital gains were genuine and supported. Similar grounds were raised in the other three appeals.

3. Tribunal's Decision:
- The Tribunal heard arguments from both sides. The assessee's counsel highlighted differences in facts from previous cases cited by the revenue authorities. The revenue's representative emphasized the nature of share transactions in Penny Stocks cases. The Tribunal reviewed the facts, orders of the lower authorities, and relevant judgments, including the one by the Hon'ble Delhi High Court. The Tribunal found that the shares were Penny Stocks, and while the documentation was not found erroneous, the Assessing Officer considered it self-serving. Considering the facts and judgments, the Tribunal decided to remand the matter to the CIT(A) for further examination. The Tribunal directed the CIT(A) to pass a speaking order after considering all submissions and comparing the facts of the cases. The appeals of all four assessees were allowed for statistical purposes.

4. Conclusion:
- The Tribunal's decision to remand the matter to the CIT(A) for a detailed examination indicates a need for a thorough analysis of the nature of share transactions, the authenticity of documentation, and the application of human probabilities in such cases. The Tribunal's decision provides an opportunity for the CIT(A) to reconsider the facts and make a well-informed decision based on the specific circumstances of the case.