2024 (5) TMI 501 - HC - Income Tax

Bogus LTCG - bogus penny stock script purchases - exemption u/s 10(38) denied - I TAT deleted addition - HELD THAT - The shares of Sunrise Asian Ltd. are listed on Bombay Stock Exchange, shares have been purchased through D-mat Account and payment have been received through Banking Channel and Security Transaction Tax has been paid by Stock Exchange. Thus, all the conditions for availing exemption have been fulfilled. As truly contended that under Income Tax Act there is no provision which requires the Assessing Officer to investigate the genuiness of the shares because these share are listed, issued by the Company and records are maintained with the Register of Companies. Thus, these shares cannot be said to be bogus shares as have been issues and subscribed under the Companies Act. The revenue has failed to appreciate that how these shares can be termed as Bogus Shares, when these shares have been issued by the Company incorporated under the Companies Act by following the provisions and procedures prescribed under the Companies Act, 1956 Thus it is incorrect notion of the Revenue that these shares are bogus shares, on the contrary these shares are genuine and lawfully issued share by the company by following the law and procedure in this regard. The Assessing Officer has heavily relied upon report of Investigation Wing of Income Tax Department which was conducted in Kolkata in case of some of the Companies including M/s. Sunrise Asian Limited. This report has never been provided to the respondent at any stage of the proceedings nor filed by the department before ITAT or before this Court. It is settled law that no material can be used against the assessee without providing the assessee to examine it and, if required, to cross examine. Thus, there was violation of principles of natural justice. That on similar set of facts and in respect of the same share script of M/s Sunrise Asian Ltd. the Mumbai Bench of ITAT in case of (1) Narayan Ramchandra Rathi 2019 (8) TMI 1520 - ITAT MUMBAI (2) Dipesh Ranmeshchandra Vardhan 2020 (8) TMI 405 - ITAT MUMBAI and, (3) Anraj Hiralal Shah 2019 (9) TMI 719 - ITAT MUMBAI has dealt with the identical issue and decided in favour of the assessees. Thus no substantial question of law arises from the order of the ITAT requiring consideration by this Court.

Summary

Issues Involved:
The judgment involves the condonation of delay in filing appeals, question of admission, substantial question of law u/s 260A of the Income Tax Act, 1961, and the legality of addition made by the Assessing Officer.

Condonation of Delay:
The court allowed the applications for condonation of delay in filing the appeals, thereby condoning the delay. The order covered a total of 33 appeals which were heard analogously and disposed of by a common order due to identical substantial questions of law involved.

Substantial Question of Law:
The main issue revolved around whether the appeal involved any substantial question of law as required under Section 260A of the Income Tax Act, 1961. The appellant challenged the deletion of an addition made by the Assessing Officer, questioning the justification for the deletion and the involvement of the respondent in alleged manipulation of share prices.

Legality of Addition:
The appellant contended that the ITAT erred in deleting the addition made by the Assessing Officer, arguing that the shares in question were not genuine and were part of a sham transaction. The respondent, on the other hand, claimed lawful exemption u/s 10(38) of the Act, stating that all conditions for exemption had been met and the shares were lawfully issued.

Judgment:
The court found no merit in the bunch of appeals and dismissed them, stating that no substantial question of law arose from the ITAT's order. It was held that the appeal did not meet the provisions of Section 260A of the Income Tax Act, 1961 for admission. The court referred to previous decisions by High Courts and the Apex Court to support its conclusion.