2022 (4) TMI 547 - AT - Income Tax

Maintainability of appeal against Disallowance on sale of shares - monetary limit fixed for filing appeal before ITAT/HC SLPs/Appeals before SC - Special Order of cases involving bogus Long Term Capital Gains (LTCG)/Short Term Capital Loss (STCL) through penny stocks from monetary limits Specified in any Circular issued under Section 268A - whether monetary limit issued vide Circular No. 23/2019 along with office memorandum dated 16.09.2016 are not applicable because in the case of the assessee, no long term capital gain/short term capital loss was claimed from impugned shares transactions? - HELD THAT - As categorically specified in the office memorandum that monetary limit fixed for filing appeal before ITAT/HC SLPs/Appeals before SC shall not apply in case of assessee claiming Long Term Capital Gain/Short Term Capital Loss through penny stocks and appeals/SLPs in such cases shall be filed on merit. Since, in the case of the assessee it is undisputed fact that assessee has shown Short Term Capital Gain of ₹ 1,95,500/- on total sale consideration of ₹ 6,97,000/- on the sale of 50,000 shares during the year under consideration and assessee has not claimed any Short Term Capital Loss, therefore we find merit in the submission of the assessee that this case of the assessee is not covered by the office memorandum dated 16.09.2019 which is specifically pertained to Short Term Capital Loss. Therefore, we don t find any merit in appeal of the revenue and the same stand dismissed. Appeal of the revenue is dismissed.

Summary

Issues:
1. Disallowance on sale of shares to M/s First Financial Services Ltd.
2. Applicability of CBDT Circular No. 17/2019 for filing appeal.
3. Interpretation of office memorandum dated 16.09.2019 regarding monetary limits for filing appeals in cases involving bogus LTCG/STCL through penny stocks.

Analysis:
1. The revenue appealed against the deletion of the addition of ?6,97,000 on account of disallowance on the sale of shares to M/s First Financial Services Ltd. The assessing officer observed that the shares were part of penny stocks manipulated by brokers for offering high returns. The CIT(A) allowed the appeal, stating there was no evidence of the assessee's involvement in share manipulation.

2. The appellant argued that the CBDT Circular No. 17/2019 applied due to no long-term capital gain/short-term capital loss claimed. The tax effect involved was ?2.36 lakh, below the ?50 lakh monetary limit for filing appeals. The appellate tribunal noted that the appeal fell within the monetary limit specified in Circular No. 17/2019 and the exception to the limit did not apply as the assessee had not claimed any short-term capital loss.

3. The tribunal referred to the office memorandum dated 16.09.2019, which exempted cases involving bogus LTCG/STCL through penny stocks from monetary limits for filing appeals. As the assessee only showed short-term capital gain and did not claim any short-term capital loss, the tribunal concluded that the case did not fall under the memorandum's purview. Therefore, the appeal of the revenue was dismissed based on the specific circumstances of the case.

In conclusion, the tribunal upheld the CIT(A)'s decision to delete the disallowance on the sale of shares and dismissed the revenue's appeal based on the CBDT circular and the interpretation of the office memorandum regarding monetary limits for filing appeals in cases involving penny stocks.