SHRI RAMESH MEGHRAJ JAIN HUF,MUMBAI vs. THE ITO WARD 19(3)(1), MUMBAI

All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of the learned CIT(A) in upholding the rejection of the assessee's claim of exemption under section 10(38) on account of the claim of long-term capital gain.

I have heard the counsel for both the parties, perused the material placed on record, the judgments cited before us, and also the orders passed by the Revenue authorities.

I notice that, as per the record, the assessee, being an HUF, filed its return of income on 08.03.2016 and claimed exempt income of Rs. 28,15,775 under section 10(38) of the Act on account of the sale of equity shares of M/s. Greencrest Financial Services Limited. Since the case of the assessee was selected for complete scrutiny, the AO, based on the information received from the Directorate of Income Tax (Investigation), examined the financials and transactions of M/s. Greencrest Financial Services Limited and found that there was an abnormal increase in the prices of its equity shares. The AO concluded that, with the help of entry operators and promoters, there had been systematic manipulation of the prices of the equity shares. The AO found the scrip to be a penny stock through which bogus long-term capital gains were availed of by a large number of beneficiaries. According to the Assessing Officer, since the assessee was one of the beneficiaries, he rejected the claim of exemption under section 10(38) of the Act and made additions under sections 68 and 69C of the Act on account of unexplained cash credit and unexplained expenditure, respectively, which were also upheld by the learned CIT(A).

I notice that the assessee has furnished all the supporting documents in order to prove that the transactions entered into by the assessee on the sale of equity shares of M/s. Greencrest Financial Services Limited are genuine transactions, and the AO has not found any defect in the documents relied upon by the assessee.

Moreover, I noticed that the Coordinate Benches of the ITAT, while dealing with the same scrip pertaining to the same assessment year, wherein also the claim of LTCG was rejected in the cases of the respective assessees, after analysing the entire evidence and the financials of M/s. Greencrest Financial Services Limited, deleted the additions made by the AO. The decisions of the Coordinate Benches of the ITAT are as follows:

Thus, considering the totality of the facts and circumstances of the case, and keeping in view the decisions of the Coordinate Benches of the ITAT in respect of the said scrip, and respectfully following the doctrine of binding precedents and maintaining judicial consistency, I direct the AO to allow the claim of exemption under section 10(38) of the Act and delete the additions made under sections 68 and 69C of the Act. Accordingly, the grounds raised by the assessee stand allowed.

In the result appeal filed by the assessee stands allowed.