PRAMILA JAIN,CHENNAI vs. ACIT NON CORPORATE CIRCLE 5(4) , CHENAI

The brief facts of the case are that the assessee has filed her return of income for the AY 2014-15 on 24.03.2016 admitting total income of Rs.18,07,290/-. The case has been selected for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee has declared long term capital gains derived from purchase and sale of shares and claimed exemption u/s.10(38) of the Act. Therefore, on the basis of information furnished by the assessee and also taken note of Investigation Report of Income Tax Department, Kolkata, came to the conclusion that long term capital gains derived from sale of shares of M/s.NCL Research & Financial Services Ltd., is an accommodation entry provided by a group of people in the guise of long term capital gains and thus, rejected the arguments of the assessee and made addition towards sale consideration received from sale of shares as income of the assessee. The assessee carried the matter in appeal before the First Appellate Authority, but could not succeeded. The Ld.CIT(A) for the reasons stated in their appellate order, sustained the additions made by the AO. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

The Ld.AR for the assessee submitted that the issue involved in the present appeal is covered by the decision of ITAT Chennai Bench in the assessee’s own case for the AY 2013-14 in where under identical circumstances, the Tribunal has set aside the issue to the file of the AO to decide the issue in accordance with law. Therefore, this year also, the issue may be set aside to the file of the AO.

The Ld.DR, on the other hand, strongly supporting the order of the Ld.CIT(A), submitted that the AO has carried out detailed inquiry of modus operandi of entry providers in penny stocks and find that the assessee is also one of the beneficiaries of the accommodation entry provider and thus, made addition towards sale consideration u/s.68 of the Act. Therefore, there is no reason to set aside the issue to the file of the AO. In this regard, he relied upon the decision of the Hon’ble Madras High Court in the case of Smt. Tharakumar v. ITO in TCA No.128 of 2019 dated 11.02.2019.

We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. Although, the Hon’ble Madras High Court has taken a view against the assessee on the issue of long term capital gains derived from sale of penny stocks, but subsequent developments reveals that the AO has made additions towards sale consideration u/s.68 of the Act, as unexplained credit without providing the materials used against the assessee. Under these circumstances, various Courts, including the Hon’ble Karnataka High Court also taken a view that the issue needs to be set aside to the file of the AO to give one more opportunity to the assessee to collect necessary papers from the AO and submit the reply on the issue of Investigation Report relied upon by the AO to make additions. Further, in the assessee’s own case, the co- ordinate Bench of the Tribunal, for the AY 2014-15 had considered a similar issue and after considering relevant facts set aside the issue to the file of the AO for further verification. Therefore, consistent with view has taken by the co-ordinate Bench in the assessee’s own case for the earlier assessment year, we are of the considered view that this year also the appeal needs to go back to the file of the AO for verification. Hence, we set aside the issue to the file of the AO and direct the AO to re-do the assessment after considering relevant objections filed by the assessee regarding non-furnishing of relevant materials used against the assessee and deal with the said issue in accordance with law.

In the result, appeal filed by the assessee is allowed for statistical purposes.