INCOME TAX OFFICER, WARD - 12(1), KOLKATA vs. VASA COMMERCIAL PVT LTD., KOLKATA

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ITA 1675/KOL/2024Status: DisposedITAT Kolkata17 March 2025AY 2015-163 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the shares of M/s Indian Infotech & Software Ltd. involved in the transaction were not 'penny stock' as they were not included in the list of 84 penny stocks relied upon by the AO. The Tribunal noted that the assessee had provided copies of contract notes for purchase and sale, as well as audited balance sheets, which showed the sale of shares on the income side of the Profit and Loss account. The profit earned from these sales was offered to tax at the maximum marginal rate. The Tribunal found no mistake or infirmity in the order of the CIT(A), who had correctly observed that the LTCG was not claimed under Section 10(38). Therefore, the Tribunal dismissed the appeal of the Revenue, upholding the order of the CIT(A). The cross-objection filed by the assessee was dismissed as not pressed.

What were the facts?

The assessee, Vasa Commercial Pvt. Ltd., filed its return of income for Assessment Year 2015-16 on 24.09.2015. The Assessing Officer (AO) reopened the case under Section 147 of the Income Tax Act, 1961, issuing a notice under Section 148 on 31.03.2021. The AO determined that the assessee had realized ₹32,03,840/- from the sale of equity shares of M/s Indian Infotech & Software Ltd., which the AO considered a 'penny stock' based on a letter from ADIT (Inv.) Unit-2(3), Kolkata, dated 18.07.2017. Consequently, the AO added this amount to the assessee's income as Long-Term Capital Gain (LTCG) in an assessment framed under Section 147 read with Section 144B of the Act on 28.03.2022. The assessee appealed this addition to the National Faceless Appeal Centre (NFAC), Delhi.

What were the issues?

1. Whether the addition of ₹32,03,840/- as Long-Term Capital Gain arising from the sale of shares of M/s Indian Infotech & Software Ltd. is justified, considering the AO's classification of these shares as 'penny stock' (mixed question of law and fact, turning on the interpretation of 'penny stock' and the nature of the transaction). Assessee's Contentions (as per CIT(A)'s findings): The assessee argued that the LTCG was not claimed under Section 10(38) of the Act. Instead, the sale of shares was reflected in the Profit and Loss account, and the profit earned was offered to tax at the maximum marginal rate. Revenue's Contentions: The Revenue's sole ground of appeal was against the deletion of the addition of ₹32,03,840/- made by the AO on account of LTCG arising from the sale of penny stock.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148(2),Section 144B,Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

Heard together (2 matters)

ITA No.1675/KOL/2024
CO No. 59/KOL/2024

Read from the judgment's own cause title. This page is filed under one of them.

These are cross appeals against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 14.06.2024 for the AY 2015-16.

2.

The only issue raised by the Revenue in the various grounds of appeal is against the order of ld. CIT (A) allowing the appeal of the assessee

3.

The facts in brief are that the assessee filed the return of income on 24.09.2015, declaring total income of ₹78,09,700/-. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021, after recording the reasons to believe u/s 148(2) of the Act. The ld. AO accordingly issued statutory notices along with questionnaire which was duly replied/complied by the assessee. Finally, the ld. AO held that the assessee has realized ₹32,03,840/- by selling equity shares which is a penny stock namely ‘M/s Indian Infotech & Software Ltd. (INDI NFO & SOF), which is bogus as per letter dated 18.07.2017, received from ADIT (Inv.) Unit-2(3), Kolkata. The AO, finally, added the same to the income of the assessee as Long-Term Capital Gain arising from penny stock in the assessment framed u/s 147 read with section 144B of the Act dated 28.03.2022.

4.

In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by holding that the assessee has not claimed said Long Term Capital Gain u/s 10(38) of the Act and showed the same as sale of shares in the Profit and Loss account and the profit earned by the assessee was offered to tax at the maximum marginal rate of tax.

5.

After hearing the rival contentions and perusing the materials available on record, we find that the script involved in the present case i.e. M/s Indian Infotech& Software Ltd. is not a penny stock and as not included in the list of 84 Penny stocks. The list thereto is extracted by the ld. AO at page no.7 to 10 of the assessment order. The assessee has also filed before us the copies of contract notes of

6.

Since, the assessee did not press the cross objection filed by the assessee and therefore, same is dismissed as not pressed.

7.

In the result, both the cross objection of the assessee as well as appeal of the Revenue are dismissed.

Order pronounced in the open court on 17.03.2025.

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