SMT. VANDANA SURESH BHANDARI,,CHENNAI vs. ITO, NCW - 6 (4),, CHENNAI

This is an appeal filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-5, Chennai in dated 31.07.2019 for the Assessment Year 2011-12.

Mr. Suresh Kumar, Chartered Accountant represented on behalf of the Assessee and Ms. R. Anitha, JCIT represented on behalf of the Revenue.

It was submitted by the learned Authorized Representative that the issues in the appeal was in respect of the disallowance of the assessee’s claim for exemption u/s.10(38) of the Income Tax Act, 1961. It was a submission that the assessee has made purchases of shares of M/s. Regency Trust Limited. It was a submission that 2400 shares were purchased as early as in the assessment year 2005-2006 and 1200 shares were purchased before March 2010. The shares had been held for more than five years. The shares were purchased through the Bombay Stock Exchange [BSE] for a total consideration of Rs.15,149/- and the payments were all made through cheques. The share broker was M/s. Networth Stock Broking Limited. It was a submission that after five years, the assessee had sold 3600 shares during the assessment year 2011-12 for a total consideration of Rs.3,14,768/-. It was a submission that Security Transaction Tax had also been paid on the same. The shares were held in the DEMAT account of the assessee for more than five years. It was a submission that just because the said company was considered as ‘Penny Stocks’, the assessee’s transactions could not be treated as bogus. It was a further submission that even the sales had been done through the BSE and by using the same broker itself and the transactions were routed through the Demat account and payments through the Bank account. It was a submission that the 3 -: Assessing Officer and the learned Commissioner of Income Tax (Appeals) treated the transactions as Penny Stock Transactions and disallowed the assessee’s claim u/s.10(38) of the Income Tax Act, 1961. It was a submission that the issue is now squarely covered by the decision of the Co-ordinate Bench of this Tribunal in respect of similar transactions where the purchases and sales had been done through the recognized stock exchange, through Demat account and the payments processed through banks alone. It was further a submission that in the assessee’s case, the situation was better in so far as the assessee has been holding the shares for more than five years. He relied upon the decision of the Co-ordinate Bench of this Tribunal in the case of Shri Narendra Harlalka, Chennai vs. The Income Tax Officer, Chennai in dated 05.08.2019, as also the decision in the case of Vijay Kumar Baid [HUF] vs. The Income Tax Officer, Chennai in I.T.A. No.2300/Chny/2018 dated 24.01.2019 and the decision in the case of Smt. Nainimal Jain Anitha, Chennai in I.T.A. No.384/Chny/2019 dated 18.06.2019, wherein it has been held in para-5 as follows: “5. We have considered the rival submissions. A perusal of the assessment order clearly shows that this is not a case where the AO has been able to point out where the assessee has made a bogus claim of long term capital gains exempt u/s.10(38) of the Act. Further, perusal of the assessment order clearly shows that from page-2, para-4 to para 34, the AO has only made allegation in respect of the company and the modus operandi of the bogus claim u/s.10(38) of the Act. The evidences clearly show that the transactions of purchase and sale of the shares by the assessee herein are through BSE by paying STT. This is not a case for offline purchase, nor is the 4 -: case of direct purchase. Neither is the assessee’s name coming out in the Investigation report, which has been received by the AO from Directorate of Investigation, Kolkata. This being so, the claim of assessee cannot be disallowed merely on presumptions and the AO is directed to grant the assessee benefit of exemption u/s.10(38) of the Act as claimed in respect of long term capital gains generated by purchase and sale of shares of M/s.Sulabh Engineers and Services Ltd., as claimed by the assessee.”

In reply, the learned Departmental Representative vehemently supported the order of the Assessing Officer and the learned Commissioner of Income Tax (Appeals).

I have considered the rival submissions and perused the materials available on record.

A perusal of the facts in the present case shows that the disallowance of the assessee’s claim of deduction u/s.10(38) of the Income Tax Act, 1961 has been made by the Assessing Officer and upheld by the learned Commissioner of Income Tax (Appeals) only on presumption. Clearly the facts in the present case shows that the transactions in the case of the assessee is through recognized Stock Exchange and through a Broker who is not in the tainted list. The transactions have been made through Demat Account and the payments and receipts through the banking channels only. More than anything else, in the assessee’s case, the transactions are not transactions which are of twelve months or of around twelve months, these are transactions

In the result, the appeal of the assessee in is allowed. Order pronounced in the open Court on 19th March, 2020 in Chennai.