SURESHKUMAR(HUF),CHENNAI vs. ITO, NON CORP WARD 10(4), CHENNAI

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ITA 134/CHNY/2019Status: DisposedITAT Chennai11 October 2019AY 2014-155 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the investigation report was not furnished to the assessee and that the Assessing Officer had not established the assessee's involvement in promoting penny stocks or inflating share prices. Therefore, the matter was remitted back to the Assessing Officer for fresh consideration.

What were the facts?

The assessee claimed exemption under Section 10(38) for long-term capital gains from share sales. The Assessing Officer disallowed this, relying on an investigation report not provided to the assessee. The assessee argued for a fresh opportunity to present their case.

What were the issues?

Whether the disallowance of long-term capital gains exemption was justified without providing the investigation report to the assessee and establishing their role in penny stock manipulation.

Which sections of the Income-tax Act were involved?

Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN

For Appellant: Shri K. Balasubramanian
Hearing: 19.08.2019Pronounced: 11.10.2019

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -12, Chennai, dated 20.11.2018 and pertains to assessment year 2014-15.

2.

Shri K. Balasubramanian, the Ld.counsel for the assessee, submitted that the assessee claimed exemption under Section 10(38) of the Income-tax Act, 1961 (in short 'the Act') in respect of long term capital gains arising out of sale of shares to the extent of ₹28,91,884/-. In fact, according to the Ld. counsel, the assessee invested in shares of M/s GFL Financials (India) Ltd. The Ld. counsel further submitted that the Assessing Officer mainly placed his reliance on the investigation report of Directorate of Investigation, Kolkata. According to the Ld. counsel, a copy of the said investigation report was not furnished to the assessee. Therefore, the Ld. counsel submitted that an opportunity may be given to the assessee by remitting back the matter to the file of the Assessing Officer.

3.

On the contrary, Ms. G.D. Jayanthi Angayarkanni, the Ld. Departmental Representative, submitted that she is placing reliance on the orders of the Assessing Officer as well as the CIT(Appeals).

4.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee made investments in the shares of M/s GFL Financials (India) Ltd. From the order of the CIT(Appeals) it appears that the assessee sold 100000 shares of M/s GFL Financials (India) Ltd. and on sale of these shares, the assessee disclosed long term capital gains to the extent of ₹28,91,884/-. This was disallowed by the Assessing Officer on the ground that the company in which the assessee invested is a penny stock company. However, it is not brought on record how the assessee is involved in promoting the penny stock company and how the assessee involved in inflating the shares of the company. Moreover, the copy of the investigation report said to be received from the Investigation Wing of the Department at Kolkata was not furnished to the assessee. On identical circumstances, this Tribunal in the case of Kanhaiyalal & Sons (HUF) v. ITO in has remitted back the matter to the file of the Assessing Officer for reconsideration. In fact, this Tribunal has observed at para 4 of its order dated 06.02.2019 as follows:-

“4. We heard Shri AR.V. Sreenivasan, the Ld. Departmental Representative also. Admittedly, the Assessing Officer disallowed the claim of the assessees on the basis of the information said to be received from the Investigation Wing of the Department at Kolkata with regard to investment made by the assessees in the penny stock company. It is not in dispute that a copy of the investigation report said to be received from Kolkata was not furnished to the assessee. Moreover, details of the enquiries said to be made by the Assessing Officer were also not furnished to the assessees. In those circumstances, this Tribunal is of the considered opinion that the Assessing Officer has to reconsider the issue afresh after furnishing the material relied upon by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall bring on record the role of the assessees in promoting the company and the relationship of the assessees, if any with the promoters, role of the assessees in inflating the price of shares, etc. The Assessing Officer shall also furnish a copy of the investigation report said to be received from the Investigation Wing of the Department at Kolkata and other materials if anything in his possession and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessees.”

5.

In view of the above, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue raised by the assessee with regard to deduction under Section 10(38) of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall examine the matter as directed by this Tribunal in the case of Kanhaiyalal & Sons (HUF)

(supra) and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

6.

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

Order pronounced in the court on 11th October, 2019 at Chennai.

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