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Income Tax Appellate Tribunal, ‘C’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
Both the appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals)-12, Chennai, dated 28.01.2019 and pertain to assessment years 2010- 11 and 2011-12. Since common issue arises for consideration in both these appeals, I heard these appeals together and disposing the same by this common order.
Shri R. Padmanabhan, the Ld. representative 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 ₹13,23,820/- and ₹3,30,995/- for assessment year 2010- 11 and 2011-12 respectively. In fact, according to the Ld. representative, the assessee invested in shares of M/s Bakra Pratisthan Ltd. The Ld. representative further submitted that the Assessing Officer mainly placed his reliance on the investigation report of Directorate of Investigation, Kolkata. According to the Ld. representative, a copy of the said investigation report was not furnished to the assessee. Therefore, the Ld. representative submitted that an opportunity may be given to the assessee by remitting back the matter to the file of the Assessing Officer.
On the contrary, Shri Sanath Kumar Raha, the Ld. Departmental Representative, submitted that he is placing reliance on the orders of the Assessing Officer as well as the CIT(Appeals).
I heard the Ld. representative for the assessee and the Ld. D.R. and perused the relevant material available on record. The assessee made investments in the shares of M/s Bakra Pratisthan Ltd. From the order of the Assessing Officer it appears that the assessee purchased 5,000 shares of M/s Bakra Pratisthan Ltd. for ₹1,00,000/- for each assessment year and on sale of these shares, the assessee disclosed long term capital gains to the extent of ₹13,23,820/- and ₹3,30,995/- for assessment year 2010-11 and 2011-12 respectively. 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.”
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 for both the assessment years 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.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.