SHOBANABAI DILIPKUMAR,CHENNAI vs. ITO NON CORPORATE WARD 6(2), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-5, Chennai, dated 31.08.2018 and pertains to assessment year 2013-14.

Shri T.C. Narayanan, 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 ₹33,76,497/-. In fact, according to the Ld. representative, the assessee invested in shares of M/s GFL Finance 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 GFL Finance Ltd. From the order of the Assessing Officer it appears that the assessee purchased 24000 shares of M/s GFL Finance Ltd. at ₹10/- per share. The assessee disclosed long term capital gains on the sale of these shares to the extent of ₹33,76,497/-. 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:-

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)

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