RAKESH KUMAR KUNDANMALJI JAIN,CHENNAI vs. ITO NON CORPORATE WARD 6 (1), CHENNAI

The appeals filed by five independent assessees are directed against the respective orders of the Commissioner of Income Tax (Appeals) -5, Chennai. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.

The assessees claim for exemption under Section 10(38) of the Income-tax Act, 1961 (in short 'the Act'), which was not allowed by the Assessing Officer after referring to the Investigation Report said to be received from Investigation Wing of the Department at Kolkata.

We heard Shri R. Padmanabhan, the Ld. representative for the assessees and Shri Guru Bashyam, the Ld. Departmental Representative. Admittedly, the Investigation Report said to be received by the Assessing Officer from Kolkata was not furnished to the assessees. Moreover, the statement said to be recorded from Shri Ashok Kumar Kayan at Kolkata was also not furnished to the assessees. The Revenue claims that the assessees have invested in Penny stock companies. It is not known how the Revenue claims that the assessees invested in Penny stock companies? How the Penny stock companies are allowed to issue public shares so as to invite the general public for investment? It is also not known how this kind of companies are allowed to be listed in stock exchange? Therefore, an investigation has to be made by the Assessing Officer. The Assessing Officer shall furnish a copy of Investigation Report said to be received from the Investigation Wing of the Department at Kolkata and a copy of statement recorded from Shri Ashok Kumar Kayan at Kolkata to the assessees. Accordingly, the orders of both authorities below are set aside and the Assessing Officer is directed to furnish copies of the Investigation Report received from the Department at Kolkata and the statements recorded at Kolkata and at Chennai and also to make a thorough investigation how the Penny stock companies are allowed to issue public shares and bring on record the action taken against the officers who are responsible for allowing such Penny stock companies to issue public shares. The Assessing Officer shall also examine whether these companies are listed in stock exchange. If so, what are the actions taken for delisting such companies from stock exchange. The Assessing Officer shall examine all these aspects and bring on record all material facts and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessees.

In the result, all the appeals filed by the assessees are allowed for statistical purposes.