Sanjay Jain, CHENNAI V. ACIT Non Corporate Circle 10(1), CHENNAI

ITA 1334/CHNY/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4064 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 20-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: N VIJAY KUMAR
• Keywords: Wrong claim
• Section: 10

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL D SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER !./ ITA NO.1333/CHNY/2018 # $%# / ASSESSMENT YEAR : 2014-15 SMT. VANDANA SANKHALA, 9/5, VP COLONY, ANGADI STREET, AYNAVARAM, CHENNAI - 600 023. PAN : AARPG 3278 M V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 10(1), CHENNAI. ('(/ APPELLANT) ()*'(/ RESPONDENT) !./ ITA NO.1334/CHNY/2018 # $%# / ASSESSMENT YEAR : 2014-15 SHRI SANJAY JAIN, 9/5, VP COLONY, ANGADI STREET, AYNAVARAM, CHENNAI - 600 023. PAN : AAFPJ 2749 E V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 10(1), CHENNAI. ('(/ APPELLANT) ()*'(/ RESPONDENT) '( + , / APPELLANTS BY : SHRI N. VIJAY KUMAR, CA )*'( + , / RESPONDENT BY : SHRI B. SAGADEVAN, JCIT - $ + ./ / DATE OF HEARING : 17.10.2018 01% + ./ / DATE OF PRONOUNCEMENT : 24.10.2018 2 I.T.A. NO.1333/CHNY/18 I.T.A. NO.1334/CHNY/18 / O R D E R BOTH THE APPEALS OF TWO INDEPENDENT ASSESSEES AR E DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER O F INCOME TAX (APPEALS)-12, CHENNAI, DATED 16.02.2018 AND 19.02.2 018 RESPECTIVELY, FOR THE ASSESSMENT YEAR 2014-15. SIN CE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, I HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SHRI N. VIJAY KUMAR, THE LD. REPRESENTATIVE FOR THE ASSESSEES, SUBMITTED THAT EACH ASSESSEE PURCHASED 2 000 SHARES OF KAPPAC PHARMA LTD. THROUGH OFF MARKET TRANSACTIO N FOR 30,000/-. ACCORDING TO THE LD. REPRESENTATIVE, EACH SHARE COS TS ABOUT 15/-. IN FACT, THE SHARES WERE PURCHASED FROM A STOCK BRO KER KNOWN AS M/S SANNIDHYA TRADELINK PVT. LTD. THE SHARES WERE PURCHASED PHYSICALLY ON 19.07.2012. ACCORDING TO THE LD. REP RESENTATIVE, OUT OF 2000 SHARES, THE ASSESSEE-SMT. VANDHANA SANKHALA SOLD 1200 SHARES ON 05.02.2014 AT A PRICE OF 683.95 PER SHARE AND 500 SHARES ON 10.02.2014 AT A PRICE OF 683.95 PER SHARE. THE BALANCE OF 300 SHARES WERE SOLD ON 13.02.2014 AT A PRICE OF 678/- PER SHARE, WHEREAS, THE ASSESSEE-SHRI SANJAY JAIN SOLD 1500 SHARES AT A PRICE OF 727.80 PER SHARE ON 24.02.2014 AND 500 SHARES AT A 3 I.T.A. NO.1333/CHNY/18 I.T.A. NO.1334/CHNY/18 PRICE OF 707/- PER SHARE ON 25.02.2014. WHEN THE F ORMER ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE INCOM E-TAX ACT, 1961 (IN SHORT 'THE ACT') TO THE EXTENT OF 13,31,521/-, THE LATER CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE ACT T O THE EXTENT OF 14,05,695/-. THE ASSESSING OFFICER, HOWEVER, DISAL LOWED THE CLAIM OF THE ASSESSEES ON THE GROUND THAT KAPPAC PHARMA L TD. IS A PENNY STOCK COMPANY, THEREFORE, THE PROFIT ON SALE OF SHA RES OF KAPPAC PHARMA LTD. CANNOT BE ALLOWED AS EXEMPTION UNDER SE CTION 10(38) OF THE ACT. 3. REFERRING TO THE ASSESSMENT ORDER, SHRI N. VIJAY KUMAR, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFF ICER REFERRED TO VARIOUS INVESTIGATIONS SAID TO BE CARRIED OUT BY TH E INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA AND FOUND THAT SE VERAL COMPANIES ARE PROVIDING ACCOMMODATION ENTRY IN ORDE R TO MAKE BOGUS CLAIM OF EXEMPTION UNDER SECTION 10(38) OF TH E ACT. THE COPIES OF INVESTIGATION REPORT SAID TO BE RECEIVED BY THE ASSESSING OFFICER WERE NOT FURNISHED TO THE ASSESSEES. MOREO VER, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEES HAVE NO RO LE EITHER IN THE PROMOTION OF THE COMPANY KAPPAC PHARMA LTD. OR ITS FUNCTIONING. THE ASSESSEES, ACCORDING TO THE LD. REPRESENTATIVE, ARE INVESTORS IN 4 I.T.A. NO.1333/CHNY/18 I.T.A. NO.1334/CHNY/18 A PUBLIC LIMITED COMPANY, THEREFORE, THE CIT(APPEAL S) IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI B. SAGADEVAN, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT KAPPAC PHARMA LTD. I S A PAPER COMPANY AND IT IS A PENNY COMPANY. ACCORDING TO TH E LD. D.R., KAPPAC PHARMA LTD. IS NOT ENGAGED IN ANY BUSINESS. THE SHARE PRICE OF KAPPAC PHARMA LTD. WAS INFLATED ABNORMALLY . ACCORDING TO THE LD. D.R., THE INVESTIGATION WING OF THE DEPARTM ENT AT KOLKATA MADE THOROUGH INVESTIGATION AND FOUND THAT KAPPAC P HARMA LTD. IS ONE OF THE PAPER COMPANIES FOR THE PURPOSE OF ENROU TING UNACCOUNTED BLACK MONEY. ONE SHRI ANIL KUMAR KHEMK A, THE DIRECTOR OF APEX COMMOTRADE PRIVATE LTD. WAS EXAMIN ED. ACCORDING TO THE LD. D.R., THE ASSESSEES EARNED HUG E CAPITAL GAIN WITHIN A SHORT PERIOD BY INVESTING MONEY IN PENNY S TOCK COMPANY. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE ASSESSEES INVESTED IN THE SHARES OF LOSS M AKING COMPANY AT AN ABNORMALLY HIGH RATE AS IDENTIFIED BY JAMAKHA RCHI COMPANIES WHICH HAVE NO NET WORTH. THEREFORE, ACCORDING TO T HE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5 I.T.A. NO.1333/CHNY/18 I.T.A. NO.1334/CHNY/18 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT BOTH THE ASSESSEES INVESTED IN THE SHARES OF K APPAC PHARMA LTD. THROUGH INDEPENDENT STOCK BROKER AND CLAIMED E XEMPTION IN RESPECT OF THE SALE OF SAID SHARES UNDER SECTION 10 (38) OF THE ACT. THE DEPARTMENT APPEARS TO HAVE MADE THOROUGH INVEST IGATION AT KOLKATA AND FOUND THAT KAPPAC PHARMA LTD. IS A PENN Y STOCK COMPANY AND THE NET WORTH OF THE SAID COMPANY WAS A RTIFICIALLY INFLATED TO INCREASE THE SHARE PRICE. HOWEVER, A C OPY OF THE INVESTIGATION REPORT WAS NOT FURNISHED TO THE ASSES SEES. MOREOVER, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD THE ROLE OF THE ASSESSEES IN PROMOTING KAPPAC PHARMA LTD. OR INFLATING THE SHARES OF KAPPAC PHARMA LTD. IN THE MARKET. IF THE ASSESSEES ARE INNOCENT INVESTORS, THEN THEY CANNOT BE FOUND FAULT MERELY BECAUSE THE INVESTMENTS WERE MADE IN A PENNY STOCK COMPANY. 6. IT IS NOT KNOWN HOW A PENNY STOCK COMPANY WAS AL LOWED TO CONTINUE AS A REGISTERED COMPANY BY THE OFFICE OF R EGISTRAR OF COMPANY? AND IT IS ALSO NOT KNOWN HOW IT WAS ALLOW ED TO ISSUE PUBLIC SHARES? THE ACTION TAKEN BY THE INCOME-TAX DEPARTMENT OR THE MINISTRY OF COMPANY AFFAIRS WAS NOT BROUGHT ON RECORD BY THE ASSESSING OFFICER. IT IS ALSO NOT KNOWN WHETHER KA PPAC PHARMA 6 I.T.A. NO.1333/CHNY/18 I.T.A. NO.1334/CHNY/18 LTD. WAS ALLOWED TO CONTINUE TO BE PUBLIC LIMITED C OMPANY BY THE REGISTRAR OF COMPANY OR IT WAS DEREGISTERED? IT IS ALSO NOT KNOWN WHO ARE RESPONSIBLE FOR PROMOTING SUCH COMPANIES AN D OFFICERS WHO ARE RESPONSIBLE TO REGISTER THIS KIND OF COMPANIES AS PUBLIC LIMITED COMPANIES. SINCE FACTS ARE NOT AVAILABLE ON RECORD , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE FACTS NEED TO BE VERIFIED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH TH E AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTE D BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL FURNISH A COPY OF SO-CALLED INVESTIGATION REPORT SAID TO BE RECEIV ED FROM INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA TO BOTH THE ASSESSEES AND ALSO BRING ON RECORD WHETHER KAPPAC P HARMA LTD. CONTINUES TO BE A REGISTERED COMPANY AS ON TODAY AN D WHO ARE THE PROMOTERS OF THE PENNY STOCK COMPANY, AND WHETHER T HE FINDING OF INCOME-TAX DEPARTMENT WAS BROUGHT TO THE NOTICE OF MINISTRY OF COMPANY AFFAIRS AND THE ACTION TAKEN ON SUCH REPORT S BY THE MINISTRY OF COMPANY AFFAIRS AND THEREAFTER DECIDE T HE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE O PPORTUNITY TO THE ASSESSEES. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. 7 I.T.A. NO.1333/CHNY/18 I.T.A. NO.1334/CHNY/18 ORDER PRONOUNCED IN THE COURT ON 24 TH OCTOBER, 2018 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 3! /DATED, THE 24 TH OCTOBER, 2018 KRI. + ).45 65%. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 7. () /CIT(A)-12, CHENNAI 4. PRINCIPAL CIT-3, CHENNAI 5. 5$8 ). /DR 6. # 9 /GF.