M/s. Kiran Chand Kundalia, Bangalore V. Income Tax Officer, Circle- 7(2)(2), Bengaluru

ITA 1950/BANG/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3542 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-11-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 11-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Cost of acquisition; Penny stocks; Set aside; Capital Gains
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, A BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER ITA NO.1950/BANG/2019 ASSESSMENT YEAR : 2011-12 SHRI KIRAN CHAND KUNDALIA, 10/1, KUNDALIA TOWER, 3 RD CROSS, H SIDDIAH ROAD, BENGALURU-560 027. PAN ABYPK 8879 Q VS. THE INCOME-TAX OFFICER, WARD-7(2)(2), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SARWAN KUMAR, C.A RESPONDENT BY : SHRI GANESH R GHALE, ADVOCATE STANDING COUNSEL TO D EPT. DATE OF HEARING : 27.11.2019 DATE OF PRONOUNCEMENT : 29.11.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING T HE ORDER DATED 5/8/2019 PASSED BY LD CIT(A)-7, BENGALURU AND IT RELATES TO THE ASST. YEAR 2011-12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.4,59,000 /-, BEING LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. AT THE TIME OF HEARING THE LD AR DID NOT PRESS GROUND NO.1 TO 6 BY DULY MAKING ENDORSEMENT IN THE GROUNDS OF APPEAL. ACCORDINGLY THESE GROUNDS ARE DISMISSED AS NOT PRESSED. ITA NO.1950 /BANG/2019 PAGE 2 OF 5 3. THE LD AR SUBMITTED THAT THE ASSESSEE HAD PURCHA SED SHARES OF M/S DEVIKA PROTINES LTD., AND SOLD THE SAME DURI NG THE FINANCIAL YEAR RELEVANT TO THE ASST. YEAR 2011-12 FOR A SUM O F RS.4,59,000/-. THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN ON SALE OF ABOVE SHARES AND CLAIMED THE SAME AS EXEMPT U/S 10(38) O F THE ACT. THE AO RECEIVED INFORMATION THAT SHARES OF M/S DEVIKA P RODUCTS LTD., FALLS UNDER THE CATEGORY OF PENNY STOCKS AND ITS PRICES HAVE BEEN RIGGED IN ORDER TO GENERATE CAPITAL GAINS IN THE HA NDS OF INVESTORS. ACCORDINGLY THE AO REOPENED THE ASSESSMENT OF THE A SSESSEE. THE INVESTIGATION WING OF THE ASSESSEE HAD ANALYZED THE MODALITIES ADOPTED IN PENNY STOCK CASES. AFTER REPRODUCING TH E OBSERVATIONS OF THE INVESTIGATION WING, THE AO TOOK THE VIEW TH AT THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE ON ALLEGED S HARE OF SHARES IS LIABLE TO BE TAXED AS UNEXPLAINED CASH CREDIT U/S 6 8 OF THE ACT. ACCORDINGLY HE ASSESSED A SUM OF RS.4,58,996/- AS I NCOME OF THE ASSESSEE U/S 68 OF THE ACT. THE LD CIT(A) ALSO CON FIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE HA S PRODUCED EVIDENCES IN SUPPORT OF PURCHASE AND SALE OF SHARES AND FURTHER THE SHARES HAVE ENTERED THE DEMAT ACCOUNT OF THE ASSESS EE. ACCORDINGLY HE SUBMITTED THAT TAX AUTHORITIES ARE N OT JUSTIFIED IGNORING THE CLAIM OF CAPITAL GAIN. 5. THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE, I N ORDER TO PURCHASE PEACE, FORGO THE CLAIM OF CAPITAL GAIN. H E SUBMITTED THAT THE AO HAS ASSESSED THE SALE CONSIDERATION OF RS.4. 59 LAKHS AS INCOME OF THE ASSESSEE. HOWEVER, THE ASSESSEE HAS PURCHASED THE ITA NO.1950 /BANG/2019 PAGE 3 OF 5 SHARES DURING THE RELEVANT TO THE ASST. YEAR 2010-1 1 AND THE PURCHASE COST HAS ALSO BEEN DULY DECLARED IN THE RE TURN OF INCOME FILED BY THE ASSESSEE. ACCORDINGLY HE SUBMITTED TH AT THE AO SHOULD HAVE ASSESSED THE PROFIT ELEMENT ARISING IN THIS TR ANSACTION. ACCORDINGLY HE PRAYED THAT THE AO MAY BE DIRECTED T O ALLOW DEDUCTION OF PURCHASE COST AND ASSESS ONLY PROFIT E LEMENT. 6. THE LD DR ALSO SUBMITTED THAT THE EXPENDITURE IN CURRED BY THE ASSESSEE ON ALLEGED PURCHASE OF SHARES MAY BE A LLOWED AS DEDUCTION. 7. IN VIEW OF THE RIVAL SUBMISSIONS, I SET ASIDE TH E ORDER PASSED BY LD CIT(A) AND RESTORE THE ISSUE TO THE FILE OF T HE AO WITH THE DIRECTION TO EXAMINE THE CLAIM OF EXPENDITURE INCUR RED BY THE ASSESSEE FOR PURCHASING THE SHARES AND ALLOW DEDUCT ION OF THE SAME AGAINST THE SALE PROCEEDS AND ASSESS INCOME ARISING FROM THOSE TRANSACTIONS. I ORDER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2019. SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 29 TH NOVEMBER, 2019. /VMS/ ITA NO.1950 /BANG/2019 PAGE 4 OF 5 COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE