Vanita Jain, CHENNAI V. ITO Non Corporate Ward 6(4), CHENNAI

ITA 2500/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6009 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 28-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANATH KUMAR RAHA
• Keywords: Penny stocks; Set aside

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL D SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER !./ ITA NOS.2499 & 2500/CHNY/2018 # $%# / ASSESSMENT YEARS : 2010-11 & 2011-12 SMT. VANITA JAIN, 82, AUDIAPPAN NAICKEN STREET, SOWCARPET, CHENNAI - 600 079. PAN : AADPV 0013 B V. THE INCOME TAX OFFICER, NON CORPORATE WARD 6(4), CHENNAI - 600 006. ('(/ APPELLANT) ()*'(/ RESPONDENT) '( + , / APPELLANT BY : NONE )*'( + , / RESPONDENT BY : SHRI SANATH KUMAR RAHA, JCIT - $ + ./ / DATE OF HEARING : 01.07.2019 01% + ./ / DATE OF PRONOUNCEMENT : 01.08.2019 / O R D E R BOTH THE APPEALS OF ASSESSEE ARE DIRECTED AGAINST T HE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 5, CHENNAI, DATED 29.06.2018 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. 2 I.T.A. NOS.2499 & 2500/CHNY/18 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS REJEC TION OF CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE INCOME-TAX ACT , 1961 (IN SHORT 'THE ACT'). 3. NO ONE APPEARED FOR THE ASSESSEE INSPITE OF SERV ICE OF NOTICE OF HEARING. THE REGISTRY HAS PLACED ON RECORD THE POS TAL ACKNOWLEDGEMENT RECEIVED FROM THE ASSESSEE AS PROOF OF SERVICE OF N OTICE ON THE ASSESSEE. THEREFORE, I HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PROCEEDED TO DISPOSE THE APPEAL ON MERIT. 4. SHRI SANATH KUMAR RAHA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IN RE SPECT OF LONG TERM CAPITAL GAINS ARISING OUT OF SALE OF SHARES TO THE EXTENT O F 3,31,032/- FOR ASSESSMENT YEAR 2010-11 AND 4,96,826/- FOR ASSESSMENT YEAR 2011-12. IN FACT, ACCORDING TO THE LD. D.R., THE ASSESSEE IN VESTED IN SHARES OF M/S BAKRA PRATHISTHAN LTD. ACCORDING TO THE LD. D.R., IT IS A PENNY STOCK TRANSACTION. ACCORDING TO THE LD. D.R., THE EQUITY SHARES OF SHELL COMPANIES WERE TRANSACTED AND THE PRICE OF EACH SHA RE WAS ARTIFICIALLY INCREASED. ACCORDING TO THE LD. D.R., THE INVESTIG ATION WING OF THE DEPARTMENT AT KOLKATA FOUND THAT THERE WAS CARTEL A MONG THE BROKERS WHO ARE ALL INVOLVED IN PENNY STOCKS OF SHELL COMPA NIES. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HA S RIGHTLY DISALLOWED THE 3 I.T.A. NOS.2499 & 2500/CHNY/18 CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE A CT FOR BOTH THE ASSESSMENT YEARS. 5. I HEARD THE LD. D.R. AND PERUSED THE RELEVANT MA TERIAL AVAILABLE ON RECORD. THE ASSESSEE MADE INVESTMENTS IN THE SH ARES OF M/S BAKRA PRATHISTHAN LTD. FROM THE ORDER OF THE ASSESSING O FFICER IT APPEARS THAT THE ASSESSEE PURCHASED 2500 SHARES OF M/S BAKRA PRA THISTHAN LTD. AT 20/- PER SHARE FOR EACH ASSESSMENT YEAR. THE ASSES SEE DISCLOSED LONG TERM CAPITAL GAINS ON THE SALE OF THESE SHARES TO T HE EXTENT OF 3,31,032/- AND 4,96,826/- 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 S TOCK COMPANY. HOWEVER, IT IS NOT BROUGHT ON RECORD HOW THE ASSESS EE IS INVOLVED IN PROMOTING THE PENNY STOCK COMPANY AND HOW THE ASSES SEE INVOLVED IN INFLATING THE SHARES OF THE COMPANY. MOREOVER, THE COPY OF THE INVESTIGATION REPORT SAID TO BE RECEIVED FROM THE I NVESTIGATION WING OF THE DEPARTMENT AT KOLKATA WAS NOT FURNISHED TO THE ASSE SSEE. ON IDENTICAL CIRCUMSTANCES, THIS TRIBUNAL IN THE CASE OF KANHAIY ALAL & SONS (HUF) V. ITO IN I.T.A. NO.1849/CHNY/2018, HAS REMITTED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. IN F ACT, 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 4 I.T.A. NOS.2499 & 2500/CHNY/18 ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEES ON THE BASIS OF THE INFORMATION SAID TO B E RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA WITH REGARD TO INVESTMENT MAD E 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 TH E ASSESSEE. MOREOVER, DETAILS OF THE ENQUIRIES SAID TO BE MADE BY THE ASSESSING OFFICER WERE ALSO NOT FURNISH ED TO THE ASSESSEES. IN THOSE CIRCUMSTANCES, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFF ICER HAS TO RECONSIDER THE ISSUE AFRESH AFTER FURNISHING THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BEL OW 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 ASSES SEES IN PROMOTING THE COMPANY AND THE RELATIONSHIP OF TH E ASSESSEES, IF ANY WITH THE PROMOTERS, ROLE OF THE ASSESSEES IN INFLATING THE PRICE OF SHARES, ETC. T HE 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 WI TH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEES. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSE SSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE ISSUE RAISED BY THE ASSESSEE WITH REGARD TO DEDUCTI ON UNDER SECTION 10(38) OF THE ACT IS REMITTED BACK TO THE FILE OF T HE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE MATTER AS DIREC TED BY THIS TRIBUNAL IN 5 I.T.A. NOS.2499 & 2500/CHNY/18 THE CASE OF KANHAIYALAL & SONS (HUF) (SUPRA) AND TH EREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 ST AUGUST, 2019 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 3! /DATED, THE 1 ST AUGUST, 2019 KRI. + ).45 65%. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 7. () /CIT(A)-5, CHENNAI-34 4. PRINCIPAL CIT-9, CHENNAI 5. 5$8 ). /DR 6. # 9 /GF.