The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the revisional order when the Assessing Officer (AO) failed to enquire about bogus Transactions of earning long-term capital gain (LTCG) from penny stock companies.
Shri Rajeeva Kumar, Advocate appeared on behalf of the assesseeand Md. Ghayasuddin, CIT(DR), appeared on behalf of the Revenue
Suman Saraf, the assessee is an individual. Income of Rs.9,99,300/- declared in the e-return was filed on 11.08.2015 for assessment year 2015-16. An assessment under section 143(3) of the Act was framedand income was assessed at Rs.11,38,026/- after making disallowance under section 14A of the Act at Rs.78,726/- and addition on account of drawing at Rs.60,000/-.
Subsequently, PCIT called for the assessment records and observed that during the year, the assessee has claimed exemption under section 10(38) of the Act at Rs.51,99,603/- on account of long-term capital gain from the sale of shares of CCL International Limited. Further observed that as per the Departmental Information, CCL International Limited is a penny stock company, whose shareprices have been rigged/manipulated to generate bogus long-term capital gain to evade tax and claim exemption.
The PCIT found that the Assessing Officer failed to utilise the evidence furnished by the Investigation Wing of the Department and did not carry out any enquiry regarding the said transaction. The PCIT invoked jurisdiction under section 263 of the Act whereby held the assessment order as erroneous and prejudicial to the interest of revenue and set aside the said assessment order.
The assesseestated that the transactions of long-term capital gain were genuine, which is duly supported by the Contract Note of purchase of shares, transactions statement, and relevant bank account.
A Coram consisting of Shri Sanjay Garg, Judicial Member &Dr Manish Borad, Accountant Member observed transactions which are of earning long-term capital gain from penny stock companies have been held to be bogus.
It was evident that the Assessing Officer has not conducted any enquiry about the said transaction even when the report of the Investigation Wing containing the list of 84 companies found to be penny stock companies was available in the Income Tax Portal.
While dismissing the appeal of the assessee, the Tribunal viewed that PCIT was justified in invoking the revisionary proceedings holding the assessment order as erroneous as well as prejudicial to the interest of revenue and directed the Assessing Officer to frame the assessment afresh considering the observation in the impugned order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
