The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has recently held that exemption under Section 10(38) of Income Tax Act, 1961 could not be disallowed when a transaction is not declared as penny stock.
Section 10(38) of Income Tax Act deals with long term capital gains which was obtained after sale or transfer of securities that was not chargeable under Income Tax Act.
Assesee Atulbhai Amritlal Mehta filed original return of income for the year declaring total income at Rs. NIL and claimed business loss of Rs. 84,15,914/-.The assessee claimed exempt income of Rs. 1,80,41,375/- inclusive of Rs. 1,54,25,446/- being Long Term Capital Gains from transactions on which securities transaction tax was paid.
The assessee’s case was reopened under Section 147 of the Income Tax Act, The Assessing Officer observed that the assessee earned capital gain of Rs. 36,26,308/- and claimed exemption income under Section 10(38) of the Act. The Assessing Officer made addition of Rs. 36, 26,308/- and thereby denied exemption under Section 10(38) and audited the same under Section 68 of the Act as unaccounted cash deposit.
Aggrieved assesse filed appeal before CIT(A).CIT(A) rejected the appeal .
Kalpesh Shah, counsel for the assessee submitted that the assessee company is dealing with share trading as investment during the year assessee filed return of income under Section 139(1) and Section 148.Moreover The assessee entered into transaction of Vas Infrastructure Ltd. to its share broker and he has given the details relates to the brokers as well as the transaction was carried out through the National Stock Exchange.
Y. R. Raval, counsel for the revenue contented that script of M/s. Vas Infrastructure Ltd. was a penny stock and from the report of the Investigation Wing the same is confirmed.
The tribunal, while considering the records found that The Assessing Officer as well as CIT (A) has not given any detailed finding as to how the assessee is dealing with penny stock.
Further the bench observed that the script of purchase and sales of Vas Infrastructure Ltd. has not been declared a penny stock by SEBI or the Stock Exchange Regulatory Authority.
It was also observed that the assessee had filed statement of scrip wise purchase and sales, stocks summary, copy of assessee’s ledger in broker’s books and copy of broker’s ledger in books of assessee for Assessment year 2011-12 along with bank statements and bank book.
The single bench of Suchitra Kamble (Judicial Member) allowed the appeal filed by the assessee.
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