The case of assessee was taken for scrutiny assessment by issuing a notice under section 143(2) of the Act, the appeal was filed by the assessee against the rejection of exemption claimed with respect to section 10(38) of the Income Tax Act.
Assessee engaged in trading business of ferrous and non ferrous materials filed income returns reporting total income as ₹ 12,08,750. The Investigation Wing of the Department pointed out that the assessee had transacted certain shares characterized by the Department as penny scrip, amounting to ₹ 1,01,38,461 and for addition of ₹ 5,06,923 under section 69C as unexplained commission estimated @ 5% on the sale proceeds of the alleged shares.. Assessing Officer enquired about the capital gain of ₹ 99,80,463/- on sale of shares of PS IT Infrastructure and Services Limited (PS IT), claimed as exempt under section 10(38) of the Act.
The assessee,Vikram N. Chandan, represented by Adv.Neelkanth Khandelwal, filed an appeal against the Income Tax officer, Mumbai – respondent, represented by Rajeshwari Menon .In this case during the assessment the assessing officer (AO) made an addition in respect of one scrip of PS IT u/s 68 of the act. Aggrieved by this assessee went on appeal before CIT(A) who upheld the same decision.
The assessee reiterated the submissions before the Counsel with relevant evidence. The division bench of Pavan Kumar Gadale and Girish Agrawal observed that the purchase took place in an offline mode and the sale of shares were undertaken via SEBI (stock exchange platform) and the consideration was routed through normal exchange. While making the additions the AO didn’t point out any disparity in the details furnished by the assessee.
Assessing officer relied upon the search and survey operations of the department’s investigation wing. According to him, the sharp jump in the share prices of the scrip is not justified . The conclusions drawn by the AO are unsupported by any cogent material hence is purely presumptuous.
Considering the totality of facts and circumstances of the case the division bench deleted the addition made u/s 68 towards proceeds of sale of listed shares of PS IT which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). As a result, appeal of the assessee was allowed.
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