Tax Exemption Claim u/s 10(38) Sent Back for Re-Adjudication; Emphasizes Fair Inquiry and Evidence Presentation.

The ITAT Chennai remitted the issue concerning the exemption claim under Section 10(38) back to the Assessing Officer for re-adjudication, emphasizing the need for the assessee to substantiate the legitimacy of the Long Term Capital Gain transactions. The AO was instructed to conduct proper inquiries and provide the assessee with a fair opportunity to present evidence. The appeal was partly allowed for statistical purposes, with the tribunal underscoring the necessity for natural justice and proper substantiation of claims.

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Issues involved:
Appeal against order of Commissioner of Income Tax regarding Long Term Capital Gain transactions.

Detailed Analysis:
1. The assessee appealed against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2014-15, where the Assessing Officer concluded that the Long Term Capital Gains claimed were sham transactions aimed at bringing unaccounted money in the guise of exempted gains. The CIT(A) dismissed the appeal, leading to the current appeal (Para 2).

2. The main issue in this appeal was the treatment of the purchase and sale of shares by the assessee as penny stock transactions. The Assessing Officer disallowed the exemption claimed under Section 10(38) due to lack of proof of genuineness. The case was compared to previous tribunal decisions for reference (Para 3).

3. The ITAT Chennai noted that the assessee was not given a fair opportunity to prove the genuineness of the transactions, and the assessment was based primarily on evidence collected by the Revenue during investigations. The tribunal emphasized that the onus of proving exemption lies on the assessee, and the AO must provide evidence for any contrary claims. The issue of genuineness required re-adjudication for natural justice (Para 4).

4. Referring to previous tribunal decisions, the tribunal highlighted the need for proper substantiation of claims, especially in cases involving penny stocks and Long Term Capital Gains. The case was compared to similar instances where lack of evidence led to remittal for further examination by the Assessing Officer (Para 5).

5. Consequently, the tribunal decided to remit the issue of exemption claim under Section 10(38) back to the Assessing Officer for re-adjudication. The assessee was required to establish the legitimacy of transactions, comply with AO's requirements, and provide necessary evidence for assessment. The AO was directed to conduct appropriate inquiries and provide adequate opportunity to the assessee for a fair decision (Para 6).

6. The appeal filed by the assessee was treated as partly allowed for statistical purposes, and the order was pronounced in court on 29th November 2019 in Chennai (Para 7).

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