Tribunal remits exemption issue under Income-tax Act, directs reassessment

The Tribunal allowed the appeal for statistical purposes and remitted the issue of exemption under Section 10(38) of the Income-tax Act back to the Assessing Officer for fresh consideration. The Tribunal emphasized the need for the Assessing Officer to provide all relevant materials and reexamine the role of the assessee in promoting the company and inflating share prices. The orders of the lower authorities were set aside, and the Assessing Officer was directed to decide the issue afresh after giving a reasonable opportunity to the assessee.

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Issues:
Appeal against order of Commissioner of Income Tax (Appeals) regarding exemption under Section 10(38) of the Income-tax Act, 1961 for long term capital gains from sale of shares.

Analysis:
The appeal was directed against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2015-16. The assessee claimed exemption under Section 10(38) of the Income-tax Act for long term capital gains from the sale of shares. The Assessing Officer disallowed the claim based on an investigation report from the Directorate of Investigation, Kolkata, without providing a copy to the assessee. The representative for the assessee requested the matter to be remitted back to the Assessing Officer for reconsideration. The Departmental Representative, on the other hand, relied on the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals).

The Tribunal considered the submissions and found that the Assessing Officer disallowed the claim without establishing how the assessee was involved in promoting the penny stock company or inflating the shares. Citing a similar case, the Tribunal decided to remit the issue back to the Assessing Officer for a fresh consideration. The Tribunal emphasized the need for the Assessing Officer to provide all relevant materials relied upon, including the investigation report from Kolkata, and to reexamine the role of the assessee in promoting the company and inflating share prices. The Tribunal set aside the orders of both authorities below and directed the Assessing Officer to decide the issue afresh after giving a reasonable opportunity to the assessee.

Consequently, the Tribunal allowed the appeal filed by the assessee for statistical purposes and ordered the matter to be re-examined by the Assessing Officer. The issue regarding deduction under Section 10(38) of the Act was remitted back to the Assessing Officer for a fresh decision in accordance with the Tribunal's directions. The order was pronounced in court on 10th January, 2020 in Chennai.

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