Tribunal remits case for reassessment due to lack of evidence.

The Tribunal remitted the matter back to the Assessing Officer for reconsideration as the disallowance lacked sufficient evidence of the appellant's involvement in promoting the penny stock company. Emphasizing the need for all relevant materials to be furnished, the Tribunal instructed reassessment of the appellant's involvement with the company before making a decision. The lower authorities' orders were set aside, and the issue of deduction under Section 10(38) was remitted for a fresh examination, with directions to provide the appellant a fair opportunity to present their case. The appeal was allowed for statistical purposes.

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Issues:
Claim for exemption under Section 10(38) of the Income-tax Act, 1961 based on long term capital gains from sale of shares.

Analysis:
The appellant claimed exemption under Section 10(38) of the Income-tax Act for long term capital gains from the sale of shares of a specific company. The Assessing Officer disallowed this claim, citing the company as a penny stock company, without providing the appellant with the investigation report from the Directorate of Investigation, Kolkata. The appellant's counsel requested an opportunity for the appellant to address this issue. The Departmental Representative, however, supported the decisions of the Assessing Officer and the CIT(Appeals).

Upon review, the Tribunal found that the Assessing Officer's disallowance lacked sufficient evidence regarding the appellant's involvement in promoting the penny stock company or inflating its shares. Referring to a similar case, the Tribunal decided to remit the matter back to the Assessing Officer for reconsideration. The Tribunal emphasized the need for the Assessing Officer to furnish all relevant materials, including the investigation report, details of enquiries, and any other pertinent information. The Assessing Officer was instructed to reassess the appellant's involvement with the company, relationship with promoters, and role in share price inflation before making a decision in accordance with the law.

Consequently, the Tribunal set aside the orders of the lower authorities and remitted the issue of deduction under Section 10(38) back to the Assessing Officer for a fresh examination. The Assessing Officer was directed to follow the guidelines outlined in the Tribunal's decision and provide the appellant with a fair opportunity to present their case. The appeal by the assessee was allowed for statistical purposes, with the decision pronounced in court on 20th November 2019 in Chennai.

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