2022 (12) TMI 384 - AT - Income Tax

ITAT Kolkata: COVID-19 delay condoned, long-term capital gain upheld under Income Tax Act

The Appellate Tribunal, ITAT Kolkata, condoned the delay in filing an appeal due to COVID-19 restrictions, admitting the appeal for adjudication. ... Revision u/s. 263 - Bogus LTCG - as per CIT, AO failed to examine the correctness and genuineness of claim of long term capital gain(LTCG) u/s. 10(38) from sale of equity shares of a penny stock companies - HELD THAT:- In the impugned order ld. PCIT referred to the information from Directorate of Income Tax (Investigation), Kolkata, which had unearthed a large economic scam of tax evasion in July 2013 conducting search and seizure operations - share brokers and entry operators were involved in manipulation of market price of such penny stock. In the case of Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] under similar set of facts considering report of Directorate of Income Tax (Investigation), Kolkata and also poor financials of the penny stock companies but having sharp, drastic and abnormal increase in share price, held such long term capital gain from sale of such shares as bogus and confirmed the addition made by the ld. AO u/s. 68 of the Act and also confirmed the order passed u/s. 263 of the Act, thereby treating the assessment order as erroneous and so far as prejudicial to the interest of the revenue. Assessee having failed to controvert this finding by placing any other binding precedence of Hon’ble Supreme Court in its favour we fail to find any infirmity in the finding of the ld. PCIT holding the assessment order u/s. 143(3) of the Act dt. 25-05-2017 as erroneous and so far as prejudicial to the interest of the revenue. Therefore, we confirm the finding of the ld.PCIT given in the impugned order. Appeal of the assessee is dismissed. Issues:1. Condonation of delay in filing appeal due to COVID-19 restrictions.2. Treatment of long-term capital gain (LTCG) from the sale of shares as bogus.3. Application of the judgment of the Hon'ble Jurisdictional Calcutta High Court.4. Confirmation of the order passed under section 263 of the Income Tax Act.Analysis:1. The Appellate Tribunal, ITAT Kolkata, addressed the issue of condonation of delay in filing the appeal due to COVID-19 restrictions. The appeal was found to be time-barred by 247 days, but the Tribunal, considering the Supreme Court's judgment, excluded the limitation period between 15.03.2020 and 28.02.2022. Consequently, the delay was condoned, and the appeal was admitted for adjudication.2. The main issue revolved around the treatment of LTCG claimed on the sale of shares as bogus. The assessee declared LTCG of Rs. 72,30,715/- on the sale of shares of a company. The Principal Commissioner of Income-tax invoked section 263 of the Act, alleging that the assessing officer failed to conduct a proper inquiry regarding the claim of exemption under section 10(38) and did not consider information indicating the company's involvement in tax evasion. The Tribunal, relying on a similar judgment by the Calcutta High Court, upheld the PCIT's decision, considering the sharp increase in share price without proper financials as indicative of a bogus claim.3. The Tribunal discussed the application of the judgment of the Hon'ble Jurisdictional Calcutta High Court in a similar case. The assessee failed to provide any contrary evidence or binding precedence from the Supreme Court to challenge the applicability of the High Court's decision. As a result, the Tribunal found no infirmity in the PCIT's decision to treat the assessment order as erroneous and prejudicial to the revenue's interest.4. Ultimately, the Tribunal confirmed the PCIT's finding, dismissing the grounds raised by the assessee. The appeal was consequently dismissed, upholding the order passed under section 263 of the Income Tax Act. The decision was pronounced in open court on 31-0-2022.