2024 (1) TMI 1528 - HC - Income Tax

Long Term Capital Gains exemption contested on basis of regulatory probes; tribunal found no evidential basis for denial, so exemption stands.

Long term capital gains exemption under section 10(38) was contested where revenue relied on ongoing SEBI and SFIO investigations; the Tribunal held the ... Bogus LTCG - exemption from Long Term Capital Gains by virtue of Section 10(38) denied - ongoing investigation by the Securities Exchange Board of India ['SEBI'] as well as the Serious Fraud Investigation Office ['SFIO'] - ITAT held AO merely declared this company to be penny stock company without bringing any evidence on record. Though the A.O. discussed in the assessment order that Investigation Wing as well as SEBI revealed that Shilpi Cable Technologies Ltd., is engaged in scam, but, no details have been brought on record as to how in assessment year under appeal this company was engaged in scam or indulged in price raise in shares. HELD THAT:- Material which is sought to be alluded to by Appellant/revenue did not even exist at the time when the assessment order came to be passed nor does it appear to have been place for the consideration of the CIT(A) or the ITAT. The ongoing investigation, in any case would neither be impacted nor impeded or influenced by any findings that have been returned by the ITAT while considering whether Long Term Capital Gain benefits were liable to be claimed. We note that the findings of fact as recorded by the Tribunal could not be assailed before us. Since the issue itself appears to be concluded by findings of facts, we find that no substantial question of law arises. Issues: Whether the assessee was entitled to exemption under Section 10(38) of the Income-tax Act, 1961 in respect of long-term capital gains on sale of shares of Shilpi Cable Technologies Ltd.Analysis: The question was decided on factual findings by the Tribunal and the CIT(A). The authorities below recorded that the assessee held the shares for more than one year, purchased and sold them through recognised stock exchange platforms with payments routed through banking channels, and paid securities transaction tax. No evidence was placed on record by the assessing officer to demonstrate that the transactions were not genuine or that the company qualified as a penny stock in the assessment year under appeal. Alleged subsequent or ongoing investigations by regulatory authorities were not part of the material before the assessing officer, CIT(A) or the Tribunal. As the contested determinations rest on findings of fact, they were not open to interference in the present proceedings.Conclusion: Exemption under Section 10(38) of the Income-tax Act, 1961 in respect of the long-term capital gains was upheld; the appeal by the revenue is dismissed.