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03-09-2019, Saroj Mootha, Section 10(38), Tribunal Chennai

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4 months 2 weeks ago #10750 by amit
Section - 10(38)
Order Date - 03-09-2019
Favouring - Partly allowed for statistical purposes
Court - Tribunal Chennai
Appellant - Saroj Mootha
Respondent - ITO
Citation - 919Taxpundit71
Appeal No. - I.T.A.No.423/CHNY/2019
Asstt. Year - 2012 -13



The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-5, Chennai in ITA No.354/CIT(A)-5/2017-18 dated 14.12.2018 for the assessment year 2012-13.

2. Smt. Saroj Mootha, the assessee, an individual purchased 41,500 shares of M/s. Esaar India Ltd., on 17.05.2019 for Rs.41,500/- by cash, off market, and subsequently earned a profit of LTCG and claimed it as an exempt income U/s.10(38). The Assessing Officer received a report from the investigation wing of Kolkata, in which, inter alia, the assessee was specified as one of the parties who indulged in bogus / non-genuine long term capital gain from the transactions of alleged purchase and sale of shares of Esaar (India) Ltd. Further, the shares of Esaar India Ltd were found by them as penny stock company which has been used for generating bogus LTCG and the investigations revealed that a scheme was hatched by various players to obtain / provide accommodation of entry of bogus LTCG through manipulation of stock market. Therefore, the Assessing Officer re-opened the assessment. During the reassessment the Assessing Officer required the assessee to furnish particulars. The assessee has not furnished the required particulars. Therefore, the Assessing Officer examined the entire set of transactions in the background of the information received from the DIT(Inv), Kolkatta and upon such examination of facts and on detailed analysis of the transactions held, inter alia, that the transaction of purchase and sale of shares are not genuine, it is a colourable device adopted by the assessee to give the substantial gains shown on the sale of such penny stocks, within colour of genuineness so as to convert the unaccounted money into accounted money without the need to pay any taxes. Therefore, the Assessing Officer treated the entire sale at Rs.63,77,513/- added to the income Further, the assessee claimed interest expenditure of Rs.4,69,089/-. Since, the interest claim did not commensurate w th the earning, the Assessing Officer disallowed Rs.70,363/- and added to the returned income. Moreover, the Assessing Officer disallowed Rs.77,248/-, the dividend claimed by the assessee and added to the income. Aggrieved, the assessee filed an appeal before the CIT(A). The Ld CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.

3. It was submitted by Ld.AR that the issue in this appeal is against the action of the Ld. CIT(A) in confirming the additions made by the Assessing Officer in treating the purchase and sale of shares by the assessee as penny stock transactions. The Ld.AR submitted that the Ld.CIT(A) upheld the interest disallowance made by theAssessing Officer although such expenses were incurred by the assessee and upheld the disallowance of dividend income without appreciating the facts and circumstances of the case. Per Contra, the Ld DR submitted that the assessee has claimed deduction u/s 10 (38) but she has not furnished any material in support of her claim and to prove the genuineness of the transactions. Further, the assessee has not furnished any material and substantiated its interest claim. Therefore, reiterating the facts and circumstances of these cases from the orders of the lower authorities the Ld. DR supported the orders of the lower authorities.

4. We have considered the rival submissions. It is noticed that the assessee has not been given a fair opportunity to prove the genuineness of the transactions but the assessment has been made primarily based on the evidences collected by the Revenue in the course of the investigation conducted by them on the brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the genuineness of the transactions require re-adjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of

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