Usha Devi Modi Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) Kolkata recently addressed a case involving Usha Devi Modi, contesting the Principal Commissioner of Income Tax’s (PCIT) decision under Section 263 of the Income Tax Act, 1961. The case centers on the claim of Long-Term Capital Gain (LTCG) exemption under Section 10(38), stemming from transactions in penny stocks. The ruling highlights critical aspects of the assessment process and revisional powers under the Act.
Background of the Case
The dispute arises from the PCIT’s revision of an assessment order issued by the Assessing Officer (AO) under Section 143(3) for the Assessment Year 2014-15. The PCIT argued that the AO had failed to adequately investigate the LTCG claim from the sale of equity shares in M/s Surabhi Chemicals and Investments Ltd., flagged as a penny stock. The PCIT invoked Section 263, alleging the order was erroneous and prejudicial to the interests of revenue.
PCIT’s Observations and Revision
- Claim of Exemption under Section 10(38): The assessee claimed an LTCG exemption on shares sold through a recognized stock exchange, with Security Transaction Tax (STT) paid.
- Penny Stock Allegation: Based on a report from the Directorate of Income Tax (Investigation), the PCIT identified M/s Surabhi Chemicals as a penny stock with suspected price manipulation.
- Grounds for Revision: The PCIT argued that the AO failed to examine the transaction details and relied on limited evidence, resulting in a “lack of inquiry.”
The revision order directed the AO to reexamine the LTCG claim, ensuring due inquiry and adherence to the law.
