Case Law Details
DCIT Vs Krishan Kumar (ITAT Delhi)
Introduction: The Income Tax Appellate Tribunal (ITAT) Delhi recently addressed an appeal filed by the Department against an order from the Commissioner of Income-Tax (Appeals) concerning a share transaction. The case pertains to the assessment year 2011-12.
Detailed Analysis: The Department had contested the decision made by the Commissioner of Income-Tax (Appeals) in favor of the taxpayer, Mr. Krishan Kumar. The Department’s main grievance was related to the deletion of an addition of Rs. 58,17,415 made by the Assessing Officer.
In the course of the proceedings, it became apparent that the tax effect in this particular appeal amounted to Rs. 17,97,581 on an addition of Rs. 58,17,415. The ITAT inquired about the applicability of CBDT Circular no.17/2019 dated 08.08.2019, which set certain thresholds for filing appeals.
The issue at the heart of this case revolved around Long-Term Capital Gains generated by the taxpayer through the sale of shares of Nouveau Multimedia Ltd. These shares had been classified as penny stocks by the Assessing Officer, who perceived the transaction as involving accommodation entries.
The taxpayer, however, contended that the CBDT Circular exception applied to their case, and they should be evaluated on the merits. To support their argument, they referred to a recent decision by ITAT Delhi in the case of DCIT vs. Rajesh Aggarwal. In that case, a similar transaction involving Nouveau Global Ventures Ltd., which was formerly Nouveau Multimedia Ltd., was under consideration. The Assessing Officer had confirmed that Nouveau Global Ventures Ltd. was not a penny stock, and the case was not recommended for further appeal.
The taxpayer emphasized that the company mentioned in the decision was Nouveau Global Ventures Ltd., formerly known as Nouveau Multimedia Ltd. The change in the company’s name had been acknowledged by the Coordination Bench. Therefore, the taxpayer contended that their share transaction was not related to penny stocks and did not fall under the exception clause of the CBDT Circular.
Conclusion: In light of the facts presented and the decision in the Rajesh Aggarwal case, the ITAT Delhi dismissed the Department’s appeal due to the low tax effect. However, the Department was granted the liberty to approach the Tribunal if it could demonstrate that the appeal did not fall within the CBDT Circular’s exception clause. This case underscores the importance of adhering to tax guidelines and relevant circulars when evaluating transactions, especially those related to penny stocks.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the Department is against the order of learned Commissioner of Income-Tax(Appeals)-14, New Delhi in appeal no.300/18-19/CIT(A)-14, New Delhi vide Order dated 17.09.2020 against the assessment order of DCIT, Circle 40(1), New Delhi passed under Section 143(3)/ 147 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 24.12.2018 for assessment year 2011-12.
2. Grounds taken by the Department are reproduced as under:
1. Whether on facts and circumstances of the case, the CIT(A) has erred on facts in deleting the addition of Rs.58,17,415/- made by the AO.
2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of the appeal.
2.1 Perusal of Form No.36 reveals that the tax effect in the present appeal is of Rs.17,97,581 on an addition of Rs.58,17,415. Specific query was raised by the Bench on the learned Sr. DR as to applicability of CBDT Circular no. 17/2019 dated 08.08.2019.
2.2 Learned Sr. DR submitted that the present appeal is in respect of Long Term Capital Gain earned by the assessee on sale of shares of Nouveau Multimedia Ltd. which has been treated as a penny stock. Learned Assessing Officer has held the transaction in these shares as bogus or sham by way of taking accommodation entry. Therefore, the issue in the present appeal is covered in the exception clause of the said CBDT Circular and thus has to be dealt with on merit of the case.
3. In this respect, learned counsel for the assessee placed on record a recent decision of ITAT, Delhi in the case of DCIT vs. Rajesh Aggarwal in ITA No.28/Del/2021 dated 28.06.2023 wherein identical facts and issue have been dealt with. The learned counsel for the assessee submitted that in the case of Rajesh Aggarwal, similar transactions were undertaken. In the said decision, a letter from the learned Assessing Officer i.e. ITO, Ward 43(6), Delhi dated 07.12.2022 confirmed that Nouveau Global Ventures Ltd. is not a penny stock and, therefore, the case is not recommended for further appeal. The said letter from the decisions of Shri Rajesh Aggarwal (supra) is reproduced for ease of reference:
“To
Dated: 07.12.2022
The Sub Registrar,
ITAT, Flo, Lak Nayak han C Wing Khan Market
New Delhi
Madam Sir,
SUB: Appeal in the case of Sh. Ankit Agarwal -ITA 73/D/2021 for AY2011-12 IPAN AJAPA7220M) Reference: letter F.No.SR(DR)/A Bench/Del/2022-23 dated 06.09.2022 received from O/o SR. DR. ITAT, A Beach, New Delhi
Kindly refer to the above mentioned subject.
2. In this regard it as submitted that considering the tax effect i.e. Rs 10,36,590/- which is below the limit prescribed for filing appeal in the light of circular no. 17 of 2016 F. No 279/Misc. M- 142/2007-I TJ (Pt.) dated 08.08.2019 issued by CBDT and decision of Hon ‘ble ITAT, Bench- G Delhi wherein it has held in its order vide ITA No. 8701/DEL/2019 dated 29.06.2020 in the case of Suresh Kumar Aggarwal Vs ACIT, CC-25, New Delhi that M/s Nouveau Global Ventures Ltd. is not a penny stock, this case is not recommended for further appeal.
This issue with the approval of PCTT-15, New Delhi.
Yours faithfully,
Sd/-
(Jitender Pal) Income Tax Officer War 43(6), Delhi”
4. It was pointed out by the learned counsel that name of the company mentioned in the letter is Nouveau Global Ventures Ltd. whose earlier name was Nouveau Multimedia Ltd. The fact of change in name of the company is noted by the Coordinate Bench in the decision of Rajesh Aggarwal (supra) in para4. Thus, in the present case, it is not a transaction of shares in penny stock and, therefore, not covered by the exception clause of the aforesaid CBDT Circular.
5. Considering the above facts and the decision of Shri Rajesh Aggarwal (supra), present appeal by the Revenue is dismissed owing to the low tax effect. However, liberty is granted to the Revenue, if the learned Assessing Officer finds that appeal is not hit by the aforesaid CBDT Circular, he may approach the Tribunal in accordance with the appropriate provisions of law.
6. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 19.09.2023.
