ITAT Condones 24-Day Delay, Remands Rs 1.07 Crore LTCG Penny Stock Dispute After CIT(A) Fails to Record Complete Submissions:

The ITAT Mumbai Bench has condoned the delay of 24 days in filing the appeals, after noting that the delay was not intentional. The tribunal has restored the appeals of Vipin Shersingh Argarwal to the first appellate authority for fresh consideration.

The dispute concerns Long-Term Capital Gains (LTCG) claimed as exempt under Section 10(38) of the Income Tax Act, 1961. For Assessment Year (AY) 2015-16, the Assessing Officer (AO) had made an addition amounting to Rs 1.07 crore to the assessee's income under Section 68, treating the LTCG arising from transactions in Kailash Auto Finance Ltd. shares as a penny stock transaction. Additionally, the amount of Rs 3.23 lakh was treated as unexplained expenditure under Section 69C, and the same was added to the assessee's income. When these two additions were challenged before the first appellate authority, i.e., the Commissioner of Income Tax (Appeals) [CIT(A)], both were sustained.

Subsequently, the assessee approached the Income Tax Appellate Tribunal (ITAT), claiming that he could not furnish required details and documentary evidence before the first appellate authority. He maintained that the transactions were genuine and that he had no involvement in any alleged penny stock manipulation. The assessee therefore sought one more opportunity to present his case with complete evidence.

The Revenue opposed the matter on the merits, stating that the AO had brought sufficient material on record to establish that the assessee was a beneficiary of the alleged penny stock arrangement involving Kailash Auto Finance Ltd.

The tribunal when analysing the facts of the case had noted that "on page 52 of that the learned CIT(A) recorded that Assessee filed submission before him and recorded same, “written submission the relevant part of submission is reproduced as under.” We find that in the written submission, the CIT(A) recorded that similar grounds of appeal was raised in AY 2014-15 and the Assessee made prayer to relying upon such submission. However, contents of such submissions are not recorded."

The ITAT observed that the CIT(A) had recorded only part of the assessee’s submissions and that the assessee had sought an opportunity to file complete evidence. It held that granting one more opportunity would not prejudice the revenue. Accordingly, the Tribunal restored the grounds for both AYs 2014-15 and 2015-16 to the CIT(A) for fresh adjudication after considering the assessee’s complete submissions and supporting evidence. Both appeals were allowed for statistical purposes.