Penny Stocks: CBDT guidelines in respect of listed scrips cannot be made applicable for unlisted scrips

Income Tax Appellant Tribunal in the matter of M/s. Pantime Finance Company Pvt. Ltd. vs Income Tax Officer (ITO) held that SOP guidelines issued by CBDT in respect of listed scrips cannot be made applicable for unlisted scrips.

5. Hence it could be safely concluded that the base order seeking to be revised i.e the re-assessment order dated 20.11.2018 itself is bad in law and is liable to be quashed due to various legal infirmities stated supra, then any subsequent proceedings on the said illegal base order also would get automatically quashed. Hence the revision order u/s 263 of the Act deserves to be quashed on this count also.

6. Even on merits of revision order passed by the ld. PCIT only says that M/s Aditi & Finance Pvt Ltd is a penny stock and that SOP guidelines issued by CBDT had not been followed by the ld. AO while framing the reassessment. In this regard, it is pertinent to note that penny stock SOP guidelines have been issued by CBDT only in respect of listed scrips. In the instant case, Aditi & Finance Pvt Ltd scrip is not listed in any stock exchange. We hold that the SOP guidelines issued by CBDT cannot be made applicable for unlisted scrips. Hence the ld. PCIT had assumed revision jurisdiction on incorrect assumption of fact and incorrect application of CBDT guidelines. Hence the revision order passed u/s 263 of the Act is to be quashed on this count also.

7. In view of the aforesaid observations, we hold that the revision order passed by the ld. PCIT u/s 263 of the Act deserves to be quashed both on law and also on merits. Accordingly, the grounds raised by the assessee are allowed.

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