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In a penny stock companies case [2021] 17 ITR-OL 86 (Mad)both the AO and CIT (A) are found to have examined the modus operandi of the assessee and held that the shares were purchased through off market and that the selling rates were artificially hiked later on. In their next the Tribunal sent the case for remand. This case proceeded u/s 147 based on an information received relating to bogus long-term capital gains exemption claim in a scrip of M/s. Bakra Pratisthan Limited trade and the entire sale proceeds of shares is assessed under the head “Income from other sources”. In a case of meagre investment huge profits the off market purchase of shares followed was by a merger and thereafter into a conversion which lead to substantial increase in number of shares held as well as substantial hike in price of shares.

The department agitated such remand before Madras High Court.

The Court went into following irregularities in the order of the Tribunal:

“On a reading of the order passed by the Tribunal, we find that the Tribunal did not interfere with the factual findings recorded by the Assessing Officer and the Commissioner of Income-tax (Appeals) with regard to the transaction done by the assessee. Thus, unless and until the Tribunal found an error in the approach of the Assessing Officer or the Commissioner of Income-tax (Appeals) and only after interfering with such a finding, the Tribunal could have exercised its power of remand. Even in such circumstances, the Tribunal was required to record reasons as to why the matter should be remanded and as to why the Tribunal could not decide the factual issue on the available material.”

The Court left the following laudable directive in this case:-

“The Tribunal, being a last fact finding authority, is under a legal obligation to record correct findings of fact. The power to remand a case should be exercised on judicial principles. Where all the evidence had been produced and the Commissioner (Appeals), after full investigation of the evidence and examination of the accounts, had given a definite finding on the question in issue, the Tribunal’s order of remand is invalid.”

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