The RX and receiver circuit is not working
The SM0038 IR receiver is designed to receive a signal with 38 kHz carrier, +- 3 kHz. The rest is filtered out by sophisticated circuitry. 



To get any signal out of this, your IR LED transmitter must be driven with 38 kHz rectangular signal. The DC signal won't make it through. The information must be encoded using any sort of pulse modulation, whichever you are comfortable with.