The Delhi bench of the Income Tax Appellate Tribunal(ITAT) has held that the Commissioner of Income Tax (CIT(A) )can’t disallow the claim of business loss when the assessee adduced sufficient evidence.
Genuine Finance Pvt. Ltd, the assessee is engaged in the business of shares and securities and trades in shares of various companies and income/loss earned therefrom is shown as business income. The assessee filed a return of income for A.Y. 2011-12 on 30.09.2011 declaring a total loss of Rs. 60,36,102/-.
The Assessing Officer observed that the assessee company sold shares of VAS Infrastructure Pvt. Ltd. and the total sale value for A.Y. 2011-12 is Rs. 39,08,227/-. Further viewed that M/s. VAS Infrastructure Pvt. Ltd. is a penny stock company, which has been used by beneficiaries (sell or share) to launder money in the garb of Long Term Capital Gain (LTCG) while claiming tax exemption under Section 10(38) of the Income Tax Act, 1961.
The Assessing Officer assessed the total income of the assessee at Rs. 2,70,191/- and made disallowance of loss of Rs. 18,57,032/-. The CIT(A) dismissed the appeal of the assessee.
It was contended by the assessee that the accounts of the assessee were Audited under the Companies Act and also under Section 44AB of the Income Tax Act, 1961. In response to the reason forthe re-opening of the assessment, the assessee filed its objection dated 20.05.2019 with Assessing Officer on 21.05.2019. However, the Assessing Officer disposed ofthe such objection of the assessee by passing a speaking order dated 30.09.2019.
The assessee submitted Broker’s ledger in the company’s books and the company’s ledger in the Broker’s books along witha copy of the Demat Statement. Further, a statement of Script wise purchase and sales of shares along with opening stock and closing stock of such shares were submitted which tallies with script-wise total shares Purchased and script-wise total shares sale shown in Audited Accounts after deducting purchase amount of Rs. 25,15,988/- and sale amount of Rs. 25,06,434/- of F&O Segment.
It was observed by the Tribunal that the assessee is continuously dealing in share trading of various shares/scripts and the said fact is not disputed. The Script of M/s VAS Infrastructure Ltd. was not blacklisted by the SEBI during the relevant period.
Further viewed that nowhere in the said order of SEBI dated 09.01.2018 it is said that for the particular period mentioned herein the script of M/s VAS Infrastructure is blacklisted or is penny stock or sham and bogus script/shares. The assessee purchased shares online through various brokers and the payments made to brokers are reflected in the bank account. The assessee has transferred the shares through the online platform of the stock exchange through a broker.
A Coram of Ms Suchitra Kamble, Judicial Member viewed that the Assessing Officer has not given any description as to why the script at a particular juncture was at its lowest or highest price at the time of trading due to the assessee company’s interference when the entire transaction of purchase and sale of the scripts was through National Stock Exchange or Bombay Stock Exchange and that also through the authorised brokers.
The ITAT bench observed that the CIT(A) has ignored the evidence which was submitted by the assessee before the Assessing Officer as well as before the CIT(A). While allowing the appeal, the Tribunal quashed the order of the Assessing Officer and the CIT(A) in disallowing the claim of business loss to the assessee.
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