ITAT upholds AO's Disallowance of STCL Due to Adjustment already made in Previous AY but Deletes Penalty Citing Lack of Justification [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) upheld the disallowance of short-term capital loss which was already adjusted in the previous assessment year (AY) but deleted the penalty levied by the assessing officer (AO) stating that lack of justification.

Sunil Kumar Somani, the assessee claimed adjustment for short-term capital loss of Rs.5,53,954. The Assessing Officer(AO) disallowed the adjustment as it was already adjusted in the previous assessment year. The Assessee accepted his mistake and pleaded that it was made because of inadvertence but not due to malafide intention.

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The Assessing Officer (AO) levied a penalty on the assessee under section 271(1)(c) for the wrong claim of brought forward capital loss. The assessee approached the Commissioner of Tax [appeals] [CIT(A)] aggrieved by the order of the Assessing Officer(AO). The Commissioner of Tax (appeals)[CIT(A)] upheld the order of the Assessing Officer(AO) and confirmed the penalty on the assessee.

Aggrieved by the order of [CIT(A)], the assessee filed an appeal before ITAT. The Counsel of the Revenue argued that the set off of losses was detected by the Assessing Officer(AO) even though it was done by mistake. Therefore the counsel argued that the assessee deserved the penalty.

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The two-judge Bench composed of Sanjay Garg (Judicial member) and Sanjay Awasthi (Accountant member) observed that losses were not found from any independent source. The tribunal observed that the Assessing Officer (AO) detected claims of losses from the material available to him. The Tribunal highlighted that if the losses were detected from an independent source it can be said that there was real intention to hide the total income.

Therefore the Tribunal upheld the disallowance on a claim of excessive loss and stated that extra tax and interest on the assessee was justified. However, the tribunal deleted the penalty levied under section 271(1)(c) as it was not justified in the totality of facts. The appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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