The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that speculative transaction through a broker without the purchase of share and deletes addition on purchase of shares and commission expenditure.
The appellant, M/s. Dhaval R Ajmera is deriving salary income, house property income, short-term and long-term capital gains, and income from other sources. Based on the information received from the Directorate of Income Tax (Intelligence and Criminal Investigation), concerning search action conducted in the case of Maha Sagar Group cases and Shri Mukesh Chokshi, the case of the assessee was sought to be reopened by issue of notice u/s.148 of the Act.
During re-assessment proceedings, the AO made disallowance the purchase of shares of Rs.7,89,745/- through M/s. Alliance Intermediates & Network Pvt. Ltd. and also added payment of commission expenditure u/s. 69C of the Act in the sum of Rs. 39,487/. On appeal, by ignoring all the contentions of the assessee the CIT(A) confirmed the action of the AO.
The counsel for the appellant submitted that it had done only speculative transactions through the broker and had incurred a loss of Rs.33,83,516/- and had not made any purchase of shares through the broker. It was also submitted that the appellant had neither claimed the said speculation loss incurred of Rs.33,83,516/- with Alliance Intermediates and Network Pvt. Ltd., for the relevant period nor in any subsequent assessment years. Since no transactions of purchase of shares were made through Alliance Intermediates Pvt. Ltd., there is no question of making payment of any commission.
The Tribunal observed that the speculation loss incurred cannot claim set-off of the same with future speculation income. Even if the speculation loss incurred by the assessee is treated as non-genuine, the same would be of no consequence so far as the determination of tax liability of the assessee in the instant case as well as in the subsequent years is concerned.
The Coram of Mr. M.Balaganesh, Accountant Member, and Mr. Kuldip Singh, Judicial Member while allowing the appeal has held that “we hold that the entire disallowance of Rs.7,89,745/- has been made on a completely incorrect assumption of facts and on a mistaken premise. We categorically hold that there is no purchase of shares of Rs.7,89,745/- made by the assessee through Alliance Intermediates and Network Pvt. Ltd which was claimed as a deduction in return for income. Hence, there is absolutely no question of making any disallowance of Rs.7,89,745/- on account of the purchase of shares in the assessment. Hence, the same is hereby directed to be deleted. Once the disallowance made on account of purchase of shares is deleted, the alleged related commission expenditure u/s.69C of the Act in the sum of Rs.39,487/- also automatically gets deleted”.
Mr. Prakash Jotwani and Mr. Rajat Mittal appeared on behalf of the appellant and revenue respectively.
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