Disallowance of Share Trading Loss Held Unsustainable as AO Failed to Examine Contract Notes and Broker Confirmations: ITAT Orders Review of ₹3.26 Cr Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has held that disallowance of share trading loss cannot be sustained where the Assessing Officer (AO) failed to examine crucial documentary evidence including contract notes, Securities Transaction Tax (STT) payments, and broker confirmations. The Tribunal consequently directed a fresh review of the ₹3.26 crore addition.

The appeal was filed by the assessee Aarken Advisors Private Limited. against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) for the Assessment Year 2018-19.

The dispute has arisen upon the disallowance of business loss amounting to ₹3.26 crore arising from the sale of shares of the assessee.

However, during the assessment proceedings, the Revenue authorities treated the share transactions as bogus relying substantially on information received from the Investigation Wing. The AO consequently rejected the assessee’s claim of loss and the CIT(A) affirmed the addition.

The assessee stated that both the AO and the CIT(A) failed to properly consider the extensive documentary evidence placed on record. It was argued that the transactions were supported by contract notes, broker documents, STT payments and other supporting materials establishing the genuineness of the trades. The assessee further submitted that none of this evidence had been rebutted by the Revenue authorities.

The Tribunal observed that neither the assessment order nor the appellate order dealt with the documents furnished by the assessee. It noted that important aspects such as time-stamped contract notes, norms governing the purchase and sale of shares, STT payments, and broker confirmations had not been examined at all by the authorities.

The Bench comprising Yogesh Kumar U.S. and Krinwant Sahay held that the matter required reconsideration by the AO.Further, the Bench directed the AO to conduct a de novo assessment after verifying all evidence and submissions produced by the assessee and after granting adequate opportunity of hearing.

Accordingly, the appeal is allowed for statistical purposes.

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