ITAT Dismisses Revenue’s Appeal on Business Loss, Rules CBDT Exception for Bogus LTCG/STCL from Penny Stocks Inapplicable [Read Order]
The tribunal noted that the tax effect of the appeal was below the threshold in CBDT Circular No. 09 of 2024 and that exceptions for bogus LTCG/STCL applied only when such losses were claimed.
Business Loss - Taxscan
Business Loss - Taxscan
The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) dismissed the Revenue’s appeal for the Assessment Year 2013-14, holding that the loss from share trading was a business loss and that the Central Board of Direct Taxes (CBDT) exception for bogus Long Term Capital Gain / Short Term Capital Loss ( LTCG/STCL ) from penny stocks was not applicable.
The Revenue-appellant appealed against the order dated 19/10/2023 for the Assessment Year 2013-14 passed by Commissioner of Income Tax(Appeals)[CIT(A)].In this case, Satya Prakash Gupta,respondent-assessee, filed his return of income on 29/09/2013 declaring a business loss from share trading through his proprietary concern, M/s Sterling Security Systems. The return was assessed u/s 143(3) on 25/02/2016, where the claim of business loss was accepted.
A search u/s 132 was carried out on 26/12/2016, and assessment u/s 153A was completed on 31/12/2019 without any incriminating material being found. This order was later quashed by the tribunal on 09/03/2022.
Meanwhile, based on Investigation Wing information alleging bogus short-term capital loss from trades in shares of PMC Fincorp Ltd. and Cubical Financial Services Ltd., notice u/s 148 was issued on 30/03/2021. The Assessing Officer (AO) passed an assessment u/s 147/143(3) on 31/03/2022, making an addition of ₹1,61,43,692/- on account of alleged accommodation entries.
On appeal, the CIT(A) by order dated 19/10/2023 allowed relief, holding that the AO had wrongly treated the transactions as short-term capital loss instead of business loss already disclosed in the ITR and audited accounts. The Department then filed the present appeal against the CIT(A)’s order.
The tax effect in the Revenue’s appeal was ₹49,88,400/-, which was below the limit for filing an appeal before the tribunal as per CBDT Circular No. 09 of 2024 dated 17/09/2024.
The department counsel argued that the appeal involved bogus short-term capital loss from penny stocks, which was an exception under the circular, and thus the appeal was maintainable.
The assessee counsel contended that the assessee claimed business loss from share trading and never claimed short-term capital loss. He added that under the relevant office memorandum and CBDT circular, the Revenue’s appeal was not maintainable and asked for its dismissal.
The two member bench comprising Yogesh Kumar U.S (Judicial Member) and Manish Agarwal (Accountant Member) heard both parties and noted that the assessee declared business loss from share trading through his proprietary concern, M/s Sterling Security Systems, and did not claim any short-term capital loss. The tax effect of the Revenue’s appeal was ₹49,88,400/-, below the limit for filing an appeal before the tribunal as per CBDT Circular No. 09 of 2024.
The appellate tribunal referred to the Office Memorandum and earlier tribunal ruling in ITO vs. Palak Chinubhai Patil, which clarified that exceptions to the monetary limit applied only to cases involving bogus LTCG/STCL through penny stocks. Since the assessee had claimed the loss as business loss, the case did not fall under these exceptions.
Accordingly, the bench dismissed the Revenue’s appeal due to low tax effect in line with the CBDT circular.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
