2015 (2) TMI 1127 - AT - Income Tax

Long Term Capital Loss - CIT(A) allowed the claim - Held that - As sale and purchase of share was done through cheques and transfer of shares was properly supported by the transfer deeds and complete formalities were done by the issuing company in respect of allotment of shares and transfer of shares. Nothing adverse was brought by the Assessing Officer except his belief that assessee is not expected to sell shares below the book value Section 48 clearly states that for the purpose of calculation of capital gain of shares, it is only the sum received which can be considered for calculation of capital gain. In view of the above, we are of the considered opinion that the Ld. CIT(A) has rightly considered the loss declared by assessee. In view of the above, we do not see any reason to interfere in the order of Ld. CIT(A) - Decided against revenue

Summary

Issues involved:
1. Allowance of Long Term Capital Loss despite AO's valuation of shares.
2. Justification of deletion of addition by CIT(A) despite ITAT's observations.
3. Acceptance of CIT(A)'s predecessor's view despite ITAT's observations.
4. Restoration of AO's order by setting aside CIT(A)'s order.

Detailed analysis:
1. The appeal involved a dispute regarding the allowance of Long Term Capital Loss by the CIT(A) despite the AO's valuation of shares. The AO observed that the shares were sold at a significant loss within a short period to the Managing Director of the company, suspecting a collusive transaction. The AO recalculated the Long Term Capital Loss based on the book value on the date of sale, resulting in a disallowance. The CIT(A) allowed relief to the assessee, prompting the department to appeal to the ITAT.

2. The second issue revolved around the justification of the deletion of the addition by the CIT(A) despite the ITAT's observations. The ITAT had noted that the assessee had earned exempt income, indicating familiarity with investments and business activities. The department argued that the shares were not quoted in the market, and the AO's valuation based on book value was correct. The CIT(A) was criticized for allowing relief to the assessee in this context.

3. The third issue concerned the acceptance of the CIT(A)'s predecessor's view despite the ITAT's observations. The ITAT had remanded the case back to the CIT(A) for fresh adjudication, leading to the CIT(A) allowing relief to the assessee. The department contended that the shares were undervalued and the CIT(A) erred in overturning the AO's decision.

4. The final issue involved the restoration of the AO's order by setting aside the CIT(A)'s decision. The ITAT, after considering the submissions of both parties and reviewing the case history, concluded that the facts of the present case were identical to a previous case involving the assessee's brother. Relying on the precedent set in the brother's case, the ITAT dismissed the department's appeal, upholding the CIT(A)'s decision to allow relief to the assessee.