2015 (5) TMI 44 - AT - Income Tax

Application for rectification or order u/s 254(2) - Disallowance of short term capital loss on account of sale / purchase of shares - AO treated the transaction as Sham - it was held by the Tribunal in these cases that it cannot be accepted that any loss was incurred during this period from 07/12/2007 to 15/12/2007 and therefore, the claim of the assessee regarding short term capital loss is not allowable. However, it was held by the Tribunal as per Para 6 of the impugned Tribunal order that since the assessee was also holding old shares on 07/12/2007, the loss incurred by the assessee should be held to be allowable as long term capital loss having been incurred on sale of these old shares. Now in these Misc. Applications, this is the argument of the assessee as per Para 20 of the Misc. Application, as reproduced above, that the issue regarding long term capital loss was not before the Tribunal and therefore, the direction of the Tribunal in this regard is beyond the authority of the Tribunal. Held that - As per above discussion, we have seen that none of the objections raised by the assessee in the Misc. Application is having any merit and therefore, this Misc. Application is liable to be dismissed. - Decided against the appellants.

Summary

Issues Involved:
1. Whether the Tribunal erred in not considering the comprehensive compilation of documents and case laws submitted by the assessee.
2. Whether the Tribunal exceeded its authority by directing the CIT(A) to re-examine the valuation of shares and allow long-term capital loss.
3. Whether the Tribunal's decision to disallow the short-term capital loss claimed by the assessee was based on proper consideration of facts and applicable laws.
4. Whether the Tribunal's direction to re-work the market value of shares on 07.12.2007 was appropriate and within its jurisdiction.

Issue-wise Detailed Analysis:

1. Non-Consideration of Comprehensive Compilation:
The assessee argued that the Tribunal failed to consider a comprehensive compilation of documents and case laws submitted during the appeal. The Tribunal observed that as per Rule 18(6) of the Appellate Tribunal Rules, only documents/records referred to during arguments are treated as part of the record. Since the assessee did not reference the compilation during the hearing, it was not considered part of the record, and thus, the Tribunal was not required to advert to it. The Tribunal also noted that the cited judgments were considered and found not applicable to the specific issues at hand.

2. Tribunal's Authority and Directions:
The assessee contended that the Tribunal exceeded its authority by directing the CIT(A) to re-examine the valuation of shares and allow long-term capital loss, an issue not originally before the Tribunal. The Tribunal clarified that its direction was a consequential decision arising from the primary issue of the disallowance of short-term capital loss. The Tribunal stated that it is within its jurisdiction to pass orders it deems fit and proper in resolving disputes, including directing the re-examination of related matters such as the valuation of shares.

3. Disallowance of Short-Term Capital Loss:
The core issue was the allowability of short-term capital loss claimed by the assessee on the sale of shares of M/s Shakumbari Sugar and Allied Industries Ltd. (SSAIL). The Tribunal upheld the Assessing Officer's view that the transaction was a sham, as the shares were purchased at Rs. 10 per share on 07.12.2007 and sold at Rs. 3.15 per share on 15.12.2007. The Tribunal found that no real loss was incurred during this period, given the net worth per share was significantly lower than the purchase price. The Tribunal's finding was based on a detailed examination of the company's financials and was not deemed to be based on conjecture or surmise.

4. Re-Working Market Value of Shares:
The Tribunal directed the CIT(A) to re-work the market value of shares on 07.12.2007 and determine the long-term capital loss accordingly. The assessee argued that this created a new controversy and was beyond the Tribunal's scope. The Tribunal, however, justified this direction as necessary for a comprehensive resolution of the matter. The Tribunal further clarified that this direction did not involve collecting new evidence but rather re-evaluating the existing material to determine the correct valuation and resultant losses.

Conclusion:
The Tribunal dismissed all the Miscellaneous Applications, holding that none of the objections raised by the assessee had merit. The Tribunal reiterated that its directions were within its jurisdiction and necessary for a fair resolution of the issues. The Tribunal's decision to disallow the short-term capital loss and direct a re-evaluation of the share valuation was based on a thorough examination of the facts and applicable laws.