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2019 (1) TMI 893 - AT - Income TaxDisallowance of business loss - scrips considered as bogus - Held that - We find the issue of gains arising out of shares of these type of companies had been the subject matter of adjudication by this tribunal in the case of Smt. Savita Bhura vs DCIT 2018 (9) TMI 1783 - ITAT KOLKATA for Asst Year 2013-14 wherein reliance was placed on various decisions of tribunals and high courts. Some of them were even followed by the ld CITA while granting relief to the assessee. Hence we do not find any infirmity in the order of the ld CITA granting relief to the assessee. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the judicial precedent relied upon hereinabove, we hold that the ld AO had erred in disallowing the business loss incurred in the sum of ₹ 3,85,70,774/- in respect of two scrips as bogus which were rightly deleted by the ld CIT-A. Accordingly, the Grounds 1 & 2 raised by the revenue are dismissed. Disallowance made u/s 35(1)(ii) - whether assessee is not eligible for weighted deduction u/s 35(1)(ii) - Held that - We find that the issue under dispute is already addressed by the order of this tribunal in the case of DCIT vs M/s Maco Corporation (India) Pvt Ltd 2018 (3) TMI 811 - ITAT KOLKATA
Issues Involved:
1. Disallowance of business loss treating it as bogus loss. 2. Disallowance under section 35(1)(ii) of the Income Tax Act. 3. Alleged violation of Rule 46A(3) of the Income Tax Rules. Issue-wise Detailed Analysis: 1. Disallowance of Business Loss Treating It as Bogus Loss: The primary issue was whether the CIT(A) was justified in disallowing the business loss of ?3,85,70,774 incurred on the sale of shares of Blue Circle Services Limited and Tuni Textile Mills Ltd by treating it as bogus. The assessee, engaged in share broking, declared a total income of ?3,37,95,314 for the Assessment Year 2013-14. The AO disallowed the loss based on an investigation report suggesting collusion with entry operators to rig stock prices. The assessee countered that the transactions were genuine, backed by SEBI’s non-suspension of the scrips and provided extensive documentation including demat statements, bank statements, and contract notes. The CIT(A) deleted the disallowance, noting the absence of concrete evidence against the assessee and emphasizing the principles of natural justice, including the right to cross-examine witnesses. The Tribunal upheld the CIT(A)’s decision, citing that the AO’s conclusions were based on suspicion without substantial proof, and the assessee had adequately demonstrated the legitimacy of the transactions. 2. Disallowance Under Section 35(1)(ii) of the Income Tax Act: The second issue was the disallowance of ?1,66,25,000 claimed under section 35(1)(ii) for donations made to the School of Human Genetics & Population Health (SHGPH). The AO disallowed the deduction based on a survey that indicated SHGPH was involved in providing bogus donation entries. The assessee argued that the donation was made to a recognized institution and provided supporting documents, including the institution’s credentials and government notifications. The CIT(A) deleted the disallowance, referencing judicial precedents that protected such deductions even if the institution’s approval was withdrawn after the donation. The Tribunal affirmed the CIT(A)’s decision, reiterating that the disallowance could not stand as the assessee had made the donation to a recognized institution, and subsequent withdrawal of approval did not affect the deduction. 3. Alleged Violation of Rule 46A(3) of the Income Tax Rules: The final issue was the alleged violation of Rule 46A(3) by the CIT(A). The revenue contended that additional evidence was admitted without following the due process. However, the Tribunal found that the CIT(A) had examined documents that were already part of the assessment proceedings and did not admit any new evidence. Therefore, there was no violation of Rule 46A(3), and this ground of appeal was dismissed. Conclusion: The Tribunal dismissed the revenue’s appeal, upholding the CIT(A)’s decisions on all grounds. The disallowance of business loss and the deduction under section 35(1)(ii) were found to be unjustified, and no procedural violations were identified in the handling of evidence by the CIT(A).
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