2022 (11) TMI 16 - AT - Income Tax

Bogus LTCG - Disallowance of loss - sale of shares of Vas Infrastructure Limited - HELD THAT - AO has not given any description as to why the script at particular juncture was at lowest or highest price at the time of trading due to assessee company s interference, when the entire transaction of purchase and sale of the scripts was through National Stock Exchange or Bombay Stock Exchange and that also through the authorised brokers. In fact, the Revenue has also not pointed out as to whether any of the broker during the said period was black listed or prevented to trade in the stock market by SEBI or other investigation agencies. Merely on conjecture and surmises, the Assessing Officer cannot made disallowance. In fact, the assessee has not claim the benefit of Section 10(38) in the present assessment year or earlier assessment year or in subsequent assessment years. CIT(A) has totally ignored the evidences such as Audited accounts and Tax Audit report for F.Y. 2011-12, copy of demat statements for F.Y. 2011-12, F O Segment yearly summary sheet, Audited Accounts for F.Y. 2011-12, Statement of Script wise purchase and sales for F.Y. 2011-12, stock summary of M/s VAS Infrastructure Ltd., copy of assessee s ledger in broker s books and copy of broker s ledger in books of assessee for F.Y. 2011-12 along with bank statements and bank book for F.Y. 2011-12 which were submitted by the assessee before the Assessing Officer as well as before the CIT(A). Thus, the Assessing Officer as well as the CIT(A) was not right in disallowing the claim of business loss to the assessee. The appeal of the assessee is allowed.

Summary

Issues:
Appeal against CIT(A) order confirming disallowance of loss on sale of shares of Vas Infrastructure Limited for A.Y. 2012-13.

Analysis:
1. The assessee, engaged in shares and securities business, filed return for A.Y. 2011-12 showing total loss. The Assessing Officer disallowed loss on sale of shares of VAS Infrastructure Pvt. Ltd., suspecting money laundering. Total income assessed at Rs. 2,70,191/- with disallowance of Rs. 18,57,032/-.

2. Assessee appealed to CIT(A) who upheld the disallowance. Assessee contended genuine business loss, submitted evidence justifying sales value, and argued against penny stock categorization of VAS Infrastructure Ltd.

3. The Ld. AR emphasized the genuine nature of the loss, highlighting the small percentage of turnover related to VAS Infrastructure Ltd. shares. Assessee's trading activity supported by audited accounts and tax audit reports. No claim under Section 10(38) made.

4. The Ld. DR alleged manipulation in VAS Infrastructure Ltd. shares, linking the assessee to bogus gains/losses per investigation wing report. Reopening issue not specified in grounds of appeal.

5. Tribunal noted continuous share trading by assessee, absence of SEBI blacklisting for VAS Infrastructure Ltd., and transactions through authorized brokers. Lack of evidence supporting penny stock classification. Disallowed claim based on conjecture and surmises. Emphasized ignored evidence submitted by assessee.

6. Tribunal allowed the appeal, emphasizing the inadequacy of reasoning for disallowance and the substantial evidence provided by the assessee. Dismissed CIT(A)'s decision, ruling in favor of the assessee.

7. Conclusion: The appeal against the disallowance of loss on sale of shares of VAS Infrastructure Limited for A.Y. 2012-13 was allowed by the Tribunal, highlighting the lack of concrete evidence supporting the disallowance and the genuine nature of the business loss claimed by the assessee.