Case Law Details
Sunil Ghorawat Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi, in the case of Sunil Ghorawat vs. ACIT, has provided a significant verdict regarding the application of Section 194J of the Income-tax Act, 1961, which pertains to the deduction of tax at source (TDS) on fees for professional or technical services. The tribunal’s decision revolves around two crucial points of litigation: the disallowance of a short term capital loss on the sale of shares and the disallowance under Section 40(a)(ia) of the Act for non-deduction of TDS on consultancy charges.
Short Term Capital Loss on Sale of Shares
The appellant contested the disallowance made by the assessing officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) regarding a short term capital loss amounting to Rs. 14,86,214 on the sale of shares of a listed company, M/s. Blue Circle Services Ltd. The AO had labeled these transactions as suspicious due to the involvement of the shares being classified as penny stocks, suggesting price manipulation. However, the tribunal meticulously reviewed the sequence of transactions, including the purchase and sale of shares through a registered broker, payment and receipt of consideration through banking channels, and compliance with Securities Transaction Tax (STT), to establish the genuineness of the transactions. The tribunal criticized the AO’s reliance solely on investigation reports without providing the assessee an opportunity for rebuttal or cross-examination. It was concluded that the AO’s approach was based on suspicion rather than concrete evidence, leading to the deletion of the disallowance of the short term capital loss claimed by the assessee.
Disallowance under Section 40(a)(ia) for Non-deduction of TDS on Consultancy Charges
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