DCIT Vs Satya Prakash Gupta (ITAT Delhi)
ITAT Delhi ruled that business losses from penny stock trading cannot be classified as bogus Short-Term or Long-Term Capital Loss (STCL/LTCG). The Revenue’s appeal was dismissed due to low tax effect, reaffirming that CBDT Circular exceptions apply only to genuine bogus capital gains/losses.
Case Summary and Facts
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, concerned the Revenue (Deputy Commissioner of Income Tax) challenging the order of the Commissioner of Income Tax (Appeals) in the case of DCIT Vs Satya Prakash Gupta for the Assessment Year (AY) 2013-14.
Background of the Case
The assessee, Satya Prakash Gupta, filed his return for AY 2013-14 declaring a Business Loss from trading in shares through his proprietary concern, M/s Sterling Security Systems. The initial assessment under Section 143(3) of the Income Tax Act, 1961 (the Act) was completed on February 25, 2016, accepting the assessee’s claim.
Subsequently, a search operation under Section 132 of the Act was conducted on December 26, 2016. While a subsequent assessment was completed under Section 153A, it was later quashed by the Tribunal.
The crucial issue arose from a notice issued under Section 148 on March 30, 2021, based on Investigation Wing information alleging bogus Short Term Capital Loss (STCL) from trades in the shares of PMC Fincorp Ltd. and Cubical Financial services Ltd. This led to an assessment order on March 31, 2022, under Section 147/143(3) of the Act, resulting in an addition of ₹1,61,43,692/- on account of the alleged accommodation entry of bogus STCL.
