ACIT Vs Ranu Vohra (ITAT Mumbai)
ITAT Mumbai held that disallowance of short term capital loss not justified since there is no evidence on record based on which genuineness of transactions can be doubted. Hence, held that conclusion drawn by AO is wholly irrational and unsustainable.
Facts- In course of assessment proceedings, AO, while verifying the return of income noticed that in the year under consideration, assessee had sold 1,23,73,872 shares of Avendus Capital Pvt. Ltd. on 02.02.2016 and derived long term capital gain of Rs.16,81,07,825/-. As against the capital gain so derived, the assessee has set off short term capital loss of Rs.9,14,39,681/-, comprising mainly of short term capital loss of Rs.9,11,83,666/- from sale of shares of M/s. Mindtree Ltd. On further verification, AO concluded that adopting unfair means the assessee has reduced its tax liability on account of long term capital gain derived on sale of shares of Avendus Capital Pvt. Ltd. Accordingly, AO disallowed the short term capital loss of Rs.9,11,83,666/- and added back to the income of the assessee as long term capital gain.
First Appellate Authority deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the conclusion drawn by the Assessing Officer is wholly irrational and unsustainable. When the transactions relating to purchase and sale of shares are beyond doubt and are not in the nature of sham transaction even there is no such allegation by the Assessing Officer, the short term capital loss derived by the assessee from sale of shares cannot be prevented from being set off against the long term capital gain by alleging adoption of colorable device. There is no requirement under the law that the assessee has to pay more tax. If the assessee arranges her affairs within the legal framework and through legitimate means to reduce its tax liability, the Assessing Officer cannot prevent her from doing so. When there is no evidence on record to doubt the genuineness of the transactions entered into by the assessee, the resultant capital loss derived out of such transaction cannot be disallowed.
