Innovate Derivatives Pvt. Ltd. Vs ITO (ITAT Ahmedabad)
In Innovate Derivatives Pvt. Ltd. Vs ITO, the Income Tax Appellate Tribunal (ITAT), Ahmedabad, examined an appeal against an order of the Commissioner of Income Tax (Appeals) confirming disallowance of a loss claimed on sale of shares. The matter arose from reassessment proceedings initiated under Section 147 read with Section 144B of the Income Tax Act, 1961 for Assessment Year 2019–20.
The assessee, engaged in trading of shares, securities, and derivatives, had filed its return declaring a loss of ₹18,34,253. The assessment was reopened on the ground that the assessee had undertaken transactions in shares of Looks Health Services Ltd. (LHSL), treated as a penny stock, and claimed a loss of ₹13,18,400. A notice under Section 148A was issued seeking explanation. The assessee submitted details including broker ledger, demat statements, and transaction records. However, the Assessing Officer was not satisfied and proceeded with reassessment, ultimately disallowing the entire loss on the basis that the transaction was an accommodation entry.
The Commissioner (Appeals) upheld this disallowance, leading to the present appeal before the Tribunal. The assessee contended that all relevant documents were submitted to establish genuineness of transactions, including contract notes, demat account details, and banking records. It was argued that the transactions were carried out through registered brokers and payments were made through banking channels. The assessee also emphasized that it regularly traded in multiple scripts and had reported both profits and losses, and that the impugned loss was shown as business loss.
