Vishwas Marketing Services Pvt. Ltd. Vs ITO (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, decided two appeals filed by the assessee for Assessment Years 2014-15 and 2015-16 relating to disallowance of losses arising from transactions in shares of SRK Industries Ltd. and denial of exemption under Section 10(38) of the Income Tax Act. Since similar issues were involved in both years, the Tribunal heard the matters together and treated Assessment Year 2014-15 as the lead case.
The assessee had filed its return for AY 2014-15 declaring a loss of Rs.21,119/-. During scrutiny assessment, the Assessing Officer observed that the assessee had declared dividend income and conducted transactions in shares. The assessee had purchased shares of SRK Industries Ltd. in December 2013 and sold them in March 2014, resulting in a short-term capital loss of Rs.1,71,72,155/-. To verify the transactions, the Assessing Officer issued notice under Section 133(6) to SRK Industries Ltd. and sought information regarding the share dealings.
The Assessing Officer concluded that the details submitted by SRK Industries Ltd. were incomplete and relied upon investigation reports from the Kolkata Investigation Wing alleging that the scrip of SRK Industries Ltd. was used for accommodation entries and bogus long-term capital gains. Statements of several persons including Shri Bidyoot Sarkar, Shri Sanjay Vora, Shri Jai Kishan and Shri Anil Kedia were referred to in the assessment order. Based on these materials, the Assessing Officer treated the scrip as a penny stock and disallowed the loss claimed by the assessee after applying the “human probability test” and relying on judicial precedents including Mac Dowell & Company and Sumati Dayal.
