Case Law Details
Duxton Hills Builders [P] Ltd Vs ACIT (ITAT Delhi)
Introduction: Duxton Hills Builders [P] Ltd has found itself in a legal battle against the ACIT Circle -7(2), with the Income Tax Appellate Tribunal (ITAT) Delhi recently delivering a significant judgment on the matter. The appeal, arising from the assessment year 2016-17, primarily revolves around the disallowance of a short-term capital loss claimed on the sale of listed securities.
The crux of the issue lies in the Assessing Officer’s suspicion that the claimed short-term capital loss of Rs. 1,41,29,999/- is a result of a sham transaction, manipulated to book losses falsely. The contention is that Duxton Hills Builders engaged in a bogus transaction to benefit unlawfully.
However, the appellant argues that, even after disallowing the contested loss, the overall loss declared is Rs. 94,345/-. They stress that there is no advantage gained by booking this alleged loss. Furthermore, the transaction in question involves the sale of equity shares of listed companies, Sidharth Business Ltd and AF Enterprises Ltd, on the Bombay Stock Exchange.
The ITAT Delhi, in its order, criticizes the authorities for overlooking the lack of motivation for converting accounted money into unaccounted money through artificial losses. It emphasizes that the Revenue failed to provide substantial evidence demonstrating any benefit derived by Duxton Hills Builders from the alleged bogus loss.
The tribunal points out that the transaction was executed through the Bombay Stock Exchange, where Securities Transaction Tax (STT) was duly paid. This crucial detail strengthens the genuineness of the transaction, categorically stating that it cannot be labeled as sham or bogus.
In light of these considerations, the ITAT Delhi directs the Assessing Officer to allow the claimed loss of Rs. 1,41,29,989/-, providing a favorable judgment to Duxton Hills Builders.
ITAT Delhi’s verdict brings clarity to the authenticity of transactions conducted on the Bombay Stock Exchange, emphasizing that transactions subjected to Securities Transaction Tax cannot be hastily labeled as sham or bogus. This decision serves as a precedent reinforcing the importance of concrete evidence in tax assessments and preventing unfounded allegations of fraudulent practices in financial dealings.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is preferred against the order of the ld. CIT(A) – 3, New Delhi dated 10.06.2019 pertaining to A.Y. 2016-17.
2. The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the action of the Assessing Officer in making disallowance of Rs. 1,42,29,999/- being short term capital loss claimed on sale of listed securities.
3. Briefly stated, the facts of the case are that the assessee electronically filed its return of Income on 17.10.2016 declaring loss of Rs. 1,42,24,334/-. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.
4. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown short term capital loss of Rs. 1,41,29,989/-. The assessee was asked to furnish details.
5. The assessee explained that it has sold equity shares of Sidharth Business Ltd and AF Enterprises Ltd, both listed companies of Bombay Stock Exchange, on which the assessee has incurred loss.
6. The contention of the assessee did not find any favour with the Assessing Officer who was of the firm belief that the assessee has booked bogus short term capital loss through manipulation of stock price and disallowed the claim of loss of Rs. 1,41,29,999/-.
7. The assessee carried the matter before the ld. CIT(A) but without any success.
8. Before us, the ld. counsel for the assessee vehemently stated that the allegation of the Assessing Officer that the assessee has booked loss by bogus transaction is baseless as the assessee had returned loss of Rs. 1,42,24,334/- and even after disallowing loss of Rs. 1,41,29,989/-, the assessee still has loss of Rs. 94,345/-. Therefore, the assessee has derived no benefit by the allegation of the Assessing It is the say of the ld. counsel for the assessee that transaction has been done through Bombay Stock Exchange and the same cannot be stated to be bogus.
9. Per contra, the ld. DR strongly supported the findings of the Assessing Officer.
10. We have carefully perused the orders of the authorities below. The Assessing Officer and the ld. CIT(A) have been carried away with the decision of the Hon’ble Supreme Court in the case of Durga Prasad More 82 ITR 540 and Sumati Dayal 214 ITR 801 but have completely ignored that no prudent person would convert his accounted money into unaccounted money by booking losses for which no benefit is derived.
11. The Revenue has grossly failed in bringing cogent material on record to demonstrate that the assessee has benefitted by booking the alleged bogus loss whereas material on record shows that the transaction has been done through Bombay Stock Exchange on which STT has been paid and cannot be considered as sham or bogus transaction Considering the facts in totality, we direct the Assessing Officer to allow loss of Rs. 1,41,29,989/-.
12. In the result the appeal of the assessee in ITA No. 5407/DEL/2019 is allowed.
The order is pronounced in the open court on 08.12.2023.
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