ITAT states when given proof, CIT(A) cannot disallow business loss claim

ITAT states when given proof, CIT(A) cannot disallow business loss claim

Quashes the orders of the revenue department on the basis that it ignored the evidence submitted by the assessee

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the Commissioner of Income Tax (CIT(A) cannot disallow the claim of business loss when the assessee adduces sufficient evidence.

The assessee, Genuine Finance Pvt. Ltd is engaged in the business of shares and securities and trades in shares of various companies. The gain/loss earned therefrom is shown as business income. On September 2011, the assessee filed an Income Tax Return (ITR) for the Assessment Year 2011-12 declaring a total loss of Rs.60,36,102.

The Assessing Officer (AO) observed that the assessee company sold shares of VAS Infrastructure Pvt Ltd, and the total sale value was Rs.39,08,227. The AO viewed VAS as a penny stock company used by the beneficiaries to launder money in the garb of Long-Term Capital Gain (LTCG), while claiming tax exemption under the Income Tax Act, 1961.

Assessing the total income of the assessee at Rs.2,70,191, the AO disallowed the loss of Rs.18,57,032. Thus, the CIT(A) dismissed the appeal of the assessee.

The assessee contended that the accounts were audited under the Companies Act and the IT Act. In May 2019, it filed the objection with the AO, but the latter disposed it of and in September passed a speaking order.

The assessee maintained that it submitted the broker's ledger in the company's books and the company's ledger in the broker's books along with a copy of the Demat statement. Also, a statement of the script-wise purchase and sales of shares along with the opening stock and closing stock of the shares were submitted. It tallied with the shares purchased and sold shown in the audited accounts after deducting the purchase amount of Rs.25,15,988 and the sale amount of Rs.25,06,434 of the Futures and Options (F&O) segment.

The tribunal observed that the assessee was continuously dealing in share trading of various shares/scripts. The script of VAS was not blacklisted by the Securities and Exchange Board of India (SEBI) during the relevant period. The assessee purchased shares online through various brokers, and the bank accounts reflected the payments made to the brokers.

Thus, the Coram of Suchitra Kamble (judicial member) viewed that the AO did not provide any description that the script was at its lowest or highest price at the time of trading. The entire transaction of purchase and sale of the scripts was either through the authorized brokers or the National Stock Exchange and the Bombay Stock Exchange.

Thus, allowing the appeal, ITAT quashed the order of the AO and CIT(A) in disallowing the claim of business loss to the assessee. It held that they had ignored the evidence submitted by the assessee.