2019 (3) TMI 1635 - AT - Income Tax

Bogus trading loss - AO relied on information/data provided to his office by the DIT(Inv.) Kolkata for making this disallowance - HELD THAT - When the purchase and sale of shares were made through online trading system and when these transactions were made at the prevailing market rate through stock exchange and when the entire transactions were routed through proper banking channels and were duly reflected in the demat account of the parties and when the BSE in response to notices u/s 133(6) confirmed these transactions as genuine to the AO it is not right on the part of the AO to disregard these evidences and disallow the trading loss on the basis of some alleged report of DIT(Inv.) Kolkata and some alleged statements recorded from certain persons which were never brought on record by the Assessing Officer. This Bench of the Tribunal in the assessee s own case 2019 (1) TMI 893 - ITAT KOLKATA under identical circumstances upheld the order of the ld. CIT(A) deleting this said addition. - Decided against revenue.

Summary

Issues:
Appeal against disallowance of trading loss claimed by the assessee company in dealing with shares of five companies based on alleged bogus transactions.

Analysis:
1. The case involved an appeal by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals) concerning the disallowance of trading loss claimed by the assessee company in dealing with shares of five companies. The Assessing Officer disallowed the trading loss on the grounds of alleged bogus transactions based on an investigation report from the DIT(Inv.), Kolkata. The ld. CIT(A) granted relief to the assessee, stating that the claim of loss was genuine.

2. The Revenue raised several grounds in their appeal, questioning the ld. CIT(A)'s decision. They argued that the investigation report submitted by DIT(Investigation), Kolkata should have been considered, especially in light of SEBI's suspension of operations of a company's shares in which the assessee transacted. The Revenue disputed the findings of the ld. CIT(A) and sought a reversal of the decision.

3. During the proceedings, the Departmental Representative supported the Assessing Officer's order, emphasizing the detailed investigation conducted by DIT(Inv.), Kolkata. The Counsel for the assessee relied on the previous Tribunal order in a similar case, where the addition on account of bogus loss was deleted. The assessee highlighted the lack of access to the investigation report and statements relied upon by the Assessing Officer for making the disallowance.

4. The Tribunal carefully considered the facts and circumstances of the case, noting that all transactions were conducted through recognized stock exchanges and online trading systems. The Tribunal found that the Assessing Officer's conclusion of bogus transactions was not supported by evidence, especially since the transactions were reflected in the demat account, conducted through proper banking channels, and confirmed as genuine by the stock exchange. The Tribunal upheld the ld. CIT(A)'s decision based on these findings and the lack of concrete evidence supporting the disallowance.

5. Ultimately, the Tribunal dismissed the Revenue's appeal, upholding the order of the ld. CIT(A) in favor of the assessee. The decision was based on the genuine nature of the transactions and the lack of substantiated evidence to support the disallowance of the claimed trading loss.