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2021 (10) TMI 109 - AT - Income TaxAddition u/s 68 - Sham and bogus Loss booked in manipulated penny stocks - case of the assessee was selected for scrutiny assessment u/s 143(2) - CIT-A deleted the addition - HELD THAT:- A.O had absolutely on the basis of glaringly incorrect and misconceived facts made an addition u/s 68 - assessee had during the year under consideration not traded in the shares of the aforementioned companies. Rather, the scrips in question, viz. (i). M/s Shreenath Commercials & Finance Ltd. (1,00,000 shares); and (ii). M/s Tuni Textiles Mills Ltd. (14,60,500 shares) were even held by the assessee in the succeeding year i.e A.Y. 2015-16. We are unable to comprehend that now when the assessee had not sold any of the aforementioned scrips during the year, then, how and on what basis the A.O had concluded that the assessee had booked a bogus loss on sale of shares, which thereafter had been set-off against its other income. As the loss suffered by the assessee company is on account of the valuation of inventory and not a trading loss or a capital loss, therefore, in our considered view the CIT(A) had rightly vacated the addition. As the valuation of the “closing stock” of the shares held by the assessee is as per the provisions of Sec. 145 of the Act and in conformity with the Accounting Standard 2 (AS-2), therefore, no infirmity qua the loss suffered by the assessee pursuant to the diminution in the value of the inventory therein arises. Backed by the aforesaid facts, we are of the considered view that as the A.O had framed the assessment on the basis of glaringly misconceived and incorrect facts - Decided against revenue.
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