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2016 (6) TMI 1477 - AT - Income TaxValuation of unquoted shares - deduction towards depreciation in the value of shares claimed - deduction for decline in the value of shares which it perceived to be stock-in-trade rather than investment - assessee submitted before the AO that the company had surplus funds which were used for purchasing 1,80,000 shares at par and company was about to come out with public issue, but, eventually, did not due to market conditions - Since the assessee invested all surplus funds as per the assessee’s own version, the AO treated the purchase of shares as 'Investment’ and, resultantly, disallowed the amount of loss on their valuation HELD THAT:- It is evident from the assessee’s reply tendered before the AO that the company invested its surplus funds in purchase of unquoted shares. It can be seen that the assessee had never dealt with or traded in shares either in the past or in the future. Under these circumstances, it is difficult to accept the assessee’s contention of having held these shares as `stock-in-trade’. Once it is held that the shares were purchased as investment, there cannot be any deduction on account of decline in the value of `investment’ as at the year end. Therefore, approve the view taken by the authorities below. Penalty u/s 271(1)(c) in respect of disallowance deduction towards depreciation in the value of shares - Facts narrated above evidently prove that the assessee claimed deduction for decline in the value of shares which it perceived to be stock-in-trade rather than investment. But, for that, all the necessary details were duly filed. Simply because the assessee’s contention of the shares having been purchased and held as stock-in-trade has not been accepted, it cannot be equated with concealment of income or furnishing of inaccurate particulars of income so as to attract the penalty. It is a case in which the assessee’s bona fide belief of these shares having been held as investment has not been accepted, which can be a good ground for making of disallowance, but, cannot lead to imposition of penalty. Therefore, order for the deletion of the penalty.
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