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2022 (7) TMI 262 - AT - Income TaxAdditions u/s 68 - Disallowance of short term capital loss aroused on the forfeiture of share warrant money - As per revenue entire transaction is nothing but a colourable device adopted for evasion of tax by the assessee company - HELD THAT:- It is not the case of the assessing officer that the legal claim of short-term capital loss arising out of forfeiture of share warrant money is not legally sustainable. Rather assessing officer in the beginning has questioned the wisdom of assessee is investing. For this he has referred to the share price movement of the investing company. Despite noting that prices were touching Rs. 28, he found Rs. 29 investment a wrong decision. His inference in this regard is not correct as the price movement by no stretch of imagination point out that investment was in a bogus or penny stock company As settled law that AO cannot sit in the shoes of businessman and decides the prudence of business decision. Thereafter AO has wondered why instead of getting the share warrants forfeited assessee did not sell these shares. As informed that as per the agreement there was no clause of selling the shares. As subsequent movement in prices have duly corroborated that the share prices fell and the assessee's decision not to pay the balance amount was not at all unjustified. The prime emphasis of the assessing officer at the end is that the exercise was meant to bring capital receipt in the hands of Indiabulls Power Pvt. Ltd. and thwart examination from the perspective of section 68. This line of reasoning is wholly unsustainable. Firstly assessing officer is not at all seized with the assessment of Indiabulls Power Pvt. Ltd. as to how the capital receipt in his hand is to be examined from the perspective of section 68. Even if assessee had contributed the balance amount that would still be a capital contribution. Moreover, even for exempt capital receipt, there is no law that such credits are outside purview of section 68. Hence, AO's surmise also is without any basis whatsoever. Moreover, the amendment in section 68 providing for examination of source of source for share application money, share capital, and share premium, or any such amount was brought in by Finance Act, 2012 w.e.f. 01.04.2013 is not applicable in this case. Hence the premise of the assessing officer the entire exercise was meant to provide capital receipt in the hands of the said company cannot at all be sustained. Even otherwise, since all the details of the flow of funds was before the assessing officer he has not been able to point out as to which stage and in what respect ingredients of section 68 are not cogently satisfied. There is no mention as to whether the identity is not available, or that the source of funds is not given, or that Assessing Officer has unearthed some other transactions. Hence the assessing officer's order is only based upon surmises and conjecture and hence it is not sustainable in law. Moreover, we note that in identical circumstances, this ITAT in the case of DCIT vs. Azalea Infrastructure Pvt. Ltd. [2021 (2) TMI 31 - ITAT DELHI] had allowed the claim of short term capital loss. Taxation in the hands of the assessee in this case is whether the forfeiture of the convertible warrant amount to a transfer within the meaning of section 2(47) held that AZALEA INFRASTRUCTURE PVT. LTD. [2021 (2) TMI 31 - ITAT DELHI] - Decided against revenue.
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