INCOME TAX ACT, 1961

Section 28(i)

Business loss - Genuineness of trading in securities - Sale and purchase of land and bonds during off market -

Assessee was an individual engaged in the business in trading of securities, commodity trading and real estate. During the course of assessment proceedings, the AO had noticed that assessee had sold land for Rs. 6, 19,20,000 which was purchased at Rs. 15,88,5,350. The AO noticed that the assessee had earned profit on sale of plot of land amounting to Rs. 4,60,34,650 and he also noticed that in the purchase and sale of bonds the assessee had shown net loss of Rs. 4,57,29,090. AO was of the view that trading transactions in securities had not been effected for commercial purpose but to create loss with a view to reduce tax liability. The AO had disallowed the claim of business loss in trading in securities treating the same as non-genuine. Held:Assessee had provided all the details related to the trading in securities during the course of assessment proceedings to the AO. AO had not examined/investigated the transactions in order to prove that the transactions were bogus and not genuine. For alleged non-compliance of the summons, AO had neither issued any show cause notice nor imposed penalty under section 272A(1)(c). Loss on the trading of the bonds was occurred before the earning of profit on the sale of land by the assessee. AO had raised doubt about the genuineness of transactions but had not proved with supporting materials that the transactions were bogus. AO had failed to establish with relevant material that the impugned transactions of sale/purchase of shares were not genuine. There was no justification in the decision of CIT(A) to disallow the loss on transactions on bonds merely on doubt/assumption basis, therefore, the appeal of the assessee was allowed.

Relied:Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC) and Taraben Ramanbhai Patel v. ITO (1995) 215 ITR 323 (Guj-HC) : 1995 TaxPub(DT) 1192 (Guj-HC).

REFERRED : Kishanchand Chellaram v. ITO (1980) 125 ITR 713 (SC) : 1980 TaxPub(DT) 1130 (SC), CIT v. Pradipkumar Gupta (2008) 303 ITR 95 (Del-HC) : 2008 TaxPub(DT) 417 (Del-HC), Andaman Timber Industries v. CCE 62 Taxman.com 3(SC), CIT v. Ramanbhai B. Patel in ITA No. 210 of 2008 (Guj.), Vaishal S. shah & others in ITA No. 1499/2016 (ITAT Ahd), Pratik S. Shah in ITA No. 810 to 815/2015 (ITAT Ahd), Pri. CIT v. Chartered Speed Ltd. IT 126 of 2015 (Guj.), McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC) : 1985 TaxPub(DT) 1186 (SC), CIT v. Walfort Shares & Stock Brokers (P) Ltd. (2010) 326 ITR 1 (SC) : 2010 TaxPub(DT) 2087 (SC), Vodafone International Holdings v. UOI (2012) 341 ITR 1 (SC) : 2012 TaxPub(DT) 370 (SC) and CIT v. Shivraj Gupta (2015) 372 ITR 337 (Del-HC) : 2015 TaxPub(DT) 327 (Del-HC).

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

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