Claim of loss not to be disallowed if the AO fails to detect any discrepancy in the documentary proofs furnished
Alliance Vintrade Pvt Ltd Vs ITO
– Assessee’s appeal allowed : KOLKATA ITAT
Whether claim of loss is to be disallowed if the AO fails to detect any discrepancy in the documentary proofs furnished – NO: ITAT
++ Calcutta High Court in the case of Principal Commissioner Of Income vs M/S. Blb Cables And Conductors had upheld the order of the Tribunal by observing as follows ” there is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The AR has also submitted the IT return, ledger copy, letter to AO land PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The AR produced the purchase & sale contracts notes. It was noted that in order to create a tax liability in a case of this nature, the AO has to prove and establish the cash trail and the allegations, particularly in respect of the appellant, which is yet to be proved in the instant case. Similar view has been pronounced by Delhi High Court in the case of Pr. CIT vs Jatin Investment (P) Ltd. wherein it was observed “A transaction cannot be treated as fraudulent if the appellant has furnished the documentary proof and proved the identity of the purchaser and no discrepancy is found. The AO has to exercise his powers u/s 131 & 133(6) of the Act to verify the genuineness of the claim and cannot proceed on surmises. The AO must establish that cash has changed hands. There is no material or evidence even to suggest that the cheques directly or indirectly emanated from the assessee so that it could be said that the assessee own money was brought back in the guise of sale proceeds’’;
++ in the case of DCIT Vs. Sunita Khemka, ITAT Kolkata ruled that the AO cannot treat a transaction as bogus only the basis of suspicion or surmises. He has to bring material on record to support his findings that there has been a collusion/connivance between the Broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and d-mat statements and account payee cheques cannot be treated as bogus;
++ the AO in his order has mentioned that SEBI has given adverse report on so many scrips including that of Kailash Auto. Further, we note that SEBI, in its two reports on the said scrip, has named and banned/suspended the beneficiaries in particular. However, we note that the appellant’s name does not appear in this list. And that the SEBI did not stop/suspend the trade of sale of M/s. KAFL when assessee sold the scrip. We note that M/s. KAFL was very much listed on the stock exchange and trading in the said scrip was permissible on the stock exchange. Moreover SEBI report against certain beneficiaries of Kailash Auto was in public much after the appellant has sold the shares, and we note that on 29.03.2016 SEBI has revoked the ban on such entities which implies that there was no evidence against them;
++ from the facts discussed and the ratio decidendi of the jurisdictional High court and other High Courts, and particularly the jurisdictional High Court decision in the case of M/s. Blb Cables And Conductors, respectfully following the same, it was decided to allow the claim of loss as made by the assessee. In the result, the appeal of the assessee is allowed.