No question of law if Assessing Officer had concluded that the transaction of purchase and sale of shares was a sham transaction & disallowed Short-Term Capital Loss
Where the Assessing Officer had concluded that the transaction of purchase and sale of shares was a sham transaction, disallowing short-term capital loss claimed by the assessee did not raise any substantial question of law.
In the recent judgement of Trends Pharma vs. Income-tax Officer 171 taxmann,com 848 (Bombay). The assessee claimed a short-term capital loss amounting to 70.2 lakhs by selling shares of Trends Pharma Pvt Ltd.
The Assessing Officer observed that shares were purchased in February 2010 for Rs.100 per share and sold for Rs.12.20 per share in March 2010. Thus, the assessing officer in the assessment order has concluded that the purchase and sale of the shares is a tax avoidance measure and, after giving detailed reasons, held the transaction to be a sham transaction. The assessing officer disallowed the short-term capital loss of Rs.70,24,000/-. After an examination of the facts and submission, both CIT(A) and ITAT held that the transaction was a sham.
The question before the High court of Bombay was whether the Tribunal was right in law in holding that the purchase as well as the sale of shares of Trends Pharma Pvt. Ltd. was a colourable device adopted by the assessee to avoid tax.
The high court, in this regard, held that, since all the three authorities and particularly the tribunal, being the final fact finding authority, has given the finding that the transaction of buying and selling of shares is a colourable device adopted by the assessee to avoid tax. All three authorities have considered the submissions and reached a concurrent conclusion based on the evidence on record. The Court cannot reassess these factual findings, which are the records filed before the authorities. Whether the transaction is a colourable device to avoid tax does not raise any substantial question of law but is purely a finding of fact. Thus, the appeal was dismissed since it did not raise any substantial question of law.
