DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-19, NEW DELHI, NEW DELHI V. SATYA PRAKASH GUPTA, DELHI

ITA 3925/DEL/2023

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The case involves the Deputy Commissioner of Income Tax, Central Circle-19, New Delhi as the appellant and Satya Prakash Gupta as the respondent. The dispute arose from the assessment year 2013-14, where the assessee declared a business loss from trading in shares through his proprietary concern, M/s Sterling Security Systems. Initially, the loss was accepted, but following a search operation and subsequent assessments, the loss was reclassified as a bogus short term capital loss, leading to an addition of Rs. 1,61,43,692 to the assessee's income. The CIT(A) reversed this decision, leading to the Revenue's appeal. The Tribunal's decision was influenced by the specific provisions of the CBDT Circular and the nature of the income declared by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793305 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 29-12-2023
• Other Referred Cases: ITO vs Palak Chinubhai Patil [2022] 137 taxmann.com 194
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH KUMAR
• Assessee Lawyers: SUMIT LALCHANDANI
• Keywords: Business income; Tax effect; Capital Gains; Penny stocks; Bogus
• Section: 148; 143(3); 132; 153A

Judgement Text

" 1 ITA No. 3925/Del/2023 DCIT Vs. Satya Prakash Gupta IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI BENCHES ‘G’ ‘NEW DELHI’ BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER I.T.A. No. 3925/DEL/2023 (A.Y 2013-14) Deputy Commissioner of Income Tax, Central Circle-19, New Delhi V s Satya Prakash Gupta H-3/1, Model Town, Part-III, New Delhi PAN: AAHPG0717H Appellant Respondent Assessee by Adv.Sumit Lalchandani Revenue by Sh. Mahesh Kumar, CIT (DR) Date of Hearing 11/09/2025 Date of Pronouncement 24/09/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-27, New Delhi (‘Ld. CIT(A)’ for short), New Delhi dated 19/10/2023 for the Assessment Year 2013-14. 2. Brief facts of the case are that, the Assessee filed his return of income on 29/09/2013 declaring a ‘Business Loss’ from trading in shares through his proprietary concern, M/s Sterling Security Systems. The return filed by the Assessee was scrutinized and assessed u/s 143(3) on 25/02/2016, wherein the Ld. A.O. examined the share trading activity and accepted the Assessee’s claim as ‘Business Loss’. Thereafter, a search u/s 132 of the Income Tax Act, 1961 ('Act' for short) was conducted on 26/12/2016 and assessment Printed from counselvise.com 2 ITA No. 3925/Del/2023 DCIT Vs. Satya Prakash Gupta u/s 153A of the Act was completed on 31/12/2019, but no incriminating material relating to the relevant year was found. The said assessment order was quashed by the Tribunal vide order dated 09/03/2022 in ITA No. 724/Del/2021. Thereafter, a notice u/s 148 of the Act was issued on 30/03/2021 based on Investigation Wing information alleging bogus Short Term Capital Loss from trades in scripts of PMC Fincorp Ltd. and Cubical Financial services Ltd. An assessment order came to be passed on 31/03/2022 u/s 147/143(3) of the Act by making an addition of Rs. 1,61,43,692/- on account of accommodation entry of bogus Short Term Capital Loss. 3. Aggrieved by the assessment order dated 31/03/2022, the Assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 19/10/2023, allowed the Appeal of the Assessee on several grounds including the ground that A.O. has incorrectly treated sale of shares as Short Term Capital Loss while it was actually the Business Loss duly declared in the ITR and audited balance sheet. 4. Aggrieved by the order of the Ld. CIT(A) 19/10/2023, the Revenue preferred the present Appeal. Admittedly, the tax effect involved in the present Appeal of the Revenue is Rs. 49,88,400/- which is less than the monetary limit to file the Appeal before the Tribunal as per the CBDT Circular No.09 of 2024 dated Printed from counselvise.com 3 ITA No. 3925/Del/2023 DCIT Vs. Satya Prakash Gupta 17/09/2024. However, it is the contention of the Ld. Department's Representative that, it is the case of claiming bogus Short Term Capital Loss through penny stock, thus comes under the exceptions mentioned in the circular, therefore, the present appeal is maintainable. 5. Per contra, the Ld. Assessee's Representative submitted that the Assessee has claimed the Business Loss from trading shares through his propriety concerns M/s Sterling Security Systems and at no point of time claimed any Short Term Capital Loss. Further submitted that, in view of Office Memorandum F. No. 279/MISC./M-93/2018-ITJ(PT.) coupled with CBDT Circular No.09 of 2024 dated 17/09/2024, the present Appeal filed by the Revenue is not maintainable. Thus, sought for dismissal of the Appeal. 6. We have heard both the parties and perused the material available on record. Admittedly, the Assessee declared Business Loss from trading in shares through his proprietary concerned M/s Sterling Security Systems and the Assessee has not claimed any Short Term Capital Loss. The tax effect of the present appeal filed by the Revenue is Rs. 49,88,400/- which is less than the monetary limit to file the Appeal before the Tribunal as per the CBDT Circular No.09 of 2024 dated 17/09/2024. The only Printed from counselvise.com 4 ITA No. 3925/Del/2023 DCIT Vs. Satya Prakash Gupta question to be decided is whether the case of the Assessee falls in the exceptions provided in the CBDT Circular or not. TheOffice Memorandum F. No. 279/MISC./M-93/2018-ITJ(PT.) dated 16/09/2019, clarified that the monetary limits fixed for filing Appeals in Circular No. 23/2019 dated 06/09/2019 shall not apply only in the case of assessee claiming bogus LTCG/STCL through penny stocks and the Appeals in such cases shall be filed on its merits. For the sake of ready reference, the Office Memorandum dated 16/09/2019 is reproduced as under:- “OFFICE MEMORANDUM F.NO. 279/MISC./M-93/2018-ITJ(PT.) SECTION 268A OF THE INCOME-TAX ACT, 1961 - FILING OF APPEALS OR APPLICATION FOR REFERENCE BY INCOME-TAX AUTHORITY - SPECIAL ORDER OF BOARD EXEMPTING CASES INVOLVING BOGUS LONG TERM CAPITAL GAINS (LTCG)/SHORT TERM CAPITAL LOSS (STCL) THROUGH PENNY STOCKS FROM MONETARY LIMITS SPECIFIED IN ANY CIRCULAR ISSUED UNDER SECTION 268A. OFFICE MEMORANDUM F.NO. 279/MISC./M-93/2018- ITJ(PT.), DATED 16-9-2019 The undersigned is directed to refer to Circular No. 23 of 2019 dated 6th September, 2019 and to say that by virtue of powers of the Central Board of Direct Taxes under section 268A of Income-tax Act, 1961, the monetary limits fixed for filing appeals before ITAT/HC and SLPs/appeals before Supreme Court shall not apply in case of assessees claiming bogus LTCG/STCL through penny stocks and appeals/SLPs in such cases shall be filed on merits.” Printed from counselvise.com 5 ITA No. 3925/Del/2023 DCIT Vs. Satya Prakash Gupta 7. The Co-ordinate Bench of the Tribunal of Ahmedabad Bench decided the identical issue in the case of ITO vs Palak Chinubhai Patil [2022] 137 taxmann.com 194,wherein it is held that the Appeal of the Revenue is not maintainable in following manners:- “8. From a plain reading of the language of Circular No. 23 of 2019 dated 06.09.2019 read with Office Memorandum dated 16.09.2019, in our view, the same shall apply when assessee has earned / claimed bogus LTCG/STCL through penny stocks. However, there is nothing to suggest that the Circular read with Memorandum would apply with equal force even if the assessee has shown sale and purchase of such alleged penny stocks as “income from business or profession” in its return of income. In our view, the language of Circular read with Memorandum is very categorical and does not suggest any scope for a wider interpretation so as to cover within its scope even ‘business income’ from purchase and sale of alleged penny stocks. A perusal of the return of income and the computation of income filed by the assessee shows that the assessee has filed return of income declaring income from sale of shares to the tune of Rs. 4,83,946/- under the head ‘income from business or profession’. The assessee has not declared any income/ loss under the head ‘capital gains’. The total tax effect from the assessment framed during the captioned year is Rs. 3,51,871/- which as admitted by both parties is below the prescribed limit for filing appeals before Tribunal. Therefore, in our view, the case of the assessee does not fall within the exceptions as provided by CBDT Circular No. 23 of 2019 dated 06.09.2019 read with Office Memorandum dated 16.09.2019 and therefore, the impugned appeal filed by the Revenue deserves to be treated as withdrawn on account of low tax effect.” 8. In view of the fact that the Assessee has not claimed any Short Term Capital Loss, on the other hand the Assessee claimed the loss in share trading activity as Business Loss in his return, by following the ratio laid down by the tribunal in the case of Palak Chinubhai Patil(supra), we are of the opinion that the case of the Assessee will not come under the purview of exception mentioned in the CBDT Printed from counselvise.com 6 ITA No. 3925/Del/2023 DCIT Vs. Satya Prakash Gupta Circular, accordingly we dismiss the Appeal of the Revenue having Low Tax Effect in the light of the CBDT Circular No.09 of 2024 dated 17/09/2024. 9. In the result, Appeal of the Revenue is dismissed. Order pronounced in the open court on 24th September, 2025 Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 24 .09.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTR ITAT, NEW DELHI Printed from counselvise.com "