PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX -1 V. M/S DUXTON HILLS BUILDERS PVT LTD

ITA/495/2024

AI Insights

The case revolves around an appeal by the Principal Chief Commissioner of Income Tax against the ITAT's decision which favored M/s Duxton Hills Builders Pvt Ltd. The core issue was the disallowance of a short-term capital loss of \\u20b91,41,29,289 declared by the assessee on the grounds that the transactions were bogus. The AO had disallowed the loss citing manipulation of share prices and lack of commercial prudence, which was upheld by the CIT(A). However, the ITAT reversed this decision, leading to the present appeal by the Revenue. The High Court found no substantial question of law in the Revenue's appeal and dismissed it, upholding the ITAT's decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 731585 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 08-11-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAKESH GUPTA; SOMIL AGARWAL; DUSHYANT AGRAWAL
• Assessee Lawyers: DEBESH PANDA; VIKRAMADITYA SINGH; ZEHRA KHAN; KANISHK AGGARWAL
• Keywords: Assessment Order; Bogus Transaction; Equity Shares; Income Tax; Short Term Capital Loss
• Section: 260A

Judgement Text

"$~1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 495/2024 & CM APPL. 53892/2024 PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX -1 .....Appellant Through: Mr. Debesh Panda, SSC with Mr. Vikramaditya Singh and Ms. Zehra Khan, JSCs with Mr. Kanishk Aggarwal, Advocate versus M/S DUXTON HILLS BUILDERS PVT LTD .....Respondent Through: Mr. Rakesh Gupta, Mr. Somil Agarwal and Mr. Dushyant Agrawal, Advocates CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU HON'BLE MS. JUSTICE SWARANA KANTA SHARMA O R D E R % 08.11.2024 1. The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 (thereafter the Act) impugning an order dated 08.12.2023 (hereafter the impugned order) passed by the learned Income Tax Appellate Tribunal (hereafter the learned ITAT) in ITA No. 5407/Del/2019 captioned M/s Duxton Hills Builders Pvt. Ltd. v. ACIT. 2. The said appeal (ITA No. 5407/Del/2019) was preferred by the respondent [hereafter the Assessee] impugning an order dated 10.06.2019 passed by the learned Commissioner of Income Tax, Appeals-3 [hereafter This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/11/2024 at 12:23:43 CIT(A)] whereby the Assessee’s appeal against an assessment order dated 09.12.2018 in respect of assessment year (AY) 2016-17 was rejected. The controversy essentially centers around an addition of ₹1,41,29,289/- made by the learned Assessing Officer (hereafter the AO) by disallowing short- term capital loss declared by the Assessee. The Assessee had filed its return of income on 17.10.2016 declaring a total loss of ₹1,42,24,334/-. This included loss suffered on account of purchase and sale of short-term capital assets amounting to ₹1,41,29,989/-. The short-term assets in this case are equity shares of two listed companies, namely Siddartha Business Limited and AF Enterprises Limited. The details of the loss suffered on account of purchase and sale of said shares, as declared by the Assessee, are set out below: Name of scrip Siddhartha Business Limited AF Enterprises Limited Total Number of shares sold 2,58,000 15,590 2,73,590 Sale Value 40,23,843.35 21,53,847.90 61,77,691.25 Less Charges 7,217.48 2,966.58 10,484.06 Net Sale Value 40,16,325.87 21,50,881.32 61,67,207.19 Cost of purchase 1,29,45,711.96 73,51,484.21 2,02,97,196.18 Net Profit/(Loss) (89,29,386.09) (52,00,602.89) (1,41,19,504.93) This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/11/2024 at 12:23:43 3. The AO considered the said transaction as bogus on essentially three grounds. First, the AO found that the value of the shares of the two listed companies fluctuated widely and according to him, the same was reflective of the value of shares being manipulated. Second, the AO found that while the SENSEX (an index based on the value of a basket of shares listed on the Bombay Stock Exchange Limited) had increased, the value of the shares in question had fallen significantly. Third, the AO found that the transaction entered into was not commercially prudent. He reasoned that no prudent person would have invested in these shares as the accounts of the companies did not reflect that the affairs of the companies were robust. 4. The Assessee appealed the assessment order dated 09.12.2018 before the learned CIT(A). However, the same was rejected by an order dated 10.06.2019. The learned CIT(A) upheld the assessment order dated 09.12.2018 and also surmised that the loss declared by the Assessee may be on account of entries provided by an entry provider and the transactions of purchase and sale of the equity shares were sham transactions. 5. The learned ITAT allowed the Assessee’s appeal, inter alia, on the ground that the findings of the AO and the learned CIT(A) were not based on any cogent material. 6. Clearly, there is no material on record which would establish that the transactions in question were sham transactions. It is conceded that the transactions were executed through the Bombay Stock Exchange and the security transaction tax was paid on the said transactions. Absent any material to reflect that the transactions were sham transactions or what was apparently disclosed was not real, the losses claimed could not be This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/11/2024 at 12:23:43 disallowed. Clearly, the fact that the SENSEX had gone up while some shares had dropped in value, cannot be the ground for disallowing the loss. It is puerile to assume that price of all listed shares must follow the fall and rise of the SENSEX. 7. The Revenue has projected the following questions for consideration of this Court: “A. Whether the Ld. ITAT has grossly erred in setting aside the Assessment Order dated 09.12.2018 on the ground that no “benefit” was derived to the Respondent-Assessee by booking an allegedly bogus Short-Term Capital Loss through sale of listed equity shares? B. Whether the Ld. ITAT has grossly erred in finding that the Appellant/Commissioner had failed to produce any material to demonstrate that the sale of the shares by the Respondent- Assessee was a bogus transaction which only sought to claim a Short-Term Capital Loss? C. Whether the Ld. ITAT has erred by allowing the Short-Term Capital Loss of INR 1,41,29,989/- as claimed by the Respondent-Assessee for AY 2016-17? 8. None of the aforesaid questions as projected can be considered as substantial questions of law, in the given facts. We find no infirmity with the decision of the learned ITAT in allowing the Assessee’s appeal. 9. In view of the above, the present appeal is dismissed. VIBHU BAKHRU, J SWARANA KANTA SHARMA, J NOVEMBER 8, 2024 zp Click here to check corrigendum, if any This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/11/2024 at 12:23:43 "