Income Tax -1 v. M/S Duxton Hills Builders Pvt Ltd

$~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. ZehraKhan,JSCswithMr.KanishkAggarwal, AdvocateVikramaditya Singh and Ms. ZehraKhan,JSCswithMr.KanishkAggarwal, Advocate versus M/S DUXTON HILLS BUILDERS PVT LTD.....RespondentThrough:Mr.RakeshGupta,Mr.SomilAgarwal and Mr. Dushyant Agrawal,Advocates CORAM:HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MS. JUSTICE SWARANA KANTA SHARMA O R D E R08.11.2024 % 1.The Revenue has filed the present appeal under Section 260A of theIncome Tax Act, 1961 (thereafter the Act) impugning an order dated08.12.2023 (hereafter the impugned order) passed by the learned IncomeTaxAppellateTribunal(hereafterthelearnedITAT)inITANo.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 therespondent [hereafter the Assessee] impugning an order dated 10.06.2019passed by the learned Commissioner of Income Tax, Appeals-3 [hereafter CIT(A)] whereby the Assessee’s appeal against an assessment order dated09.12.2018 in respect of assessment year (AY) 2016-17 was rejected. Thecontroversy 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 returnof 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 capitalassets amounting to ₹1,41,29,989/-. The short-term assets in this case are equity shares of two listed companies, namely Siddartha Business Limitedand AF Enterprises Limited. The details of the loss suffered on account ofpurchase and sale of said shares, as declared by the Assessee, are set outbelow: 3.The AO considered the said transaction as bogus on essentially threegrounds. First, the AO found that the value of the shares of the two listedcompanies fluctuated widely and according to him, the same was reflectiveof the value of shares being manipulated. Second, the AO found that whilethe SENSEX (an index based on the value of a basket of shares listed on theBombay Stock Exchange Limited) had increased, the value of the shares inquestion had fallen significantly. Third, the AO found that the transactionentered into was not commercially prudent. He reasoned that no prudentperson would have invested in these shares as the accounts of the companiesdid not reflect that the affairs of the companies were robust. 4.The Assessee appealed the assessment order dated 09.12.2018 beforethe learned CIT(A). However, the same was rejected by an order dated10.06.2019. The learned CIT(A) upheld the assessment order dated09.12.2018 and also surmised that the loss declared by the Assessee may beon account of entries provided by an entry provider and the transactions ofpurchase and sale of the equity shares were sham transactions. 5.The learned ITAT allowed the Assessee’s appeal, inter alia, on theground that the findings of the AO and the learned CIT(A) were not basedon any cogent material. 6.Clearly, there is no material on record which would establish that thetransactions in question were sham transactions. It is conceded that thetransactions were executed through the Bombay Stock Exchange and thesecurity transaction tax was paid on the said transactions. Absent anymaterial to reflect that the transactions were sham transactions or what wasapparently disclosed was not real, the losses claimed could not be disallowed. Clearly, the fact that the SENSEX had gone up while someshares had dropped in value, cannot be the ground for disallowing the loss. Itis puerile to assume that price of all listed shares must follow the fall andrise of the SENSEX. 7.The Revenue has projected the following questions for considerationof this Court: 6.Clearly, there is no material on record which would establish that thetransactions in question were sham transactions. It is conceded that thetransactions were executed through the Bombay Stock Exchange and thesecurity transaction tax was paid on the said transactions. Absent anymaterial to reflect that the transactions were sham transactions or what wasapparently disclosed was not real, the losses claimed could not be disallowed. Clearly, the fact that the SENSEX had gone up while someshares had dropped in value, cannot be the ground for disallowing the loss. Itis puerile to assume that price of all listed shares must follow the fall andrise of the SENSEX. 7.The Revenue has projected the following questions for considerationof this Court: “A. Whether the Ld. ITAT has grossly erred in setting aside theAssessment Order dated 09.12.2018 on the ground that no“benefit” was derived to the Respondent-Assessee bybookinganallegedlybogusShort-TermCapitalLossthrough sale of listed equity shares?Assessment Order dated 09.12.2018 on the ground that no“benefit” was derived to the Respondent-Assessee bybookinganallegedlybogusShort-TermCapitalLossthrough sale of listed equity shares? B.Whether the Ld. ITAT has grossly erred in finding that theAppellant/Commissioner had failed to produce any materialto demonstrate that the sale of the shares by the Respondent-Assessee was a bogus transaction which only sought to claima Short-Term Capital Loss?Appellant/Commissioner had failed to produce any materialto demonstrate that the sale of the shares by the Respondent-Assessee was a bogus transaction which only sought to claima Short-Term Capital Loss? C.Whether the Ld. ITAT has erred by allowing the Short-TermCapital Loss of INR 1,41,29,989/- as claimed by theRespondent-Assessee for AY 2016-17?Capital Loss of INR 1,41,29,989/- as claimed by theRespondent-Assessee for AY 2016-17? 8.None of the aforesaid questions as projected can be considered assubstantial questions of law, in the given facts. We find no infirmity with thedecision 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, 2024zpClick here to check corrigendum, if any