The case of Franklin Leasing and Finance Ltd versus the Income Tax Officer involves a contentious dispute over the disallowance of short-term capital losses amounting to Rs.25,64,399, which were claimed on the sale of shares during the assessment year 2014-15. This appeal was heard before the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, under Judicial Member Shri H.S. Sidhu.
Franklin Leasing and Finance Ltd challenged the order passed by the CIT(A)-3, Delhi which upheld the disallowance made by the Assessing Officer. The main grounds of the appeal included alleged violations of natural justice principles due to insufficient opportunities provided to the appellant to be heard, and the treatment of their claimed short-term capital loss as bogus.
The appellant argued that the CIT(Appeals) and the Assessing Officer did not properly consider their submissions and erroneously upheld the disallowance of the losses claimed. Additionally, the appellant contested the labeling of these transactions as ‘accommodation entries’ meant to infuse unaccounted money into their books. They emphasized that all transactions were supported by adequate documentation and were genuine in nature.
The Tribunal, acknowledging the procedural flaws in the appellate decision, particularly the lack of sufficient opportunity provided to the appellant, decided to set aside the matter to the file of the First Appellate Authority. This decision underscores the Tribunal’s commitment to ensuring fairness and adherence to principles of natural justice in the appellate proceedings. The case was remanded for a fresh decision, providing the appellant another opportunity to present their case.
This case highlights the critical importance of procedural fairness and the right to a proper hearing in tax dispute resolutions. It serves as a significant precedent for other taxpayers facing similar disallowance issues under the scrutiny of tax authorities.
Challenging the Disallowance of Capital Losses in ITA No. 1088/DEL/2019
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