Penny stock loss disallowance upheld where surrounding material showed accommodation entries and non-genuine share transactions.

Loss claimed from transactions in alleged penny stock scrips was treated as non-genuine where the assessment material, including an investigation report, indicated accommodation entries and paper transactions. The ITAT Kolkata followed binding jurisdictional High Court and coordinate bench precedent holding that such share dealings, when supported by surrounding circumstances showing no commercial substance, can be characterised as bogus. On that basis, the Tribunal found no merit in the assessee's challenge and upheld the disallowance of the claimed loss.

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Issues: Whether the disallowance of loss claimed from transactions in alleged penny stock scrips was justified.

Analysis: The assessee claimed loss from trading in three scrips, but the assessment authorities treated the transactions as non-genuine on the basis of an investigation report indicating penny stock accommodation entries. The Tribunal noted that similar share transactions had been examined by the jurisdictional High Court and by coordinate benches, which had upheld the view that such transactions were bogus where the surrounding material showed they were paper transactions only. Following that binding precedent, the Tribunal found no merit in the assessee's challenge to the addition.

Conclusion: The disallowance of the claimed loss was upheld and the issue was decided against the assessee.

Final Conclusion: The appellate challenge to the treatment of the share-trading loss as bogus failed, and the assessment was sustained.

Ratio Decidendi: Where share transactions in penny stock scrips are shown, on the basis of surrounding circumstances and binding precedent, to be non-genuine accommodation entries, the claimed loss can be disallowed as bogus.

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