ITAT disallows claim of business loss in absence of evidence

The brief fact of the case is that the assessee had claimed income from the sale of long-term capital assets amounting to Rs.1,01,35,146/- and Rs.1,48,344/- as interest income on FDR under the head ‘income from other sources. The assessee has further claimed a business loss of Rs.20,77,454/-. The Ld. Assessing Officer during the scrutiny proceedings asked the assessee to justify the loss under the business security, however in absence of any supporting evidence, the Ld. Assessing Officer disallowed the claim of the business loss and denied setting off a business loss against long-term capital gain.

On further appeal, the Ld. CIT(A) has sustained the disallowance. CIT(A) noted that the appellant did not make any submission before the AO to justify the claim of business loss even though a specific query to this effect was raised by the AO. It submitted that consultancy is not a business activity of the appellant. Consultancy receipts are only casual receipts and the expenditure debited by the appellant in the profit and loss account cannot be considered to have been incurred by it wholly and exclusively for earning consultancy income. Rather, most of the expenditure pertains to investment activities being carried out by the appellant, and the appellant is not entitled for deduction in respect of the same against income from other sources/income from long-term capital gain offered by it. Therefore, the AO has rightly disallowed the set-off of a business loss against income from other sources/long-term capital gain.

Aggrieved assessee preferred appeal before ITAT. ITAT on perusal of submissions made by the CIT(A) was of the view that the absence of any documentary evidence in support of business loss claimed by the assessee before the lower authorities, the Ld. CIT(A) is justified in disallowing the claim of the assessee of business loss as not genuine. Accordingly, it upholds the disallowance by the Ld. CIT(A).

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