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2012 (5) TMI 362 - AT - Income TaxRevision u/s 263 - Disallowance u/s 14A - speculation loss - carry forward of the balance of speculation loss - held that - since the eligibility period of carry forward of speculation loss incurred in the year 2001-02 has already expired in the assessment year 2005-06, the ld. AO had wrongly allowed the assessee to carry forward of the balance speculation loss of Rs.80.15 crores as claimed by the assessee beyond 2005-06. - it is evident that the AO has not applied his mind on the issues. - The ld. AO has not made a clear finding whether the assessee is entitled to carry forward the speculation losses beyond four years by virtue of the amendments brought in the Act for the relevant assessment year. Further the ld.CIT has also not adjudicated the issue but only remitted the matter back to the file of the AO to re-do the assessment after due consideration and as per law. - matter remanded back.
Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act, 1961. 2. Set-off of speculation loss against speculation profit. 3. Classification of capital gains from the sale of shares. Detailed Analysis: 1. Validity of the Order Passed Under Section 263 of the Income Tax Act, 1961: The assessee contended that the order passed by the Commissioner of Income Tax (CIT) under section 263 was void and deserved to be annulled. The CIT had invoked section 263 based on the observation that the Assessing Officer (AO) had allowed set-off of brought forward speculation loss without proper inquiry, making the assessment order erroneous and prejudicial to the interests of the revenue. The Tribunal upheld the CIT's order, emphasizing that the AO had not applied his mind to the issues and had not made a clear finding on the eligibility of carrying forward speculation losses beyond four years, as per the amended provisions of section 73(4). The Tribunal confirmed the CIT's order to remit the matter back to the AO for re-adjudication, ensuring proper inquiry and verification. 2. Set-off of Speculation Loss Against Speculation Profit: The CIT observed that the assessee had wrongly adjusted a profit of Rs. 9,54,15,842/- from speculation business against the brought forward speculation loss of Rs. 89,70,10,352/- pertaining to the assessment year 2001-02. According to the amended provisions of section 73(4), speculation losses could not be carried forward for more than four assessment years immediately succeeding the year in which the loss was first computed. Since the loss was incurred in the assessment year 2001-02, the period for carrying forward the loss expired in the assessment year 2005-06. Therefore, the set-off allowed for the assessment year 2006-07 was incorrect, leading to under-assessment of income. The Tribunal agreed with the CIT's view and directed the AO to verify the eligibility of set-off of brought forward speculation loss in accordance with the amended provisions. 3. Classification of Capital Gains from the Sale of Shares: The CIT also noted that the profit from the sale of shares of Independent News Services Pvt. Ltd. and Adani Wilmar Ltd. should be treated as Short Term Capital Gain (STCG) instead of Long Term Capital Gain (LTCG), as these companies were not listed on stock exchanges and the holding period did not qualify for LTCG. The AO had allowed the assessee's claim without proper inquiry and verification. The Tribunal supported the CIT's observation, stating that the AO had not sought the assessee's explanation or called for details to verify the claim. The matter was remitted back to the AO for re-adjudication, with directions to pass an appropriate order after considering all submissions and materials produced by the assessee. Conclusion: The Tribunal confirmed the CIT's order under section 263, directing the AO to re-do the assessment after due consideration and proper inquiry. The AO was instructed to pass an appropriate order as per law and merit, taking into account all relevant submissions, materials, and case laws cited by the assessee. The assessee's appeal was allowed for statistical purposes.
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