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2019 (6) TMI 1592 - AT - Income TaxAllowability of loss on share transactions - determination of date of transfer and holding period for the purpose of computing the period for capital gains - HELD THAT - Circular issued by the CBDT vide Circular No. 704 dated 28.4.1995 wherein it was clarified that the share transactions carried on by the parties if followed by delivery of shares and transfer deeds then the same would have to be accepted. Though this circular was issued in the context of determination of date of transfer and holding period for the purpose of computing the period for capital gains the analody drawn thereon could be utilized to the facts of the instant case. It is not in dispute that the assessee had traded in shares of Nirma Ltd in off-market but the same was subsequently followed by delivery of shares and transfer deeds. The sale of shares is made following First In First Out (FIFO) basis and it is pertinent to note herein that the opening balance of shares held by the assessee were never doubted by the revenue. No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. Hence the share transactions in respect of Nirma Ltd is to be considered as genuine and assessee had made profit in respect of this off-market transaction. Assessee had also submitted the statement giving details of purchase and sale of shares of Visual Soft Ltd along with copies of bills and contract notes copies of demat statement and copy of price list from the stock exchange . No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. Assessee had also submitted the statement giving details of purchase and sale of shares of Elque Polyster Ltd along with copy of price list from the stock exchange. No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. We find that the assessee had also submitted the statement giving details of purchase and sale of shares of Global Tele Ltd along with copies of bills and contract notes and copy of price list from the stock exchange. No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. Assessee had also submitted the statement giving details of purchase and sale of shares of Penta Four Soft Ltd along with copies of bills and contract notes; copies of demat statement ; copy of trade file of NSEand copy of price list from the stock exchange (page 86 of paper book). No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. Assessee had also submitted the statement giving details of purchase and sale of shares of Ramco Systems Ltd along with copies of bills and contract notes. No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. We direct the ld AO to treat the net speculation loss as genuine loss and allow the same to be carried forward to subsequent years. Accordingly the grounds raised by the assessee are allowed. Chargeability of interest u/s 234D - HELD THAT - No interest u/s 234D of the Act could be charged on the assessee in the peculiar facts and circumstances of the instant case before us. We find that the ld CITA had followed this tribunal order which had attained finality. Hence we do not find any infirmity in the said order of the ld CITA . Accordingly the grounds raised by the revenue are dismissed.
Issues Involved:
1. Whether the CIT(A) was justified in upholding the AO's action in not allowing the loss on share transactions to subsequent years. 2. Whether the CIT(A) was justified in granting relief to the assessee regarding the chargeability of interest under Section 234D of the Income Tax Act. Issue 1: Loss on Share Transactions Facts and Background: The assessee, engaged in investment and trading in shares and securities, filed an appeal against the disallowance of a share trading loss of ?4,84,12,423/- for the assessment year 2001-02. The original assessment had determined the total income of the assessee at ?18,57,47,180/-, including disallowances and additions such as share trading loss, dividend, bad debts, and penalty. The only issue that traveled to the tribunal was the disallowance of the share trading loss. First Round of Proceedings: The tribunal observed discrepancies in the AO’s computation of the loss and directed the AO to re-examine the genuineness of the transactions and the quantum of the loss. The tribunal noted that the AO had not provided a clear basis for the disallowed amount and had not examined the documentary evidence submitted by the assessee. Second Round of Proceedings: In the subsequent assessment, the AO reiterated the disallowance, claiming the assessee had not furnished requisite documents. The CIT(A) observed that the AO had allowed the net speculation loss of ?4,84,12,423/- to be carried forward but had inadvertently omitted this in the second assessment. The CIT(A) directed the AO to rectify this error but also converted the loss into income, resulting in a demand on the assessee. Tribunal’s Findings: The tribunal found that the assessee had disclosed the total loss from speculation business as ?4,84,12,423/- and claimed it to be carried forward. The tribunal noted that the assessee’s business transactions were suspended after the assessment year, and there was no way to set off this loss in later years. The tribunal also examined the genuineness of the loss by reviewing various documentary evidence, including special audit reports and transaction details for specific shares like Nirma Ltd, Visual Soft Ltd, Elque Polyster Ltd, Global Tele Ltd, Penta Four Soft Ltd, and Ramco Systems Ltd. The tribunal concluded that the transactions were genuine and directed the AO to treat the net speculation loss as genuine and allow it to be carried forward. Issue 2: Chargeability of Interest under Section 234D Facts and Background: The revenue appealed against the CIT(A)’s decision to grant relief to the assessee regarding the chargeability of interest under Section 234D of the Income Tax Act. The AO had charged interest under Section 234D in the second round of proceedings, which was contested by the assessee. Tribunal’s Findings: The tribunal referred to its earlier order for the assessment year 2001-02, where it had directed the AO to cancel the interest under Section 234D. The tribunal noted that the AO had disregarded this direction in the second round of proceedings. The tribunal also observed that the revenue had not challenged the earlier tribunal order, which had attained finality. The tribunal held that no interest under Section 234D could be charged in the given circumstances and upheld the CIT(A)’s order. Conclusion: The tribunal allowed the assessee’s appeal, directing the AO to treat the net speculation loss as genuine and allow it to be carried forward. The tribunal dismissed the revenue’s appeal, upholding the CIT(A)’s decision to grant relief regarding the chargeability of interest under Section 234D.
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