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TMI Blog2012 (12) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal and the following question of law had been admitted before the Hon'ble High Court:- "Whether on the facts and in the circumstances of the case and in law an amount of Rs.66.00 lacs is allowable as business loss to the appellant" 2.1 The Hon'ble High court in the order No.63 of 2004 dated 9.2.2009 noted that though the AO had given a finding that the assessee was not carrying on the business of dealing in shares, neither CIT(A) nor Tribunal had confirmed the said finding. Both CIT(A) and the Tribunal had proceeded on the footing that the record maintained by the assessee showed that the shares were shown as investment and not as stock in trade. The Hon'ble High court also observed that the said finding was contrary to the entry in the balance sheet produced before the Hon'ble Court in which the shares were shown as trading stock. The Hon'ble High Court accordingly restored the matter to the AO for reconsideration and to record a finding afresh according to law. In the fresh assessment proceedings, the AO asked assessee to produce necessary evidence to prove that the shares of Good Value Marketing Co.Ltd. (GVMCL) from which loss had been shown was held as stock in trade. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submitted that since GVMCL shares were shown as trading stock in assessment year 1995-96, there was no need to convert them into trading stock in assessment year 1996-97 as mentioned by the AO in the assessment order. The assessee in the balance sheet for assessment year 1996-97 had made a mistake in not properly recording the shares which was subsequently corrected in the re-cast balance sheet. It was pointed out that dividend income had arisen from shares which had been purchased during course of share trading. It was also submitted that the assessee had given details before the AO of earlier years to show that the assessee was in the business of purchase and sale of shares, vide letter dated 15.12.2009 which had been totally ignored by the AO. The assessee also submitted that AO had referred to journal entry No.33, 34, 33A and 34A. It was explained that the journal entries 33 and 34 recorded sale of shares effected on 28.12.1995 and 29.12.1995 @Rs.31.25 per share which was the market rate per share. The entries at Sl.No. 33A, 34A, recoded loss incurred in the transactions of sale of shares. The AO was, therefore, not correct in stating that the assessee had inserted these entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of GVMCL were ever brought into the books of account as stock-in-trade. CIT(A) therefore confirmed the made by AO disallowance aggrieved by which the assessee is in appeal before Tribunal. 4. Before us, the ld. AR for the assessee reiterated the submissions made before lower authorities that shares of GVMCL were shown as stock-in-trade in the balance sheet for the assessment year 1995-96 copy of which was available at page-32 of the paper book . It was also submitted that 4,36,350 shares of GVCL had been acquired in March 1995 in the rights issue with the intention to sell and accordingly the same were shown as stock-in-trade in the balance sheet. Out of these shares, 352000 shares were sold in the financial year 1995-96 and balance 84350 shares were shown closing stock-in-trade in the balance sheet for the assessment year 1996-97. The ld. AR submitted that in the balance sheet for the assessment year 1996-97, the assessee had originally made mistake by mentioning the share as investment which was later corrected in the re-cast balance sheet, but in the balance sheet for the assessment year 1995-96, these were declared as trading stock. He also referred to affidavit dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -in-trade. In reply, the ld. AR for the assessee stated that the Schedule-B at page 54 of the paper book referred to by the ld. DR was the original balance sheet in which the shares had been shown by the assessee as investment by mistake which was subsequently corrected in the re-cast balance sheet and, therefore, the same could not be the basis to decide the nature of the transaction. 5. We have perused the records and considered the rival contentions carefully. The dispute raised in this appeal is regarding nature of loss incurred by the assessee from sale of GVMCL shares. The assessee was promoter of the said company in which he was holding shares as promoter. In February/March 1995, the assessee had been allotted 436350 shares of face value of Rs.10/- each for Rs.2,18,17,500/-. In the assessment year 1996-97, the assessee had sold 3,52,000 shares of the said company from which he had incurred loss of Rs.66.00 lacs. The AO declared loss as trading loss. However, the AO in the original assessment in assessment year 1996-97 treated the loss as short term capital loss holding that the shares were investment of the assessee and not trading stock, The order of the AO had been confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1994-95 and profit of Rs.1,75,573/- in assessment year 1995-96. The CIT(A) has not given any adverse finding in respect of these claims of the assessee. Therefore, claim of the assessee that he was in the share trading business from assessment year 1991-92 has to be accepted. 5.3 The assessee before CIT(A) also submitted that he had shown shares of GVMCL acquired in the rights issue in February/March, 1995 as trading stock which was declared in the balance sheet as under :- a) Investment 9,83,87,805.00 b) Work in progress 12,76,28,085.00 c) Stock in Trade (4,36,350 shares of Rs.10/- each of Good Value Marketing Co.Ltd.) 2,18,17,500.00 TOTAL 24,78,33,390.00 5.4 CIT(A) has observed that in the balance sheet for the assessment year 1995-96 which had been made available by the AO, the assessee had shown a sum of Rs.24,78,33,390/- as "investment and work-in-progress" and no further break-up was given in any schedule. The CIT(A) has further observed that the same was the position in the original balance sheet for assessment year 1996-97 in which a sum of Rs.24,73,49,656/- had been shown against "investment and work-in-progress" and there was no mention of stockin- trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had filed the balance sheet for assessment year 1995-96 during the assessment proceedings in which the shares were shown as stock-in-trade. The assessee has also submitted that the assessee had obtained the balance sheet of assessment year 1995-96 from CIT(A) in response to application dated 30.11.2011, a copy of which has been enclosed with the affidavit showing that the shares of GVMCL had been declared as stock-in-trade. However, from the perusal of the said balance sheet we note that the same is not the certified copy of balance sheet given by CIT(A) from his records because it neither bears the stamp of the office of CIT(A) nor there is any covering letter from CIT(A) enclosing therewith copy of balance sheet. Therefore, it is not established whether the balance sheet for the assessment year 1995-96 now being filed is copy of balance sheet filed during the assessment proceedings for the assessment year 1995-96. However, since the assessee has given an affidavit that it is the copy of balance sheet filed during the assessment proceedings, the matter in our view requires verification at the level of CIT(A). In case, it is found that the assessee had declared the shares as stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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