9911796707
TMI Blog2016 (4) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts in an order passed u/s 153A of Income Tax Act, 1961. The action of the A.O was wholly unreasonable, uncalled for and bad in law. The Ld. CIT (A) was unjustified in confirming the action of AO. 3. For the appellant craves leave to add, alter or withdraw all or any grounds of appeal at the time of hearing." Grounds of appeal raised by the revenue reads as follows :- 1. For that on the facts and circumstances of the case the Ld. CT(A) has erred in granting the benefit to the assessee to carry forward the speculative loss of Rs.l,34,38,700/-, whereas the assessee has failed to prove his share transaction as genuine, by not furnishing the fundamental evidence in support of his claim. 2. That the Department craves leave to add, modify or alter any of the ground(s) of appeal and/or adduce additional evidence at the time of hearing of the case. 3. The facts and circumstances under which the above grounds of appeal arise for consideration are that the Assessee is a company. It is engaged in the real estate business, manufacturing of sponge iron, logistics, C&F Agency, distributorship etc. For A.Y.2007-08 assessee filed return of income declaring total income of Rs. 10,28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of a company ( 2 other than a company whose gross total income consists mainly of income which. is chargeable under the heads" Interest on securities"'," Income from house property"," Capital gains" and" Income from other sources"] or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]" 5. According to the AO, the assessee was a company and the loss that the assessee had incurred in trading in shares had to be treated as speculation loss in view of Explanation to Sec.73 of the Act which provides that where any part of the business of a company consists in the purchase and sale of shares of other companies, such company shall, for the purpose of Sec.73 be deemed to be carrying on speculation business. Consequently the loss in such purchase and sale of shares will be treated as speculation loss u/s.73(1) and cannot therefore be allowed to be set off against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases and sales of such shares and the narration given thereon also indicates the differences of the manner of purchase and sale. In the ledger account, no detailed narration is given as to the payment made for claimed purchase of- shares from M/s. Chandimata Management Pvt. Ltd., My s. Bahar Paper Pvt. Ltd. and My s. Wellfit Fashions Pvt. Ltd. The copies of sale bill produced along with the ledger copies given in respect of such claimed purchase of shares also evoked questions about the genuineness of such transactions. The copy of sale bill given by M/s. Chandimata Management Pvt. Ltd., My s. Bahar Paper Pvt. Ltd. and My s. Wellfit Fashions Pvt. Ltd. as well as ledger copies of purchases and sales signifying the nature of difference in entries are enclosed as part of the order with Annexure - 1 to 7. The analysis given above clearly reveals that assessee is not eligible for getting such benefit of set-off of loss with the rental income on two grounds - (i) provision as enumerated in Explanation to Section 73 of the L T. Act and (ii) the ingenuinity of transactions which resulted the arranged loss. Accordingly, a sum of Rs.l,34,38,700/- is disallowed as business loss, as claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the loss in trading in shares was created by the assessee as a device to avoid tax by selling shares of companies controlling group of companies, explanation to section 73 of the Act cannot be invoked. In this regard the assessee placed reliance on the decision of ITAT Delhi Bench in the case of Aman Portfolio Pvt., Ltd. Vs DCIT 92 ITD 324. CIT(A) however was of the view that the said decision has not been approved by the Hon'ble Calcutta high Court in the case of RPG Industries Ltd. (supra). For the above reason CIT(A) held that the share trading loss was a speculation loss and cannot be set off against the business income of the assessee. Accordingly the loss in question was added to the total income of the assessee. 9. Aggrieved by the order of CIT(A) treating the loss in question as a genuine loss the revenue has preferred the present appeal before the Tribunal. Aggrieved by the order of CIT(A) holding that the loss in question cannot be set off against the business income, the assessee has preferred the present appeal before the Tribunal. 10. It can be seen from ground no.2 raised by the assessee that the assessee has raised the issue with regard to the jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income" of the six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years in which both the disclosed and the undisclosed income would be brought to tax. (iv) Although section 153A does not say that additions should be strictly on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material. (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to completed assessment proceedings. (vi) In so far as pending assessments are concerned, the jurisdiction to make the original assessment assessment under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008. The time limit for issue of a notice u/s.143(2) on the above return filed by the Assesssee was 6 months from the end of the financial year in the which the return was filed. That time would expire on 30.9.2009. Admittedly no such notice was issued. However, it must be noticed that on 24.4.2008 a search was conducted u/s.132 of the Act in the business premises of the Assessee and therefore no action whatsoever could be taken by the AO on the return of income filed by the Assessee. Therefore it cannot be said that the intimation u/s.143(1) of the Act should be equated to an assessment u/s.143(3) of the Act. While issuing an intimation u/s.143(1) of the Act, the AO has not power to go into any issues arising out of the return of income filed by an Assessee. The intimation u/s.143(1) of the Act cannot therefore said to be a completed assessment which can be disturbed only on the basis of evidence found in the course of search. It is no doubt true that no incriminating material whatsoever found in the course of search with regard to the loss on trading in shares claimed to have been incurred by the Assessee. But in the light of the circumstances set out above, it cannot be said th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by virtue of Explanation to s. 73, even the transactions which are not speculative transactions within the meaning of s. 43(5) are deemed to be speculative transactions. The Hon'ble Court has explained that if the contention of the assessee that the provision of s. 43(5) of the Act defining speculative transaction should prevail even if the case comes within the purview of the Explanation to s. 73 is accepted, effect cannot be given to the Explanation at all and it would be rendered meaningless and that it was the intention of the legislature that if the assessee is a company indicated in the Explanation to s. 73, there shall be a different definition of speculation business than the one applicable to other types of assessees. The Hon'ble Court further held that there is nothing illegal for the legislature to enact two different definitions of speculation business for two different categories of assessees. The Hon'ble Court has explained that although ordinarily the object of an Explanation is not to enlarge the scope of the original section that it is supposed to explain, if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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