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TMI Blog2016 (4) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 should be given to the legislative intent and that only one interpretation of the Explanation to s. 73 is possible and that goes against the assessee and therefore there is no question of adopting a view which is favourable to the assessee. CIT(A) treating the share trading loss as deemed speculation loss confirmed - Decided against assessee Genuity of tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 ₹ 10,28,840/-. An intimation u/s 143(1) of the Income Tax Act, 1961 (Act) dated 03.10.2008 was issued. 4. There was a search and seizure operation carried out in the case of the assessee u/s 132 of the Act on 25.04.2008. Thereafter notice u/s 153A was issued. For A.Y.2007- 08. The Assessee filed return of income in response to notice u/s 153A of the Act on 25.04.2010 declaring total income of ₹ 50,02,709/-. Computation of total income filed by the assessee is at page 5 of the assessee s paper book. The computation of income of the assessee shows that the assessee had declared income under the head profits and gains of business prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res.] 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 business income of the Assessee. On this ground according to the AO, the claim of the assessee for setting off loss on purchase and sale of shares could not be permitted. 6. Without prejudice to the above AO also held that the loss in question was not genuine. The findings of the AO in this regard were as follows :- Notwithstanding the fact mentioned above, the documents furnished by the assessee as regards its purchase and sale of shares have also been examined from this end. It is seen that assessee had claimed purchase of 16060 number of shares of Bajaj Hindusthan @ ₹ 524.05 per sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 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 the assessee and no benefit of set-off in this respect is allowed. 7. On appeal by the assessee CIT(A) held that the loss in question was genuine loss. He however held that in view of Explanation to section 73 of the Act, the loss in question will not be set off against the business and had to be carried forward for being set off only against the income which is of the nature of speculation. The findings of CIT(A) with regard to loss in question being genuine were as follows :- However, as far as the view of the A.O. regarding ingenuineness of said loss is concerned, I am- of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 of the AO to make the addition in respect of loss in trading in shares treating the speculation loss in the present proceedings u/s 153A of the Act. Such a ground was raised by the assesse before CIT(A) but since no arguments were advanced on the said ground of appeal, the CIT(A) dismissed the said ground. 11. The learned counsel for the assessee first addressed the arguments on ground no.2. His submission was that in the course of search no incriminating documents whatsoever was found with regard to the share trading loss. It was his submission that once the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 153A merges into one. Only one aseessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the intimation u/s.143(1) of the Act is a completed assessment. The intimation u/s.143(1) of the Act should therefore be equated to a pending assessment proceeding which stood abated under the proviso to Sec.158BA of the Act. In respect of such abated proceedings, the total income for such AYs will have to be computed by the AOs as a fresh exercise. The AO will exercise normal assessment powers in respect of AY 2008-09 and the AO has the power to assess and reassess the 'total income' of the aforementioned AY in which both the disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 should be given to the legislative intent and that only one interpretation of the Explanation to s. 73 is possible and that goes against the assessee and therefore there is no question of adopting a view which is favourable to the assessee. In view of the aforesaid decision of the Hon ble Calcutta High Court, we are of the view that the decisions referred to by the learned counsel for the Assessee was rightly not accepted by the CIT(A). The decision in the case of Aman Portfolio Pvt.Ltd. (supra) was also considered and the ratio laid down ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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