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TMI Blog2018 (3) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... on the first opportunity available and it did so. FAA was fully empowered to admit the additional ground and to decide the same on merits without asking for comments/remand report of the AO. Assessee had also filed an application u/s. 154 of the Act in that regard. The AO should have dealt it disregarding the filing of appeal. We are of the opinion the order of the FAA allowing indexation to the assessee with regard to the capital loss does not need any interference from our side. - Decided against revenue. Applicability of the provisions of explanation to section 73 - carry forward of loss on sale of investment - Held that:- As during the appellate proceedings the FAA had held that the assessee was covered by the exceptions mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and valuation of shares as well as loss on sale of shares back to the file of the AO for verifying the genuineness of the transaction. The Tribunal also directed the AO to allow valuation of closing stock of share as per cost/market price whichever was lower in so far as assessee was dealing in shares which formed part of its closing stock. It was further observed that profit/loss arising on sale and purchase of shares and securities held as stock in trade was to be computed and allowed as business profit/ loss whereas profit/loss on sale of shares held as investment was to be allowed as capital gain/loss. 2. We are giving brief background of the matter. During the original assessment proceedings the AO disallowed the loss of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive loss by invoking the provisions of explanation to section 73 that the loss of ₹ 1. 12 crore was treated as capital loss that while computing capital loss the AO had not given effect to the provisions of indexation of cost of acquisition that the capital loss would increase to ₹ 1. 70 crore that the loss would not be entitled to be set off against other income of the current year that the loss would not be entitled to be set off against other income of the year under consideration that it would be carried forward in the subsequent years and would be entitled for setting of against the capital gain that the AO had rightly decided the issue about setting off and carrying forward. Referring to the explanation to section 73 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly invoked the provisions of explanation to section 73 of the Act that loss suffered by the assessee was to be assessed as speculative loss. The Authorised Represetative(AR)stated that the AO had not allowed benefit of indexation to the assessee while calculating the capital loss that it came to know about the said mistake only after it received the set aside assessment order that it had filed a rectification application u/s. 154 of the Act in that regard that the application was still pending before the AO that the FAA had rightly held that the assessee was covered by the exceptions of the explanation to Section 73 of the Act. He further stated that there was an amendment to the provisions of explanation to section 73 that amended pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against capital gain of the subsequent years. Regarding the business loss he held that explanation to section 73 was attracted that as per deeming provision of the explanation the loss was to be treated as speculative loss that same was to be set off against speculative profits only. We find that in the appellate proceedings the FAA while deciding the additional ground raised by the assessee had held that the assessee was entitled to benefit of indexation. In our opinion raising an additional ground before the FAA is a legal right of an assessee. It is prerogative of the FAA to accept or reject the same. In the case before us he had not accepted any additional evidence as per Rule 46A of the Income tax Rules 1962 that requires calling fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been treated as capital loss. There was no chance for it to claim indexation. In these circumstances only remedy left was to raise an additional ground on the first opportunity available and it did so. In our opinion the FAA was fully empowered to admit the additional ground and to decide the same on merits without asking for comments/remand report of the AO. The Act provides that while calculating capital gains/losses indexation has to be allowed. The AO should have allowed benefit of indexation to the assessee the moment he held that transaction in question was capital loss. The assessee had also filed an application u/s. 154 of the Act in that regard. The AO should have dealt it disregarding the filing of appeal. We are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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