TMI Blog2014 (4) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of the IT Act – assessee has not produced any evidence by which he can demonstrate that nature of transaction is short term capital loss - In absence on evidence, it is difficult to ascertain the nature of the transaction - There is no evidence of past from the assessee’s record which substantiate assessee’s claim – thus the matter is remitted back to the AO for fresh consideration – Decided in favour of Assessee. - ITA No.4136/Ahd/2007, ITA Nos. 4137 & 4138/Ahd/2007, ITA No. 4139/Ahd/2007 - - - Dated:- 17-1-2014 - Shri G.C. Gupta and Shri T.R. Meena, JJ. For the Appellant : Shri Subhash Bains, CIT D.R. with Shri O.P. Batheja, Sr. D.R. For the Respondent : Shri S. N. Soparkar, A.R. ORDER Per: T R Meena: These four appeals at the behest of three assessee which have emanated from the order of CIT(A)-II, Ahmedabad, dated 05.09.2007 in ITA Nos. 4138 4139/Ahd/07 for assessment year 2001-02, dated 12/09/2007 in ITA No.4137/Ahd/07 for A.Y. 2000-01 dated 13/09/2007 in ITA No.4136/Ahd/07 for A.Y. 2001-02. These appeals were heard together and are being disposed of by way of this common order for the sake of convenience. The effective grounds of all appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od on the ground that there was no addition on this account. 5. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in confirming loss of Rs.3,65,164 as speculative loss. 6. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in holding that levy of interest u/ss. 234A, 234B and 234C of I.T. Act is consequential. 7. In law and in the facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in rejecting Appellant's ground regarding initiation of penalty proceeding u/s.271(1)(c) of I.T. Act. Grounds of ITA No. 4138/Ahd/2007 1. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in points of law and facts. 2. In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming issue of Notice u/s.148 of I.T. Act. 3. In law and in facts and circumstances of the Appellant's cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Ground nos. 2 3 in all the cases are against recording of reasons u/s.147 of the IT Act and issue of notice u/s.148 of the IT Act. The A.O. in all cases observed that in this case, returns were filed and process u/s.143(1) of the IT Act and no scrutiny assessment was made u/s.143(3) of the IT Act. The A.O. recorded reasons: Reasons for initiating action u/s. 147 in the case of Nima Specific Family Trust for A.Y. 2000-01. The assessee purchased debentures of Tata Finance Ltd. in A.Y. 2000- 01. The debentures had following features: a) It had two components Principal and Interest b) The debentures were secured redeemable at the rate of 17% c) Interest coupons could be sold separately independent at principal strips. 2. During the block assessment proceedings of the assessee u/s.158BD it was ascertained that immediately after the purchase of the debenture of Rs.25 lacs the assessee sold off the principal component of the debenture to M/s. Shree Developers Ltd. for Rs.12.5 lacs. In this transaction the assessee took whole of the cost of the principal scrip and thus on this sale it booked short term capital loss of Rs.12.5 lacs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investor cannot have negative return on any of the transactions. Even during the intervening period when shares in which vyaj badla investments were made, were lying with the clearing house the rights of the appellants over the shares were not in any way comparable to absolute right of ownership. This is so as during this period the appellants could have neither enforced delivery of these shares to themselves nor could they have sold these securities to an independent party. 4. The true nature of the transactions of vyaj badia can he equaled with transaction of lending against security of shares. This becomes clear when we compare the risk taken by the appellants in these transactions with the inherent risks of a lending transaction. In any lending transaction the lendor bears a credit risk i.e. the risk that the person to whom the money is being lent may default on the repayment of the loan, the inherent properties of this transaction are us under: i. Against the credit risk the lendor may call for a security to be given to him. In a lending transaction the lendor has a right to enforce the security only, in case there is default in repayment by the lend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. Even the appellant has not given the date on which the assessment order was originally passed u/s.143(3) of IT Act. These submissions are thus made without any supporting evidence. On the contrary in the assessment order itself the A.O. has while dealing with the objection regarding change of opinion observed that the assessment proceedings u/s. 143(3) of IT Act were never carried out for this year in the past as the case was not selected for scrutiny assessment (para 4.3 of the assessment order). The appellant has thus made incorrect submissions. As no opinion was formed earlier on the facts of the case, there was no change of opinion as alleged. These grounds of appeal are, therefore, rejected. 5. Now the assessees are before us. Ld. Counsel for the appellants contended that the accounts were filed with the return of income. The income was disclosed in the return under the head capital gain . There is no escapement of income in case of Jethiben K. Patel Discretionary Trust. Similarly accounts were filed during the assessment proceeding, the same shows that the shares of Shri Rama Multitech Ltd. as investment in case of Harsiddh Specific Family Trust. In case of Nima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily Trust in A.Y. 2000-01, the A.O. has tangible material with him that claim of assessee s short term capital loss was in fact speculative loss. Thus, the A.O. rightly reopened the case u/s. 147 and issued notice u/s. 148. 7. We have heard the rival contentions and perused the material on record. In these cases, no scrutiny assessments were made and in Nima Specific Family Trust in A.Y. 2000-01 scrutiny of assessment was made but notice u/s.148 was issued within four years. The Hon ble Supreme Court in case of ACIT vs. Rajesh Jhaveri (supra) held that in case of case processed u/s. 143(1)(a), no opinion has been formed by the A.O. Therefore, no question of change of opinion is there. The reasons recorded by the A.O. are of subjective satisfaction of the A.O. and within the realism of him. In case of Nima Specific Family Trust in A.Y. 2000-01, notice u/s. 148 was within four years and assessee has not demonstrated with evidence that this issue even has been touched by the A.O. in first scrutiny assessment. The A.O. has ample power as held by the Supreme Court in various cases even cases reopened where scrutiny assessment had been made previously. Thus, both the ground nos. 2 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction is very low compared to share transaction. As such, there is no price risk in case of vyaj badla transaction. There is a remote possibility that broker defaults the ownership of security transfer in the hands of vyaj badla creditors. Therefore, he assessed interest income and not as short term capital gain and also has not allowed to be set off against the capital loss incurred in other securities. In case of Harsiddh Specific Family Trust, the assessee claimed short term capital loss in purchase and sale of shares of Shree Rama Multitech Ltd. at Rs.62,518/-. But the A.O. held that this transaction is covered u/s. 43(5) of the IT Act as no delivery based purchase and sale was made by the assessee to any other person. The assessee did not furnish any detail of transfer of shares. Copy of demat account, copy of contract note to the A.O. to verify the nature of the transaction. Thus, he treated this transaction speculative loss and same is not allowed to be set out against the capital gain of other shares. 10. Being aggrieved by the order of the A.O. the assessee carried the matter before the CIT(A) who had confirmed the finding of the A.O. in all cases on similar findings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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