TMI Blog2019 (6) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... ever were brought out by the ld DR before us with regard to these documentary evidences. Hence the share transactions in respect of Nirma Ltd is to be considered as genuine and assessee had made profit in respect of this off-market transaction. Assessee had also submitted the statement giving details of purchase and sale of shares of Visual Soft Ltd along with copies of bills and contract notes, copies of demat statement and copy of price list from the stock exchange . No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. Assessee had also submitted the statement giving details of purchase and sale of shares of Elque Polyster Ltd along with copy of price list from the stock exchange. No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. We find that the assessee had also submitted the statement giving details of purchase and sale of shares of Global Tele Ltd along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. Commissioner of Income Tax, Central Circle, 40, Mumbai (hereinafter referred to as ld. AO). Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidate order, for the sake of convenience. ITA No. 590/Mum/2014 Assessee Appeal 2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the action fo the ld AO in not allowing the loss of ₹ 4,84,12,423/- on share transactions to subsequent years, in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee company is engaged in the business of investment and trading in shares and securities. The assessee is also a stock broker. The original assessment was completed u/s 143(3) of the Act for the Asst Year 2001-02 on 30.3.2004 determining total income of the assessee at ₹ 18,57,47,180/- as against the returned income of Rs Nil. The following additions / disallowances were made in the said assessment which are recorded in the impugned assessment order before us are as under:- :- a) Disallowance of Share Trading Loss - ₹ 9,39,48,483/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares of Nirma Ltd on which the assessee made only profit and not loss. The learned counsel for the assessee referred to pages 1 to 91 of the paper book which included statement of purchases and sale of shares of Nirma Ltd , Visual Soft, Elque Polyster Ltd, Global Tele, Pentafour Soft, Ramco Systems and also the computation of total income of Asst Year 2001-02. Copy of the special audit report u/s 142(2A) of the Act and various letters filed with the ld AO were enclosed in pages 16 to 36 of the paper book filed. The learned counsel for the assessee argued before this tribunal in the first round of proceedings that neither the special audit report mentions about violations nor there was any evidence with the ld AO to treat the share transactions as bogus transactions. The counsel then referred to the para wise comments of the various remarks of the ld AO and the rebuttal given by the assessee in that regard. It was finally contended that the ld CITA in first round of proceedings had not considered any evidence filed before him and simply endorsed the action of the ld AO. Per contra, the learned counsel for the revenue submitted that the assessee was involved in stock market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income to arrive at total income of ₹ 18,57,47,180/- . The amount of bad debt is being allowed but we are unable to under how this trade loss can be income. Be that as it may, it is the amount of ₹ 9,39,48,483/- which cannot be verified and on what basis the A.O. considered this, is not placed before us. When the assessee has contested the same before the CIT(A), the CIT(A) also has not given any clear finding except stating that the assessee has admitted before the A.O. The learned Standing Counsel, however, admitted that he has not having the record with him to examine this aspect but stated that it is on the basis of assessee's letter only. We are unable to verify this amount of share trading loss arrived at by the A.O, in the absence of any detail in this regard. Even if we exclude the profits earned in the share transactions the loss figures are not tallying with the share trading loss. Moreover, when share trading loss is considered as speculative loss by virtue of section 73 Explanation the profits and losses are to be netted off and was correctly claimed by the assessee. Only the net amount can be considered for carry forward to be set off against speculati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the A.O. The assessee should be given proper opportunity for explaining the transactions and the claim of loss. It is not out of place to mention that the losses are to be considered as speculative loss as the assessee itself has offered speculation loss in view of the Explanation to section 73. The issue is restored back to the file of the A.O. for fresh consideration after due examination of the facts. Assessee's grounds are considered allowed. 9. Ground No. 3 pertains to the claim of set off of losses. In view of restoring ground Nos. 1 2 back to the file of the A.O., the A.O. is directed to examine this issue also at the time of recomputation of income after examining the above issue. With these directions the grounds are considered allowed 10. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 25th June 2010. 4. The ld AO in the second round of proceedings passed an order u/s 143(3) read with section 254 of the Act on 28.12.2011 simply stated that the assessee had not furnished the requisite documents before him and again disallowed the share trading loss of ₹ 9,39,48,483/- , which was never c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurities (Debt market transactions) to the tune of ₹ 1,53,15,358/- (Debt Bonds Wise Workings enclosed in pages 18 to 21 of paper book) and incurred a loss of ₹ 6,36,99,614/- in respect of trading in shares (Scrip Wise Workings enclosed in pages 22 and 23 of paper book) thereby arriving at a net loss figure of ₹ 4,83,84,256/-. In addition to this, there is yet another loss from share trading activity in the sum of ₹ 28,167/-. Hence the total loss on share transactions worked out to ₹ 4,84,12,423/- ( 4,83,84,256 + 28,167). This loss was treated as speculation loss by the assessee in the computation of total income and sought to be carried forward to subsequent years. We find that this tribunal vide its order dated 25.6.2010 in the first round of proceedings had taken cognizance of the fact (based on the statement made by the learned counsel for the assessee) that the assessee s business transactions were suspended after this assessment year and that there is no way of setting off of this loss in later years. Hence in any case, the speculation loss claimed by the assessee, even if carried forward, is not set off with any future income. Hence it could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter dated 31.10.2011 and adjourned the hearing to 30.11.2011. On 30.11.2011, the ld AO had informed that he had written a letter to BSE to get the trades confirmed to adjudicate on the genuineness of the transactions. However , as the BSE had not responded till that date, the ld AO adjourned the hearing to 16.12.2011. On 16.12.2011, the ld AO informed the authorized representative that no response was received from the BSE to the queries raised by the ld AO. After this, no further hearing was granted to the assessee and finally the assessment was framed on 28.12.2011 by the ld AO. 6.3. Findings of Special Auditor u/s 142(2A) of the Act We find from the Special Audit Report issued u/s 142(2A) of the Act dated 5.7.2002 which was carried out by making due examination of the audited balance sheet and profit and loss account as on 31.3.2001 which matched with the books of accounts maintained by the assessee in computerized form and no deficiencies were found thereon by the Special Auditor. The Special Auditor also examined the software data, seized material, data supplied by the concerned Stock Exchange for carrying out its audit. It is not in dispute that the Special Auditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. But all off-market transactions have been settled by way of direct payment / receipts through their own account. Please find enclosed herewith copy of account of National Stock Exchange in the books of accounts of the assessee (Attachment No. 1‟ Page No. 1 to 42). Please find enclosed herewith a CD containing electronic data about money statement / obligation provided by NSE and compared with the data of the assessee. (Attachment A‟). Print out of Vallan Reports (Attachment A ) 2. We have enclosed herewith the duly Certified copies of all Bank Statements received from various banks, accounts maintained by the assessee. (However, please find enclosed herewith a summary of names of Banks with Account No. (As per Attachment No. 2‟ Page No. 1 to 1). Please find enclosed herewith a file containing bank statement of all banks specified as Attachment B in a separate file. 3. In respect of cash credits, name address of creditor, amount received, mode of receipt payment:- As explained by the assessee no cash credit have been received by them hence no details have been submitted by them (Please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee. There has been a total turnover of ₹ 59704.31 Crores for the year and including own transactions and off-market deals as per the assessee‟s books. However as per confirmation received from NSE the total turnover amounted ₹ 53669.71 Crores which included off market deals which amounted to Rs Nil. As explained by the assessee a reconciliation statement has been prepared showing the reasons for the discrepancies / differences. Please refer Attachment No. 10‟ Page No. 1 to 17). 6.4. We find that the assessee had also submitted the statement giving details of purchase and sale of shares of Nirma Ltd (enclosed in page 37 of paper book) along with copies of correspondence for purchase of warrants from Nirav Trust and copies of ledger account showing payment to Nirav Trust (pages 38 to 42 of paper book) together with copies of bills and contract notes (pages 43 to 55 of paper book) ; copies of demat statement (page 56 of paper book) ; confirmation from Classic Credit Ltd (person to whom shares were sold in off market) (enclosed in pages 57 to 58 of paper book) ; copies of trade files of NSE (pages 59 to 61 of paper book) and copy of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Global Tele Ltd (enclosed in page 72 of paper book) along with copies of bills and contract notes (page 73 of paper book) and copy of price list from the stock exchange (page 74 of paper book). No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. 6.4.4. We find that the assessee had also submitted the statement giving details of purchase and sale of shares of Penta Four Soft Ltd (enclosed in page 75 of paper book) along with copies of bills and contract notes (pages 76 to 80 of paper book) ; copies of demat statement (pages 81 to 84 of paper book) ; copy of trade file of NSE (page 85 of paper book) and copy of price list from the stock exchange (page 86 of paper book). No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. 6.4.5. We find that the assessee had also submitted the statement giving details of purchase and sale of shares of Ramco Systems Ltd (enclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht on the statute book w.e.f. 01.06.2003, therefore, interest u/s.234D should not be applicable to assessment year prior to that date. Further since the issue is debatable, therefore, this cannot be a subject matter of rectification u/s.154 of the I.T. Act. We find the coordinate Bench of the Tribunal in the case of ITO vs. M/s, Panther Industrial Products Pvt. Ltd. (supra), following the decision of Special Bench of the Tribunal in :.he case of Ekta Promoters Pvt. Ltd. reported in 117 TTJ 289, has held that provisions of sec-234]) should be applied for case where refund is granted u/s 143(1] after 01.06.2003 and no interest u/s.234D could be charged for earlier years even though regular assessment for these years are framed after 01.06.2003 or the refund were granted for those years after the said date. We find the Jurisdictional High court in the case of Bajaj Hindustan Ltd. had dismissed the appeal filed by the Revenue and held that the provision of Sec.234D came into the statute book w.e.f. 01.06.2003 and the said provision does not have retrospective effect. The Hon‟ble High Court accordingly dismissed the appeal filed by the Revenue holding that no substantial question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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