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2017 (7) TMI 428 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - securities held as stock in trade - Held that:- We have observed from the perusal of audited financial statements which are placed in paper book filed with the tribunal by the assessee that the assessee has made investments in shares to the tune of ₹ 3,78,000/- (Previous Year ₹ 3,78,000/- as on 31- 03-2009) which were held as ‘Investments’ in its books of accounts as on 31- 03-2010, while investments in shares and securities as on 31-03-2010 were ₹ 12,50,94,940 which were held as stock-in-trade (previous year as on 31- 03-2009 of ₹ 8,70,06,123/-) –ref. pb/page 3-18). We have also observed that the assessee’s own funds are to the tune of ₹ 7,98,02,973/- (consisting of share capital + reserves-miscellaneous expenditure(debit)). We have observed that the Mumbai-tribunal has decided this issue in the assessee’s own case for assessment year 2012-13 wherein held that no disallowance u/s.14A r.w.r 8D of the Rules, can be made for the securities held as stock in trade. The reason behind it is not difficult to understand. Income arising from the business of an assessee is taxed under the head business and profession. So, all the expenses have to be considered while computing the business income. On the other hand, if the securities are held as investment and an assessee earns exempt income, same can be subjected to disallowance as envisaged by the provisions of section 14A. Non compliance of order u/s 144A - Disallowance of loss claimed as F & O trading loss - client code modifications undertaken in the month of March 2010 - loss stood disallowed by the AO considering the same to be sham loss being colorable device adopted by the assessee to evade taxes - as per CIT-A AO did not conducted enquiry as per directions of the Addl. CIT and disallowed the said loss merely on presumption that these transactions were sham transactions - Held that:- We are afraid that this approach of learned CIT(A) disregarding the material on record and coming to certain conclusions without any material on record is completely flawed to the extent that it has made the order of learned CIT(A) enter the arena of perversity and this order of learned CIT(A) cannot be sustained in the eyes of law and is liable to be set aside. The powers of the learned CIT(A) is co-terminus with the powers of the AO including powers to enhance assessment, after following due procedures as contemplated by law. We are of the considered view, the appellate order of the learned CIT(A) cannot be sustain in the eyes of law as it is suffering from serious flaw and is perverse as indicated, and hence we are inclined to set aside the order of learned CIT(A) and restore the matter to the file of the learned AO for fresh adjudication of the issue on merits in accordance with law and in compliance with directions issued by Addl. CIT vide orders dated 22-03-2013 passed u/s 144A of the 1961 Act.
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