TMI Blog2011 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... n business under the deeming fiction of Explanation to Section 73 of the Act. - ITA No. 3076/Mum/10 - - - Dated:- 31-3-2011 - Shri D K Agarwal, Shri Pramod Kumar, JJ. Arvind Dalal, for the appellant Sumeet Kumar, for the respondent O R D E R Per Pramod Kumar : 1. The short issue that we are required to adjudicate in this appeal is whether or not the learned Commissioner was justified in exercising revision powers under section 263 of the Income Tax Act, 1961, on the facts and in the circumstances of this case. The assessment year involved is 2005-06 and the order so subjected to revision proceedings by the learned Commissioner was passed under section 143(3) of the Act. 2. The issue in appeal lies in a rather narrow compass of material facts. The assessee is engaged in the business of share trading activity. Subsequent to finalization of assessment under section 143(3), the Commissioner sought to subject the assessment revision. In the impugned revisions order, learned Commissioner states that he proceeded to initiate the revision proceedings on the ground that the details of purchase and sale of share transactions in futures were not verified as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fifth sentence of the impugned revision order, learned Commissioner notes that that [o]n perusal of assessment record, it was noticed that assessment order was erroneous inasmuch as it was prejudicial to the interest of the revenue as the details of purchase and sale of share transactions in future were not verified as to whether the profit or loss from the futures trading amounts to speculation gain or loss . The extracts from show cause notice, which have been reproduced in the impugned revision order at page 1 and 2, donot, however, even remotely support that stand. The stand taken in the show cause notice is that, on merits, set off is not permissible inasmuch as show cause notice states that [a]s per the provisions of Section 73 of the Income Tax Act, any loss computed in respect of speculation business carried on by the assessee shall not be set off except against profits and gains of another speculation business , and, [t]heref ore you (the assessee) are not allowed to adjust the speculation loss . The show cause notice, therefore, clearly refers to declining , what the Commissioner perceives as, a set off of speculation loss against business profits. That is a categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f being heard relates to the point on which the Commissioner considers the order to be erroneous and prejudicial to the interests of the revenue. In other words, it is necessary for the commission to point out the exact error in the order which he proposes to revise so that the assessee would have an adequate opportunity of meeting the error before the final order is made. [Emphasis supplied] In the case before the High Court, the show-cause notice referred to two issues to which the assessee had given satisfactory replies. No action was taken under section 263 in respect of these two issues. However, in the said order the CIT mentioned the hire charges as the ground for revising the assessment. This point had not been mentioned as a ground in the show-cause notice. The High Court held that inasmuch as the Commissioner had not chosen to show these two points as the errors in making the final order and the final order under section 263 refers only to the inference of hire charges being exigible to tax which was not mentioned at all in the show cause, obviously the assessee had no opportunity to meet that point. [Emphasis supplied] 10. The ratio of the decision, clear fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner as well. If the Tribunal is allowed to find out the ground available to the Commissioner to pass an order under section 263(1) of the Act, then it will amount to a sharing of the exclusive jurisdiction vested in the Commissioner, which is not warranted under the Act. It is all the more so, because the Revenue has not been given any right of appeal under the Act against an order of the Commissioner under section 263(1) of the Act. . . . Under section 263 of the Act it is only the Commissioner who has been authorized to proceed in the matter and, therefore, it is his satisfaction according to which he may pass necessary orders there under in accordance with law. If the grounds which were available to him at the time of the passing of the order do not find a mention in his order appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under section 263(1) of the Act. In this situation, the Tribunal, while hearing an appeal filed by the assessee, cannot substitute the grounds which the Commissioner himself did not think proper to form the basis of his order. We respectfully understand this judgment as holding, by necessary imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Explanation to section 73 defines when an assessee is to be deemed to be carrying on a speculation business for the purposes of the section. The deeming fiction is, therefore, one which arises specifically in the context of the provisions of section 73 and is confined to that purpose alone. The Explanation stipulates that where an assessee is a company whose business consists in any part of the purchase and sale of shares of other Companies, it shall be deemed to be carrying on a speculation business to the extent to which the business consists of purchase and sale of such shares. Whether or not it is a profit or loss that has resulted from carrying on such business, is a consideration which is alien to the meaning of what constitutes a speculation business by the Explanation to section 73. Once an assessee is deemed to be carrying on a speculation business for the purpose of section 73, any loss computed in respect of that speculationbusiness, can be set off only against the profits and gains of an other speculation business. Similarly, for the purposes of subsection (2), the loss in respect of a speculation business which has not been set off either in whole or in part, can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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