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2016 (9) TMI 945

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..... be safely concluded that the assessee’s case squarely falls under the two exceptions provided in Explanation to Section 73 of the Act and hence the order passed by the ld AO in these circumstances cannot be termed as erroneous much less prejudicial to the interests of the revenue warranting revisionary jurisdiction u/s 263 of the Act. Apart from this, we also find that the ld AO had made a specific enquiry with regard to the applicability of Explanation to Section 73 of the Act during the course of original assessment proceedings for which the necessary order sheet entries were placed on record in the paper book. We find from the said order sheet entry on 10.3.2010 and 24.3.2010, a specific query was raised by the ld AO on the applicability of Explanation to section 73 of the Act and the assessee had given due reply to the same and the fact of assessee’s reply is also mentioned in the said order sheet entry recorded on 24.3.2010 by the ld AO. The queries raised by the ld AO and the replies filed thereon in this regard are part of the records. Hence in these circumstances, it could be safely concluded that the ld AO on due appreciation of the replies filed in the given set of fa .....

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..... me from other sources, in that case the provisions of this Explanation will not be invoked. The 2nd exception is in regard to principal business of the company. If the assessee is a banking company or the principal business of the company is granting of loans and advances, in that case this Explanation of deeming provisions will not be invoked. 4. The ld CIT observed that the principal business of the assessee was not granting of loans and advances and the case does not fall under the exception to Explanation to Section 73 of the Act and further observed that although the assessee is having NBFC registration, the principal business is only share trading. Hence the loss arising out of share trading is to be construed only as speculation loss which has not been done by the ld. AO thereby making his order erroneous in as much as it is prejudicial to the interest of the revenue, warranting revision u/s 263 of the Act. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. For Ld. Commissioner of Income Tax was not justified in setting aside the order passed u/s 143(4) on ground that Explanation to Section 73 of the Income Tax Act, 1961 is applicable on the .....

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..... the extent of ₹ 38.66 crores was never disclosed by the assessee either before the ld AO or before the ld. CIT and the same is brought to the notice of this tribunal for the first time. Hence he argued that no view should be taken on the same. He argued that the aspect of principal business of the assessee was never enquired by the ld. AO while raising a query in March 2010 as could be seen from the order sheet entries. He stated that the ld. CIT had given a categorical finding in his order that the granting of loans is not principal business of the assessee. But we find that the ld CIT had proceeded the revision proceedings only by looking at Note No. 8 of the audited financial statements filed before the ld AO wherein the fact of assessee dealing in shares as well as in sarees were duly mentioned with quantitative particulars thereon. Hence the fact which is staring on us from the face of the balance sheet read together with the notes on accounts thereon cannot be ignored. 5.4. We find from the paper book that the assessee is a non banking finance company having certificate of registration obtained from Reserve Bank of India with effect from 22.12.2004. We find from the .....

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..... ive of the fact that the Legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the Explanation. Consequently, in the present case, the gross total income of the assessee was required to be computed, inter alia, by computing the income under the head of profits and gains of business or profession as well. Both the income from service charges in the amount of ₹ 2.25 crores and the loss in share trading of ₹ 2.23 crores, would have to be taken into account in computing the income under that head, both being sources under the same head. The assessee had a dividend income of ₹ 4.7 lakhs (income from other sources). The Tribunal was justified, in coming to the conclusion that the assessee fell within the purview of the exception carved out in the Explanation to section 73 and that consequently the assesse .....

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..... exceptions provided in Explanation to Section 73 of the Act and hence the order passed by the ld AO in these circumstances cannot be termed as erroneous much less prejudicial to the interests of the revenue warranting revisionary jurisdiction u/s 263 of the Act. 5.7. Apart from this, we also find that the ld AO had made a specific enquiry with regard to the applicability of Explanation to Section 73 of the Act during the course of original assessment proceedings for which the necessary order sheet entries were placed on record in the paper book. We find from the said order sheet entry on 10.3.2010 and 24.3.2010, a specific query was raised by the ld AO on the applicability of Explanation to section 73 of the Act and the assessee had given due reply to the same and the fact of assessee s reply is also mentioned in the said order sheet entry recorded on 24.3.2010 by the ld AO. The queries raised by the ld AO and the replies filed thereon in this regard are part of the records. Hence in these circumstances, it could be safely concluded that the ld AO on due appreciation of the replies filed in the given set of facts and circumstances after making requisite enquiries thereon, had c .....

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