TMI Blog2017 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... ities should have probed the matter further by making enquiries from the concerned seller & buyer, about prevailing market rates etc., and then they should have come to a conclusion. It is pertinent to note that the Special auditors have only reported the same as Exceptional cases, but they have not branded the same as bogus. Hence, in our view, this claim has been disallowed by the tax authorities only on surmises and not based upon any credible evidence. Accordingly we do not find any justification in disallowing this claim. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Disallowance of loss arising with purchase and sale of securities - Held that:- In the first round of proceedings, the assessee had also claimed that the transactions noted in Sl.No.11 have also been entered on different dates, but the said claim was not made in the second round proceedings. Hence we restore the issue relating to transactions noted in Sr. No. 11 to the file of the AO with the direction to delete the addition, if the transactions have been entered on two different dates. With regard to the loss of ₹ 33,15,000/- in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adjudicate the disallowance of ₹ 16,95,427/- separately. Addition of Negative balance of securities - Held that:- We notice that the assessee has offered explanations in respect of the items that were pointed out by the AO. In respect of remaining items, no details were furnished to the assessee, since the workings were not given by the AO and hence there was no occasion for the assessee to furnish any explanation. We have noticed earlier that the tax authorities have not examined these explanations and proved the same to be false. In the absence of any contradiction, we are of the view that the explanations offered by the assessee should be accepted. We have also noticed that the assessee also makes short sales and it is submitted that this is also a prevalent commercial practice. Hence, what is required to be seen is that the short sale was ultimately covered up or not. In our view, the claim of short sale could very well be examined by the AO during the course of assessment proceedings, which he has failed to do so. Disallowance of loss arising in the security transactions entered with Oswal Agro Ltd. - Held that:- Out of the aggregate amount of about ₹ 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the order passed by Ld CIT(A) on the above said issues and direct the AO to delete the disallowances. Disallowance on ground that the same has resulted in reduction of brokerage - Held that:- We notice that the auditors have only given the list of reduction in brokerage account. The assessee has explained that the same represents loss incurred in the share trading. We notice that the AO has rejected the explanation without even examining the same. The contention of the assessee is that both profit and loss arising in share trading were also accounted in brokerage account only. Since there is no material to contradict explanations given by the assessee, we are of the view that there is no justification in rejecting the same. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Disallowance of loss booked in BCD Share trading Account - Held that:- We have noticed earlier while disposing the appeals of the assessee for earlier years that the Patawat Sheets is only summary of transactions entered during the month and the same were prepared at the end of the month. Hence, even though the transactions appear to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not supported by the any evidence. Accordingly, we are of the view that the assessee may be given further relief of ₹ 2,50,000/-. Accordingly, we modify the order passed by Ld CIT(A) and direct the AO to confirm the addition on this issue to the extent of ₹ 2,50,000/-. Disallowance of loss incurred in the security transaction entered with Milan Mahindra - Held that:- The transactions entered with unrelated parties and also through banking channels may not be doubted with, unless due enquiries were carried out to ascertain the non-genuineness of transactions. Undoubtedly, no such enquiry or investigation was carried out by the AO either in the original assessment proceedings or in the set aside proceedings. Accordingly we do not find any merit in this addition also. Disallowance of loss incurred in share transactions - Held that:- In any case, the transactions have been entered through banking channels and both these parties are not related parties. We further notice that the explanations of the assessee that the same were funding transactions have been rejected by the tax authorities without examining the corresponding parties or the gamut of whole transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x authorities and restored all the matters to the file of the Assessing officer with the direction to complete the assessments afresh after providing all the materials, which were relied upon by the AO to make additions, to the assessee. Consequently, the present assessment orders were passed by the assessing officer in the second round of proceedings. The assessee again challenged the assessment orders by filing appeals before Ld CIT(A) and both the parties have filed the appeals under consideration challenging the orders passed by Ld CIT(A) on the issues decided against each of them. 4. The assessee has filed returns of income for AY 1987-88 to 1991-92. However the assessee did not file returns of income for AY 1992-93 and 1993-94. It was explained that he could not file the return of income for those years, since all the records were seized by the CBI/revenue and further he was constrained to undergo imprisonment and to face enquiries of various investigating agencies. 5. In the order dated 09-11-2016 passed by us in the hands of the assessee for AY 1987-88 to 1989-90, we have discussed in brief the nature of business activities carried on by the assessee. The discussions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained for receipt and delivery of securities (Statement of assessee recorded on 22.09.1993). (vii) The assessee entered into security transactions with a number of banks and Reserve Bank of India but no ledger accounts was maintained for all these parties. He replied that for security transactions with all these parties the security account was debited or credited and corresponding entry was made in the bank account from where the cheque was issued or the cheque was received. (Statement of assessee recorded on 22.09.1993). (viii) In the security ledger of the assessee, the transactions were recorded on the basis of dates of delivery. Therefore, from the security ledger alone it was not possible to ascertain the date of contract. (ix) In the security ledger a number of transactions were recorded by journal entry only. Accordingly the AO came to the conclusion that the assessee had maintained his books in such a manner that his income could not have been correctly derived there from. 7. As in other years, the original assessment was set aside by the Tribunal and the present assessment order has been passed in the set aside proceedings. 8. The first issue conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the view that the loss arising from sale of securities are not genuine and accordingly disallowed the same. 12. In the appellate proceedings, the Ld CIT(A) took cognizance of another disallowance made by the AO, viz., the loss of ₹ 7,87,500/- reported by the assessee in respect of security transaction entered with M/s Ganesh Book Binding Works. In the statement taken from the owner of M/s Ganesh Book Binding works, he had denied the transactions and when it was put to the assessee, he could not furnish any convincing reply. Hence the AO disallowed the above said loss of ₹ 7,87,500/- and it was confirmed by the Ld CIT(A) in the first round of proceedings. Taking the above said transaction as a sample case, the Ld CIT(A) expressed the view that the claim of loss can be accepted only if a third party confirmation could be submitted by the assessee. With regard to the plea of the assessee that the AO has examined only exceptional transactions where loss has occurred and did not examine profit transactions, the Ld CIT(A) expressed the view that the AO was entitled to examine as to whether the expenses have been inflated. 13. We heard the parties on this issue and per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction of the auditors, which has led the auditors to make such kind of observations. Accordingly the Ld A.R submitted that the tax authorities are not justified in taking adverse view on the basis of auditors observations. 14. The Ld A.R submitted that the assessee had also made profits in such kind of transactions and the said fact has been conveniently ignored by the AO. He submitted that the transaction made with Bank of America in 11.5% 2008 securities resulted in a loss of ₹ 5,50,800/- in the month of April (page no.413 of paper book). However, the transaction entered with Bank of America on the very same security subsequently has resulted in a profit of ₹ 5,50,000/- (Page no.417 of paper book). The transaction shown at Sr. No.3 at page 416 of paper book in 11.5% 2006 security resulted in a loss of ₹ 18.60 lacs. Subsequently, the assessee made a profit of ₹ 12.87 lacs in the very same security subsequently (Sr. No.10 at page 418). Accordingly the Ld A.R submitted that the tax authorities have made this addition without applying their mind on this issue and hence the same should be deleted. 15. On the contrary, the Ld D.R submitted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same time, there is a major deficiency on the part of the assessee, i.e., he could not furnish relevant contract notes nor he could get confirmation from the other broker or his client in support of the financial transaction. As submitted by Ld D.R, a financial transaction entered through banking channels, may not always prove the transaction of purchase and sales unless the details of securities, buyer, seller etc. are also furnished. 19. We have also earlier noticed that the assessee has also declared exceptional profits in certain transactions. Hence we are of the view that the disallowance of entire amount of loss declared by the assessee may not be appropriate under the facts discussed above, i.e., we are of the view that a portion of the loss may be disallowed to take care of deficiencies, if any, in the claim so made. Hence, on a conspectus of the matter, we are of the view that a disallowance of 20% of the exceptional loss claimed on sale of securities may be reasonable. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance of 20% of the amount disallowed by him. We order accordingly. 20. The next add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same has not come to the hands of the assessee. The transactions are supported by the bank advices for paying DOR. The assessee was issuing delivery instructions to the seller and the same constitute the supporting document. The Ld A.R submitted that the assessee has also made exceptional profits around ₹ 50 lakhs in DOR transactions. 22. On the contrary, the Ld D.R placed strong reliance on the orders passed by the tax authorities. He submitted that the assessee has failed to furnish convincing explanations as to how these losses were incurred. 23. On a consideration of rival submissions, we find merit in the submissions made by the assessee. In the instant case, it is not the case of the revenue that the assessee has entered these transactions through another broker. The Special auditors have reported that the DOR loss was exceptional in certain transactions. Neither the special auditor nor the tax authorities has probed those transactions further to ascertain as to whether the loss so incurred could be a case of artificial enhancement of losses. The assessee has also listed out transactions, where he had made exceptional profits. There is merit in the submissions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el, i.e., to the tune of ₹ 33,15,000/-. The AO also recorded a statement from him subsequent to the completion of original assessment, wherein he also confirmed the transactions. However he has stated that he was given contract notes and cheques only, meaning thereby he did not receive the securities. The assessee submitted that the securities are usually delivered directly by the selling bank to the buying bank. The assessee also pointed out certain instances, were the transactions were not on the same day, viz. (a) Transactions mentioned by the auditors at Sr. No.13 ₹ 1,48,334/- (b) Transactions mentioned by the auditors at Sr. No.5 ₹ 1,100/- (c) Transactions mentioned by the auditors at Sr. No.12 ₹ 7,85,500/-. However, the AO placed reliance on the statement given by Shri M J Patel, wherein he had stated that he was given only security vouchers and cheques. The AO further noticed that some of the parties to whom the securities were sold were not traceable. Accordingly the AO took the view that the assessee has engineered the loss and hence this claim is not genuine. Accordingly he disallowed the claim to the tune of ₹ 43,82,480/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Shri M.J. Patel was not available before the AO. In the statement, Shri M.J. Patel has confirmed all the transactions, but he submitted that he has received only contract notes and cheques and not any other documents. The relevant extract from the statement given by Shri M.J. Patel is given below:- Q.No.2 :- What are the evidences before you to prove that the above said two transactions in 11.5% 2006 IDBI bonds were genuine transactions? Ans.:- Except for the securities contract issued by B.C. Devidas the receipt of the above said three cheques of ₹ 33.15 lakhs from B.C. Devidas, I don t have any other evidence. Q.No.3:- These evidences can be created by you and B.C. Devidas in order to give a loss entry of ₹ 33.15 lacs to him. Pl. Confirm. Ans.:- As stated in my earlier reply, except for the securities vouchers receipt of cheque, I don t have any other evidence to prove the genuineness of the above said transactions in securities bonds. We notice that the M.J. Patel has claimed to have entered into these transactions on behalf of parties located in West Bengal and Mumbai. The AO has also pointed out the above said parties were not trace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ready forward transactions. The Special auditors have prepared a list of transactions wherein the purchase and sale of transactions were entered with the very same party. The assessee had purchased the securities on a higher rate and sold the same to the very same party at a lower rate on a subsequent date resulting in loss to the assessee. Sometimes, the assessee had purchased securities at a lower rate and sold them to the very same party at a higher rate making profits also. During the year under consideration, the assessee incurred loss of ₹ 1,57,34,386/- and made profit of ₹ 48,92,460/-. Thus, the net result of these transactions was loss of ₹ 1,08,41,926/-. Since the assessee did not furnish any explanations during the original assessment proceedings, the AO disallowed the same. 32. In the second round, the assessee submitted that these transactions are in the nature of loan transactions, i.e., the assessee shall receive loan on pledging the security, but on papers it would be shown as purchase of securities. At the time of sale, the securities would be sold at a price, which would cover the interest factor. But the AO was not satisfied with the said ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever we notice that the assessee has offered general explanations with regard to these transactions. In that case, the tax authorities could have examined the net loss vis- -vis normal interest expenditure. These kind of examination has not been carried out by the tax authorities in order to find out as to whether the loss vis- -vis is excessive or unreasonable. We further notice that the assessing officer has not conducted any enquiry with the concerned parties. 36. We also notice that the rate of interest given in the last column ranges from 8.03% to 14.95%. In our view, the same appears to be reasonable rates also. Hence, we are of the view that there is no reason to reject the explanation of the assessee that the same actually represents funding transactions. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. 37. The next addition relates to the disallowance of loss arising from security transaction entered with Maruti Udyog Ltd. The assessee had credited the account of Maruti Udyog Ltd with ₹ 15.30 crores on 27.6.1989 and debited with the amount of ₹ 15.47 crores on 10.7.1989. Thus, he declared a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.25% IDBI Loan and 1.35 crores 7.50% IDBI Loan. The aggregate par value of both the securities is 14.85 crores. However the ledger account copy as extracted in page 47 of the assessment order refers the security as 14.85 crores 6.25% IDBI-92. Thus there is a contradiction in the description of the type of security, but the par value of the securities tallies. 41. The assessee has claimed that he has purchased the securities from Hiten Dalal and sold the same to Jayantilal Khandwala. However the ledger account copy of Hiten Dalal is not available on record. However the bank account copy of the assessee placed at page 503 shows the receipt of ₹ 15.30 crores on 27.6.89 and the Bank account copy placed at page 502 shows payment of ₹ 15.47 crores on 10.7.1989. Thus there is a difference of ₹ 16,95,247/- between the two. 42. The foregoing discussions show that there is confusion in the assessee s explanation also. The amount originally received from Maruti Udyog was ₹ 15.03 crores on 19.5.1989 and according to the assessee it was received by Hiten Dalal. Thereafter, Hiten Dalal repaid a sum of ₹ 15.30 crores to the assessee on 27.6.1989 and the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 15.47 crores on 10.07.1989, i.e., the assessee has used the funds for 13 days. According to the assessee, the above said purchase and sale were in the nature of funding transactions only. Hence, in our view, the interest calculated at 12% p.a. on the above said transaction may be accepted and the same would meet the ends of justice also. Accordingly, the interest computed at 12% p.a. for a period of 13 days on the amount of ₹ 15.30 crores works out to ₹ 6,63,300/-. Accordingly, we are of the above that the above said amount of ₹ 6,63,300/- may be allowed in the place of ₹ 16,95,247/- claimed by the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the amount of ₹ 6,63,300/- against the claim of ₹ 16,95,427/- made by the assessee. We also notice that the above said loss claimed by the assessee also forms part of disallowance of ₹ 1,08,41,926/- relating to Ready forward transactions. Hence the disallowance of ₹ 16,95,427/- results in double disallowance. Since we have deleted the above said disallowance of ₹ 1,08,41,926/-, there was a need to adjudicate the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 31.3.1990. (b) Sl. No.7 of Annexure 6 7% AP 1993 sold to Bank of America. The assessee has explained sequence of events, i.e., he received interest of ₹ 35.00 lakhs on sale of 7% AP 1993 security worth ₹ 10.00 crores. But the assessee repaid ₹ 6.00 crores and hence the corresponding interest of ₹ 20.50 lakhs was remitted to Bank of America. (c) Sl. No.14 15 Interest paid to Allahabad Bank ₹ 48,87,500/- and interest received thereon ₹ 51,75,000/-. However, neither the assessing officer nor the Ld CIT(A) did examine the above said explanations furnished by the assessee. Both have followed their respective earlier orders to make this disallowance again. 51. While considering an identical issue in AY 1987-88, we have arrived at a conclusion that this disallowance has been made only on surmises and conjectures. In our view, the tax authorities have made this addition in this year also only on surmises and conjectures, even without examining the explanations furnished by the assessee. All these payments have been made to third parties, i.e., unrelated parties and according to the assessee these transactions are commercial transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions towards negative balance of securities were made in AY 1987-88. We have dealt with the same in a detailed manner in that year. In the instant year, the assessing officer has listed out 35 scrips, wherein the alleged negative balance was noticed. However, detailed workings have been given in respect of three scrips only. In respect of the three scrips, the assessee has offered following explanations:- (a) 7% U.P. 1993:- The AO has worked out negative balance of ₹ 12,16,78,900/-. There was a punching error at the time of recording of purchases on 05.6.1989, i.e., the face value was punched as ₹ 1.00 crores instead of ₹ 10.00 crores. Further ₹ 2.00 crores worth securities purchased on 13.5.1989 has been wrongly posted in other security account. Sale value of ₹ 2.19 crores of another security sold to Hiten Dalal on 12.6.1989 was wrongly posted in this account. All these mistakes stood rectified in the securities ledger before the end of the year. Hence there is no negative balance in this security. (b) 7% State 1993:-- (Rs.5,22,50,000/-) It was a ready forward transaction (funding transaction). The sale was reversed before the end of the year. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56. Thus, we notice that the assessee has offered explanations in respect of the items that were pointed out by the AO. In respect of remaining items, no details were furnished to the assessee, since the workings were not given by the AO and hence there was no occasion for the assessee to furnish any explanation. We have noticed earlier that the tax authorities have not examined these explanations and proved the same to be false. In the absence of any contradiction, we are of the view that the explanations offered by the assessee should be accepted. We have also noticed that the assessee also makes short sales and it is submitted that this is also a prevalent commercial practice. Hence, what is required to be seen is that the short sale was ultimately covered up or not. In our view, the claim of short sale could very well be examined by the AO during the course of assessment proceedings, which he has failed to do so. Under these set of facts, we are of the view that there is no justification in making addition on account of alleged negative stock. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of remaining funds also, the same has been received through the bank account of the assessee and, in the absence of specific finding about diversion, it would get mixed up with the business funds and accordingly it should be presumed that the same has been used for the purposes of business of the assessee. In that view of the matter, the excess payment of ₹ 12,56,943/- would partake the character of interest only, which the assessee is entitled to claim. The assessee has also pointed out that he has made a profit of ₹ 12,56,943/- in respect of securities transactions entered with M/s Oswal Agro. In view of the above, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. 62. The next item of addition relates to the disallowance of loss arising in the security transaction entered with Ganesh Book Binding Works. The assessee had shown security transactions with the above said company and incurred a loss of ₹ 7,85,500/-. The AO conducted Survey operations u/s 133A of the Act on Ganesh Book Binding Works and the proprietor of the above said concern denied the transactions. When the statement given by the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- from share transactions and hence it was not correct to isolate the loss transactions alone and disallow the same. We find merit in the said contentions of the assessee. The auditors have merely highlighted the loss transactions and they have not reported the same to be bogus. When the AO is accepting the profit making transactions, there is no reason to isolate the loss making transactions and disallow the same. With regard to the loss of ₹ 1,13,231/- pointed out by the auditors are concerned, we have noticed in AY 1988-89 that the Patawat sheets contain transactions entered throughout the month and hence it was not correct to presume that the purchase and sale has taken place on the last day of month. Further the contention of the assessee is that these transactions have been routed through bank account. Hence there is no reason to make such kind of presumption and hence the disallowance of ₹ 1,13,231/- is not justified. Accordingly, we set aside the order passed by Ld CIT(A) on the above said issues and direct the AO to delete the disallowances. 67. The next item of addition relates to the disallowance of ₹ 1,64,285/- on the ground that the same has resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyers by passing journal entries by crediting their respective accounts. In respect of other transactions, the assessee contended that they have been entered in the normal course of business. He further submitted that these transactions are not same day transactions as presumed by the AO. However, the AO was not convinced with the explanations of the assessee and accordingly disallowed the loss of ₹ 42,42,350/- in both original as well as in set aside proceedings. The Ld CIT(A) also confirmed the same. 70. We heard the parties on this issue. We notice that there is a totalling mistake in the aggregate amount computed by the AO. The total of the eight transactions work out to ₹ 41,42,350/-, where as the AO has casted the same as ₹ 42,42,350/-. Accordingly, the assessee gets relief of ₹ 1.00 lakh on this account. 71. In respect of ₹ 34,54,000/- referred above, the assessee has claimed that he has passed journal entries in order to transfer dividend amount to their respective accounts, since the shares were sold on cum-dividend basis. Normally when the dividend is declared, the market price of the shares gets adjusted to include dividend also. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly we set aside the order passed by the Ld CIT(A) in respect of remaining items and direct the AO to delete the same. 74. The next issue relates to the addition of difference in closing stock of ₹ 2.64 crores. During the course of search floppies containing data were seized and the print outs were generated from them. A list of closing stock as on 31.3.1990 was generated, which disclosed shares of 130 companies valued at ₹ 1,04,48,151/-. The floppies also contained another list of stock on which no date was mentioned. The said list contained shares of 153 companies valued of ₹ 3,69,47,542/-. Though the second statement was undated, most of the items of shares tallied with the first statement. Hence, the AO confronted the same with the assessee. He replied that the same was rough sheet prepared before carrying out necessary corrections, i.e., it may include shares that were purchased on behalf of its clients etc. It was submitted that the second list is the final copy which has been accepted by the auditors u/s 44AB of the Act as well as by the Special auditors. But the explanations of the assessee were not convincing to the AO and hence he added the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has incurred loss in all the three occasions of purchase of shares of HCL Ltd from CIFCO Ltd and sale of same shares again to CIFCO. The repeated transactions of purchase and sale of very same shares at a lower price, in fact, creates doubt in the minds of anyone. Hence, the possibility of stage managing the loss by the transactions entered with the sister concern cannot be ruled out. Though the assessee claims that these transactions have been entered in the normal course of business, yet the fact that the assessee was incurring loss on every occasion is not understandable. The assessment of profits in the hands of sister concern, in our view, will not take away the responsibility of the assessee to prove the genuineness of these transactions. In the absence of anything to prove their genuineness, we are of the view that the Ld CIT(A) was justified in confirming the addition of ₹ 1,61,950/- made by the AO by disallowing the loss incurred on security transactions entered with CIFCO Ltd. 80. The next item of addition relates to the unexplained Cash deposit of ₹ 5.00 lakhs. The AO made an addition of ₹ 7,50,000/- relating to cash deposit made into the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit. With regard to the withdrawals aggregating to ₹ 5,00,000/- made between 15.11.1989 to 14.12.1989, we are of the view that the assessee may be given credit of 50% of the same, since the claims of both the parties are not supported by the any evidence. Accordingly, we are of the view that the assessee may be given further relief of ₹ 2,50,000/-. Accordingly, we modify the order passed by Ld CIT(A) and direct the AO to confirm the addition on this issue to the extent of ₹ 2,50,000/-. 83. The next addition relates to the disallowance of loss incurred in the security transaction entered with Milan Mahindra amounting to ₹ 4,73,472/-. The AO made this addition in the set aside proceedings without discussing the same. Since this addition was set aside by the ITAT in the original assessment proceedings, the Ld CIT(A) (and also the AO in his remand report) took the view that the assessee should have taken the responsibility to explain the transactions entered with M/s Milan Mahindra. The Ld CIT(A) also expressed the view that the failure on the part of the AO to discuss about this addition will not make the addition void. Since the assessee failed to adduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out all these transactions through banking channels and there are cases, where he has made profits also in the funding transactions. The assessee further submitted that these transactions have been entered in the normal course of carrying the business and accordingly contended that there is no reason to disallow the claim. The AO was not convinced with these explanations and accordingly disallowed the loss. The Ld CIT(A) also confirmed the same. 88. We heard the parties and perused the record. Both the concerns referred above are not related parties. All the transactions have been entered through banking channels. The very fact that the assessee did not deliver the shares shows that the same may be a funding transaction as claimed by the assessee. In the case of funding transaction, the receiver of the funds has to give interest to the lender. According to the assessee, the loss on securities is actually in the nature of interest paid to the above said lenders. According to the assessee, the above said method of funding is quite prevalent in the share trading circles. The said claim has not been proved to be wrong. Further the AO has not brought on record the details of q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of losses only. The Ld CIT(A) also observed that the above said position was also accepted by the AO during the course of hearing of the appeal. Accordingly the Ld CIT(A) deleted the above said addition in the first round of proceedings. 91. In the set aside proceedings, the AO again made the addition and the Ld CIT(A) deleted the same by following his order passed in the first round. The revenue is aggrieved by this decision. 92. We heard the parties on this issue and perused the record. The AO has noted down this issue from the books of accounts of the assessee and hence there is merit in the claim of the assessee that the profit computed by the AO has already been included in the profits from share trading. Further, the assessing officer himself has confirmed before the Ld CIT(A) in the first round of proceedings that he did not intend to make separate addition of the profits, cited above. Under these set of facts, the Ld CIT(A) has deleted this addition and hence, we do not find any reason to interfere with his order passed on this issue. 93. In the result, the appeal of the assessee is partly allowed and the appeal of department is dismissed. Order pronounced in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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