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2018 (3) TMI 886

I 158 - BOMBAY HIGH COURT) AO could accept new claim only a new return was filed by an assessee. Here as stated earlier the case is of additional ground. The assessee was not aware as to how the claim made by it would be treated by the AO during the set aside proceedings. Only after receiving the order it came to know that loss has been treated as capital loss. No chance for it to claim indexation. Only remedy left was to raise an additional ground on the first opportunity available and it did so. FAA was fully empowered to admit the additional ground and to decide the same on merits without asking for comments/remand report of the AO. Assessee had also filed an application u/s. 154 of the Act in that regard. The AO should have dealt it dis .....

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ssee-company engaged in the business of making investment in shares and securities and also dealing in shares filed its return of income on 30/11/1996 declaring loss of ₹ 2. 73 crore. The original assessment u/s. 143 (3) of the Act was completed on 26/03/1999 determining its income at ₹ 11. 66 lakhs. The matter travelled up to the Tribunal and vide its order dated 30/11/2006 it reminded the matter relating to loss and valuation of shares as well as loss on sale of shares back to the file of the AO for verifying the genuineness of the transaction. The Tribunal also directed the AO to allow valuation of closing stock of share as per cost/market price whichever was lower in so far as assessee was dealing in shares which formed part .....

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. 4. Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA)and made submissions. It also relied upon certain case laws. It raised additional ground before him about indexation. After considering the assessment order and submissions of the assessee the FAA held that the AO had treated the loss of ₹ 2 00 85 200/-on sale/valuation of stock in trade as speculative loss by invoking the provisions of explanation to section 73 that the loss of ₹ 1. 12 crore was treated as capital loss that while computing capital loss the AO had not given effect to the provisions of indexation of cost of acquisition that the capital loss would increase to ₹ 1. 70 crore that the loss would not .....

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e was to be treated as normal business loss. 5. Before us the Departmental Representative(DR)stated that claim of indexation was not made before the AO or the FAA that the same was made during the appellate proceedings by way of an additional ground that the FAA did not afford any opportunity to the AO to rebut the claim that the calculation of indexation was not made available to the AO that the AO had rightly invoked the provisions of explanation to section 73 of the Act that loss suffered by the assessee was to be assessed as speculative loss. The Authorised Represetative(AR)stated that the AO had not allowed benefit of indexation to the assessee while calculating the capital loss that it came to know about the said mistake only after it .....

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th the categories he held that the loss of ₹ 1. 12 crore (on sale of investment)was capital loss. With regard to the loss of ₹ 2 00 85 200/-(on sale/valuation of stock) as a business loss. He also held that loss on sale of investment being capital loss was not entitled to be set of against other income for the year under consideration that same was to be carried forward to be set off against capital gain of the subsequent years. Regarding the business loss he held that explanation to section 73 was attracted that as per deeming provision of the explanation the loss was to be treated as speculative loss that same was to be set off against speculative profits only. We find that in the appellate proceedings the FAA while deciding t .....

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atter of Goetze (India)Ltd. (284 ITR 323) wherein it was held that the AO could accept new claim only a new return was filed by an assessee. Here as stated earlier the case is of additional ground. The assessee was not aware as to how the claim made by it would be treated by the AO during the set aside proceedings. It was only after receiving the order it came to know that loss has been treated as capital loss. There was no chance for it to claim indexation. In these circumstances only remedy left was to raise an additional ground on the first opportunity available and it did so. In our opinion the FAA was fully empowered to admit the additional ground and to decide the same on merits without asking for comments/remand report of the AO. The .....

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