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TMI Blog2019 (6) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... n upholding the action fo the ld AO in not allowing the loss of Rs. 4,84,12,423/- on share transactions to subsequent years, in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee company is engaged in the business of investment and trading in shares and securities. The assessee is also a stock broker. The original assessment was completed u/s 143(3) of the Act for the Asst Year 2001-02 on 30.3.2004 determining total income of the assessee at Rs. 18,57,47,180/- as against the returned income of Rs Nil. The following additions / disallowances were made in the said assessment which are recorded in the impugned assessment order before us are as under:- :- a) Disallowance of Share Trading Loss - Rs. 9,39,48,483/- b) Addition towards Dividend u/s 10(33) - Rs. 39,37,900/- c) Bad Debts - Rs. 8,76,88,237/- d) Penalty - Rs. 2,04,061/- 3.1. In respect of additions / disallowances made from b) to d) above, the assessee succeeded before the ld CITA and no further appeal was preferred by the revenue in that regard. The only issue which travelled to this tribunal in the first round of proceedings was with regard to disallowance of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings that neither the special audit report mentions about violations nor there was any evidence with the ld AO to treat the share transactions as bogus transactions. The counsel then referred to the para wise comments of the various remarks of the ld AO and the rebuttal given by the assessee in that regard. It was finally contended that the ld CITA in first round of proceedings had not considered any evidence filed before him and simply endorsed the action of the ld AO. Per contra, the learned counsel for the revenue submitted that the assessee was involved in stock market scam of 2001 and there were various reports of SEBI and JPC and in almost all the group companies, transactions were treated as non-genuine transactions in the absence of any evidence. 3.3. The Tribunal in the first round of proceedings observed as under:- 7. We have considered the issue, examined the paper book and copy of the written submissions made before the CIT(A). First of all there is no basis for arriving at the loss of Rs. 9.39 crores taken by the AC. What we noticed from the paper book was that the assessee has earned profit of Rs. 1,54,15,358/- from trading in securities and incurred a loss o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are unable to verify this amount of share trading loss arrived at by the A.O, in the absence of any detail in this regard. Even if we exclude the profits earned in the share transactions the loss figures are not tallying with the share trading loss. Moreover, when share trading loss is considered as speculative loss by virtue of section 73 Explanation the profits and losses are to be netted off and was correctly claimed by the assessee. Only the net amount can be considered for carry forward to be set off against speculation income in later years. So, on the issue of quantum of loss since there are no details on record we are of the opinion that this has to be examined by the A.O. and arrive at the correct quantum of loss. 8. Coming to the issue of genuineness of the loss claimed, it was the assessee's submission that he has given all the details before the A.O. and the CIT(A). As seen from the written submissions filed before the CIT(A) also the assessee was referring to the various documents placed before the A.O. in proving the genuineness of the transactions. Neither the A.O. nor the CIT(A) examined or referred to this documents. Even though general comments were passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come after examining the above issue. With these directions the grounds are considered allowed 10. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 25th June 2010. 4. The ld AO in the second round of proceedings passed an order u/s 143(3) read with section 254 of the Act on 28.12.2011 simply stated that the assessee had not furnished the requisite documents before him and again disallowed the share trading loss of Rs. 9,39,48,483/- , which was never claimed by the assessee in its return, and converted the same into income and raised demand on the assessee. 5. The ld CITA in the second round of proceedings (i.e the impugned order before us) observed that the ld AO in the order passed u/s 143(3) of the Act dated 30.3.2004 had actually allowed the share trading loss (i.e net speculation loss of Rs. 4,84,12,423/-) to be carried forward to subsequent year. The ld CITA also gave a categorical finding that the actual net speculation loss is only Rs. 4,84,12,423/- and not Rs. 9,39,48,483/- as considered by the ld AO in the second round of proceedings. The ld CITA obtained the remand report from the ld AO and observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de its order dated 25.6.2010 in the first round of proceedings had taken cognizance of the fact (based on the statement made by the learned counsel for the assessee) that the assessee's business transactions were suspended after this assessment year and that there is no way of setting off of this loss in later years. Hence in any case, the speculation loss claimed by the assessee, even if carried forward, is not set off with any future income. Hence it could be safely concluded that there is absolutely no loss to the exchequer either in this year or in subsequent years because of the income tax behaviourial conduct of the assessee. 6.1. We find that the ld CITA had directed the ld AO to make an addition to the extent of Rs. 4,84,12,423/- representing the net speculation loss. We are unable to persuade ourselves to understand as to how the same could be added to the total income. In the instant case, the assessee had only claimed carry forward of such net speculation loss of Rs. 4,84,12,423/- to subsequent years and had not set off the same with any other income in the computation of income. Hence there is no question of treating the said loss as income and levying tax and interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by making due examination of the audited balance sheet and profit and loss account as on 31.3.2001 which matched with the books of accounts maintained by the assessee in computerized form and no deficiencies were found thereon by the Special Auditor. The Special Auditor also examined the software data, seized material, data supplied by the concerned Stock Exchange for carrying out its audit. It is not in dispute that the Special Auditor had given a clean and unqualified report on the assessee u/s 142(2A) of the Act. It is not in dispute that the said Special Auditor was appointed at the behest of the revenue. The Special Auditor with regard to the shares held as stock in trade had specifically commented that the opening and closing stock in trade were valued at the lower of cost or net realizable value and there was no change in the method of valuation compared to preceding previous year. He had also stated that quantitative details in respect of securities were duly given (enclosed in Attachment 2 of Special Audit Report). The Special Auditor had specifically stated that the following books of accounts were maintained by the assessee and the same were subject to its examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a file containing bank statement of all banks specified as Attachment 'B' in a separate file. 3. In respect of cash credits, name & address of creditor, amount received, mode of receipt & payment:- As explained by the assessee no cash credit have been received by them hence no details have been submitted by them (Please find enclosed herewith Attachment No. 3 Page No. 1 to 1). 4. Details of share transactions and other security transactions done on assessee‟s own account:- (Please find enclosed herewith Attachment No. 4 Page No. 1 to 7 which is self explanatory) 5. Detail of speculation transactions done on your own account:- As explained by the assessee it is difficult to bifurcate trading activities with speculation. It is included in details given in attachment No. 4. 6. Year wise receipt of gross brokerage and other incomes:- (Please find enclosed herewith Attachment No. 5 Page No. 1 to 1). 7. In respect of payment of / credit of sub brokerage, submit name and address of the sub brokers, names of the clients handled by them and amount of such brokerage paid year wise:- (Please find enclosed herewith details of sub-brokerage paid during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ; copies of demat statement (page 56 of paper book) ; confirmation from Classic Credit Ltd (person to whom shares were sold in off market) (enclosed in pages 57 to 58 of paper book) ; copies of trade files of NSE (pages 59 to 61 of paper book) and copy of price list from the stock exchange (page 62 of paper book). In this regard , it would be pertinent to refer to the Circular issued by the CBDT vide Circular No. 704 dated 28.4.1995 wherein it was clarified that the share transactions carried on by the parties , if followed by delivery of shares and transfer deeds, then the same would have to be accepted. Though this circular was issued in the context of determination of 'date of transfer' and holding period for the purpose of computing the period for capital gains, the analody drawn thereon could be utilized to the facts of the instant case. It is not in dispute that the assessee had traded in shares of Nirma Ltd in off-market but the same was subsequently followed by delivery of shares and transfer deeds. The sale of shares is made following First In First Out (FIFO) basis and it is pertinent to note herein that the opening balance of shares held by the assessee were never doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. All these documents conclusively prove that the transaction carried out by the assessee is genuine. 6.4.5. We find that the assessee had also submitted the statement giving details of purchase and sale of shares of Ramco Systems Ltd (enclosed in page 87 of paper book) along with copies of bills and contract notes (pages 88 to 91 of paper book). No deficiencies whatsoever were brought out by the ld DR before us with regard to these documentary evidences. All these documents conclusively prove that the transaction carried out by the assessee is genuine. 6.5. In view of the aforesaid observations in the facts and circumstances of the case, we direct the ld AO to treat the net speculation loss of Rs. 4,84,12,423/- as genuine loss and allow the same to be carried forward to subsequent years. Accordingly, the grounds raised by the assessee are allowed. ITA No. 1510/Mum/2014 - Revenue Appeal 7. The only issue to be decided in revenue appeal is as to whether the ld CITA was justified in granting relief to the assessee with regard to chargeability of interest u/s 234D of the Act in the facts and circumstances of the case. 8. We have heard the rival submissions. We find that the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c.234D came into the statute book w.e.f. 01.06.2003 and the said provision does not have retrospective effect. The Hon‟ble High Court accordingly dismissed the appeal filed by the Revenue holding that no substantial question of law arises. 9. So far as the reliance placed by the ld. DR on the decision of the Hon‟ble Kerala High Court in the case of CIT vs. Ketala Chemicals & Proteins Ltd.(supra), in our opinion the decision of the jurisdiction High Court shall prevail over the decision of the Non-Jurisdictional High Court. Further, it is the settled proposition of the law that when two views are possible, the view favourable to the assessee has to be accepted. In this view of the matter we set aside the order of CIT(A) and direct the Assessing Officer to cancel the charging of interest u/s.234D of the IT Act. The grounds raised by the assessee are accordingly allowed. 10. In the result, appeal filed by the assessee is allowed." 8.1. It could be seen that this tribunal had specifically directed the ld AO to cancel the interest u/s 234D of the Act which was sought to be levied by him in the rectification order u/s 154 of the Act and giving effect order to CITA ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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