TMI Blog2022 (7) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 27-6-2022 - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Bhupendra Shah, CA For the Revenue : Shri Sanjay Dhariwal, CIT ORDER PER SANDEEP GOSAIN, J.M. The present appeal is filed by the assessee against the order of ld. PCIT Jaipur-1 dated 25.03.2021 for the A.Y. 2016-17 under section 263 of the IT Act, 1961. The grounds raised by the assessee are as under :- 1. In the facts of the case and in law, the learned PCIT has erred in invoking section 263 to the case of the appellant only by way of change of opinion, without pointing out any error in the order of the AO and also by disregarding/rejecting detailed submissions made to her from time to time. 2. In the facts of the case and in law, the Show Cause Notice or order u/s 263 alleging errors and prejudice, itself is erroneous on many counts as follows : a. In the facts of the case and in law, the learned PCIT has erred in invoking the provision of sec. 263 merely because she wants to take a view different from the one taken by the Assessing Officer and thereby changing the opinion of the Assessing Officer by his opinion. b. In the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares. Thereafter the ld. PCIT Jaipur-1 discussed the provision of section 43(5)(d) and held that the same is limited to income from business and does not cover section 73. Accordingly the ld. PCIT Jaipur-1 observed that the losses incurred by the assessee by trading in futures /derivative is speculative loss by virtue of provisions of explanations to section 73(4) of the Act. Further the ld. PCIT Jaipur-1 relied upon following judgments :- i. DLF Commercial Developers Limited Vs CIT in ITA No. 94/2013 dated 11.07.2013 ii. Intermetal Trade Ltd. (2006) 285 ITR 536 (MP) iii. CIT vs Lokmat Newspapers P. Ltd. (2010) 322 ITR 43 (Bom) iv. R.P.G. Industries Ltd. vs CIT, (2011) 338 ITR 313(Cal) The ld. PCIT further observed that the view taken by the AO was not in accordance with the provisions of the section 73. The ld. PCIT also rejected several case laws cited by the assessee and held that the order passed by the AO on 26.11.2018 was erroneous and prejudicial in the interest of the revenue. Accordingly the order of the AO was set aside by the PCIT and directed the AO to pass necessary order after giving opportunity of being heard to the assessee. Thus the revision pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be carried forward for eight years for set-off against speculation profits in subsequent years. These restrictions were essentially designed as an anti-evasion measure to prevent claims of artificially generated losses in the absence of an appropriate institutional infrastructure. Recent systemic and technological changes introduced by stock markets have resulted in sufficient transparency to prevent generating fictitious losses through artificial transactions or shifting of incidence of loss from one person to another. The screen based computerised trading provides for an excellent audit trail. Therefore, the present distinction between speculative and nonspeculative transactions, particularly relating to derivatives is no more required. The proposed amendment, therefore, seeks to provide that an eligible transaction carried out in respect of trading in derivatives in a recognised stock exchange shall not be deemed to be a speculative transaction. The proposed amendment also seeks to notify relevant rules etc. regarding conditions to be fulfilled by recognised exchanges in this regard. Further it is also proposed to amend sub-section (4) of section 73 so as to reduce t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon ble Delhi High Court in DLF Commercial (supra) took a distinct stand that derivatives cannot be treated at par with shares for the purposes of Explanation to Section 73 of the Act because the legislature has t reated it differently. Thus, in view of the aforesaid posit ion enunciated by the Hon ble High Court in Asian Financial Services (supra) , we find good deal of force in the case of assessee. The claim of the assessee thus requires to be allowed on this ground alone. 9.3 In view of the resounding conclusion drawn in favour of the assessee on the aforesaid legal position, we do not consider it necessary to advert to other alternative content ions raised on behalf of the assessee. 10. In the result, Ground No.1 of the assessee s appeal is allowed. The aforesaid judgment of Hon ble Ahmedabad Bench is followed in the case of Jeenec Solutions Pvt. Ltd in ITA No. 973/Ahd/2018 for AY 2013-14 by SMC Bench of Ahmedabad, wherein it has been held as under :- 6. We have heard both the sides and perused the material on record. During the year under consideration, the assessee company has entered in the derivative transactions of Nifty and currency (F O) in which n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) 111 taxman.com 239 (Ahmedabad Trib.) in the case of Magic Share Traders Ltd. vs. ITO has adjudicated the identical issue as under:- 3.3 The substantive question in controversy is whether loss incurred in eligible transactions viz. 'derivative transactions' within the meaning of Proviso (d) to Section 43(5) of the Act not involving any purchase or sale of shares per se can be regarded as 'speculative loss' for the purposes of set off in view of Explanation to Section 73 or not? 3.4 The Co-ordinate Bench of ITAT in ITA No. 770/Ahd/2016 concerning A.Y. 2012-13 order dated 31.10.2018 has adjudicated the issue in favour of the assessee. The relevant operative para is reproduced hereunder:- 9. We have carefully considered the rival submissions and perused the respective orders of the AO and CIT(A). The substantive question that arises for adjudication is whether loss incurred in eligible transactions i.e. derivative transactions within the meaning of Proviso (d) to Section 43(5) of the Act not involving any purchase or sale of shares per se can be regarded as speculative loss for the purposes of set off in view of Explanation to Section 73 or not. The contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the appeal of the assessee is allowed. With regard to the reliance placed by ld. PCIT Jaipur 1 in the case of DLF Commercial Developers Ltd. (35 Taxman.com 280 Delhi) is not tenable in law because the same is already distinguished following cases: - Asian Financial Services Ltd. 70 taxmann.com 9 (Calcutta) - Upkar Retail (P.) Ltd. 171 ITD 626 (Ahmedabad) - Magic Share Traders Ltd. 174 ITD 230 (Ahmedabad) - Sadhana Stocks Securities (P.) Ltd. 168 ITD 499 (Kol) - Sucon India Ltd. 184 TTJ 713 (Del) - Vibha Goel 16 ITR(T) 418 (Chand) - Madanlal Ltd 51 SOT 188 (Kol) - Hiren Jaswantrai Shah 141 TTJ 851 (Ahd) - D H Sechron Electrodes Pvt.Ltd. vs JCIT Range-1, Indore ITA No.62/Ind/2015 - Sri Vasavi Gold Bullion (P.) Ltd.[ 92 taxmann.com 290 (Madras)] - Smt. Seema Jain 6 ITR(T) 488 (Del) - G.K. Anand Bros. Buildwell (P.) Ltd. 34 SOT 439 (Delhi) - Ivory Consultants (P.) Ltd. 96 taxmann.com 539 - Lohia Securities Ltd. [157 ITD 265 Kolkata - Trib.] Further, Hon ble Supreme Court in the case of Vegetable Products Ltd. (88 ITR 192 SC) has categorically held that where there are two different views possible, one favourable to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power u/s 263 cannot in any manner be equated to or regarded as approaching in any way in Appellate jurisdiction as was held in the case of V K. Rice Co. [163 ITR 129 (Mad)]. Further powers u/s. 263 require both the conditions should co-exist i.e order should erroneous as well as should be prejudicial to the interest of revenue. In this regard reliance is placed on the decision of Hon ble Bombay High court in the case of Gabriel India Ltd. reported in 203 ITR 128. In this regard further reliance is placed on the following: - Malabar Ind. Co. Ltd. 243 ITR 83 (2000)(SC) - Venkata Krishna Rice Co. 163 ITR 129 (97)(Mad.) During the course of assessment proceedings details of losses in future and set off against profit on sale of land were duly submitted vide letter dated 10.10.2018 (page no. 24 to 26 of the paper book). Merely because there is no discussion about the losses in derivatives in the assessment order does not mean that the AO is not made application of mind. The ld. AO has taken one possible view and change of the opinion by PCIT Jaipur is not permissible as has been held in the case of Green world Corporation 314 ITR 81 (2009) (SC). In view of the facts and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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