SIDDHESH CAPITAL MARKET SERVICES P,.LTD, MUMBAI V. DCIT 3(3), MUMBAI

ITA 1259/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7923 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 24-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Speculation loss; Revised return
• Section: 143(3)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./1259/MUM/2012, / ASSESSMENT YEAR: 2008-09 SIDDHESH CAPITAL MARKET SERVICES PVT.LTD.,122, MAKER CHAMBER III NARIMAN POINT,MUMBAI-400 021. PAN:AACCS 4582 N VS. DCIT CIRCLE-3(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT) ./I.T.A./2583/MUM/2014, / ASSESSMENT YEAR: 2008-09 DCIT CIRCLE-3(3) MUMBAI. VS. SIDDHESH CAPITAL MARKET SERVICES PVT.LTD. MUMBAI-400 021. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI ANAND MOHAN-CIT-DR /ASSESSEE BY: SHRI JAY BHANSALI / DATE OF HEARING: 21/03/2017 / DATE OF PRONOUNCEMENT: 24.03.2017 PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 13/09/2011 AND 10/01/20 14 OF THE CIT (A) 7, MUMBAI THE ASSESSEE AND THE ASSESSING OFFICER (AO) HAVE FILED THE ABOVE-MENTIONED APPEALS FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS FILED THE APP EAL AGAINST THE ADDITION MADE BY THE AO IN QUANTUM PROCEEDINGS, WHEREAS, THE AO HAS CHALLENGED THE DELETION OF PENALTY LEVIED U/S.271 OF THE ACT.FOR THE SAKE OF CONVENIENCE, WE ARE DISP OSING OF BOTH THE APPEALS BY A SINGLE COMMON ORDER.ASSESSEE-COMPANY,ENGAGED IN THE BUSINE SS OF FINANCE, TRADING, INVESTMENT, FILED ITS RETURN OF INCOME ON 29/09/2008, DECLARING LOSS OF RS. 30.52 CRORES.THE AO COMPLETED THE ASSESSMENT, ON 26/11/2010, U/S.143 (3 ) OF THE ACT, DETERMINING ITS INCOME AT RS. 3.72 CRORES. VIDE ITS APPLICATION DT. 23.2.16 T HE ASSESSEE MADE AN APPLICATION FOR ADDITIONAL GROUND. IT WAS ARGUED THAT FACTS ARE ALR EADY ON RECORD THAT IT DOES NOT WARRANT ANY FRESH INVESTIGATION INTO FACTS. BEFORE US, THE AUTH ORISED REPRESENTATIVE (AR) MADE THE SAME SUBMISSIONS AND THE DEPARTMENTAL REPRESENTATIVE (DR ) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY A LEGAL GROUND AND STATES THAT THE CIT(A) HAD ERRED IN NOT HOLDING THA T THE ASSESSEE WAS COVERED BY EXCEPTIONS PROVIDED IN THE EXPLANATION TO SECTION 73 OF THE AC T.THEREFORE, WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. ITA/1259/MUM/12(BY ASSESSEE) : 2. EFFECTIVE GROUND OF APPEAL IS ABOUT UPHOLDING VALU ATION LOSS OF RS.34.26 CRORES ON STOCK OF SHARES AS SPECULATION LOSS U/S.73 OF THE ACT. DURIN G THE ASSESSMENT PROCEEDINGS,THE AO 1259&2583/M/12&14(08-09) M/S. SIDDESH CAPITAL MARKET SERVICES P.LTD. 2 DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE LOSS INITIATED SHOULD NOT BE TREATED SPECULATION LOSS. IN ITS RESPONSE, THE ASSESSEE REFERRED TO EXP LANATION 1 TO SECTION 73 OF THE ACT AND STATED THAT ITS BUSINESS CONSISTED OF ONLY SHARE TRADING, THAT THE OBJECT BEHIND THE SECTION WAS TO PREVENT PROFITS OF NON-SHARE TRADING BUSINESS TO BE SET OFF AGAINST THE SHARE TRADING LOSSES. IT REFERRED TO THE CASES OF A. B. SHANTI (225 ITR 258) ; ALLIED MOTORS PRIVATE LTD(224ITR677) AND PODAR CEMENT PRIVATE LTD. (226 ITR 625) AND ARG UED THAT THE ASSESSEE HAD NOT ADOPTED ANY DEVICE TO MANIPULATE AND REDUCE THE TAXABLE INC OME, THAT THE ASSESSEE HAD MADE PROFIT ON SALE OF SHARES, THAT THE LOSS WAS ON ACCOUNT OF VAL UATION OF STOCK AND NOT ON TRADING, THAT THE LOSS ON VALUATION WAS ON ACCOUNT OF CONSISTENT INVE NTORY POLICY FOLLOWED BY IT FOR VALUATION OF INVENTORIES, THAT THE TRADING LOSS INCURRED BY I T COMPRISED OF ACTUAL PROFIT/LOSS AND MARK TO MARKET LOSSES, THAT THE ASSESSEE HAD REALISED PROFI T OF RS.22.35 LAKHS ON SALE/PURCHASE OF SHARES, THAT THE LOSS WAS ON ACCOUNT OF VALUATION, THAT IT HAD PURCHASED EQUITY SHARES WHEN THE SHAREMARKET WAS ALL-TIME HIGH, THAT SUBSEQUENTLY DU E TO GLOBAL TURMOIL AND RECESSION MARKET WERE FALLING WHEN THE SHARES WERE VALUED AT LOWER O F COST OR MARKET PRICE AT THE BALANCE SHEET DATE AS PER THE CONSISTENT ACCOUNTING POLICY FOLLOW ED BY IT, THAT THERE WAS A BOOK LOSS, THAT THE LOSS ON ACCOUNT OF VALUATION OF STOCK HAD BEEN REVE RSED IN THE SUBSEQUENT YEARS IN VALUATION OR SALES WHEN MARKET IMPROVED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, T HE AO HELD THAT AS PER EXPLANATION 1 TO SECTION 73 LOSS ON SALE OF SHARES HAD TO BE TREATED AS SPECULATION LOSS, THAT EXPLANATION WAS DEEMING FICTION. REFERRING TO THE CASE OF EASTERN A VIATION & INDUSTRIES LTD. (208/1023), THE AO HELD THAT THE LOSS SUFFERED BY THE ASSESSEE DU RING THE PREVIOUS YEAR OF RS.34.26 CRORES WAS TO BE TREATED AS LOSS OF SPECULATIVE BUSINESS. 3. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM THE ASSESSEE MADE ELABORA TE SUBMISSIONS. AFTER CONSIDERING THE SAME, THE FAA HELD THAT THE ISSUE INVOLVED STOOD CO VERED AGAINST THE ASSESSEE BY JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF LO KMAT NEWSPAPERS PVT.LTD.(332ITR 43).TAKING NOTE OF THE AFORESAID JUDGMENT HE DISMIS SED THE APPEAL FILED BY THE ASSESSEE. 4. DURING THE COURSE OF HEARING BEFORE US,THE AR STATE D THAT LOSS SUFFERED BY THE ASSESSEE WAS PART OF THE NORMAL BUSINESS CONDUCTED BY IT,THAT TH E LOSS RESULTED FROM THE VALUATION OF STOCK, THAT THE ONLY BUSINESS OF ASSESSEE WAS DEALING IN S HARES, THAT THE INTENTION OF INTRODUCING EXPLANATION TO SECTION 73, AS PER THE CIRCULAR 204 OF 24.07.96 WAS TO CURB THE DEVICE TO MANIPULATE AND REDUCE THE TAXABLE INCOME OF COMPANI ES UNDER THEIR CONTROL, THAT THE FACTS OF LOKMAT NEWSPAPER (P.) LTD.WERE NOT APPLICABLE TO TH E FACTS OF THE CASE UNDER APPEAL, THAT THE 1259&2583/M/12&14(08-09) M/S. SIDDESH CAPITAL MARKET SERVICES P.LTD. 3 CASE OF THE ASSESSEE IS COVERED BY THE EXCEPTION T O EXPLANATION. HE REFERRED TO PG-8 OF THE PB AND STATED THAT ASSESSEE HAD EARNED PROFIT OF RS.2 .20 CRORES UNDER THE HEAD INCOME FROM CAPITAL GAINS. HE ALSO REFERRED TO THE ORDER PASSE D BY AO FOR THE AY 2013-14 WHERE SIMILAR KIND OF DISALLOWANCE WAS NOT MADE.HE RELIED ON THE CASE OF HSBC SECURITIES AND CAPTAL MARKETS INDIA (P.)LTD.(208TAXMANN 439) OF THE HON'B LE BOMBAY HIGH COURT.THE DR SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD CLAIMED LOSS ON ACCOUNT OF VALUATION OF CLOSING STOCK ON THE LAST DATE OF AY, THAT THE AO INVOKED THE PROVISIONS OF SECTION 73 AN D HELD THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE OF SPECULATIVE NATURE, THAT THE FAA CONFIRMED HIS ORDER, THAT BOTH THE AUTHORITIES DID NOT CONSIDER THE ARGUMENT ABOUT THE EXCEPTION TO THE EXPLANATION TO SECTION 73, THAT THE ASSESSEE HAD EARNED PROFIT OF RS.2,20,67, 126/-, THAT IT HAD STCG ON SALE OF MUTUAL FUNDS TO THE TUNE OF RS.2.68 CRORES. IT IS A FACT T HAT SHARES TRADED BY THE ASSESSEE WERE NOT OF ANY OF THE GOOD COMPANIES.THE ASSESSEE HAD IN THE NORMAL COURSE OF BUSINESS PURCHASED THE SHARES. BECAUSE OF THE TURMOIL IN THE SHARE MARKET IN THE YEAR UNDER CONSIDERATION THE ASSESSEE SUFFERED HUGE LOSS.IT WAS VALUING ITS STO CK ON COST OR MARKET PRICE WHICHEVER WAS LOWER AND HAD ACCORDINGLY VALUED THE SHARES.THE RES ULTANT LOSS, IN THESE CIRCUMSTANCES, CANNOT BE CONSIDERED SPECULATIVE LOSS AS HELD BY AO AND CONFIRMED BY FAA.IN OUR OPINION FACTS OF LOKMAT CASE ARE APPLICABLE TO THE FACTS OF PRESENT CASE. WE WOULD LIKE TO REPRODUCE THE SUBSTANTIAL QUESTIO N OF LAW RAISED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HSBC SECURITIES AND CAPI TAL MARKETS (P.) LTD. (SUPRA). FIRST WE ARE REPRODUCING THE QUESTION RAISED BEFORE THE HON BLE COURT AND IT READS AS UNDER: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE HON'BLE I.T.A.T. WAS JUSTIFIED IN HOLDING THE TRADING LOSS OF RS. 84 ,51,000/- AS ORDINARY BUSINESS LOSS AS AGAINST SPECULATION LOSS AS HELD BY THE ASSESSING O FFICER BY RELYING ON THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF AMAN PORTFOLIO PVT. LTD. 93 ITD 324IGNORING THE DECISION OF THE DIVISIONAL BENCH OF ITAT DELHI IN THE CASE OF F RONTLINE CAPITAL SERVICES LTD. 96 TTJ 201 AND ALSO THE DECISION OF THE ITAT DELHI BENCH IN TH E CASE OF ROHINI CAPITAL SERVICES LTD. 92 ITD 317WHILE DECIDING THAT THE EXPLANATION TO SEC. 73 OF THE INCOME-TAX ACT, 1961 CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE ?' FACTS OF THE CASE THE RELEVANT PORTION OF THE JUDGM ENT ARE AS FOLLOW: 4. ON 1.12.1997, THE RESPONDENT FILED ITS RETURN FO R THE ASSESSMENT YEAR 1997-1998 DECLARING A TOTAL LOSS OF RS. 1,95,12,651/-. ON 12.3.1998, TH E RESPONDENT FILED A REVISED RETURN DECLARING A TOTAL LOSS OF RS. 1,24,92,940/-. IN THE REVISED R ETURN, THE ASSESSEE SHOWED LOSS OF RS. 1,65,29,711/- ARISING OUT OF THE PURCHASE AND LOSS OF SHARES. THE AO BY AN ASSESSMENT ORDER DATED 29.3.2000 UNDER SECTION 143(3) INTER ALIA RECORDED AS UNDER: 'THE ASSESSEE'S GROSS TOTAL INCOME AS PER THE SECON D REVISED RETURN WAS LOSS OF RS. 1,65,29,711/-. THE COMPOSITION OF THE SAME IS AS UN DER : 1259&2583/M/12&14(08-09) M/S. SIDDESH CAPITAL MARKET SERVICES P.LTD. 4 BUSINESS PROFIT (-) RS. 1,72,31,711/- INCOME FROM OTHER SOURCES RS. 7,02,000/- (-) RS. 1,65,29,711/-' 5. THE ASSESSEE FILED AN APPEAL AGAINST THE ASSESSM ENT ORDER. XXXXX THE CIT BY AN ORDER DATED 10.1.2001 PARTLY ALLOWED THE APPEAL. 6. THE RESPONDENT THEREFORE, FILED ITA NO.3386/MUM/ 2001. BY THE IMPUGNED ORDER DATED 14.7.2005, THE ITAT PARTLY ALLOWED THE APPEAL. THE RESPONDENT'S CONTENTION BASED ON SECTION 73 WAS UPHELD. FOLLOWING THE JUDGMENT OF THE ITAT D ELHI BENCH IN AMAN PORTFOLIO (P.) LTD. V. DY. CIT [2005] 92 ITD 324, IT WAS HELD THAT SECT ION 73 COULD NOT BE INVOKED AGAINST THE RESPONDENT. THIS HOWEVER, WAS ON THE BASIS THAT THE EXPLANATIONS TO SECTION 73 APPLIES ONLY TO THE LOSSES ARISING OUT OF THE TRANSACTION RESORTED TO BY THE BUSINESS HOUSES CONTROLLING A GROUP OF COMPANIES. WHEREAS THE TRANSACTIONS REFERRED TO BY THE RESPONDENT WERE NOT CARRIED OUT WITH ANY INTEREST OF CONTROLLING GROUP COMPANIES. XXXXX 8. IN THE PRESENT CASE, SECTION 73 WOULD NOT APPLY IN VIEW OF THE FACT THAT THE EXPLANATION THERETO, DOES NOT OPERATE IN RESPECT OF A COMPANY W HOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS OF 'INTE REST ON SECURITIES', 'INCOME FROM HOUSING PROPERTY', 'CAPITAL GAINS' AND 'INCOME FROM OTHER S OURCES'. WE HAVE SET OUT THE RELEVANT PART OF THE ASSESSMENT ORDER WHICH INDICATES THAT IN THE RELEVANT YEAR, THE INCOME FROM OTHER SOURCES WAS THE ONLY CHARGEABLE INCOME, AS THE RESP ONDENT HAD SUFFERED A BUSINESS LOSS OTHERWISE. IN THAT VIEW OF THE MATTER, THE JUDGMENT OF THE DIV ISION BENCH OF THIS COURT IN THE CASE OF DARSHAN SECURITIES (P.) LTD. (SUPRA) SUPPORTS THE R ESPONDENT'S CASE. IN THAT CASE, DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD A LOSS O F ABOUT RS. 2.33 CRORES IN THE SHARE TRADING AND HAD DIVIDEND INCOME OF ABOUT RS. 4.80 LACS. THE DIVISION BENCH HELD IN PARAGRAPHS 6, 7, 8 AND 9 AS UNDER : '6. THE EXPLANATION TO SECTION 73 INTRODUCES A DEEM ING FICTION. THE DEEMING FICTION STIPULATES THAT WHERE ANY PART OF THE BUSINESS OF A COMPANY CO NSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PUR POSES OF THE SECTION BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALES OF SUCH SHARES. THE DEEMING FICTION APPLI ES ONLY TO A COMPANY AND THE PROVISION MAKES IT CLEAR THAT THE DEEMING FIXATION (SIC) EXTE NDS ONLY FOR THE PURPOSES OF THE SECTION. THE BRACKETED PORTION OF THE EXPLANATION, HOWEVER CARVE S OUT AN EXCEPTION. THE EXCEPTION IS THAT THE PROVISION OF THE EXPLANATION SHALL NOT APPLY TO A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES', 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' AND ' INCOME FROM OTHER SOURCES' OR A COMPANY WHOSE PRINCIPAL BUSINESS IS OF BANKING OR T HE GRANTING OF LOANS AND ADVANCES. 7. THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT IN COMPUTING THE GROSS TOTAL INCOME FOR THE PURPOSE OF THE EXPLANATI ON TO SECTION 73, INCOME UNDER THE HEADS OF PROFITS AND GAINS OF BUSINESS OR PROFESSION MUST BE IGNORED. ALTERNATIVELY, IT HAS BEEN URGED THAT WHERE THE INCOME FROM BUSINESS INCLUDES A LOSS IN THE TRADING OF SHARES, SUCH A LOSS SHOULD NOT BE ALLOWED TO BE SET OFF AGAINST THE INC OME FROM ANY OTHER SOURCE UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. 8. IN OUR VIEW, THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE CANNOT BE ACCEPTED. LEAVING ASIDE FOR A MOMENT, THE EXCEPTION , WHICH IS CARVED OUT BY THE EXPLANATION TO SECTION 73, THE EXPLANATION CREATES A DEEMING FI CTION BY WHICH A COMPANY IS DEEMED TO BE CARRYING ON A SPECULATION BUSINESS WHERE ANY PART O F ITS BUSINESS CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES. NOW, THE EXCEPTI ON WHICH IS CARVED OUT APPLIES TO A SITUATION WHERE THE GROSS TOTAL INCOME OF A COMPANY CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES' , 'INCOME FROM HOUSE PROPERTY', 'CAPITAL 1259&2583/M/12&14(08-09) M/S. SIDDESH CAPITAL MARKET SERVICES P.LTD. 5 GAINS' AND 'INCOME FROM OTHER SOURCES'. NOW, ORDINA RILY INCOME WHICH ARISES FROM ONE SOURCE WHICH FALLS UNDER THE HEAD OF PROFITS AND GA INS OF BUSINESS OR PROFESSION CAN BE SET OFF AGAINST THE LOSS WHICH ARISES FROM ANOTHER SOURCE U NDER THE SAME HEAD. SUB-SECTION (1) OF SECTION 73 HOWEVER SETS UP A BAR TO THE SETTING OFF OF A LOSS WHICH ARISES IN RESPECT OF SPECULATION BUSINESS AGAINST THE PROFITS AND GAINS OF ANY OTHER BUSINESS. CONSEQUENTLY, A LOSS WHICH HAS ARISEN ON ACCOUNT OF SPECULATION BUSINESS CAN BE SET OFF ONLY AGAINST THE PROFITS AND GAINS OF ANOTHER SPECULATION BUSINESS. HOWEVER, FOR SUB-SECTION (1) OF SECTION 73 TO APPLY THE LOSS MUST ARISE IN RELATION TO A SPECULAT ION BUSINESS. THE EXPLANATION PROVIDES A DEEMING DEFINITION OF WHEN A COMPANY IS DEEMED TO B E CARRYING ON A SPECULATION BUSINESS. IF, THE SUBMISSION OF THE REVENUE IS ACCEPTED, IT WOULD LEAD TO AN INCONGRUOUS SITUATION, WHERE IN DETERMINING AS TO WHETHER A COMPANY IS CARRYING ON A SPECULATION BUSINESS WITHIN THE MEANING OF THE EXPLANATION, SUB-SECTION (1) OF SECT ION 73 IS APPLIED IN THE FIRST INSTANCE. THIS WOULD IN OUR VIEW NOT BE PERMISSIBLE AS A MATTER OF STATUTORY INTERPRETATION, BECAUSE THE EXPLANATION IS DESIGNED TO DEFINE A SITUATION WHERE A COMPANY IS DEEMED TO CARRY ON SPECULATION BUSINESS. IT IS ONLY THEREAFTER THAT SU B-SECTION (1) OF SECTION 73 CAN APPLY. APPLYING THE PROVISIONS OF SECTION 73(1) TO DETERMI NE WHETHER A COMPANY IS CARRYING ON SPECULATION BUSINESS WOULD REVERSE THE ORDER OF APP LICATION. THAT WOULD BE IMPERMISSIBLE, NOR, IS IT CONTEMPLATED BY PARLIAMENT. FOR, THE AMB IT OF SUB-SECTION (1) OF SECTION 73 IS ONLY TO PROHIBIT THE SETTING OFF OF A LOSS WHICH HAS RES ULTED FROM A SPECULATION BUSINESS, SAVE AND ACCEPT AGAINST THE PROFITS AND GAINS OF ANOTHER SPE CULATION BUSINESS. IN ORDER TO DETERMINE WHETHER THE EXCEPTION THAT IS CARVED OUT BY THE EXP LANATION APPLIES, THE LEGISLATURE HAS FIRST MANDATED A COMPUTATION OF THE GROSS TOTAL INCOME OF THE COMPANY. THE WORDS 'CONSISTS MAINLY' ARE INDICATIVE OF THE FACT THAT THE LEGISLA TURE 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 IN COME THE NORMAL PROVISIONS OF THE ACT MUST BE APPLIED AND IT IS ONLY THEREAFTER, THAT IT HAS T O 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. 9. CONSEQUENTLY, IN THE PRESENT CASE THE GROSS TOTA L INCOME OF THE ASSESSEE WAS REQUIRED TO BE COMPUTED INTER ALIA BY COMPUTING THE INCOME UNDER T HE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS WELL. BOTH THE INCOME FROM SERVICE CHARGES IN THE AMOUNT OF RS. 2.25 CRORES AND THE LOSS IN SHARE TRADING OF RS. 2.23 CRORES, W OULD HAVE TO BE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME UNDER THAT HEAD, BOTH BEING SO URCES UNDER THE SAME HEAD. THE ASSESSEE HAD A DIVIDEND INCOME OF RS. 4.7 LACS (INCOME FROM OTHER SOURCES). THE TRIBUNAL WAS JUSTIFIED, IN COMING TO THE CONCLUSION THAT THE ASS ESSEE FELL WITHIN THE PURVIEW OF THE EXCEPTION CARVED OUT IN THE EXPLANATION TO SECTION 73 AND THA T CONSEQUENTLY THE ASSESSEE WOULD NOT BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS FOR THE PURPOSE OF SEC. 73(1).' RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE DECIDE THE EFFECTIVE AS WELL AS THE ADDITIONAL GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA/2583/MUM/14 : 6. EFFECTIVE GROUND OF APPEAL RAISED BY THE AO IS ABO UT DELETING THE PENALTY OF RS.9.96 CRORES FOR FURNISHING INACCURATE PARTICULARS OF INCOME U/S . 271(1)( C) OF THE ACT.WHILE COMPLETING THE ASSESSMENT THE AO HELD THAT LOSS OF RS.34.26 C RORES IN SHARE TRADING WAS TO BE TREATED AS SPECULATION BUSINESS LOSS AND NOT BUSINESS LOSS .TH EREFORE VIDE HIS ORDER DT.28.3.2013, HE LEVIED PENALTY OF RS.9,96,98,988/-. 7. IN THE APPELLATE PROCEEDING,THE FAA HELD THAT IT WA S NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME,THAT AO HAD TR EATED THE BUSINESS LOSS AS SPECULATIVE 1259&2583/M/12&14(08-09) M/S. SIDDESH CAPITAL MARKET SERVICES P.LTD. 6 LOSS, THAT THERE WAS NO JUSTIFICATION FOR INVOKING THE PROVISIONS OF SECTION 271(1) (C) IN SUCH CASES.HE RELIED UPON THE CASE RELIANCE PETRO PRODUC TS (322ITR158) AND ALLOWED THE APPEAL OF THE ASSESSEE. 8. BEFORE US, THE DR STATED THAT MATTER COULD BE DECID ED ON MERITS. THE AR REFERRED TO THE CASE OF CLARIDGES INVESTMENTS & FINANCE P.LTD.(ITA 410/MUM/2011)AY 2003-04 DATED 7.5.2015. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE WE HAVE HELD THAT TRA NSACTION ENTERED INTO BY THE ASSESSEE WERE NOT OF SPECULATIVE NATURE THAT THE LOSS WAS ALLOWA BLE AS BUSINESS LOSS. THEREFORE, PENALTY ORDER WOULD NOT SURVIVE. AS A RESULT APPEAL FILED BY ASSESSEE STAND S ALLOWED AND APPEAL OF AO IS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH , 2017. 24 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 24.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.