The ITO, Ward-5(3), Ahmedabad V. Rajvi Securities Pvt. Ltd., Ahmedabad

ITA 1842/AHD/2004

• Counselvise Citation: 184220514 RSA 2004
• Duration Of Justice: 7 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-02-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 28-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Speculation loss
• Section: 28

Judgement Text

ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHM EDABAD (BEFORE SHRI D.K. TYAGI, J.M. AND SHRI A. L. GEHLOT,A .M.) I.T.A. NO. 18 42/AHD/2004 (ASSESSMENT YEAR: 2001- 02) THE INCOME TAX OFFICER, WARD 5(3), C.U. SHAH BUILDING, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. RAJVI SECURITIES PVT. LTD., D-97 KAMDHENU COMPLEX, OPP. SAHJANAND COLLEGE, AMBAWADI, AHMEDABAD. (RESPONDENT) PAN: AABCR 7379H ON BEHALF OF THE REVENUE. MR. J.P. JANGID. ON BEHALF OF THE ASSESSEE. MR. M. K. PATEL. ( )/ ORDER DATE OF HEARING : 1-2-2012 DATE OF PRONOUNCEMENT : 9-2-2012 PER: SHRI A.L. GEHLOT, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT (A)-XI, AHMEDABADS ORDER DATED 31-3-2004 FOR THE ASSESSMEN T YEAR 2001-02. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER:- 1. THE LD. CIT (A)-XI,AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE DISALLOWANCE OF LOSS OF RS. 9,76,592/- CLAIMED ON ACCOUNT OF TRANSACTION IN THE NAME OF SHRIU VINOD H. SHAH. ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 2 2. THE LD. CIT (A) XI, AHMEDABAD HAS FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE LOSS SU FFERED BY THE ASSESSEE- COMPANY IS SPECULATION LOSS AS PER EXPLANATION TO S ECTION 73 OF THE I. T.L ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-COMPANY IS A SUB-BROKER ENGAGED IN THE BUSINESS OF SHARE DEALING ON BEHALF OF CLIENTS AND FINANCIAL INVESTMENTS. THE CASE WAS SELECTED FOR LIMITED SCR UTINY TO VERIFY ASSESSEES CLAIM OF DEDUCTION OF LOSS RS. 9,82,980/- ON ACCOUNT OF D ELIVERY NOT TAKEN BY CLIENTS. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED TH AT THE COMPANY HAS PURCHASED SHARES OF GLOBAL TELE SYSTEM LTD., ON BEH ALF OF SH CHETANBHAI S.SHAH AND VINODBHAI H. SHAH. THE COMPANY HAD PURCHASED 45 25 SHARES AMOUNTING TO RS.20,24,574/- ON BEHALF OF MR. VINOD H. SHAH AND 2 00 SHARES AMOUNTING TO RS.79,787/- ON BEHALF OF MR. CHETAN SHAH. THE COMPA NY HAS RAISED BILLS DATED 28- 2-01 TO THESE TWO PERSONS. HOWEVER, THESE PERSONS R EFUSED TO TAKE DELIVERY OF THE SHARES STATING THAT THEY HAD NOT PLACED ANY ORDER F OR PURCHASE. DUE TO DECREASING TREND IN THE SHARE PRICES IN THE MARKET, TO MINIMI ZE THE LOSSES THE COMPANY HAS SOLD THE SHARES AND BOOKED THE LOSSES. THE COMPANY HAS SOLD 2800 SHARES ON7-3- 01, 1725 SHARES ON 15-3-01 AND 200 SHARES ON 7-3-01 . ALONG WITH ITS REPLY ASSESSEE HAS SUBMITTED COPY OF BILLS ISSUED TO THE TWO PARTIES,. COPY OF BILLS OF THE BROKER AND COPY OF STATEMENT OF DEMAT ACCOUNTS AS O N 19-3-01 AND 21-3-01. 4. FROM THE COPY OF BILL DATED 7-3-01 OF M/S. AJMER A & SHAH ASSOCIATES, THE BROKER SUBMITTED BY THE ASSESSEE IT HAS BEEN NOTICE D BY THE AO THAT THE SAME PERTAINS TO SETTLEMENT PERIOD FROM 21-2-01 TO 27-2- 01. ACCORDING TO THIS BILL ASSESSEE HAD PURCHASED 10525 SHARES OF GLOBAL TELEF ILMS LTD., ON 28-2-01. OUT OF ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 3 THESE 10525 SHARES ASSESSEE CLAIMS TO HAVE PURCHASE D 4525 SHARES ON BEHALF OF MR. VINOD H.SHAH AND 200 SHARES ON BEHALF OF MR. CHETAN S. SHAH. THE DEMAT ACCOUNT STATEMENTS SHOWING SHARE HOLDINGS AS ON 19-3-01 AND 21-3-01 HAS NO RELEVANCE AS THE ASSESSEE CLAIMS IN ITS REPLY STATED THAT SHARES IN QUESTION WERE ALREADY SOLD UPTO 15-3-01. IT IS ALSO NOTICED FROM THE BILLS SUBMITTE D BY THE ASSESSEE THE SAME DOES NOT REFLECT SALE OF 1500 SHARES ON15-3-01 AS CLAIME D BY IT. 5. TO VERIFY THE SUBMISSION OF THE ASSESSEE SUMMONS WERE ISSUED TOMR. VINOD H.SHAH AND SH CHETAN S. SHAH, THE TWO CLIENTS ON WH OSE BEHALF ASSESSEE CLAIMED TO HAVE MADE PURCHASES. COPIES OF TRANSACTION STATE MENTS AND CONTRACT MEMOS FOR THE RELEVANT DATES WERE ALSO OBTAINED FROM M/S.AJME RA & SHAH ASSOCIATES BROKER. 6. BEFORE THE AO MR. CHETAN SHAH INHIS REPLY DATED 8-9-03 HAS STATED THAT HE HAS NOT DONE ANY TRANSACTION WITH THE ASSESSEE-COMP ANY DURING F.Y. 2000-01.MR. VINOD SHAH ALSO STATED THAT HE DID NOT GIVE ANY ORD ER FOR PURCHASE OF SHARES. THE ASSESSEE SUBMITTED BEFORE THE AO THAT SINCE THE DIS PUTE COULD NOT BE RESOLVED AS TO IT IS WHOSE MISTAKE, THEY HAVE NEGOTIATED WITH SH. VINOD H. SHAH TO ACCEPT THE TRANSACTIONS BUT IN VAIN AND THEREFORE, EVENTUALLY THE SAID SHARES HAS TO BE SOLD BY THE COMPANY BECAUSE THE MARKET WAS DECLINING AND OT HERWISE THE LOSS WOULD HAVE BEEN OF BIGGER AMOUNT. REGARDING SOME CONFUSION ABO UT THE DATE OF PURCHASE WHETHER IT IS 23-2-01 OR 28-2-01 THE SAME HAS ALSO BEEN CLARIFIED BY SH. VINOD H.SHAH IN HIS ANSWER TO QUESTION NO.17 THAT THE COR RECT DATE OF PURCHASES OF SHARES IS 23-2-01 AND NOT 28-2-01 AND HE HAS ALSO EXPLAINE D THE REASONS FOR SUCH CONFUSION. 7. AFTER EXAMINING BOTH THE PERSONS AND REPLY OF TH E ASSESSEE THE AO NOTICED THAT OUT RIGHTLY IT CAN BE STATED THAT ASSESSEES R EQUEST FOR CROSS EXAMINATION OF THE ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 4 TWO CLIENTS WAS TO DISTORT THE FACTS STATED BY THES E TWO PERSONS IN THEIR WRITTEN SUBMISSIONS WHEREIN BOTH HAVE CLEARLY REFUSED FOR P LACING ANY ORDER FOR PURCHASE OF SHARES AND ALSO THAT THEY HAVE MADE ENQUIRY ABOU T RATE OF SHARES ON 28=2=01. HOWEVER, EVEN IN HIS STATEMENT, MR. VINOD H. SHAH H AS STATED NOT TO HAVE PLACED ANY ORDER FOR PURCHASE OF SHARES. THIS IS EVIDENT F ROM HIS REPLY TO Q. NO.8 OF HIS STATEMENT WHERE HE HAS STATED THAT HE WILL MAKE ANO THER PHONE CALL TO INFORM WHETHER HE WANTS TO PURCHASE THE SAME. IT HAS BEEN FURTHER STATED THAT HE HAS NOT MADE ANY PHONE CALL SUBSEQUENTLY. UNDER THESE CIRCU MSTANCES THERE CANNOT BE ANY CONFUSION ABOUT PURCHASE OF SHARES. CONFUSION HAS B EEN CREATED ONLY BYTHE ASSESSEE FOR ITS OWN GAINS. BY DOING SO ASSESSEE HA S TRIED TO CLAIM THE LOSS AS BUSINESS LOSS TO BE SET OFF AGAINST ITS TAXABLE INC OME. EVEN OTHERWISE IT IS DIFFICULT TO UNDERSTAND HOW COULD THE ASSESSEE MADE PURCHASE OF SHARES WORTH MORE THAN RS.20 LAC IN THE NAME OF A PERSON WHO HAS DONE ONLY SMALL TRANSACTIONS IN THE LAST 3 YEARS WITHOUT CONSIDERING EVEN ONCE ABOUT THE PAY MENT. IT HAS BEEN STATED BY SH VINOD H. SHAH THAT HIS TRANSACTIONS FOR THE WHOLE Y EAR IN SHARES IS APPROXIMATELY RS.80,000/- IN F.Y. 99-00, RS.60,000/- IN F.Y. 00-0 1 AND NIL IN F.Y. 01-02. 8. REGARDING THE DATES ASSESSEES CONTENTION THAT T HERE WAS SOME CONFUSION ABOUT DATE OF PURCHASE OF SHARES WHETHER IT IS 23-2 -01 TO 28-2-01 THE AO STATED THAT THERE IS NO CONFUSION ABOUT DATE OF PURCHASE O F SHARES WHICH IS 23-2-01. HOWEVER, THE ENQUIRY ABOUT RATES OF THE SHARES IN Q UESTION WAS DONE BY BOTH THE CLIENTS ON 28-2-01. THIS HAS BEEN STATED BY BOTH IN THEIR WRITTEN SUBMISSIONS DISCUSSED IN THE ASSESSMENT ORDER. IN HIS STATEMENT RECORDED ON 23-12-03 SH VINOD H. SHAH CHANGED HIS STATEMENT STATING THAT THE ENQU IRY REGARDING SHARES WAS DONE ON 23-2-01. WHEN HE WAS ASKED IN HIS STATEMENT HOW HE COULD REMEMBER THAT DATE OF ENQUIRY WAS 23-2-01 EVEN AFTER A GAP OF 2.1/2 YE ARS HE REPLIED THAT IT WAS DUE TO TENSION CREATED IN THIS ISSUE. BUT WHEN CONFRONT ED THAT WHY HE MENTIONED THE DATE ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 5 OF ENQUIRY AS 28-2-01 IN WRITTEN SUBMISSION MADE IN THIS OFFICE HE COULD COME UP WITH LAME EXCUSES THAT HE IS NOT WELL CONVERSED IN ENGLISH AND HIS EYE SIGHT IS WEAK. HOWEVER, IT IS CLEAR FROM THE WRITTEN SUBMIS SIONS OF SH VINOD H. SHAH AND ALSO SH CHETAN SHAH THAT THEY HAD MADE ENQUIRIES A BOUT RATE OF SHARES ON 28-2-01. THERE IS A REASON TO REMEMBER THIS DATE AS ON THIS DATE UNION BUDGET OF THE COUNTRY WAS PRESENTED AND PEOPLE ANTICIPATING CHANGES IN SH ARE MARKET DUE TO THE BUDGET COULD MAKE ENQUIRIES ON THIS DATE,. THEREFORE, SHAR ES PURCHASED BY THE COMPANY OF GLOBAL TELE ON 23-2-01 COULD NOT AT ALL BE RELATED TO THE TWO PERSONS WHO HAD NOT PLACED ANY ORDER FOR PURCHASE AND EVEN ENQUIRY ABOU T RATE OF SHARES WAS MADE ONLY ON 28-2-01. 9 FROM THE AFORESAID DISCUSSION THE AO NOTICED THAT IT IS ABUNDANTLY CLEAR THAT CONTENTION OF THE ASSESSEES PURCHASE OF SHARES IN QUESTION IN THE NAME OF SH VINOD SHAH AND SH CHETAN SHAH IS TOTALLY INCORRECT. THEREFORE, CLAIM OF RESULTING LOSS ON SALE OF THESE SHARES AS LOSS ON ACCOUNT OF DELIVERY NOT TAKEN BY CLIENTS IS NOT ALLOWABLE. THE SAME IS THEREFORE, DISALLOWED. 10. THE AO FURTHER NOTICED THAT FROM THE FACTS OF THE CASE IT IS ALSO CLEAR THAT THE ASSESSEE HAS PURCHASED SHARES IN QUESTION ON IT S OWN AND SUFFERED LOSS. SINCE ASSESSEES BUSINESS INCOME DURING THE YEAR CONSISTS OF BROKERAGE, THE LOSS INCURRED IN PURCHASE AND SALES OF THESE SHARES IS TREATED AS SPECULATION LOSS IN TERMS OF PROVISIONS CONTAINED IN EXPLANATION TO SECTION 73. 11. THE CIT (A) DECIDED THE MATTER AS UNDER:- 3.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS OF THE AR OF THE APPELLANT CAREFULLY. I HAVE ALSO GONE THROUGH T HE DECISIONS RELIED UPON ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 6 BY THE A.R. AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. I FIND THAT THE LOSS ON ACCOUNT OF IMPUGNED TRANSACTIONS HAS BEEN DISALLOWED BY THE AO MAINLY ON 2 GROUNDS, FIRST THA T THE SALE OF 1500 SHARES ON 15-3-01 WAS NOT FOUND REFLECTED IN THE ST ATEMENT AS CLAIMED BY THE ASSESSEE COMPANY AND SECOND, IN THE REPLY DATED 8-9-03 SHRI VINOD H. SHAH HAS STATED THAT HE MADE ENQUIRIES ON28-2-01 WH EREAS IMPUGNED SHARES WERE PURCHASED BY ASSESSEE-COMPANY ON BEHALF OF SHRI VINOD H. SHAH ON 23-2-01. THEREFORE, I AM DEALING WITH THESE 2 OBSERVATIONS OF THE AO FIRST, BEFORE DISCUSSING THE OTHER ASPECTS RELAT ING TO THE ISSUE. AS PER THE OBSERVATION OF THE AO THE DETAILS WHICH HAVE BE EN SUBMITTED BY M/S. AJMERA & SHAH ASSOCIATES IT WAS FOUND THAT THERE WA S NO SALE OF 1725 SHARES ON 15-3-01 AS CLAIMED BY THE ASSESSEE-COMPAN Y. IN THIS RESPECT, THE ASSESSEE-COMPANY HAS RELIED UPON ITS SUBMISSION VID E LETTER DATED 25-12- 03, WHICH HAS BEEN REFERRED BY THE AO IN THE ASSESS MENT ORDER, WHEREIN IT HAS BEEN CLARIFIED THAT ON 7-3-2001, 4525 SHARES AN D 2800 SHARES OF GLOBAL TELE SYSTEM WERE SOLD THROUGH AJMERA & SHAH ASSOCIATES AND REMAINING 1725 SHARES WERE SOLD DIRECTLY BY THE ASS ESSEE-COMPANY THROUGH AHMEDABAD STOCK EXCHANGE AND THEREFORE, THE SAID SALE OF 1725 SHARES BEING DIRECTLY SOLD BY THE ASSESSEE-COMPANY, IT WAS CLARIFIED THAT THE SAME WILL NOT APPEAR IN THE STATEMENT OF AJMERA & S HAH ASSOCIATES. THE EVIDENCES PERTAUINING TO THE SALE OF 1725 SHARES ON 15-3-01 WERE ALSO FURNISHED TO THE AO ALONG WITH THE SAID LETTER. THI S ENTIRE LETTER THOUGH HAS BEEN REPRODUCED BY THE AO IN THE ASSESSMENT ORDER O N PAGE 4 AND5 BUT THEREAFER THIS ASPECT HAS NOT BEEN DISCUSSED BY TH E AO IN THE SUBSEQUENT PART OF THE ASSESSMENT ORDER WHICH INDICATES THAT T HE DOUBT WHICH HAS INITIALLY RAISED BY THE AO WAS SATISFIED. OTHERWISE ALSO THE ASSESSEE- COMPANY HAS PRODUCED EVIDENCES FOR THE SAME BEFORE AO. 3.3 . COMING TO THE SECOND IMPORTANT OBSERVATION OF THE A O REGARDING THE DIFFERENCE IN THE DATES AS SUBMITTED BY SHRUI V INOD H. SHAH IN HIS REPLY DATED 8-9-03WHEREIN HE HAS STATED THAT HE MAD E ENQUIRIES WITH THE ASSESSEE-COMPANY ABOUT THE PURCHASE OF SHARES OF GL OBAL TELE SYSTEM ON 28-2-01 WHEREAS AS PER THE DETAILS FURNISHED, THE S AID SHARES WERE PURCHASED BY THE ASSESSEE-COMPANY ON 23-2-01 AND TH EREFORE, ON THIS BASIS, AO HAS HELD THAT THE SHARES WHICH WERE PURCH ASED BY THE ASSESSEE- COMPANY ON 123-2-01 COULD NOT AT ALL BE RELATED TO THE SAID 2 PERSONS WHO HAD NOT PLACED ANY ORDER FOR PURCHASE AND SINCE ENQ UIRIES WERE CONDUCTED ABOUT THE RATE OF SHARES ONLY ON 28-2-01,THE IMPUGN ED LOSS ON SUCH SHARE TRANSACTION HAS BEEN DISALLOWED BY THE AO. IN THIS RESPECT, THE ASSESSEE- ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 7 COMPANY HAS DRAWN MY ATTENTION TO THE STATEMENT OF SHRI VINOD H. SHAH RECORDED U/S. 131 BY THE AO ON 23-12-03 WHEREIN WHI LE ANSWERING TO QUESTION NO.8 HE HAS CLEARLY ADMITTED THAT ON 23-2- 01 HE HAD ENQUIRED WITH THE ASSESSEE-COMPANY ABOUT 5000 SHARES OF GLOB AL TELE SYSTEM AND HE HAS FURTHER CONFIRMED IN HIS STATEMENT THAT HE W ANTED TO BUY 5000 SHARES IN SYNDICATE AND FOR THAT PURPOSE HE DID ENQ UIRE THE RATE ON PHONE AND HE HAS FURTHER CONFIRMED IN HIS STATEMENT THAT HE TALKED WITH SHRI RAJUBHAI, EMPLOYEE OF THE ASSESSEE-COMPANY ABOUT 50 00 SHARES OF GLOBAL TELE SYSTEM TO BE PURCHASED WITH CERTAIN LIMIT AND IN CONTINUITY HE HAS STATED IN HIS STATEMENT THAT HE WILL CALL BACK AND CONFIRM THE RATE. THE ASSESSEE-COMPANY HAS ALSO DRAWN MY ATTENTION TO ANS WER NO.17 OF THE SAID STATEMENT WHEREIN THE SAID SHRI VINOD H. SHAH WAS R EQUIRED TO CLARIFY ABOUT THE DIFFERENCE IN DATE OF 23-2-01 AND 28-2-01 WHEREIN HE HAS STATED THAT THE DATE OF TRANSACTION IS 23-2-01 BUT IN HIS REPLY THE DATE MENTIONED AS 28-2-01 WAS NOT IN HIS KNOWLEDGE AND HE HAS FURT HER CLARIFIED THAT HE DOES NOT HAVE FULL KNOWLEDGE OF ENGLISH LANGUAGE. T HEREFORE, HAVING CLARIFIED THIS ASPECT IN THE STATEMENT OF SHRI VIN OD H. SHAH, I THINK THEIR REMAINS NO AMBIGUITY SO FAR AS DATE OF PURCHASE OF THE SHARES IS CONCERNED, MORE PARTICULARLY WHEN IN HIS STATEMENT RECORDED BY THE AO, WHILE ANSWERING TO QUES.NO.8 HE HAS CLEARLY ADMITTE D THAT ON 23-2-01 HE MADE ENQUIRY WITH THE ASSESSEE-COMPANY FOR PURCHASE OF GLOBAL TELE SYSTEM SHARES AND HAVING FURNISHED EVIDENCE OF PURC HASES BY THE ASSESSEE-COMPANY ON 23-2-01 AND HAVING RAISED THE B ILLS BY THE ASSESSEE- COMPANY FOR PURCHASES ON 23-2-01 OF 4525 SHARES OF GLOBAL TELE SYSTEM, I AM OF THE VIEW THAT THEIR REMAINS NO DISPUTE ABOUT THE DATES ON WHICH THE IMPUGNED SHARES HAVE BEEN PURCHASED BY THE ASSESSEE -COMPANY. 3.4. COMING TO THE OTHER ASPECT OF THE ISSUE, FROM THE ASSESSMENT ORDER IT IS CLEAR THAT DURING THE COURSE OF ASSESSMENT PROCE EDINGS .A.O. HAS ALSO CONDUCTED ENQUIRIES FROM M/S. AJMERA & SHAH ASSOCIA TES THROUGH WHOM THE IMPUGNED SHARES HAS BEEN PURCHASED AND SOLD PAR TLY. ON THE BASIS OF ENQUIRY, THE A.O. WAS SATISFIED ABOUT THE GENUINENE SS OF THE PURCHASE OF SHARES BY THE ASSESSEE-COMPANY AND THE SALES OF THE SHARES ALSO, EXCEPT 1725 SHARES WHICH HAS BEEN SOLD DIRECTLY BY THE ASS ESSEE-COMPANY THROUGH AHMEDABAD STOCK EXCHANGE ON 15-3-01. IT IS ALSO AN ADMITTED FACT THAT ASSESSEE-COMPANY IS BROKER OF AHMEDABAD STOCK EXCHA NGE AND SUB- BROKER OF M/S. AJMERA & SHAH ASSOCIATES, MEMBER OF THE NATIONAL EXCHANGE. THE ENTIRE SALES AND PURCHASES BY THE ASS ESSEE-COMPANY ARE ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 8 FOR AND ON BEHALF OF THEIR CLIENTS AND THERE HAS BE EN NO TRANSACTIONS OF PURCHASE AND SALES OF SHARES OF THEIR OWN. IN THE I MPUGNED TRANSACTION IN WHICH LOSS HAS BEEN CLAIMED BY THE ASSESSEE-COMPANY , IT IS CLEAR THAT SHRI VINOD H. SHAH WHO IS THE REGULAR CLIENT OF THE ASSE SSEE-COMPANY ENQUIRED ON 23-2-01 ABOUT 5000 SHARES OF GLOBAL TELE SYSTEM WHICH HE WANTED TO PURCHASE IN SYNDICATE AND FOR THAT PURPOSE HE HAD E NQUIRED ABOUT THERATE OF THE SHARES ON PHONE WITH SHRI RAJUBHAI, ONE OF T HE EMPLOYEE OF THE ASSESSEE-COMPANY AND DURING THE COURSE OF SAID ENQU IRY, THE EMPLOYEE OF THE ASSESSEE-COMPANY UNDERSTOOD THAT THERE IS A CON FIRM ORDER FOR PURCHASE OF 5000 SHARES OF GLOBAL TELE SYSTEM WITHI N CERTAIN LIMITS OUT OF WHICH THE ASSESSEE-COMPANY COULD BUY ONLY 4525 SHAR ES AND ACCORDINGLY, IN THE EVENING OF 23-2-01 AT ABOUT 5.00 OR 6.00 P.M . THE SAID SHRI RAJUBHAI HAD MADE A PHONE CALL TO SHRI VINOD H. SHAH INFORMI NG THAT 4525 SHARES HAVE BEEN PURCHASED FOR HIM AND IN RESPONSE TO WHIC H HE STATED IN HIS STATEMENT THAT ON PHONE ITSELF HE DENIED ABOUT THE SAID TRANSACTION. SHRI VINOD H. SHAH IN HIS STATEMENT HAS FURTHER STATED T HAT THEREAFTER HE HAD DISCUSSION WITH THE DIRECTOR OF THE ASSESSEE-COMPAN Y AND CONVEYED THAT THE IMPUGNED SHARES HAVE WRONGLY BEEN PURCHASED IN HIS NAME AND THEREFORE, HE SHALL NOT BE RESPONSIBLE FOR THE SAID SHARES. IT HAS FURTHER BEEN CONFIRMED BY HIM THAT THE BILLS WHICH HAVE REC EIVED WERE RETURNED BACK TO THE ASSESSEE-COMPANY. THEREFORE, THE ASSESS EE-COMPANY HAS CLAIMED THAT SINCE THE DISPUTE COULD NOT BE RESOLVE D AND PRICES OF THE SAID SHARES WERE FALLING, IN ORDER TO CURTAIL LOSS, THE SHARES WERE SOLD IN THE MARKET AND EVIDENCES THEREOF WERE ALSO FURNISHED BE FORE THE A.O. AS A RESULT THE ASSESSEE-COMPANY HAD INCURRED A LOSS OF RS.9,76,592/- ON ACCOUNT OF SAID TRANSACTIONS OF 4525 SHARES OF GLOB AL TELE SYSTEM PERTAINING TO SHRI VINOD H. SHAH. 3.5 . IN VIEW OF THE FACTS AS DISCUSSED HEREINABOVE AND E SPECIALLY THE STATEMENT OF SHRI VINOD H. SHAH IT IS ABSOLUTELY CL EAR THAT THE IMPUGNED TRANSACTION WAS A GENUINE TRANSACTION WHICH HAS BEE N UNDERTAKEN IN THE NORMAL COURSE OF BUSINESS AND SINCE THERE WERE SOME MIS-UNDERSTANDING BETWEEN THE EMPLOYEE OF THE COMPANY AND THE CLIENT AS TO WHETHER THERE WAS A CONFIRMED ORDER OR NOT AND AS SUBMITTED IN DE TAIL IN THE STATEMENT OF SHRI VINOD H. SHAH IT IS ABSOLUTELY CLEAR THAT ON T HE VERY SAME DAY WHEN THE SHARES WERE PURCHASED, THE ASSESSEE-COMPANY HAS INFORMED SHRI VINOD H. SHAH ABOUTR THE PURCHASE OF SHARES ON HIS BEHALF, WHICH INDICATES THAT THE TRANSACTIONS HAVE BEEN UNDERTAKE N IN THE NORMAL COURSE OF BUSINESS AND SINCE THE CLIENT HAS REFUSED TO TAK E DELIVERY OF THE SHARES, ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 9 THE RESULTANT LOSS INCURRED BY THE ASSESSEE-COMPANY FOR THE SALE OF THE SAID SHARES, IS REQUIRED TO BE ALLOWED AS DEDUCTION FROM THE BUSINESS INCOME. THE SAME IS BASED ON EVIDENCES, 3 RD PARTY STATEMENT AND FROM THE ENTIRE ASSESSMENT ORDER IT IS VERY CLEAR THAT THE STATEMEN T OF SHRI VINOD H. SHAH WHICH HAS BEEN RECORDED BY THE A.O. COULD NOT LEAD TO ANY CONCLUSION INDICATING ANY DOUBT ABOUT THE SAID TRANSACTION. TH EREFORE, IN EIW OF THE ABOVE DISCUSSION AND THE FACTS OF THE CASE, THE LOS S OF RS.9,76,592/- IS ALLOWED AS DEDUCTION. RELIANCE IS PLACED ON THE JUD GMENT OF CIT VS. NAINITAL BANK LTD. [1965] 55 ITR 707 (SC)/ SONIHIND UJI KHUSHALJI & COI. VS. CIT [1974] 89 ITR 1129AP)/ CIT VS. TEXTOOL CO. LTD. [1982] 135 ITR 200 (MAD.), WHEREIN IT HAS BEEN VIEWED THAT LOSS MU ST BE DURING COURSE OF OR INCIDENTAL TO BUSINESS. EVERY LOSS IS NOT SO DE DUCTIBLE UNLESS IT IS INCURRED IN CARRYING OUT THE OPERATION OF THE BUSIN ESS AND IS INCIDENTAL TO THE OPERATION. WHETHER LOSS IS INCIDENTAL TO THE OP ERATION OF A BUSINESS IS A QUESTION OF FACT TO BE DECIDED ON THE FACTS OF EACH CASE, HAVING REGARD TO THE NATURE OF THE OPERATIONS CARRIED ON AND THE FAC TS OF EACH CASE AND THE NATURE OF THE RISK INVOLVED ION CARRYING THEM OUT. THE DEGREE OF THE RISK OR, ITS FREQUENCY IS NOT OF MUCH RELEVANCE BUT ITS NEXUS WITH THE NATURE OF THE BUSINESS IS MATERIAL. 3.6. COMING TO THE REMAINING LOSS OF RS.6,388/-, TH E SAME IS CONFIRMED AS NO EVIDENCES HAS BEEN BROUGHT ON RECORD, JUSTIFY ING THE SAID LOSS. THEREFORE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. THE SECOND GROUND IN THIS APPEAL IS DIRECTED AGA INST THE TREATING THE LOSS INCURRED IN PURCHASE AND SALE OF SHARES AS SPE CULATION LOSS APPLYING THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE I.T. ACT. IT IS SEEN THAT WHILE DISALLOWING THE ASSESSEES LOSS OF RS.9,82,98 0/-, THE ASSESSING OFFICER HAS OBSERVED THAT THE [PURCHASE OF SHARES I NQUESTION WAS OF THE ASSESSEES OWN AND SUFFERED LOSS. ACCORDING TO THE A.O. SINCE THE ASSESSEES BUSINESS INCOME DURING THE YEAR CONSISTE D OF BROKERAGE, THE LOSS INCURRED IN PURCHASE AND SALE OF THE ABOVE SHARES S HOULD BE AS SPECULATION LOSS. THEREFORE, IN TERMS OF PROVISIONS OF EXPLANAT ION TO SECTION 73 OF THE ACT, THE A.O. HAS TREATED THE SAME AS SPECULATION L OSS. 4.1. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR OF THE ASSESSEE FILED WRITTEN SUBMISSIONS WHEREIN IT WAS SUBMITTED THAT IN SO FAR AS THE TREATMENT OF LOSS OF RS.9,82,980- CLAIMED BY THE AS SESSEE-COMPANY ON ACCOUNT OF DELIVERY NOT TAKEN BY CLIENTS AS SPECULA TION LOSS BY THE AO IS ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 10 CONCERNED, IT MAY BE NOTED THAT THE SAID OBSERVATIO N IS FACTUALLY INCORRECT AND BASED ENTIRELY ON SURMISES AND CONJECTURES IN V IEW OF THE FOLLOWING FACTS :- (A) THAT THE SAID TRANSACTION OF PURCHASES AND SAL E OF SHARES RESULTING IN LOSS DO NOT PERTAIN TO THE ASSESSEE BU T PERTAINS TO THE CLIENTS. THUS, THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT TO THE ASSESSEES CASE DOPES NOT ARISE A T ALL SINCE THE SAME ARE APPLICABLE ONLY IF THE TRANSACTIONS ARE PE RTAINING TO THE ASSESSEE IN WHOSE CASE THE SAME ARE INTENDED TO BE APPLIED. (B) SECONDLY, THE DELIVERY OF THE SHARES ON BEHALF OF THE TWO CLIENTS NAMELY SHRI VINOD H.SHAH AND SHRI CHETAN SHAH HAVING BEEN TAKEN BEFORE SELLING THAT SHARES, WHICH FACT IS ALSO ESTABLISHED FROM THE DEMAT A/C. FURNISHED TO T HE A.O. THE TRANSACTIONS IN QUESTION ARE EVEN OTHERWISE NOT COV ERED BY THE DEFINITION OF SPECULATIVE TRANSACTIONS AS PER SEC TION 45 (3) OF THE ACT AND ACCORDINGLY THE LOSS ARISING THEREFR OM CANNOT BE TREATED AS SPECULATION LOSS EVEN IF PRESUMING [W ITHOUT ADMITTING] THAT THE SAME WERE ENTERED INTO BY THE A SSESSEE- COMPANY ON ITS OWN BEHALF AND NOT ON BEHALF OF THEI R CLIENTS. COMING TO THE APPLICABILITY OF THE EXPLANATION TO S ECTION 73 OF THE ACT, IT IS SUBMITTED THAT THE SAME HAS BEEN WRONGLY APPLIED BY THE AO WITHOUT PROPERLY CONSIDERING THE PROVISIONS OF THE SAID SECTION. THE FOLLOWING FURTHER FACTS A ND CONTENTIONS REQUIRE TO BE TAKEN DUE COGNIZANCE OF: A) AT THE OUTSET, IT IS SUBMITTED THAT THE AO WHIL E TREATING THE LOSS IN SHARE TRANSACTION ON BEHALF OF THE CLIENTS OF THE ASSESSEE-COMPANY AS SPECULATIVE IN NATURE HAS FURTH ER FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF SALE/PURCHASE OF SHARES ON BEHALF O F THEIR CLIENTS AND THE BUSINESS INCOME COMPRISES OF BROKER AGE INCOME. THUS, THE ASSESSEE-COMPANY IS NOT ENGAGED I N THE BUSINESS OF CARRYING OUT PURCHASE AND SALE OF SHARE S FOR ITS OWN PROFIT OR LOSS. THE ABOVE FACT IS EVIDENT FROM THE BALANCE SHEET OF THE COMPANY AS ENCLOSED WITH THE RETURN OF INCOME. THUS, THE AO OUGHT TO HAVE APPRECIATED THE FACT THA T THE ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 11 ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF PURC HASE AND SALE OF SHARES ON BEHALF OF CLIENTS AND RECEIVES ON LY BROKERAGE INCOME FOR THE SAME. ACCORDINGLY, THE ASSESSEE-COMP ANY WILL BE OUT OF THE SCOPE OF DEEMING PROVISIONS OF EXPLAN ATION TO SECTION 73 OF THE ACT. B) THAT EVEN IF PRESUMING THAT THE PURCHASE AND SAL E OF SHARES RESULTING IN LOSS HAVE BEEN ENTERED INTO BY THE ASS ESSEE- COMPANY ON ITS BEHALF AND NOT ON BEHALF OF THE CLIE NTS [ FOR THE SALE OF ASSUMPTION AND WITHOUT ADMITTING ], THE SAID TRANSACTION BEING A SOLITARY TRANSACTION DURING TH E ENTIRE YEAR COULD NOT BE HELD AS ADVENTURE IN THE NATURE OF TRA DE BUT REQUIRES TO BE TREATED AS INVESTMENT AND SINCE THER E WAS A CONSTANT FALL IN THE MARKET PRICE OF THE SAID SHARE S OF GLOBAL TELESYSTEM LTD., IN ORDER TO AVOID COMPLETE CORROS ION OF THE INVESTMENT OF THE COMPANY, THE SAME WERE SOLD AT A LOSS DURING THE YEAR IN QUESTION ITSELF. THE SAID LOSS B EING DULY SUPPORTED BY DOCUMENTARY EVIDENCES AND BEING GENUIN E DELIVERY BASED LOSS, THE SAME CANNOT BE TREATED AS SPECULATIVE LOSS. C) THAT APART, IT IS CONTENDED THAT THE EXPLANATION INSERTED BELOW SECTION 73 BY THE TAXATION LAWS (AMENDMENT) A CT, 1975 TEARS THE BUSINESS OF PURCHASE AND SALE OF SHA RES BY COMPANIES, WHICH ARE NOT INVESTMENT COMPANIES, BANK ING COMPANIES OR FINANCIAL COMPANIES, AS SPECULATION BU SINESS. THE SWEEP OF SPECULATION BUSINESS WAS, EXTENDED BY INSERTION OF THE AFORESAID EXPLANATION. A PERUSAL OF SECTION 73, READ WITH AFORESAID EXPLANATION, CLEARLY INDICATES THAT IN ORDER TO BRING A TRANSACTION WITHIN THE NET OF SECTION 73, T HERE SHOULD NECESSARILY BE A BUSINESS OF SPECULATIVE TRANSACT IONS AND IT MUST BE CARRIED ON BY THE ASSESSEE. THE WORD BUS INESS AS DEFINED IN SECTION 2 (13) INCLUDES ANY TRADE, COMME RCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATU RE OF TRADE, COMMERCE OR MANUFACTURE. THESE WORDS ARE OF WIDE IMPORT UNDERLYING AN IDEA OF CONTINUOUS EXERCISE OF OCCUPATION OR PROFESSION WITH THE OBJECT OF MAKING INCOME OR PROFIT. THE SAME REQUIREMENT OF CONTINUOUS EXERCISE OF AN ACTIVITY IS IMPLICIT IN THE WORDS CARRIED ON BY HIM. ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 12 IN THE PRESENT CASE, THERE WAS NO MATERIAL OR EVIDE NCE ON RECORD THAT THE ASSESSEE-COMPANY WAS CARRYING ON SP ECULATION BUSINESS OF DEALING IN SHARES/DEBENTURES OF OTHER C OMPANIES ON ITS OWN BEHALF. THAT AS MENTIONED HEREINABOVE, THE SHARES IN QUESTI ON BEING IN THE NATURE OF INVESTMENT, THE DEEMING PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT WERE NOT APPLI CABLE ON THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE EIT HER WAY I.E. IF THE TRANSACTIONS ARE TREATED AS ON BEHALF OF CLI ENTS OR ON BEHALF OF THE ASSESSEE-COMPANY ITSELF. ACCORDINGLY, THE LOSS OF RS.9,82,980/- IS NOT REQUIRED TO BE TREATED AS SPEC ULATIVE LOSS UNDER THE GARB OF DEEMING PROVISIONS OF SECTION 73 OF THE ACT. IN SUPPORT OF THE ABOVE PRO[POSITION OF LAW, RELIAN CE IS PLACED ON THE DECISION OF HONBLE ITAT, AHMEDABAD BENCH IN CASE OF KRUTI MARKETING LTD. VS. ACIT (2001) 118 TAXMAN 194 (AHD.)(MAG.) D) IT MAY BE PERTINENT TO NOTE HERE THAT AS STATED HEREINABOVE, THE TRANSACTION IN SHARES IN CASE OF THE ASSESSEE ALSO CANNOT BE HELD TO BE SPECULATIVE IN NATURE WITHIN THE MEANING OF DEFINITION OF SPECULATIVE TRANSACTION AS GIVEN U/ S.43(5) OF THE ACT SINCE THE SAID TRANSACTIONS ARE DELIVERY BA SED, WHICH FACT HAS NOT BEEN DISPUTED BY THE AO. HENCE, TREATM ENT OF LOSS INCURRED ON SUCH TRANSACTIONS AS SPECULATIVE IN NAT URE, INSPITE OF THE FACT THAT THE SAME ARE NOT SPECULATIVE TRANS ACTIONS AS PER THE DEFINITION GIVEN IN THE ACT ITSELF, IS WHOL LY UNJUSTIFIED AND BAD IN LAW. E) THEREFORE, THE ACTION OF THE AO IN CONSIDERING T HE SAID LOSS OF RS.9,82,980/- AS SPECULATIVE IN NATURE APPLYING PRO VISO OF SECTION 73 OF THE ACT IS LEGALLY INCORRECT AND THER EFORE, THE SAID LOSS BEING A BUSINESS LOSS, INCURRED IN THE NO RMAL COURSE OF BUSINESS, REQUIRES TO BE ALLOWED AS DEDUCTION U/ S. 28 OF THE ACT. IN VIEW OF THE FACTS, DETAILS AND EVIDENCES SUPPORT ED BY LEGAL POSITION, THE APPLICATION OF THE PROVISIONS OF EXPL ANATION TO SECTION 73 OF THE ACT IN CASE OF THE ASSESSEE-COMPANY IS WH OLLY UNJUSTIFIED AND BAD IN LAW AND ACCORDINGLY, THE LOSS OF RS.9,82 ,980/- INCURRED IN ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 13 SHARE TRANSACTION CARRIED OUT ON BEHALF OF CLIENTS IS REQUIRED TO BE TREATED AS BUSINESS LOSS AND AVAILABLE FOR SET OFF AGAINST THE BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. 4.2. I HAVE CONSIDERED THE FACTS AND THE SUBMISSION S OF THE AR OF THE ASSESSEE CAREFULLY. I HAVE ALSO GONE THROUGH TH E DECISIONS RELIED UPON BY THE AR AND THE OBSERVATIONS OF THE AO IN T HE ASSESSMENT ORDER. AFTER DISALLOWING THE SAID LOSS AO HAS HELD ON PAGE-8 OF THE ASSESSMENT ORDER THAT FROM THE FACTS OF THE CASE IT IS CLEAR THAT THE ASSESSEE HAS PURCHASED SHARES IN QUESTION OF HIS OW N AND SUFFERED LOSS AND THEREFORE, THE SAID LOSS IS TREATED AS SPE CULATIVE LOSS IN TERMS OF PROVISIONS CONTAINED IN EXPLANATION TO SECTION 7 3. I HAVE ALREADY HELD WHILE DEALING WITH FIRST GROUND OF APPEAL THAT THE IMPUGNED PURCHASES OF SHARES BY THE ASSESSEE-COMPANY WAS FOR AND ON BEHALF OF CLIENTS OF THE ASSESSEE-COMPANY AND THEREFORE, S INCE THE SAID PURCHASES AND SALES OF SHARES WERE NOT OF THE ASSES SEE, THE SAID GROUND OF APPEAL BECOME INFRUCTUOUS. 12 THE DR RELIED UPON THE ORDER OF AO WHEREAS THE LD. AR RELIED UPON THE ORDER OF CIT (A) AND SUBMITTED THAT ON IDENTICAL SE T OF FACTS THE ITAT IN THE CASE OF KRUTI MARKETING LTD. VS. ACIT IN ITA NO.5248/AHD /1995 ORDER DATED 31-5- 2001, PARKAR SECURITIES LTD VS. DCIT (2006) 102 TT J 9AHD) 235 AND 320 ITR 178 CIT VS. BONANZA PORTFOLIO LTD. (DELHI). 13. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES, RECORDS PERUSED AND GONE THROUGH THE DECISIONS CITED. THE ISSUE TO BE E XAMINED IN THE CASE UNDER CONSIDERATION WHETHER UNDER THE FACTS AND CIRCUMSTA NCES THE AO IS CORRECT IN TREATING LOSS AS SPECULATION LOSS IN TERMS OF EXPL ANATION TO SECTION 73 OF THE ACT. THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSE E PURCHASED SHARES WHICH WERE BOOKED FOR CLIENTS AND CLIENTS DENIAL FOR THE TRAN SACTIONS. THE ASSESSEE COMPANY IS BROKER OF SHARES. NORMALLY ANY LOSS OR EXPENDITURES INCURRED DURING THE COURSE OF BUSINESS IS ALLOWABLE. THE LOSS OR EXPENDITURE MAY BE ON ACCOUNT OF DENIAL OF CLIENTS FOR THE TRANSACTIONS OR FAILED TO PAY THE A MOUNT OF TRANSACTION. IN THE CASE, ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 14 UNDER CONSIDERATION THE AO EMPHASIS THAT THE ASSESS EE PURCHASED SHARES WHICH COVERS BY THE EXPLANATION TO SECTION 73 OF THE ACT. EXPLANATION TO S. 73 PROVIDES THAT WHERE AN Y PART OF THE BUSINESS OF A COMPANY ( OTHER THAN CERTAIN SPECIFIED COMPANIES AS MENTIONED IN THE EXPLANATION) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATIVE BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES. I T IS CLEAR FROM THE ABOVE PROVISION THAT SALE AND PURCHASE OF SHARES OF OTHER COMPANIES, WITHIN THE AMBIT OF THE EXPLANATION, MUST BE CARRIED OUT AS AN ACTIVITY OF BUSINESS. TO FIND OUT THAT THE ASSESSEE CARRIED ON PURCHASE AND SALE OF SHARES OF OTHER COMPANIES AS ITS BUSINESS IN A GIVEN CASE, THE FACTS OF THAT CASE WILL HAVE T O BE EXAMINED AND THE TESTS WHICH COULD DETERMINE SUCH A SITUATION ARE (I) NATURE OF ASSESSEES BUSINESS IN GENERAL; (II) THE PURPOSE BEHIND THE PARTICULAR TRANSACTION; AND (III)THE EFFECT OF THE TRANSACTION .THE NATURE OF ASSESSEES BUSINESS IN GENERAL IS TO EARN INCOME AS A BROKER OF STOCK EXCHANGE AND THE PURPOSE BEHIND THE TRANSACTIONS IN REGARD TO WHICH THE ASSESSEE HAS INCURRED LOSS IS THE PURCHASE FOR AND ON BEHALF OF CERTAIN CLIENTS TO EARN BROKERAGE INCOME THEREFROM. IT WAS ONLY AN EVENTUAL ITY THAT SOME OF THE CLIENTS DISOWNED ONLY PART OF THE TRANSACTIONS WHICH UNDER COMPULSION WERE TO BE TAKEN BY ASSESSEE AS ITS OWN. THE ASSESSEE HAS SUBMITTED THE COPIES OF PARTIES BILLS, ALONG WITH ASSESSEES PURCHASE BILLS GIVING DETAILS OF NON-ACCEPTANCE OF TRANSACTIONS BY THE PARTIES. ALL THESE BILLS COMPRI SED PART OF ACCOUNTING BOOKS MAINTAINED BY THE ASSESSEE GIVING ALL REQUIRED DETA ILS REGARDING THE TRANSACTIONS ON WHICH THE ASSESSEE HAD TO BEAR THESE LOSSES. THUS, BY PLACING ALL THESE MATERIALS ON RECORD OF AO IT CAN BE SAID THAT ASSESSEE HAD DISCH ARGED ITS PRIMARY ONUS TO SUBSTANTIATE ITS EXPLANATION REGARDING INCURRING OF LOSSES OUT OF THESE TRANSACTIONS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SU GGEST THAT THE ASSERTIONS AND DOCUMENTS PRODUCED BY ASSESSEE WERE NOT SUBSTANTIAT ING THE EXPLANATION FURNISHED ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 15 IN THIS REGARD. THERE IS ALSO NO MATERIAL ON RECORD TO DISPROVE THE FACTS STATED BY THE ASSESSEE. IN THIS VIEW OF THE SITUATION, THE AO COU LD NOT ACT UNREASONABLY TO REJECT THAT EXPLANATION. THUS, THE CONTENTION OF ASSESSEE THAT THE PURPOSE BEHIND THE PURCHASE WAS TO EARN BROKERAGE INCOME THEREFROM AND SALE OF THOSE SHARES WAS CONSEQUENTIAL ACT AS PURCHASE OF THESE SHARES WAS D ISOWNED BY RESPECTIVE CLIENTS, APPEARS TO BE A BONA FIDE CONTENTION. THE CONDUCT O F ASSESSEE ALSO INDICATES THAT BY THE END OF THE YEAR, THERE WAS NO ITEM OF SUCH PUR CHASE OF SHARES OUTSTANDING IN THE CLOSING STOCK OF THE ASSESSEE. NO PURCHASE AND SALE OF SHARES HAS BEEN DONE EITHER IN THE PRECEDING YEAR OR IN THE PROCEEDING Y EAR. THUS, THE CONDUCT OF ASSESSEE SHOWS THAT ITS INTENTION HAD NEVER BEEN TO DEAL IN THE SALE AND PURCHASE OF SHARES AT ITS OWN AND IT WAS ONLY AN EVENTUALITY OR FORCED CIRCUMSTANCES UNDER WHICH THE ASSESSEE HAD TO ADOPT THESE PURCHASES AND THESE TRANSACTIONS ENTERED INTO BY ASSESSEE UNDER COMPULSION CANNOT CONSTITUTE BUSI NESS OF THE ASSESSEE, MORE SO PART THEREOF. BY DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE BE FORE AO IT WAS ESTABLISHED THAT THE PURCHASE OF SHARES WAS MADE BY ASSESSEE ON LY ON BEHALF OF ITS CLIENTS. THUS, THE CRUCIAL TIME AND THE STAGE IN THE PRESENT CASE CLEARLY DEPICTS THAT THESE WERE PURCHASED BY ASSESSEE ON BEHALF OF ITS CLIENT S AND INTENTION OF ASSESSEE BEHIND THE PURCHASE OF SHARES WAS NOT TO INDULGE IN THE BUSINESS ACTIVITIES OF [PURCHASE AND SALE OF SHARES TO MAKE PROFIT OUT OF IT AT ITS OWN. THUS, TESTING THE FACTS OF THE PRESENT CASE ON ALL THESE PARAMETERS I T CAN BE CONCLUDED THAT THE LOSS ARISEN OUT OF PURCHASE AND SALE OF SHARES BY THE AS SESSEE IS NOT A RESULT OF BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE IN THAT REGARD. THE EXPLANATION TO S. 73 IS ATTRACTED ONLY WHEN PART OF THE BUSINESS OF THE ASS ESSEE-COMPANY CONSISTS OF THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES AND IN THAT SITUATION ONLY SUCH DEALINGS IN SHARES IS DEEMED TO BE CARRYING ON A SP ECULATIVE BUSINESS. IT IS TO BE NOTICED THAT ANY KIND OF VENTURE WILL NOT FALL WITH IN THE DEFINITION OF BUSINESS. ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 16 THE VENTURE OR ADVENTURE WILL HAVE TO BE IN THE NAT URE OF TRADE, COMMERCE OR MANUFACTURE. THUS, THERE IS LACK OF INGREDIENT CALL ED BUSINESS IN THE SALE AND PURCHASE DONE BY THE ASSESSEE OF SHARES FOR WHICH L OSS HAS OCCURRED TO ASSESSEE. LOSS ARISEN TO ASSESSEE DOES NOT FALL WITHIN THE AN MBIT OF EXPLANATION TO S. 73. THE LOSS OCCURRED TO ASSESSEE WAS IN THE COURSE OF ITS BUSINESS ACTIVITY OF BROKERAGE. IT IS NOT THE CASE OF REVENUE THAT LOSS HAS NOT OCCURR ED TO ASSESSEE AND THE SAME IS NOT GENUINE. THUS THE LOSS IS ALLOWABLE AS BUSINESS LOS S IN THE NORMAL COURSE OF BUSINESS OF THE ASSESSEE AND IS AVAILABLE TO BE SET OFF AGAINST BROKERAGE INCOME. EXPLANATION TO S. 73 IS ATTRACTED ONLY WHEN PART OF THE BUSINESS OF THE ASSESSEE- COMPANY CONSISTS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES; TRANSACTION IN SHARES UNDERTAKEN BY SHARE BROKER AS ITS OWN UNDER COMPULSION AFTER CERTAIN CLIENTS DISOWNED PART OF SUCH TRANSACTIONS DID NOT CONSTITU TE BUSINESS OF THE ASSESSEE IN SHARE DEALING AND THEREFORE, LOSS INCURRED BY THE A SSESSEE IN SUCH TRANSACTIONS DID NOT FALL WITHIN THE AMBIT OF EXPLANATION TO S. 73 14. IN THE LIGHT OF ABOVE DISCUSSION, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF CIT (A) AS THE ORDER OF CIT (A) IS A REASON ORDER F ORTIFIED BY TWO DECISIONS OF ITAT IN THE CASE OF KRUTI MARKETING LTD. AND PARKAR SECURITIES LTD. (SUPRA). WE THEREFORE, CONFIRM THE ORDER OF THE CIT (A). 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 9 - 2 - 201 2. SD/- SD/- (D.K. TYAGI) (A. L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA N O.1842/AHD/2004 ASSES SMENT YEAR 2001-02 17 AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 6 - 2 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 7 / 2 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 7 - 2 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 9 - 2 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 9 - 2 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 10 - 2 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..