Shri. G.S. Ramesh Reddy, Bangalore V. ACIT, Bangalore

ITA 273/BANG/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0576 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 27-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETHI GARG
• Assessee Lawyers: C RAMESH
• Keywords: Business income; Salary income; Speculation loss; Revised return
• Section: 153A; 43(5); 250; 139(4); 132; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS.271 TO 273/BANG/08 ASSESSMENT YEARS : 2001-02 TO 2003-04 SRI G.S. RAMESH REDDY, FLAT NO.302, PALACE VIEW APARTMENTS, RAMANA MAHARSI ROAD, BANGALORE. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1(2), BANGALORE. : RESPONDENT ITA NO.313/BANG/08 ASSESSMENT YEARS : 2000-01 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 1(2), BANGALORE. : APPELLANT VS. SRI G.S. RAMESH REDDY, FLAT NO.302, PALACE VIEW APARTMENTS, RAMANA MAHARSI ROAD, BANGALORE. : RESPONDENT ITA NO.271 TO 273 & 313/08 PAGE 2 OF 18 ASSESSEE BY : SHRI C. RAMESH DEPARTMENT BY : SMT. PREETHI GARG O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER IN THESE FOUR APPEALS - (I) THREE APPEALS PREFERRE D BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) FOR TH E ASSESSMENT YEARS 2001- 02, 2002-03 AND 2003-04; AND (II) THE LONE APPEAL OF THE REVENUE [IN ITA NO:313/08] IS FOR THE AY 2000-01. 2. THE ASSESSEE, AN INDIVIDUAL, HAS RAISED EIGHT ID ENTICAL GROUNDS FOR THE AYS 01-02, 02-03 AND 03-04. ON A PERUSAL, THE ESSENCE AND CRUX OF THE ISSUE IS CENTERED TO WHETHER THE TRADING BUSINESS OF THE ASSESSEE WAS BUSINESS OR SPECULATIVE AS ALLEGED BY THE CIT(A)? 3. ON THE OTHER HAND, THE REVENUE FOR THE AY 2000-0 1, HAS RAISED SEVEN GROUNDS. HOWEVER, ON A SCRUTINY OF THE SAME, THE TWO EFFECTIVE GROUNDS EMERGED ARE REFORMULATED AS UNDER: (I) DELETION OF ADDITION OF RS.1159425/- BEING INCOME FROM SPECULATION BUSINESS; & (II) THE CIT(A) HAD ERRED TO CONSIDER THAT (A) OUT OF 5000 SHARES [GLENMARK PHARMA] FOR RS.5 L AKHS APPLIED FOR, THE ALLOTMENT WAS ONLY FOR 50 SHARES AND THE BALANC E OF RS.4.90 LAKHS WAS REFUNDED THROUGH DD; (B) THE ASSESSEE HAD SHOWN SALE OF 200 SHARES WHE REAS ALLOTMENT WAS ONLY FOR 50 SHARES WITH NO OPENING STOCK; NO DOCUMENTARY EVIDENCE WAS PRODUCED BEFORE THE C IT(A) WITH REGARD TO PURCHASE OF 250 SHARES OF M/S.ZENITH INFO TECH LTD FOR RS.27,500/- ITA NO.271 TO 273 & 313/08 PAGE 3 OF 18 ADDITIONS TO THE EXTENT OF RS.517500/- [490000 + 27500] TO BE SUSTAINED. 4. AS THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE REVENUE ARE SIMILAR AND INTER-LINKED, THESE APPEALS ARE TAKEN U P FOR CONSIDERATION TOGETHER AND ADJUDICATED IN THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NOS: 271, 272 & 273/08 AYS 01-02-02-03 & 03-04 [ BY THE ASSESSEE ]: 5. THE HISTORY OF THE CASE, IN BRIEF, IS THAT THE A SSESSEES - WHO WAS ONE OF THE DIRECTORS OF M/S. SARAVANA CONSTRUCTIONS PRIVATE LIMITED RESIDENTIAL PREMISE WAS SUBJECTED TO ACTION U/S 132 OF THE ACT ON 8.10.2003. ON VERIFICATION OF THE INCRIMINATING DO CUMENTS SEIZED DURING THE COURSE OF SEARCH, IT WAS FOUND THAT THE ASSESSEE HA D NOT FULLY DISCLOSED HIS INCOME IN THE REGULAR RETURNS FURNISHED. CONSEQUEN T TO THE ISSUANCE OF NOTICES U/S 153A, THE ASSESSEE HAD FURNISHED RETURN S ADMITTING RS.(-) 5201228, RS.(-) 64649/- & S.(-)322099/- FOR THE AYS 01-02, 02-03 & 03-04 RESPECTIVELY. ON A QUERY FROM THE AO, THE ASSESS EE, IN THE STATEMENT OF ACCOUNT ON SHARE TRANSACTIONS MADE FOR THE YEARS-EN DED 31.3.02 TO 31.3.04, HAD CLAIMED THAT HE WAS IN THE BUSINESS OF SHARE AND THE LOSS INCURRED ON SUCH TRANSACTIONS WAS CLAIMED AT BUSINE SS LOSS OF RS.1584586/-, RS.296735/- AND RS.456217/- RESPECTIV ELY FOR THE AYS IN DISPUTE. 5.1. HOWEVER, THE AO, CONSIDERING THE FACTS AND AL SO EXAMINING THE CLAIMS, THE SEIZED MATERIALS, AND THE CIRCULAR F.NO.149/287/2005/TPL ITA NO.271 TO 273 & 313/08 PAGE 4 OF 18 DT: 13.12.2005 OF THE CBDT, HAD CONCLUDED THAT THE ASSESSEE HAD NOT INVOLVED IN REGULAR SHARE BUSINESS AND IT WAS INCID ENTAL TO HIS REGULAR BUSINESS WHICH WERE IN THE NATURE OF SPECULATION. THUS, BY REJECTING THE ASSESSEE CLAIM OF BUSINESS OF SHARES AND TREATED T HE LOSS INCURRED AS SPECULATION LOSS BY WAY OF SPECULATION BUSINESS AND NO SET OFF WAS ALLOWED, FOR THE FOLLOWING REASONING: (I) THE ASSESSEE BEING A DIRECTOR OF A CONSTRUCTION COM PANY WHOSE MAIN ACTIVITY IS CIVIL CONSTRUCTION AND MANY PROJEC TS HAVE BEEN UNDERTAKEN AT VARIOUS PLACES AND GOT INVOLVED IN CO NSTRUCTION LINE FOR TIMELY COMPLETION OF THE PROJECTS; (II) ALSO A PARTNER/PROPRIETOR OF KUMARESH BUILDERS & DE VELOPERS, CONSTRUCTING APARTMENTS ON JOINT DEVELOPMENT AT VAR IOUS PLACES IN BANGALORE; (III) NO REGULAR BOOKS OF ACCOUNTS WERE MAINTAINED SHOWIN G THE DETAILS OF PURCHASES/SALE OF SHARES - REGULAR LINE OF HIS BUSINESS WAS ENTIRELY DIFFERENT TO THAT OF SHARE TRANSACTIONS AND THE SEIZED MATERIALS INDICAT E THAT THE TRANSACTIONS OF SHARES MADE BY HIM WAS SPECULATIVE IN NATURE; (IV) HE WAS NOT THE MEMBER OF ANY STOCK EXCHANGE AND NOT INVOLVED IN MAJOR PURCHASE/SALE OF SHARES INVOLVING SUBSTANTIAL AMOUNT; (V) NOT ACTING EITHER ON BEHALF OF ANY SHARE-TRADING HO USE OR OF ANY CLIENTS WHO WOULD PLACE THE ORDERS FOR PURCHASE/SAL E OF SHARES REGULARLY; (VI) NOTICED FROM THE DETAILS FURNISHED THAT HE HAD SETT LED THE ACCOUNTS ON WEEKLY BASIS AS PER THE GUIDELINES ISSUED BY SEB I; (VII) TRANSACTIONS CARRIED ON WERE NEITHER REGULAR NOR CO NTINUOUS DURING THE FINANCIAL YEARS AND, THUS, IT WAS IN THE NATURE OF SPECULATION ONLY; (VIII) NOT DISCLOSED THIS ACTIVITY OF SPECULATION BUSINESS IN THE REGULAR RETURNS FURNISHED; (IX) NOT DISCLOSED THE CLAIM OF CARRYING ON BUSINESS IN SHARES DURING THE SEARCH OPERATION OR AT THE TIME OF REGULAR ASSESSMENTS/STATEMENTS FURNISHED ALONG WITH RETURN OF INCOME.. FRESH CLAIM, CONSEQUENT ON THE SEARCH, INDICATES HI S RESOLVE TO CLAIM THE SET OFF OF SPECULATION LOSS FROM THE REGU LAR INCOME HAD GIVEN THE COLOUR OF REGULAR BUSINESS TO THE SHARE T RANSACTIONS WHICH WERE IN THE NATURE OF SPECULATION BUSINESS; ITA NO.271 TO 273 & 313/08 PAGE 5 OF 18 (X) INSTEAD OF CLAIMING ANY LOSS FROM SHARE BUSINESS BY FILING A REVISED RETURN AS PROVIDED U/S 139(4) TO SET OFF LO SS AGAINST HIS REGULAR INCOME, THE ASSESSEE HAD CHOSEN TO SET OFF LOSS AGAINST THE ALLEGED SHARE BUSINESS IN THE RETURNS SUBSEQUENT TO SEARCH OPERATION SHOWS A DEVISE FOUND TO SET OFF OF THE LO SS AGAINST THE REGULAR INCOME; (XI) SHARE BUSINESS WAS NOT AN ALLIED BUSINESS FOR HIM W HICH WAS RELATED TO HIS ACTUAL TRADE PRACTICE/COMMERCE, BUT, AN INCIDENTAL BUSINESS WITH AN INTENTION TO SPECULATE AND EARN PR OFIT BY BUYING SHARES; (XII) BEING A DIRECTOR OF A CIVIL CONSTRUCTION COMPANY H AVING PROJECTS SITUATED AT VARIOUS PLACES, THE TRANSACTIONS CARRIE D OUT BY HIM WAS OF SPECULATION IN NATURE. THUS, THESE SHARE TRANS ACTIONS WERE TO BE TREATED AS SPECULATION BUSINESS U/S 73 OF THE AC T; & (XIII) ON AN EXAMINATION OF STATEMENTS ATTACHED TO THE RET URN OF INCOME,, IT WAS OBSERVED THAT HE HAD NOT FURNISHED DETAILED TRADING ACCOUNT, P & L ACCOUNT AND BALANCE SHEET SH OWING THE TRANSACTION OF SHARES WAS HIS REGULAR BUSINESS ACTI VITY. 6. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE BEFORE THE LD. CIT(A) FOR REDRESSAL. AFTER DUE CONSIDERATION OF THE ASSESSEE S FORCEFUL CONTENTIONS WHICH WERE REBUTTED BY THE AO, REJOINDER OF THE ASS ESSEE ON THE REMAND REPORT OF THE AO AND ALSO EXPLANATION 2 OF S.28 AND S.43 (5) OF THE ACT, THE LD. CIT (A) HAD DELIBERATED THE ISSUE IN AN EXHAUST IVE AND COMPREHENSIVE MANNER AND HIS CONCLUSION, FOR THE SAKE OF CLARITY, IS SUMMARIZED AS UNDER: (I) THE INCOME/LOSS FROM SHARE TRANSACTIONS WERE NOT SH OWN TO THE DEPARTMENT BEFORE THE DATE OF SEARCH; (II) S.43(5) OF THE ACT PROVIDES AN EXHAUSTIVE DEFINITIO N OF SPECULATIVE TRANSACTION, THAT ANY PURCHASE AND SALE OF SHARES WHICH WERE SETTLED PERIODICALLY OR ULTIMATELY OTHER WISE THAN BY THE ACTUAL DELIVERY OR TRANSFER WAS SPECULATIVE TRA NSACTION; (III) THE PRESENT ASSESSEE INVESTS IN SHARES THROUGH A DE POSITORY PARTICIPANT BY MAINTAINING A DEMAT ACCOUNT IN ING V YSYA AND THE SHARES WERE SOLD OR PURCHASED THROUGH ELECTRONI C MEDIA NOT BY PHYSICAL TRANSFER OR TRANSMISSION OF SHARES; ITA NO.271 TO 273 & 313/08 PAGE 6 OF 18 (IV) THE ASSESSEE HIMSELF TREATS THESE AS BUSINESS AND THUS THESE TRANSACTIONS WERE SPECULATIVE AND THEREFORE HOLD FU RTHER THAT THE BUSINESS DONE BY THE ASSESSEE FALLS WITHIN THE SCOPE OF EXPLN.2 TO S.28 R.W.S.43(5) OF THE ACT AND, THEREFO RE, THE NATURAL COROLLARY WAS THAT IT CANNOT BE ALLOWED TO GET THE BENEFIT OF SET OFF OF LOSS AGAINST THE PROFIT OF ANY OTHER BUSINES S AS PROVIDED U/S 73(1) OF THE ACT WHICH IS IN CONFORMITY WITH TH E DECISION IN THE CASE OF BHIKAM CHAND BETALA & SONS V. ITO REPOR TED IN (2007) 294 ITR 10 (GAU); (V) WHETHER ALL TRANSACTIONS OF SHARES DONE THROUGH A DEPOSITORY PARTICIPANT (DP) AND A DEMAT ACCOUNT (WHEREIN NO AC TUAL DELIVERY WAS INVOLVED) WHEREIN LOSS OCCURRED HAD TO BE TREATED AS SPECULATIVE BUSINESS LOSS AS PER S.43(5) R.W.EXP LN.2 TO S.28 OF THE ACT. THIS WAS APPLICABLE UPTO AY 05-06. CONSE QUENTLY AN AMENDMENT WAS BROUGHT IN BY FINANCE ACT 2005 W.E.F. 1.4.2006 BY INTRODUCTION OF (D) OF THE PROVISIONS OF S.43(5 ) OF THE ACT WHICH READS (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATES REFERRED TO IN CLAUSE (AC) OF S.2 OF THE SECURITIES CONTRACTS (REGULATION) ACT 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION . THE AMENDMENT WAS A SEQUEL TO THE AMENDMENTS BROUGH T IN THE SHAPE OF INTRODUCTION OF THE DEFINITION OF THE TERM DERIVATIVE IN SECURITIES CONTRACTS (REGULATION) ACT, 1956 BY INSE RTION OF S.2(AC) BY THE SECURITIES LAWS (AMENDMENT) ACT 199 9 W.E.F. 22.2.2000 AND RENUMBERED AS CLAUSE (AA) BY THE SECU RITIES LAWS (AMENDMENT ) ACT 2004 W.E.F. 12.10.2004. A NE W SECTION VIZ., S.2 (12B) WAS ALSO INTRODUCED IN THE COMPANIE S ACT, 1956 ( 1 OF 1956) W.E.F. 13.12.2000 TO BRING THE AMENDMENT AT PAR WITH SCR ACT 1956. THE DEFINITION OF DERIVATES THEREIN INCLUDES AMONGST OTHERS SHARES; THE LEGISLATIVE INTENTION OF INTRODUCTION OF PROVIS O (D) TO S.43(5) OF THE ACT WAS TO TREAT THE LOSS ARISING FR OM TRADING OF SHARES (WHICH DO NOT INVOLVE ACTUAL PHYSICAL TRANSM ISSION) AS NON-SPECULATIVE BUSINESS LOSS SO THAT AN ASSESSEE C AN GET THE BENEFIT OF SET OFF AND CARRY FORWARD; (VI) THE AMENDMENT WAS APPLICABLE TO AY 06-07 AND SUBSEQ UENT YEARS, AND, THEREFORE, THE ASSESSEE CANNOT BE ALLOW ED TO TREAT THE LOSSES FROM SHARE TRADING THROUGH DEMAT ACCOUNT S AS NON- ITA NO.271 TO 273 & 313/08 PAGE 7 OF 18 SPECULATIVE BUSINESS LOSS TO AVAIL THE BENEFIT OF S ET OFF AGAINST PROFITS DERIVED FROM OTHER TYPE OF BUSINESS; (VII) THE A.RS ASSERTION THAT ALL TRANSACTIONS IN SHARES HAD BEEN DONE THROUGH DEMAT ACCOUNTS TO PROVE THAT NONE OF THE TR ANSACTION HAD RESULTED IN UNDISCLOSED INCOME EVEN THOUGH THES E TRANSACTIONS WERE NOT SHOWN IN THE RETURNS FILED U/ S 139, BUT, SHOWN ONLY FOR THE FIRST TIME NOW IN COMPLIANCE WIT H THE NOTICE U/S 153A OF THE ACT GOES AGAINST ASSESSEE BECAUSE A LL THE TRANSACTIONS MADE THROUGH DEMAT ACCOUNTS FALLS WITH IN THE DEFINITION OF SPECULATIVE TRANSACTION AND THUS, TH E LOSS INCURRED FROM SUCH TRANSACTIONS WERE SPECULATION LOSS WHICH CAN ONLY BE SET OFF AGAINST ANOTHER SPECULATIVE BUSINESS LOSS ( SIC) PROFIT; - SINCE THE ASSESSEE HAD NO OTHER SPECULATIVE BUSINES S PROFIT, THE LOSS CANNOT BE GIVEN SET OFF; (VIII) IN ALL THESE YEARS, THE ASSESSEE HAD SHOWN I NCOME AFTER UTILIZING THE BENEFIT OF SUCH SET OFF WHICH CANNOT BE ALLOWED AND, THUS , THE AO WAS RIGHT IN DISALLOWING AND ADDING SUCH SPECULA TIVE BUSINESS LOSS. 7. AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE US WI TH THE PRESENT APPEALS. DURING THE COURSE OF HEARING, THE LD. A.R HAD PUT- FORTH HIS SPIRITED ARGUMENTS, THE ESSENCE AND SUBST ANCE OF WHICH, FOR THE SAKE OF CONVENIENCE, ARE SUMMARIZED AS UNDER: (I) THE STAND OF THE AO WAS THE BUSINESS ACTIVITY OF TH E ASSESSEE IN TRADING OF SHARES AS SPECULATIVE WHEREAS THE ASSESS EES PLEADING WAS THAT ALL THE TRANSACTIONS OF TRADING IN SHARES HAVE BEEN CARRIED OUT THROUGH THE DEMAT ACCOUNTS MAINTAINED B Y THE ASSESSEE AND ONCE THE ENTRIES WERE MADE IN THE DEMA T ACCOUNT, PROVISIONS OF S.43(5) WOULD BE NO APPLICATION AND, THEREFORE, THE TRANSACTION WAS NO LONGER SPECULATIVE; (II) DEMAT ACCOUNTS ARE ACCOUNTS MAINTAINED BY DEPOSITO RIES IN RESPECT OF EACH PARTICIPANT. THE FUNCTIONING OF THE DEPOSITORIES WAS GOVERNED BY DEPOSITORIES ACT 1996 AND THE WOR DS DEPOSITORY AND PARTICIPANT WERE DEFINED UNDER T HE SAID ACT AS UNDER: ITA NO.271 TO 273 & 313/08 PAGE 8 OF 18 2(E) DEPOSITORY MEANS A COMPANY FORMED AND REGIS TERED UNDER THE COMPANIES ACT 1956 (1 OF 1956) AND WHICH HAS BE EN GRANTED A CERTIFICATE OF REGISTRATION UNDER SUB-SECTION (1A) OF S.12 OF THE SEBI ACT 1992(15 OF 1992) 2(G) PARTICIPANT MEANS A PERSON REGISTERED AS SUC H UNDER SUB- SECTION (1A) OF S.12 OF THE SEBI ACT S.7 OF THE DEPOSITORIES ACT, 1996 SPEAKS OF REGIS TRATION OF TRANSFER OF SECURITIES WITH DEPOSITORY AND THE RELE VANT PROVISIONS READS: 7(1) EVERY DEPOSITORY SHALL, ON RECEIPT OF INTIMAT ION FROM A PARTICIPANT, REGISTER THE TRANSFER OF SECURITY IN T HE NAME OF THE TRANSFEREE. (2) IF A BENEFICIAL OWNER OR A TRANSFEREE OF ANY SECURITY SEEKS TO HAVE CUSTODY OF SUCH SECURITY THE DEPOSITORY SHALL INFORM THE ISSUER ACCORDINGLY. S.8 SPEAKS OF OPTION TO RECEIVE SECURITY CERTIFICAT E OR HOLD SECURITIES WITH THE DEPOSITORY AND THE RELEVANT PRO VISIONS READ: 8. (1) EVERY PERSON SUBSCRIBING TO SECURITIES OFFE RED BY AN ISSUER SHALL HAVE THE OPTION EITHER TO RECEIVE THE SECURIT Y CERTIFICATES OR HOLD SECURITIES WITH A DEPOSITORY; (2) WHERE A PERSON OPTS TO HOLD A SECURITY WIT H A DEPOSITORY, THE ISSUER SHALL INTIMATE SUCH DEPOSITORY THE DETAI LS OF ALLOTMENT OF THE SECURITY, AND ON RECEIPT OF SUCH INFORMATION TH E DEPOSITORY SHALL ENTER IN ITS RECORDS THE NAME OF THE ALLOTTEE AS THE BENEFICIAL OWNER OF THAT SECURITY. S.9 SPEAKS THAT THE SECURITIES IN DEPOSITORIES TO B E IN FUNGIBLE FORM AND THE RELEVANT PROVISIONS OF WHICH READ: 9 (1) ALL THE SECURITIES HELD BY A DEPOSITORY SHAL L BE DEMATERIALIZED AND SHALL BE IN A FUNGIBLE FORM. (2) NOTHING CONTAINED IN S.153,153A,153B,187B,1 87C AND 372 OF THE COMPANIES ACT 1956 (1 TO 1956) SHALL APPLY T O A DEPOSITORY IN RESPECT OF SECURITIES HELD BY IT ON BEHALF OF TH E BENEFICIAL OWNERS; (III) THE ABOVE PROVISIONS MAKE THE PROCEDURE TO BE ADOPT ED BY A DEPOSITORY WHILE MAINTAINING DEMAT ACCOUNTS IN RESP ECT OF EACH OF THE PARTICIPANTS. THE TRANSFER AND ISSUE OF SHARES WERE INDICATED BY THE ENTRIES IN THE DEMAT ACCOUNT AND THE SECURIT IES WERE ITA NO.271 TO 273 & 313/08 PAGE 9 OF 18 MAINTAINED IN DEMATERIALIZED AND FUNGIBLE FORM. TH E MEANING OF DEMAT ACCOUNT IS THAT IT IS AN ACCOUNT WHERE SHARES ARE HELD IN A DEMATERIALIZED FORM. UNLESS THE SHARES ARE TRANSFE RRED TO THE SHARE HOLDER, NO ENTRIES WOULD BE MADE IN THE DEMAT ACCOUNT. ONCE AN ENTRY IS MADE IN THE DEMAT ACCOUNT, IT IS A S GOOD AS THE SHARE HOLDER HAS TAKEN DELIVERY OF SHARES, HE IS IN POSSESSION OF SHARES AND THE SHARES ARE TRANSFERRED TO HIM. TO I LLUSTRATE FURTHER, WHAT IS A BANK ACCOUNT MAINTAINED BY BANK IN RESPECT OF ITS ACCOUNT HOLDER WITH REGARD TO HIS TRANSACTION O F MONEY, A DEMAT ACCOUNT IS A SIMILAR ACCOUNT MAINTAINED BY A DEPOSITORY IN RESPECT OF A PARTICIPANT IN REGARD TO HIS TRANSACTI ON OF SHARES; (IV) THUS, ONCE THE TRANSACTIONS ARE ENTERED IN THE DEMA T ACCOUNT, THE CONCEPT OF SPECULATION DOES NOT APPLY AND THE PROVI SIONS OF S.43(5) HAVE NO APPLICATION; (V) THE WORDS DERIVATIVES AND SECURITIES ARE DEFINE D IN SECURITY CONTRACTS (REGULATION) ACT 1956 AND THE DEFINITIONS READ: 2. (AC) DERIVATIVE INCLUDES (A) A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, L OAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR C ONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; (B) A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX OF PRICES, OF UNDERLYING SECURITIES (H) SECURITIES INCLUDE (I) SHARES, SCRIPS, STOCKS, BONDS, DEBENTURES, DEBE NTURE STOCK OR OTHER MARKETABLE SECURITIES OF A LIKE NATURE IN OR OF ANY INCORPORATED COMPANY OR OTHER BODY CORPORATE; (IA) DERIVATIVE; . (VI) THUS, SHARES AND DERIVATIVES ARE TWO DISTINCT T ERMS DEFINED FOR THE PURPOSE OF SECURITIES CONTRACTS(REGULATION)ACT, 1956. AS THE ASSESSEE HAD TRANSACTED IN SHARES WHICH HAVE A DIST INCT DEFINITION AND CANNOT BE BROUGHT UNDER DERIVATIVES WHICH HAD BEEN DEFINED SEPARATELY; (VII) SINCE THE ENTRIES WERE AVAILABLE IN THE DEMAT ACCOU NT UNDER LAW, THE SHARES STAND TRANSFERRED TO THE ASSESSEE AND, T HEREFORE, THE PROVISIONS OF S.43(5) HAVE NO APPLICATION; (VIII) THE ACTIVITY OF THE ASSESSEE WAS TO BE CONSIDERED A S BUSINESS ACTIVITY AND LOSS CLAIMED BE ALLOWED; & (IX) BUTTRESS HIS ARGUMENTS, STRONG RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (A) C.BHARATH KUMAR V. DCIT (2005) 004 SOT 0593 (BANG); ITA NO.271 TO 273 & 313/08 PAGE 10 OF 18 (B) J.D.MAJETHIA V. DCIT ITA NO:1024/BANG/2007 DT:14.11.08; (C) REETESH MEHTA V. ACIT ITA NO:1231/B/08 DT: 13.02.09; (D) R.B.K.SECURITIES PVT.LTD. V. ITO 2008-TIOL-378- ITAT-MUM; (E) P.S.KAPUR V. ACIT (2009) 120 TTJ (JP) 422 7.1. ON THE OTHER HAND, THE LD. D R WAS VERY SPECIF IC IN HER URGE THAT THE AO AS WELL AS THE LD.CIT (A) HAVE DELIBERATED THE I SSUE AT LENGTH AND BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE HAD NOT INVOLVED IN REGULAR SHARE BUSINESS AND IT WAS INCIDENTAL TO HIS REGULAR BUSINESS WHICH WERE IN THE NATURE OF SPECULATION. IT WAS, THEREFO RE, PLEADED THAT THE STAND OF THE LOWER AUTHORITIES REQUIRES TO BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND ALSO PERUSED THE RELEVANT RECORDS AND THE VOLUMINOUS PAP ER BOOKS I, II & III FURNISHED BY THE LD. A R DURING THE COURSE OF HEAR ING. 8.1. TO PUT IT IN A NUT-SHELL, THE CRUX OF THE ISSU E IS - WHETHER THE ACTIVITY OF THE ASSESSEE WHO INDULGED IN SHARE TRANSACTION W AS BUSINESS OR SPECULATIVE ? 8.2. LET US NOW ANALYZE THE VARIOUS JUDICIAL PRECED ENTS ON THE ISSUE TO ARRIVE AT A CONCLUSION: (1) C.BHARATH KUMAR V. DCIT (2005) 004 SOT 0593 (BANG) : THE ISSUE BEFORE THE HONBLE TRIBUNAL, IN BRIEF, WA S THAT THE ASSESSEE, AN INDIVIDUAL, HAD INDULGED IN BUSINESS OF ELECTRICAL GOODS, BESIDES ENGAGED IN TRADING IN SHARES IN WHICH INCURRED A LOSS. HE HAD RESORTED TO SET OFF HIS SHARE LOSS AGAINST THE BUSINESS INCOME AND ARRIVED AT A NET LOSS. ON AN EXAMINATION, THE AO FOUND THAT THE TRADING IN SHARE S WAS DONE THROUGH SUNIL AGENCIES AND CONCLUDED THAT WHEREVER TRANSACT IONS IN SHARES HAVE TAKEN PLACE, THERE WAS NO ACTUAL DELIVERY OF SHARES AND, THUS, TREATED SUCH ITA NO.271 TO 273 & 313/08 PAGE 11 OF 18 TRANSACTIONS AS IN THE NATURE OF SPECULATIVE TRANSA CTION FALLING WITHIN THE SCOPE OF S.43(5) OF THE ACT WHICH WAS CONFIRMED BY THE FIRST APPELLATE AUTHORITY. AFTER ANALYZING THE RIVAL SUBMISSIONS, EXTENSIVELY QUOTING THE PROVISIONS OF S.43(5) AND ALSO DRAWING STRENGTH FR OM THE RULING OF THE HONBLE APEX COURT IN THE CASE OF DUNI CHAND RATA RIA V. BHUWALKA BROTHERS LTD. AIR 1955 SC 182 - WHEREIN THE HONBLE COURT HELD THAT THE DELIVERY CONTEMPLATED BY SECTION 43(5) NEED NOT BE ACTUAL BUT EVEN CONSTRUCTIVE OR IMPLIED CONCLUDED THAT THE ASSES SING OFFICER MAY HAVE TO ACCEPT THE CASE OF CONSTRUCTIVE OR IMPLIED DELIVERY AS THE ACTUAL DELIVERY WITHIN THE MEANING OF THE AFORESAID PROVISIONS . (2) J.D.MAJETHIA V. DCIT ITA NO:1024/BANG/2007 DT:14. 11.08: THE ISSUE BEFORE THE HONBLE TRIBUNAL WAS THAT THE ASSESSEE WHO WAS DOING THE BUSINESS OF PAN PRODUCTS. THOUGH HE DID NOT EN GAGE IN TRADING OF SECURITIES, HE WAS ONLY AN INVESTOR IN SECURITIES, AND ACCORDINGLY CLAIMED THE CAPITAL GAIN AROSE FROM THE TRANSFER OF SHARE AS ST CG AND THE LOSS OF RS.11.14 LAKHS AS STCL. THIS WAS NOT FINDING FAVOU R EITHER WITH THE AO OR BEFORE THE FIRST APPELLATE AUTHORITY. THE HONBLE TRIBUNAL, AFTER ANALYZING THE SECURITIES CONTRACTS (REGULATIONS) ACT, 1956 AN D ALSO CONSIDERING THE ASSESSEES CONTENTIONS, WAS OF THE VIEW THAT THE AS SESSEE WAS NOT TRADING IN SHARES, BUT, WAS ONLY AN INVESTOR. EXTENSIVELY QUOT ING THE FINDINGS OF THE HONBLE ITAT, MUMBAI BENCH IN ITA NO: 8726/2004 AND ALSO IN THE CASE OF RBK SECURITIES PVT. LTD. V. ITO REFERRED SUPRA, THE HONBLE TRIBUNAL WAS OF THE VIEW THAT - 9..WE HAVE ALREADY POINTED OUT THAT AO HAS CONSIDERED THE GAIN FROM SALE AND SHARES UNDER THE HEAD CAPITAL GAIN AND HAS NOT TREATED THE SAME AS BUSINESS INCOM E. HENCE, PROFIT OR LOSS FROM DERIVATIVES IS ON THE SAME LINE S AND IS PART OF CAPITAL GAIN OR LOSS. SECTION 43(5) IS APPLICABLE WHEN THE ASSESSEE IS IN BUSINESS AND CERTAIN BUSINESS TRANSA CTIONS ARE TO BE TREATED AS SPECULATIVE. IN THE CASE OF THE ASSE SSEE, SECTION 43(5) IS NOT APPLICABLE. SECTION 73 IS ALSO APPLIC ABLE WHEN THERE IS A LOSS IN SPECULATION BUSINESS AND IS NOT APPLICABLE WHEN GAIN IS TO BE TAXED UNDER THE HEAD CAPITAL GAI N (3). REETESH MEHTA V. ACIT ITA NO:1231/B/08 DT: 1 3.02.09 : IN THIS CASE, THE ASSESSEE, AN INDIVIDUAL, WAS HAVI NG INCOME FROM GRANITE BUSINESS. HE HAD ALSO TRADES IN SHARES WHICH WERE CATEGORIZED AS TRADING IN DELIVERY BASED SCRIPS AND INTRA-DAY TRADING, BESIDE S TRADED IN DERIVATIVES AND OPTIONS OF INDICES. THE LOSS ON DERIVATIVE TRA DING OF RS.32.10 LAKHS WAS TREATED AS NORMAL BUSINESS LOSS BY THE ASSESSEE ON THE PLEA THAT THERE CANNOT BE ANY DELIVERY IN DERIVATIVES TRADING AS PER LAW. THE AO WAS, HOWEVER, OF THE VIEW THAT DERIVATIVE TRADING WAS A FINANCIAL IN STRUMENT AND INDEX WAS A ITA NO.271 TO 273 & 313/08 PAGE 12 OF 18 SECURITY AND TRADING IN INDICES INVOLVES SPECULATIO N SINCE THERE WAS NO DELIVERY AND, THUS, TREATED THE TRADING LOSS IN DER IVATES AS SPECULATION LOSS. THE STAND OF THE AO WAS CONFIRMED BY THE CIT(A) ON THE GROUND THAT DERIVATIVE WAS A CONTRACT WHICH DERIVES ITS VALUE F ROM PRICES OR INDEX OF PRICES OF UNDERLYING SECURITIES WHICH INVOLVE A CON TRACT AGREEING TO BUY OR SELL AT A FUTURE DATE OF SECURITY AND SPECULATION D OES NOT NECESSARILY RESULT IN DELIVERY OF THE SAID SECURITIES. AFTER MUCH DELIBE RATION, THE HONBLE TRIBUNAL HAD RULED THUS: 5..ONCE THE DERIVATIVE HAS BEEN HELD T O BE NON- SPECULATIVE TRANSACTION IN ACCORDANCE WITH THE PROM ULGATION OF THE AMENDED PROVISIONS EVEN PRIOR TO IT, ON THE FACTS AS HAS BE EN BROUGHT ON RECORD, DO NOT REQUIRE ANY FURTHER DELIBERATION FOR CONSIDERIN G THE CASE OF THE ASSESSEE IN ITS (SIC) HIS FAVOUR.. (4) R.B.K.SECURITIES PVT.LTD. V. ITO 2008-TIOL-378 -ITAT-MUM: THE ASSESSEE HAD DEALT IN DERIVATIVE INSTRUMENT AND INCURRED LOSS WHICH HE TREATED IT AS BUSINESS LOSS. HOWEVER, THE AO TOOK A DIFFERENT VIEW THAT IT WAS A SPECULATION LOSS WHICH WAS CONFIRMED BY THE CIT ( A). WHEN THE ISSUE WENT BEFORE THE TRIBUNAL, THE HONBLE TRIBUNAL RULED THA T 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE CASE OF DCIT V. SSKI INVESTORS SERVICES (P) LTD. (SUPRA) [2 008 113 TTJ (MUMBAI) 511], THE MUMBAI TRIBUNAL HAS HELD THAT THE DEALING S IN THE DERIVATIVE IS A SEPARATE KIND OF TRANSACTION WHICH DOES NOT INVOLVE ANY PURCHASE AND SALE OF SHARES AND THEREFORE LOSS ON ACCOUNT OF DERIVATIVE TRADING CAN NOT BE TREATED AS SPECULATIVE LOSS TO THE ASSESSEE . IN THE CASE OF C.BHARATH KUMAR V. DCIT (SUPRA), THE BANGALORE TRIBUNAL ANSWERED TH E ISSUE OF ACCEPTANCE OF CONSTRUCTIVE OR IMPLIED DELIVERY AS ACTUAL DELIV ERY WITHIN THE MEANING OF PROVISION OF SECTION 43(5) OF THE ACT, IN THE AFFIR MATIVE (5) P.S.KAPUR V. ACIT (2009) 120 TTJ (JP) 422: IT WAS HELD BY THE HONBLE TRIBUNAL THAT THE OBSER VATION OF THE AO THAT INSERTION OF CL. (D) IN PROVISO TO S.43 (5) W.E.F. 1 ST APRIL, 2006 SHOWS THAT PRIOR TO THIS DATE THE DERIVATIVE TRANSACTION WAS S PECULATIVE TRANSACTION IS INCORRECT AS THIS PROVISION HAS BEEN INSERTED ONLY TO CLARIFY THE DOUBT AS IS EVIDENT FROM THE MEMORANDUM EXPLAINING THE PROVISO. HENCE, IN THE ABSENCE OF ANY SPECIFIC PROVISION IN THE ACT TO THE CONTRARY, IT CANNOT BE SAID THAT EARLIER DERIVATIVE TRANSACTIONS WERE SPECULATI VE TRANSACTIONS. OF COURSE THIS SECTION IS NOT SPECIFICALLY MADE RETROSPECTIVE BUT CONSIDERING THE LEGISLATIVE INTENT ITS RETROSPECTIVITY IS APPARENT BY NECESSARY IMPLICATION. AS PER PROVISIONS OF S.73, SPECULATIVE LOSS CAN BE ADJ USTED ONLY AGAINST SPECULATIVE PROFIT. IF CL. (D) TO S.43(5) IS CONSI DERED AS A PROSPECTIVE AMENDMENT AND TRANSACTION IN DERIVATIVES AS SPECUL ATIVE, THEN THE LOSES IN ITA NO.271 TO 273 & 313/08 PAGE 13 OF 18 DERIVATIVE PRIOR TO AMENDMENT WOULD BE TAKEN AS SPE CULATIVE LOSS AND PROFIT AFTER AMENDMENT AS BUSINESS INCOME. 8.3. IN OVER-ALL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE ISSUE AND ALSO RESPECTFULLY FOLLOWING THE JUDICIAL PRECED ENTS REFERRED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING AND ADDING SUCH SPECULATIVE BUSINESS LO SSES . THE AO IS THEREFORE DIRECTED TO ALLOW THE LOSS CLAIMED BY THE ASSESSEE AS BUSINESS LOSS FOR THE AYS UNDER DISPUTE. IT IS ORDERED ACCORDI NGLY. ITA NO: 313/08 AYS 00-01 [BY REVENUE] : 9. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE DERIVES INCOME FROM SALARY, HOUSE PROPERTY AND OTHER SOURCES. THE ASSESSEE WAS ONE OF THE DIRECTORS OF M/S.SARAVANA CONSTRUCTIONS PVT.LTD . THE RESIDENTIAL PREMISE OF THE ASSESSEE WAS SUBJECTED TO ACTION U/S 132 OF THE ACT ON 8.10.2003. IN COMPLIANCE TO NOTICE U/S 153A OF THE ACT, THE ASSESSEE FURNISHED A ROI, ADMITTING AN INCOME OF RS.263459/- . HOWEVER, THE AO MADE THE ADDITION OF RS.1159426/- BEING INCOME FROM SPECULATION BUSINESS ON THE GROUND THAT (I) THE ASSESSEE HAD NOT FILED DETAILED TRADING ACCOUNT , PROFIT AND LOSS ACCOUNT AND BALANCE SHEET SHOWING THE TRANSACTION O F SHARES AS HIS REGULAR BUSINESS ACTIVITY; (II) THAT THE ASSESSEE HAD NOT INVOLVED IN REGULAR SHAR E BUSINESS AND IT WAS INCIDENTAL TO HIS REGULAR BUSINESS WHICH WER E IN THE NATURE OF SPECULATION; (III) THE CLAIM OF THE ASSESSEE WITH REGARD TO BUSINESS O F SHARES WAS REJECTED AND THE ENTIRE SHARE TRANSACTIONS WERE TRE ATED AS SPECULATION BUSINESS AND THE PROVISIONS OF S.73 W ERE APPLIED WHILE DETERMINING THE ASSESSEES INCOME; & (IV) THE ENTIRE SALE CONSIDERATION AMOUNTING TO RS.11.59 LAKHS AS STCG EARNED BY THE ASSESSEE FROM SPECULATION BUSINE SS WAS BROUGHT TO TAX. ITA NO.271 TO 273 & 313/08 PAGE 14 OF 18 10. ON AN APPEAL, AFTER CONSIDERING THE RIVAL SUBM ISSIONS, PERUSING THE REMAND REPORT OF THE AO AND ALSO THE REJOINDER OF THE ASSESSEE TO THE REMAND REPORT, THE LD.CIT (A) HAD OBSERVED THUS (ON PAGE 19) THE MOOT QUESTION IN THIS CASE IS THA T AO DURING THE COURSE OF ASSESSMENT PROCEEDING HAD FAILED TO SCRUT INIZE THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE ON 28.2.06, CALL ING FOR DETAILS OF PURCHASE AND SALES OF SHARES MENTIONED THEREIN. TH EREFORE, THE AO WAS GIVEN AN OPPORTUNITY IN THE SHAPE OF REMAND REPORT TO EXAMINE THE SHARE TRANSACTIONS MADE BY THE APPELLANT, SINCE THE SEIZE D DOCUMENTS NO.A/RR/01 PAGE NO:19,21 AND 25 AND A/RR/02 PAGE NO :73 ALSO DEMONSTRATE THAT THE APPELLANT HAD CONSISTENTLY DON E SHARE DEALINGS. IN THE REMAND REPORT, THE AO HAD NOT DOUBTED THE GENUI NENESS OF SUCH TRANSACTIONS. HE HAS, HOWEVER, CONCLUDED THAT THE ASSESSEE WAS ENTITLED TO CLAIM FOR SET OFF LOSS ON THIS ACCOUNT OBSERVING THAT THE BUSINESS OF SHARE DEALINGS DONE BY THE ASSESSEE SQUARELY COMES UNDER THE SUB-HEAD SPECULATION BUSINESS AND AS PER S.73(1) OF I.T. A CT ONLY SUCH LOSS CAN BE SET OFF AGAINST A PROFIT EARNED FROM SPECULATION BU SINESS. THE ARGUMENT OF AO IS CONCERNED. THE FACTS OF THESE CASES (YEAR S) IS DIFFERENT. IN THIS YEAR, THE APPELLANT HAS EARNED PROFIT OF RS .1,51,149 /- AND RS.6,02,301/- FOR A.YS .2000-01 AND 2004-05 RESPECTIVELY AND HAD NOT CLAIMED ANY S ET OFF OF LOSS THEREON. KEEPING IN VIEW OF THE ABOVE, THE ADDITIONS OF RS. 11,59,426/- AND RS.16,32,817/- ARE DELETED .. 11. AGGRIEVED, THE REVENUE CAME UP WITH THE PRESENT APPEAL. THE MAIN GRIEVANCE OF THE REVENUE IS THAT (1) THE LEARNED CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.1159425/- MADE (2) (A) OUT OF 5000 SHARES [GLENMARK PHARMA] FOR RS.5 LAKHS APPLIED FOR, THE ALLOTMENT WAS ONLY FOR 50 SHARES AND THE BALANCE OF RS.4.90 LAKHS WAS REFUNDED THROUGH DD; (B) THE ASSESSEE HAD SHOWN SALE OF 200 SHARES WHEREAS ALLOTMENT WAS ONLY FOR 50 SHARES WITH NO OPENING STOCK; NO DOCUMENTARY EVIDENCE WAS PRODUCED BEFORE THE CIT(A) WITH REGARD TO PURCHASE OF 250 SHARES OF M/S.ZENITH INFO TECH LTD FOR RS.27,500/-; & (C ) ADDITIONS TO THE EXTENT OF RS.517500/- [4 90000 + 27500] TO BE SUSTAINED . 11.1. DURING THE COURSE OF HEARING, THE LD. D.R. V EHEMENTLY ARGUED THAT THE LD.CIT HAD FAILED TO NOTICE THAT - ITA NO.271 TO 273 & 313/08 PAGE 15 OF 18 (I) THE ASSESSEE HAD NOT PROVED THE PURCHASES AND INVE STMENTS MADE IN THE SHARES OF M/S. GLENMARK PHARMA; (II) THAT THE ASSESSEE WAS ALLOTTED ONLY 50 SHARES AND T HE BALANCE AMOUNT OF RS.4.90 LAKHS OUT OF RS.5 LAKHS, WAS REFU NDED TO THE ASSESSEE; (III) THE ASSESSEE HAS SHOWN THE SALE OF 200 SHARES OF M/ S.GLENMARK WHEREAS THE ASSESSEE WAS ALLOTTED ONLY 50 SHARES WI TH NO OPENING STOCK; (IV) NO DOCUMENTARY PROOF WAS PRODUCED FOR PURCHASE OF 2 50 SHARES OF M/S.ZENITH INFOTECH LTD. FOR RS.27500/-, EVEN THOUGH AN OPPORTUNITY WAS AFFORDED TO PRODUCE THE BOOKS OF ACCOUNT IN CONNECTION WITH THE WRITTEN SUBMISSION MADE BY T HE ASSESSEE BEFORE THE CIT(A) IN VIEW OF THE ABOVE, IT WAS PLEADED THAT THE ADDIT ION TO THE EXTENT OF RS.5,17,500/- TO BE SUSTAINED. 11.2. ON THE OTHER HAND, THE LD.A.R CONTENTED THAT (I) WHILE COMPUTING THE P & L ACCOUNT, THE ACCOUNTANT BY MISTAKE SHOWN 2500 SHARES TO HAVE BEEN BOUGHT FOR RS.5 LAKH S AND 2450 SHARES TO HAVE BEEN SOLD FOR RS.4.90 LAKHS AND THE BALANCE OF 50 SHARES WAS SHOWN IN STOCK; THE AMOUNT OF RS.4.90 L AKHS SHOWN EXCESSIVELY IN PURCHASES AND ALSO IN SHARES WAS A C LERICAL ERROR; (II) THE PURCHASE OF 250 SHARES OF M/S.ZENITH INFOTECH L TD. WAS A CASH PURCHASE WHICH HAS BEEN ACCOUNTED FOR IN THE BOOKS MAINTAINED AND THE CASH BOOK WAS PRODUCED FOR VERIFICATION DUR ING THE HEARING. THE PURCHASE OF SHARES FOR RS.27500/- WAS SHOWN UNDER PURCHASES. DURING THE YEAR, THE SHARES WER E NOT SOLD AND THEY APPEAR IN THE DETAILS OF CLOSING STOCK. THE A SSESSEE MAINTAINS A DEMAT ACCOUNT THE OWNERSHIP OF THE SHAR ES DURING THE PREVIOUS YEAR WAS REFLECTED IN THE DEMAT ACCOUNT. THUS, THERE WAS NO DISCREPANCY. 12. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS. WE SHALL DEAL WITH THE GRIEVANCES OF THE REVENUE AS UNDER: ITA NO.271 TO 273 & 313/08 PAGE 16 OF 18 (I) WITH REGARD TO DELETION OF RS.1159426/- WHICH W AS ADDED BY THE AO ON THE GROUND THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO BUSINESS OF SHARES IS REJECTED AND THE ENTIRE SHARE TRANSACTIONS ARE TREATED AS SPECULATION BUSINESS AND, ACCORDINGL Y, THE PROVISIONS OF SEC.73 OF THE I.T.ACT IS APPLIED WHIL E DETERMINING THE ASSESSEES INCOME , WE WOULD LIKE TO EMPHASIS THAT FOR THE REASONS SET-OUT IN THE FORE-GOING PARAGRAPHS, THE A SSESSEES TRANSACTION IN SHARES CANNOT BE CATEGORIZED AS SPE CULATIVE AND, THUS, THE AO WAS NOT JUSTIFIED IN HIS STAND ON THIS COUNT. IT IS ORDERED ACCORDINGLY. (II) HOWEVER, WE FIND THAT THERE IS A STRONG FORCE IN TH E ARGUMENT OF THE LD. D.R. THAT THE LD.CIT(A) HAD FAILED TO NOTIC E THE DISCREPANCIES POINTED OUT BY THE REVENUE IN ITS GRO UNDS RAISED SUPRA. WITH REGARD TO SHARES OF M/S.GLENMARK, ON A CLOSE SCRUTINY OF THE P & L ACCOUNT OF THE ASSESSEE, WE F IND THAT THERE IS SUBSTANCE IN THE CONTENTION OF THE LD. D.R. THI S FACT HAS ALSO BEEN CONCEDED BY THE LD.A.R UNCONDITIONALLY BY PLAC ING THE BLAME AT THE DOORSTEP OF THE ACCOUNTANT WHO PREPARE D THE P & L ACCOUNT. IN RESPECT OF PURCHASE OF 250 SHARES OF M/S.ZENITH INFOTECH LTD. FOR RS.27500/-, THE REVENUES ASSERTION THAT N O DOCUMENTARY EVIDENCE WAS PRODUCED EVEN AFTER AFFORD ING AN OPPORTUNITY TO THE ASSESSEE IS GAINING CREDENCE THA T EVEN AT THIS STAGE THE ASSESSEE HAD NOT BROUGHT ON RECORD T O SUBSTANTIATE THAT HE HAD INVESTED IN SHARES OF ZENI TH INFOTECH ITA NO.271 TO 273 & 313/08 PAGE 17 OF 18 LTD. AND THAT THE SUBMISSION OF THE LD.A.R IN THIS REGARD IS LACKING CREDENCE. IN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMST ANCES OF THE ISSUE AND ALSO THE VERY FACT THAT THIS ASPECT HAD N OT BEEN LOOKED INTO BY THE LD.CIT (A) AND LD. AO, PERHAPS, BY OVER- SIGHT, WE ARE OF THE CONSIDERED VIEW THAT THERE IS CONSIDERABLE FORCE IN THE ARGUMENT OF THE REVENUE. THEREFORE, I N THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE AMOUNTING TO RS.5,17,500/- [RS.490000 + 27500] BACK TO THE FILE OF LD. AO WITH DIRECTIONS TO VERIFY THE FACTS AND PASS APPROP RIATE ORDER AS PER LAW. 13. IN THE RESULT, (I) THE ASSESSEES APPEALS FOR THE AYS: 2001-02, 2002- 03 AND 2003-04 ARE ALLOWED; (II) THE REVENUES APPEAL FOR THE AY: 2000-01 IS PARTLY ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF OCTOBER, 2009. SD/- SD/- (K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 16 TH OCTOBER, 2009. DS/- ITA NO.271 TO 273 & 313/08 PAGE 18 OF 18 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.