M/s Sadhana Stocks & Securities Pvt. Ltd., Mumbai V. PCIT-4, Kolkata, Kolkata

ITA 759/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0611 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Keywords: Business income; Transactions in derivatives; Source of fund; Speculation loss
• Section: 143(3); 43(5); 263; 154

Judgement Text

1 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 759/KOL./2017 ASSESSMENT YEAR: 2012-2013 M/S. SADHANA STOCKS & SECURITIES PVT. LIMITED,..... ......................APPELLANT FLAT NO. 2701/2702, RAHEJA ATLANTIS SOCIETY, GANPATRAO JADAM MARG, LOWER PAREL, MUMBAI-400 013 [PAN: AADCS 5139 E] -VS.- PRINCIPAL COMMISSIONER OF INCOME TAX-4, KOLKATA,... ............RESPONDENT AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI RAJESH S. SHAH, C.A., FOR THE ASSESSEE MD. USMAN, CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : OCTOBER 12 , 2017 DATE OF PRONOUNCING THE ORDER : DECEMBER 22, 2017 O R D E R PER SHRI P.M. JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA-IV, K OLKATA DATED 22.02.2017 PASSED UNDER SECTION 263 OF THE INCOME T AX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF PROCESSING AND EXPORTS OF SEA-FOOD ITEMS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 29.09.2012 DECLARING LOSS OF RS.66,29,010/-. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 02.03.2015, THE LOSS AS DECLARED BY THE ASSESSEE-COMPANY IN ITS RETURN OF INCOME WAS AC CEPTED BY THE ASSESSING OFFICER. 3. SUBSEQUENTLY THE RECORDS OF THE ASSESSMENT IN TH E CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS EXAMI NED BY THE LD. 2 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 PRINCIPAL CIT AND ON SUCH EXAMINATION, HE FOUND THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE A CCORDINGLY ISSUED A SHOW-CAUSE NOTICE UNDER SECTION 263 TO THE ASSESSEE -COMPANY POINTING OUT THE SAID ERROR AS UNDER:- IT WAS OBSERVED THAT THE ASSESSEE DERIVED IFS MAI N INCOME FROM TRADING IN SHARES. OTHER SOURCES OF INCOME WER E INTEREST BROKERAGE. DIVIDEND ETC. ASSESSEE, INTER A LIA, DECLARED RS.1,45,405/- AS SPECULATION PROFIT UNDER OTHER INCOME. IN PROFIT & LOSS ACCOUNT THE ASSESSEE DEBIT ED RS.1,75,12,686/- (INCLUDED IN SCHEDULE-13/14) UNDER THE HEAD 'DERIVATIVE LOSS'. TO DETERMINE INCOME FROM BU SINESS, THE ASSESSEE TREATED THIS LOSS 'OTHER THAN SPECULAT ION' AND THE SAME WAS ACCEPTED IN ASSESSMENT. HENCE ACTUAL L OSS FROM SPECULATION BUSINESS WAS RS.1,73,67,281/- (1,75,12,686 - 1,45,405). AS PER THE DECISION OF TH E HONORABLE DELHI HIGH COURT IN CIT VS. DLF COMMERCIA L (2013) 35 TAXMAN 280]. LOSS IN EQUITY DERIVATIVE IS TO BE TREATED AS SPECULATIVE LOSS. HENCE TO DETERMINE INC OME FROM BUSINESS, THIS DERIVATIVE LOSS' WAS REQUIRED TO BE DISALLOWED. 4. IN REPLY TO THE NOTICE ISSUED BY THE LD. PRINCIP AL CIT UNDER SECTION 263, THE FOLLOWING EXPLANATION WAS OFFERED BY THE A SSESSEE IN WRITING:- IN THE SAID ASSESSMENT THE LEARNED OFFICER ALLOWED DERIVATIVE LOSS OF RS.1,75,12,686/- AGAINST OTHER B USINESS PROFIT. IT MAY BE STATED THAT THE ASSESSING OFFICER HAS RIGHTLY INTERPRETED THE PROVISION OF SECTION 43(5) AND RELEVANT PROVISIONS OF S. 73. THE DECISION OF THE A O IS SUPPORTED NUMBER OF JUDGMENTS AVAILABLE AT THAT TIM E. THEREFORE THE DCIT HAS RIGHTLY ALLOWED THE SAID LOS S. HOWEVER, NOW YOUR HONOUR IS PROPOSING TO REVISE UND ER SECTION 263 OF THE ACT. BEFORE DOING IT, WE WOULD LIKE TO INVITE YOUR ATTE NTION TO THE RECENT CALCUTTA HIGH COURT DECISION (WHICH IS JURISDICTION COURT OF THE ASSESSEE) IN THE CASE OF ASIAN FINANCIAL SERVICES LIMITED V. COMMISSIONER OF INCOM E-TAX- 3,KOLKATA[2016J 70 TAXMANN.COM 9 (CALCUTTA) HAS HEL D THAT DERIVATIVE LOSS CAN BE SET OFF AGAINST OTHER LOSS. THE COPY OF TIRE SAID JUDGMENT IS ATTACHED HEREWITH FOR YOUR READY REFERENCE. IT MAY ALSO BE STATED THAT IN THE SAID J UDGMENT THE DECISION OF DLF COMMERCIAL WHICH HAS BEEN REFER RED IN OUR NOTICE HAS BEEN CONSIDERED AND HELD THAT DERIVA TE LOSS 3 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 IS DIFFERENT FROM SHARE LOSS AND HENCE SAME CAN BE ADJUSTED AGAINST OTHER PROFIT. IN VIEW OF THE ABOVE LIE WOULD REQUEST YOU TO DROP THE PROCEEDINGS INITIATED UNDER SECTION 263 OF THE ACT. CONDITIONS OF S.263 ARE NOT FULFILLED SINCE THERE I S NO ORDER WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE SIN CE THERE IS NO LOSS OF REVENUE. WE WOULD FURTHER LIKE TO STATE AS UNDER:-IN THIS R ESPECT YOUR ATTENTION IS DRAWN TO THE PROVISIONS OF SECTIO N 43(5) OF THE ACT- 43(5) 'SPECULATIVE TRANSACTION' MEANS A TRANSACTIO N IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHORES, IS PERIODIC ALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DEL IVERY OR TRANSFER OF THE COMMODITY OR SCRAPS: PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE- (A) A CONTRACT IN RESPECT OF RAW MATERIALS OR MERC HANDISE ENTERED INTO BY A PERSON IN THE COURSE OF HIS MANUF ACTURING OR MERCHANTING BUSINESS TO GUARD AGAINST LOSS THROU GH FUTURE PRICE FLUCTUATIONS IN RESPECT OF HIS CONTRAC TS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD HIM, OR (B) A CONTRACT IN RESPECT OF STOCKS AND SHARES ENT ERED INTO BY A DEALER OR INVESTOR THEREIN TO GUARD AGAINST LO SS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUA TIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWA RD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF JOBBING OR ARBITRAGE T O GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER; [OR] (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN ORE COGNIZED STOCK EXCHANGE, SHALL N OR HE DEEMED TO BE A SPECULATIVE TRANSACTION. [EXPLANATION. -FOR THE PURPOSES OF THIS CLAUSE, T HE EXPRESSIONS- (I) 'ELIGIBLE TRANSACTION' MEANS ANY TRANSACTION. - 4 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 (A) CARRIED OUT ELECTRONICALLY ON SCREEN-BASED SYST EMS THROUGH A STOCK BROKER OR SUB-BROKER OR SUCH OTHER INTERMEDIARY REGISTERED UNDER SECTION 12 OF THE SEC URITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CO NTRACTS (REGULATION ACT, 1956 (42 OF 1956) OR THE SECURITIE S AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) OR T HE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE-LAWS MODE OR DIRECTIONS ISSUED U NDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNI ZED STOCK EXCHANGE; AND (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB-BROKER OR SUCH O THER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONT RACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER AN Y ACT REFERRED TO IN SUB-CLAUSE (A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNIZED STOCK EXCHANGE MEANS A RECOGNIZE D STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRI BED AND NOTIFIED 23 BY THE CENTRAL GOVERNMENT FOR THIS PURP OSE.] IN THIS RESPECT YOUR ATTENTION IS ALSO DRAWN TO TH E FOLLOWING JUDGMENTS. G.K. ANAND BRPOS. BUILDWELL (P) LTD. VS.- ITO 34 SOT 439 (2009) WHEREIN IT WAS HELD WHETHER LOSS ARISING IN FUTURE AND OPTION TRANSACTION CARRIED OUT IN A RECOGNIZED STOC K EXCHANGE IS TO BE TREATED AS A BUSINESS LOSS AND NO T AS LOSS IN SPECULATION BUSINESS HELD YES- THE SIMILAR FINDINGS HAVE BEEN APPRECIATED IN THE FOLLOWING CASE LAWS: SEEMA JAIN VS. ACIT 6 ITR (TRIB) 488 (DEL) 'PROFIT OR LOSS FROM DERIVATIVE TRADING WILL NOT H E SPECULATIVE PROFIT OR LOSS, THEREFORE, THE SAME WIL L BE ELIGIBLE TO BE SET OF AGAINST THE BUSINESS INCOME C ARRIED OUT BY THE ASSESSEE' RBK SECURITIES (P) LTD. VS. ITO 118 TTJ (MUM) 465 'DEALING IN DERIVATIVES IS A SEPARATE KIND OF TRAN SACTION WHICH DOES NOT INVOLVE ANY PURCHASE AND SALE OF SHA RES AND 5 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 THEREFORE LOSS ON ACCOUNT OF F&O TRANSACTIONS CANNO T BE TREATED AS SPECULATIVE LOSS'. DY. CIT VS.- SSKL INVESTORS SERVICES (P) LTD. (20 08) 113 TTJ(MUMBAI) 511- 'DEALING IN DERIVATIVES IS A SEPARATE KIND OF TRAN SACTION WHICH DOES NOT INVOLVE ANY PURCHASE AND SALE OF SHA RES AND THEREFORE LOSS ON ACCOUNT OF F&O TRANSACTIONS CANNO T BE TREATED AS SPECULATIVE LOSS'. IN VIEW OF THE ABOVE FACTS AND THE POSITION OF LAW IN PARTICULARLY CONSIDERING THE CALCUTTA HIGH COURT DE CISION, IT IS PRAYED THAT THE PROCEEDINGS INITIATED UNDER S ECTION 263 MAY BE DROPPED. 5. THE EXPLANATION OFFERED BY THE ASSESSEE AS ABOVE WAS NOT FOUND ACCEPTABLE BY THE LD. PRINCIPAL CIT AND HE PROCEEDE D TO REVISE THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) BY EXERCISING HIS POWERS UNDER SECTION 263 FOR THE FOL LOWING REASONS GIVEN IN PARAGRAPHS NO. 4 AND 5 OF HIS IMPUGNED ORDER:- 4. THE POWER OF REVISION BY THE CIT U/S 263 OF T HE ACT IS VERY WIDE AND IT IS IN THE NATURE OF SUPERVISORY JURISDICTION. THE POWER U/S 263 CAN BE EXERCISED EV EN IN CASES WHERE THE ISSUE IS DEBATABLE AND SUCH POWER I S NOT COMPARABLE WITH THE POWER OF RECTIFICATION OF MISTA KE U/S 154 OR THE INCOME TAX ACT. IT IS WELL SETTLED THAT INCORRECT ASSUMPTION OF FACTS OR APPLICATION OF LAW SATISFIES THE REQUIREMENT OF LAW I.E. ORDER BEING ERRONEOUS & PRE JUDICIAL TO THE INTEREST OF REVENUE. THE ORDER PASSED BY THE AO WITHOUT APPLICATION OF MIND OR ORDER SHOWING APPARE NT ERROR OF REASONING OR THE ORDER WHERE THE A.O. SIMP LY ACCEPTS WHERE THE ASSESSEE STATED IN HIS RETURN OF INCOME AND FAILS TO MAKE THE ENQUIRIES WHICH ARE CALLED FO R IN THE FACTS AND CIRCUMSTANCES OF THE CASE WILL ALSO CALL FOR INTERVENTION U/S 263 OF THE ACT BY THE CIT/PR. CIT. IT IS A TRITE LAW THAT THE DISCLOSURE OF FACTS BY THE ASSES SEE IN THE RETURN OF INCOME AND FOR IN THE COURSE OF ASSESSMEN T PROCEEDINGS CANNOT GIVE IMMUNITY FROM REVISIONAL JURISDICTION OF THE CIT/PR. CIT U/S 263. THE ABOVE POSITION OF THE LAW HAS BEEN REITERATED BY THE HON'BLE SUPRE ME COURT IN VARIOUS DECISIONS INCLUDING THAT OF RAMPYA RI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SE), TARA DEVI AG ARWAL VS. CIT(1973) 88 ITR 323 (SC). MALABAR INDUSTRIES C O. LTD VS. CIT (1991) 198 ITR 611 (KERALA) WHICH WAS AFFIR MED BY SUPREME COURT IN 243 ITR 83. 6 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 5. AFTER HAVING CONSIDERED THE POSITION OF LAW AND FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, THE AS SESSMENT ORDER PASSED BY THE A.O. IS FOUND TO BE ERRONEOUS A ND PREJUDICIAL OF THE INTEREST OF REVENUE BECAUSE THE ASSESSMENT ORDER HAS BEEN PASSED AND RELIEF HAS BEE N ALLOWED WITHOUT MAKING INQUIRIES OR VERIFICATION IN TO THE CLAIM OF THE ASSESSEE COMPANY WHICH SHOULD HAVE BEE N MADE BY THE ASSESSING OFFICER. HENCE I AM OF THE CO NSIDERED OPINION THAT THE ASSESSMENT ORDER PASSED BY THE' A. O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE IN ACCORDANCE WITH THE EXPLANATION 2 BELOW SECTION 263 (I) OF THE ACT. AS A RESULT, THE ASSESS MENT ORDER PASSED BY THE AO IS SET ASIDE IN RESPECT OF THE POI NT STATED IN PARA-2 ABOVE. THE AO IS DIRECTED TO INITIATE FRE SH ASSESSMENT PROCEEDINGS & CARRY OUT NECESSARY ENQUIRIES/VERIFICATION & PROVIDE REASONABLE OPPORTU NITY TO THE ASSESSEE COMPANY TO PRODUCE DOCUMENTS & EVIDENC ES WHICH IT MAY CHOSE TO RELY UPON FOR SUBSTANTIATING ITS OWN CLAIM. THEREAFTER A FRESH ASSESSMENT ORDER MAY BE P ASSED IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF LAW A ND IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIG H COURT IN ASIAN FINANCIAL SERVICES LTD.-VS.CIT(2016) 70 TAXMA NN.COM 9(CALCUTTA). HOWEVER, IT IS ALSO MADE CLEAR THAT SL P HAS BEEN GRANTED TO THE REVENUE AGAINST THE AFOREMENTIO NED ORDER OF HIGH COURT ON 19-10-2016 IN SLP NO.19120 O F 2016 & REPORTED IN (2016) 75 TAXMANN.COM 68(SC)/201 6 243 TAXMAN 147 (SC). HENCE, THE AO IS DIRECTED TO T AKE THE STATUS OF APPEAL MENTIONED ABOVE INTO CONSIDERATION WHILE REFRAMING THE ASSESSMENT. AGGRIEVED BY THE ORDER OF THE LD. PRINCIPAL CIT PAS SED UNDER SECTION 263, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE T RIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT EVEN THOUGH THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) WAS FOUND TO BE ERRONEOUS BY THE LD. PRINCIPAL CIT IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DERIVATIVE LOSS ON MERIT AS MEN TIONED IN THE NOTICE ISSUED UNDER SECTION 263, HE FINALLY REVISED THE OR DER OF THE ASSESSING OFFICER ON THE GROUND OF ALLEGED LACK OF ENQUIRY BY THE ASSESSING OFFICER. HE CONTENDED THAT THE ASSESSEE-COMPANY IN THE WRITT EN REPLY FILED IN RESPONSE TO THE NOTICE UNDER SECTION 263 HAD MADE A DETAILED SUBMISSION TO SHOW THAT THE CLAIM OF THE ASSESSEE FOR DERIVATI VE LOSS WAS RIGHTLY 7 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 ALLOWED BY THE ASSESSING OFFICER BY TREATING THE SA ME AS NON-SPECULATION LOSS ON MERIT, BUT NO FINDING OR CONCLUSION WAS GIV EN BY THE LD. PRINCIPAL CIT ON THE SUBMISSION MADE BY THE ASSESSEE SO AS TO SHOW HOW THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER WAS E RRONEOUS ON THIS ISSUE ON MERIT. HE CONTENDED THAT HE SIMPLY SET ASI DE THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE ON THE GROUND OF LA CK OF ENQUIRY WITHOUT EVEN POINTING OUT AS TO WHAT WAS THE ENQUIRY OR VER IFICATION THE ASSESSING OFFICER MUST HAVE DONE WHICH HE FAILED TO DO. HE CO NTENDED THAT IT IS NOT PERMISSIBLE UNDER SECTION 263 FOR THE LD. PRINCIPAL CIT TO DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VER IFY AND FIND OUT WHETHER THE ORDER PASSED BY HIM UNDER SECTION 143(3 ) WAS ERRONEOUS OR NOT. IN SUPPORT OF THIS CONTENTION, HE RELIED ON TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ITO- VS.- D.G. HOUS ING PROJECTS LIMITED [343 ITR 329 ]. 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR DERIVATIVE LOS S NOT BEING THE SPECULATION LOSS WAS EXAMINED BY THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THERE WAS NO LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER AS ALLEGED BY THE LD. PRINCIP AL CIT IN HIS IMPUGNED ORDER PASSED UNDER SECTION 263. IN THIS REGARD, HE INVITED OUR ATTENTION TO THE RELEVANT SCHEDULE FORMING PART OF THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE-COMPANY WHERE THE DERIVATIVE LOSS WAS SEPA RATELY SHOWN BY THE ASSESSEE AND POINTED OUT FROM THE LETTER DATED 27.0 1.2015 (COPY AT PAGE NO. 43 OF THE PAPER BOOK) ISSUED BY THE ASSESSING O FFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OFFICER TO FURNISH A DETAILED NOTE ON DERIVATIVE LOSS. HE ALSO INVITED OUR ATTENTION TO THE LETTER DATED 12.02.201 5 (COPY AT PAGE NO. 44 OF THE PAPER BOOK) TO SHOW THAT THE NOTE ON DERIVAT IVE LOSS AS REQUIRED BY THE ASSESSING OFFICER WAS DULY FURNISHED BY THE ASS ESSEE. HE CONTENDED THAT THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR DERIVATIVE LOSS THUS WAS DULY EXAMINED BY THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND AFTER HAVING SATISFIED HIMSELF, THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER AS NON-SPECULATIVE LOSS. HE C ONTENDED THAT THERE 8 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 WAS THUS NO ERROR IN THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER AS ALLEGED BY THE LD. PRINCIPAL CIT IN HIS IMPUGNED ORDER CALLING FOR REVISION UNDER SECTION 263. 8. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE AMOUNT OF DERIVATIVE LOSS WAS NOT CLAIMED BY THE ASSESSEE SEP ARATELY BUT THE SAME WAS SHOWN UNDER THE HEAD PURCHASE/DIRECT EXPENSES . HE SUBMITTED THAT THE ISSUE AS TO WHETHER THE DERIVATIVE LOSS CLAIMED BY THE ASSESSEE WAS IN THE NATURE OF SPECULATIVE LOSS OR NOT WAS REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER IN THE LIGHT OF THE PROVISION OF SECTION 43(5) AS WELL AS EXPLANATION TO SECTION 73 AND SINCE IT WAS NOT DONE BY THE ASSESSING OFFICER, THE ORDER OF ASSESSMENT MADE BY HIM WAS ER RONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS R IGHTLY HELD BY THE LD. PRINCIPAL CIT. HE CONTENDED THAT THERE IS NOTHING O N RECORD TO SHOW THAT ANY QUERY WAS SPECIFICALLY RAISED BY THE ASSESSING OFFICER ON THIS ISSUE AND IT WAS THUS A CASE OF LACK OF ENQUIRY ON THE PA RT OF ASSESSING OFFICER WHICH MADE THE ORDER PASSED BY HIM UNDER SECTION 14 3(3) ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3), THE CLAI M OF THE ASSESSEE OF DERIVATIVE LOSS BEING NON-SPECULATION LOSS WAS ACCE PTED BY THE ASSESSING OFFICER. THE RECORDS OF THE SAID ASSESSMENT WAS SUB SEQUENTLY EXAMINED BY THE LD. PRINCIPAL CIT AND ON SUCH EXAMINATION, H E HELD THAT THE SAID DERIVATIVE LOSS WAS LIABLE TO BE TREATED AS SPECULA TIVE LOSS BY RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS.- DLF COMMERCIAL [(2013) 35 TAXMANN 280]. ACCORDINGLY HE TREATED THE ORDER OF ASSESSMENT MADE BY THE ASSESSING OFFICER AS ERRONEO US ON THIS ISSUE ON MERIT AS IS CLEARLY EVIDENT FROM THE NOTICE ISSUED BY HIM UNDER SECTION 263, THE CONTENTS OF WHICH ARE EXTRACTED HEREINABOV E IN PARAGRAPH NO. 3. IN REPLY FILED TO THE NOTICE ISSUED BY THE LD. PRIN CIPAL CIT UNDER SECTION 263, A DETAILED SUBMISSION WAS MADE BY THE ASSESSEE TO SHOW THAT THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER IN ACCEPTING ITS CLAIM OF 9 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 DERIVATIVE LOSS AS NON-SPECULATION LOSS ON MERIT. I N THIS REGARD, RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF THE H ONBLE CALCUTTA HIGH COURT IN THE CASE OF ASIAN FINANCIAL SERVICES LIMIT ED VS.- CIT [70 TAXMANN.COM 9 (CALCUTTA)], WHEREIN IT WAS HELD THAT DERIVATIVE LOSS CAN BE SET OFF AGAINST OTHER PROFITS. IT WAS ALSO BROUG HT TO THE NOTICE OF THE LD. PRINCIPAL CIT BY THE ASSESSEE THAT THE SAID DECISIO N WAS RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT AFTER CONSIDERING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DLF COMMERC IAL (SUPRA), WHICH WAS REFERRED TO IN THE NOTICE ISSUED UNDER SECTION 263. RELIANCE WAS ALSO PLACED BY THE ASSESSEE ON SOME OTHER JUDICIAL PRONO UNCEMENTS AS WELL AS THE RELEVANT PROVISIONS OF SECTION 43(5) IN SUPPORT OF ITS CONTENTION THAT DEALING IN DERIVATIVE WAS SEPARATE KIND OF TRANSACT ION, WHICH DID NOT INVOLVE ANY PURCHASE AND SALE OF SHARES AND, THEREF ORE, THE DERIVATIVE LOSS COULD NOT BE TREATED AS SPECULATIVE LOSS. IT IS OBS ERVED THAT ALTHOUGH THE LD. PRINCIPAL CIT IN HIS IMPUGNED ORDER PASSED UNDE R SECTION 263 REPRODUCED THE SUBMISSION MADE BY THE ASSESSEE, HE DID NOT GIVE ANY FINDING OR OBSERVATION THEREON AND WITHOUT ARRIVING AT ANY CONCLUSION TO SHOW HOW THE ORDER OF ASSESSING OFFICER WAS ERRONEO US ON THE ISSUE ON MERIT, HE SIMPLY SET ASIDE THE SAME ON THE GROUND T HAT THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER WITH OUT MAKING ENQUIRIES OR VERIFICATION, WHICH SHOULD HAVE BEEN MADE BY HIM . IN THIS REGARD, HE RELIED ON EXPLANATION 2 TO SECTION 263 INSERTED IN THE STATUTE BY THE FINANCE ACT, 2015 W.E.F. 01.04.2015. AS PER THE SAI D EXPLANATION, AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR T HE PURPOSE OF SECTION 263 IF, IN THE OPINION OF THE LD. PRINCIPAL CIT OR LD. CIT, THE SAME IS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION, WHICH SHO ULD HAVE BEEN MADE. IT IS OBSERVED THAT IN THE CASE OF STERLING BIOTECH LTD.-VS.- PRINCIPAL CIT 9ITA NO. 2750/MUM/2015 DATED 29.06.2016), MUMBAI BE NCH OF THIS TRIBUNAL HAS ALREADY CONSIDERED THE EFFECT OF EXPLA NATION 2 TO SECTION 263. IN THE SAID CASE, THE CONTENTION RAISED ON BEH ALF OF THE ASSESSEE WAS THAT THE LD. PRINCIPAL CIT, BEFORE HOLDING AN ORDER TO BE ERRONEOUS SHOULD HAVE CONDUCTED NECESSARY ENQUIRIES OR VERIFICATION IN ORDER TO SHOW THAT 10 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 THE FINDING GIVEN BY THE LD. CIT IS ERRONEOUS AND T HE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AND THIS CONTENTION OF THE ASSESSEE WAS FOUND TO BE DULY SUPPORTED BY LAW INTE RPRETED BY THE VARIOUS HONBLE HIGH COURTS INCLUDING HONBLE DELHI HIGH COURT. RELIANCE IN THIS REGARD WAS PLACED ON BEHALF OF THE REVENUE ON EXPLANATION 2 TO SECTION 263 INSERTED BY THE FINANCE ACT, 2015 W.E.F . 1 ST APRIL, 2015. THE TRIBUNAL, HOWEVER, DID NOT FIND MERIT IN THE SAME B Y HOLDING THAT THE SAID EXPLANATION CAN BE SAID TO HAVE OVERRIDDEN THE LAW INTERPRETED BY THE HONBLE DELHI HIGH COURT. IT IS OBSERVED BY THE TRI BUNAL THAT IF THE REVENUES CONTENTION IS ACCEPTED, THE LD. CIT CAN F IND A FAULT WITH EACH AND EVERY ASSESSMENT ORDER WITHOUT CONDUCTING ANY E NQUIRY OR VERIFICATION IN ORDER TO ESTABLISH THAT THE ASSESSM ENT ORDER IS NOT SUSTAINABLE IN LAW AND ORDER FOR REVISION. IT WAS A LSO OBSERVED THAT THE LD. CIT THEN CAN FORCE THE ASSESSING OFFICER TO CONDUCT THE ENQUIRY IN THE MANNER REFERRED BY HIM PREJUDICING THE INDEPENDENT APPLICATION OF MIND OF THE ASSESSING OFFICER, WHICH COULD NOT BE THE IN TENTION OF THE LEGISLATURE INSERTING EXPLANATION 2 TO SECTION 263. IT WAS HELD THAT IT COULD LEAD TO UNENDING LITIGATION AND THERE WOULD N OT BE ANY POINT OF FINALITY IN THE LEGAL PROCEEDING. 10. IN THE CASE OF ITO VS.- D.G. HOUSING PROJECTS LIMITED (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE, THE HONBLE DE LHI HIGH COURT HAS HELD THAT IN CASES OF WRONG OPINION OR FINDING ON MERITS , THE LD. CIT HAS TO ARRIVE AT THE CONCLUSION AND HIMSELF DECIDE THAT TH E ORDER IS ERRONEOUS BY CONDUCTING NECESSARY ENQUIRY, IF REQUIRED, BEFORE O RDER UNDER SECTION 263 IS PASSED. IT WAS HELD THAT THE LD. CIT CANNOT REMA ND THE MATTER TO THE ASSESSING OFFICER TO DECIDE WHETHER THE FINDINGS RE CORDED ARE ERRONEOUS. IT WAS FURTHER HELD THAT IN SOME CASES, THE LD. CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON THE RECORD OR INFERENCE DRAWN FROM THE FACTS ON RECORD PER SE JUSTIFIED AND MANDATED FURTHER ENQ UIRY OR INVESTIGATION, BUT THE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDER TAKEN THE SAME. HOWEVER, THE SAID FINDING MUST BE CLEAR, UN-AMBIGUO US AND NOT DEBATABLE AND THE MATTER CANNOT BE REMITTED FOR A FRESH DECIS ION TO THE ASSESSING 11 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 OFFICER TO CONDUCT FURTHER ENQUIRIES. IT WAS HELD T HAT IN SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASSESSING OFFICER WO ULD IMPLY AND MEAN THAT THE LD. CIT HAS NOT EXAMINED AND DECIDED WHETH ER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THIS ASPECT/QUESTION. 11. IT IS OBSERVED THAT THE COORDINATE BENCH OF THI S TRIBUNAL HAS RECENTLY CONSIDERED A SIMILAR ISSUE IN THE CASE OF INFINITY INFOTECH PARK LIMITED [58 ITR (TRIB) 486]. IN THE SAID CASE, THER E WAS NO ALLEGATION IN THE SHOW-CAUSE NOTICE ISSUED UNDER SECTION 263, LIK E IN THE PRESENT CASE, THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSI NG OFFICER TO MAKE PROPER AND ADEQUATE ENQUIRY BEFORE COMPLETING THE A SSESSMENT AND THE ALLEGATION WAS THAT THE ASSESSING OFFICER HAS FORME D A WRONG OPINION OR FINDINGS ON MERIT. IN REPLY TO THE NOTICES ISSUED U NDER SECTION 263, THE ASSESSEE FILED A WRITTEN REPLY ON JANUARY 12, 2017. ON THE VERY SAME DAY, THE LD. COMMISSIONER PASSED AN ORDER UNDER SECTION 263 SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER ON THE GROUND OF LAC K OF ENQUIRY. IN THESE FACTS AND CIRCUMSTANCES INVOLVED IN THE CASE OF INF INITE INFOTECH PARK LTD. (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL HELD THAT THE LD. CIT BEFORE EXERCISING JURISDICTION UNDER SECTION 263 OF THE AC T FOR SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER OUGHT TO HAVE GIVEN HIS OWN SPECIFIC FINDING ON THE SUBMISSION MADE BY THE ASSESSEE AND WITHOUT DOING SO, THE LD. CIT COULD NOT EXERCISE JURISDICTION UNDER SECTION 263. IT WAS ALSO HELD BY THE TRIBUNAL THAT THE LD. CIT WAS NOT JUSTIFIED TO INVO KE JURISDICTION UNDER SECTION 263 OF THE ACT ON THE GROUND OF LACK OF ENQ UIRY BY THE ASSESSING OFFICER WITHOUT PUTTING THE ASSESSEE ON NOTICE. REL IANCE IN SUPPORT OF THIS CONCLUSION WAS PLACED BY THE TRIBUNAL ON THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS.- D.G. HOUS ING PROJECTS LIMITED (SUPRA) AND THE ORDER PASSED BY THE LD. CIT UNDER S ECTION 263 WAS QUASHED. 12. IN THE PRESENT CASE, THE RELEVANT FACTS INVOLVE D ARE MATERIALLY SIMILAR TO THE CASE OF INFINITE INFOTECH (SUPRA), I NASMUCH AS, NOTICE UNDER SECTION 263 WAS ISSUED BY THE LD. PRINCIPAL CIT POI NTING OUT THE ERROR IN 12 ITA NO. 759/KOL/2017 ASSESSMENT YEAR: 2012-2013 THE ORDER OF THE ASSESSING OFFICER IN TREATING THE DERIVATIVE LOSS AS NON- SPECULATION LOSS AND IN A REPLY FILED BY THE ASSESS EE TO THE SAID NOTICE, A DETAILED SUBMISSION WAS MADE BY THE ASSESSEE TO SHO W AS TO HOW ITS CLAIM FOR DERIVATIVE LOSS AS NON-SPECULATION LOSS WAS RIG HTLY ACCEPTED BY THE ASSESSING OFFICER ON MERITS. THE LD. PRINCIPAL CIT HOWEVER PASSED THE IMPUGNED ORDER UNDER SECTION 263 WITHOUT GIVING ANY FINDING OR CONCLUSION AS TO HOW THE ORDER OF THE ASSESSING OFF ICER WAS ERRONEOUS ON MERITS IN RESPECT OF THE ISSUE RAISED IN THE NOTICE ISSUED UNDER SECTION 263 AND SET ASIDE THE SAME ON THE GROUND OF LACK OF ENQUIRY BY THE ASSESSING OFFICER WITHOUT EVEN PUTTING THE ASSESSEE ON NOTICE. IN OUR OPINION, THE RATIO OF THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF INFINITE INFOTECH PARK LTD. (SUPRA) THUS IS SQUARELY APPLICABLE IN THE PRESENT CASE AND APPLYIN G THE SAME, WE HOLD THAT THE IMPUGNED ORDER PASSED BY THE LD. PRINCIPAL CIT UNDER SECTION 263 IS LIABLE TO BE QUASHED. WE ORDER ACCORDINGLY AND A LLOW THIS APPEAL OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF DECEMBER, 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 22 ND DAY OF DECEMBER, 2017 COPIES TO : (1) M/S. SADHANA STOCKS & SECURITIES PVT. LIMITED, FLAT NO. 2701/2702, RAHEJA ATLANTIS SOCIETY, GANPATRAO JADAM MARG, LOWER PAREL, MUMBAI-400 013 2) PRINCIPAL COMMISSIONER OF INCOME TAX-4, KOLKA TA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) CIT- , KOLKATA, (4) THE DEPARTMENTAL REPRESENTATIVE (5) GUARD FILE TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.