M/s. Ankush Finstock Limited, Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 797/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9640 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Business income; Depreciation; Speculation loss
• Section: 43(5); 144

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD 00 , ! ' #$, % & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER !./ ITA NO. 1 AND 797/AHD/2011 % ) *)/ ASSESSMENT YEAR: 1997-1998 AND 2005-2006 ANKUSH FINSTOCK LTD. B-12, SULABH FLATS NARANPURA, AHMEDABAD. PAN : AADCA 0047 R VS ITO, WARD - 1 (2) AHMEDABAD. +, / (APPELLANT) -. +, / (RESPONDENT) ASSESSEE(S) BY : SHRI TUSHAR HEMANI REVENUE BY : SHRI M.K. SINGH, SR.DR / DATE OF HEARING : 08/04/2015 / DATE OF PRONOUNCEMENT: 17/04/2015 // O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX- VI, AHMEDABAD DATED 06/10/2010 FOR THE ASSTT.YEAR 1 997-98 AND DATED 24/10/2011 FOR THE ASSTT.YEAR 2005-06. 2. IN THE ASSTT.YEAR 1997-98, THE GROUNDS OF THE A PPEAL ARE AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE AO IN TREATING BUSINESS LOSS OF RS.5,75,43,112/- AS SPECU LATIVE LOSS. 2. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN INVOKING THE EXPLANATION TO SECTION 73 IN THE SET A SIDE PROCEEDINGS. ITA NO.1 AND 797/AHD/2011 2 2. BRIEF FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT IN THE ASST.YEAR 1997-98, THE ASSESSEE HAD DONE TRADING OF SHARES AND SECURITIES WHEREIN IT HAS INCURRED LOSS OF RS.5,38, 05,710/-. IN ADDITION, THE ASSESSEE HAD THE FOLLOWING RECEIPTS DURING THE YEAR: 1. HIRE PURCHASE CHARGES RS.51,932/- 2. SPOT FINANCE CHARGES (NET) RS.1,12,498/- 3. INTEREST RECEIVED RS.4,31,853/- 4. DIVIDEND INCOME RS.19,728/- 3. THE AO OBSERVED THAT SINCE THE MAIN BUSINESS CON SISTED OF TRADING IN SHARES AND SECURITIES OF OTHER COMPANIES , PROVISIONS OF EXPLANATION TO SECTION 73 WERE APPLICABLE IN THIS CASE, AND AC CORDINGLY, HELD THAT THE LOSS OF RS.5,38,05,710/- WAS SPECULAT ION LOSS. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF TH E AO BY OBSERVING AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. APPELLANT DISCLOSED BUS INESS INCOME DURING THE YEAR WHICH WAS ACCEPTED BY THE ASSESSING OFFICER AS BUSINESS INCOME TO THE EXTENT OF RS.1,85,24,325. TH E ASSESSING OFFICER ONLY TREATED BUSINESS INCOME TO THE EXTENT OF RS.11,92,969 AS SPECULATIVE INCOME. SINCE THERE WAS NO DELIVERY IN RESPECT OF THIS, THE SAME WAS TREATED AS SPECULATIVE UNDER SEC TION 43 (5) OF IT ACT. THEREFORE IT CAN BE SEEN THAT ASSESSING OFF ICER DID NOT DISTURB APPELLANT'S CLAIM OF BUSINESS INCOME TO THE EXTENT OF RS 18524325 AND ACCORDINGLY NO APPEAL LIES AGAINST AO' S ACCEPTANCE OF APPELLANT'S CLAIM BUSINESS INCOME AS BUSINESS IN COME. AS REGARDS APPELLANT'S OBJECTION OF TREATING BUSINESS INCOME AS SPECULATIVE, THE SAME IS NOT SUSTAINABLE SINCE APPE LLANT ITSELF TREATED RS 1192969 AS SPECULATIVE INCOME. ACCORDING LY I DO NOT FIND ANY MERIT IN APPELLANTS CLAIM SINCE ASSESSING OFFICER ONLY DISTURBED RS 1192 969 FROM BUSINESS TO SPECULATION WHICH IS AS PER THE PROVISIONS OF IT ACT. SINCE ASSESSING OFFIC ER HAS NOT DISTURBED THE REMAINING BUSINESS INCOME, APPELLANT CANNOT AGITATE THE SAME IN APPEAL. ITA NO.1 AND 797/AHD/2011 3 HAVING ACCEPTED THE BUSINESS INCOME AS BUSINESS INC OME DISCLOSED BY THE APPELLANT, ASSESSING OFFICER DID N OT ALLOW SET OFF OF SPECULATIVE LOSS BROUGHT FORWARD AGAINST BUSINES S INCOME. SUCH SET OFF IS NOT PERMISSIBLE IN LAW AND THEREFORE THE RE IS NO INFIRMITY IN ASSESSING OFFICER'S ORDER. APPELLANT CLAIMED THA T SINCE UNDERSIGNED HAD CONFIRMED THE AO'S ACTION IN TREATI NG BUSINESS INCOME FROM SHARES AS SPECULATIVE WITHIN THE MEANIN G OF EXPLANATION TO SECTION 73, THE NATURE OF TRANSACTIO N BEING SAME DURING THE YEAR, THE SET-OFF WITH SPECULATIVE LOSS BROUGHT FORWARD SHOULD BE ALLOWED. I DO NOT FIND MERIT IN APPELLANT 'S ARGUMENT SINCE DECISION IN APPEAL IN ASSESSMENT YEAR 97-98 H AS NO BEARING IN ASSESSMENT YEAR 2005-06 PARTICULARLY WHEN THE IS SUE OF BUSINESS INCOME OR SPECULATIVE INCOME IS NOT THERE IN APPEAL. SINCE ASSESSING OFFICER DID NOT DISTURB THE APPELLA NTS CLAIM OF BUSINESS INCOME, THERE CANNOT BE AN APPEAL AGAINST IT AND ACCORDINGLY THE NATURE OF INCOME IS FINAL I.E. BUSI NESS INCOME. NOW SIMPLE ISSUE IS WHETHER SPECULATIVE LOSS CAN BE ADJUSTED AGAINST BUSINESS INCOME. THE ANSWER IS CLEAR NO. IF APPELLANT IS AGGRIEVED AGAINST THE APPEAL ORDER IN ASSESSMENT YE AR 97-98, IT CAN APPROACH ITAT FOR RELIEF HOWEVER SPECULATIVE LO SS BROUGHT FORWARD CANNOT BE ALLOWED TO BE SET OFF AGAINST BUS INESS INCOME ASSESSED IN THIS YEAR. THE NATURE OF INCOME WHETHER BUSINESS OR SPECULATIVE IS NOT IN QUESTION HERE THEREFORE NO FI NDINGS CAN BE GIVEN IN THIS REGARD AND NATURE OF INCOME CANNOT BE CHANGED. IN VIEW OF THIS THE APPELLANT'S CLAIM IS REJECTED. 5. THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF FINANCE AND TRADING IN SHARES AND I NVESTMENTS. THE ORIGINAL ASSESSMENT ORDER DATED 10.3.1999 WAS PASSE D UNDER SECTION 144 WHEREIN THE ASSESSEES CLAIM OF BUSINESS LOSS O F RS.5,75,62,840/- WAS DISALLOWED FOR WANT OF NECESSARY DETAILS AND EV IDENCES. HE SUBMITTED THAT ON APPEAL, THE CIT(A) AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE SAID CLAIM VIDE ORDER D ATED 22.5.2001. 6. ON REVENUES APPEAL TO THE TRIBUNAL, THE TRIBUNA L RESTORED THE ISSUE TO THE FILE OF AO VIDE ORDER DATED 3.3.2006 W ITH DIRECTIONS TO FRAME THE ASSESSMENT AFTER GIVING FAIR OPPORTUNITY TO THE ASSESSEE. CONSEQUENTLY, THE AO AGAIN FRAMED THE ASSESSMENT IN A SIMILAR MANNER VIDE ORDER DATED 24.12.2007 PASSED UNDER SECTION 14 3(3) R.W.S. 254 AND SUCH ORDER CAME TO BE CONFIRMED BY THE CIT(A) V IDE ORDER DATED 6.10.2010. HE SUBMITTED THAT BOTH THE LOWER AUTHOR ITIES SHOULD HAVE ITA NO.1 AND 797/AHD/2011 4 APPRECIATED THAT THE BUSINESS LOSS OF RS.5,75,62,84 0/- IS A GENUINE LOSS AND NECESSARY EVIDENCES AND EXPLANATION WERE PLACED BEFORE THE AO. 7. THE ISSUE OF APPLICABILITY OF EXPLANATION TO SECTION 73 WAS NEVER A SUBJECT MATTER OF CONTROVERSY IN THE FIRST ROUND OF LITIGATION. HENCE, IN THE SECOND ROUND OF LITIGATION, INVOCATION OF EXPLANATION TO SECTION 73 WAS NOT PERMISSIBLE. HE SUBMITTED THAT IN THE FIR ST ROUND, THE AO MADE DISALLOWANCE FOR WANT OF DETAILS WHICH WERE TH EN PLACED BEFORE THE CIT(A) BASED ON WHICH THE CIT(A) ALLOWED SUCH C LAIM. THE TRIBUNAL IN ORDER TO ENABLE THE AO TO PROCESS AND CONSIDER S UCH DETAILS, RESTORED THE MATTER TO THE AO. HE ARGUED THAT THE TRIBUNAL S DIRECTIONS WERE VERY LIMITED AND RESTRICTED ONLY TO THE LIMITED ASP ECT OF CONSIDERING THE NECESSARY DETAILS AND EVIDENCES IN RESPECT OF THE S AID LOSS. 8. AT THIS STAGE, IT WAS NOT OPEN TO THE AO OR THE CIT(A) TO TAKE INTO CONSIDERATION PROVISIONS OF EXPLANATION TO SECTION 73 OR EXPAND THE SCOPE OF THE CONTROVERSY. THE CONTROVERSY IS LIMIT ED AND RESTRICTED TO CONSIDERING NECESSARY EVIDENCES AND SUBMISSIONS OF THE ASSESSEE. HENCE, NOW IT WAS NOT OPEN FOR THE AO OR THE CIT(A) TO INVOKE EXPLANATION TO SECTION 73, SINCE IT WAS NEVER THE CASE OF THE REVENUE HITHERTO. HE PLACED RELIANCE ON THE FOLLOWING DECI SIONS: I) GEMINI OILS PVT. LTD. VS. ITO (ITA NO.2563/MUM/200 5) II) KELLOG INDIA (P) LTD. VS. ACIT, (2013) 33 TAXMANN.C OM 397 (MUMBAI-TRIB.) III) S.P. KOCHHARV VS. ITO, 145 ITR 255 (ALL.). 9. HE FURTHER ARGUED THAT THE TRIBUNAL DOES NOT HAV E POWER TO ENHANCE INCOME OF THE ASSESSEE. THE PROPOSED ACTI ON OF THE INVOKING EXPLANATION TO SECTION 73 AMOUNTS TO ENHANCEMENT SINCE THE ASS ESSEE WAS WORST OFF BY APPROACHING THE TRIBUNAL. HE SUB MITTED THAT LAW IS EQUALLY WELL SETTLED THAT WHAT TRIBUNAL CANNOT DO D IRECTLY, CANNOT BE DONE INDIRECTLY AS WELL. ACCORDINGLY, THE TRIBUNA L NEITHER HAS THE POWER TO ENHANCE OR EXPAND THE SCOPE OF CONTROVERSY NOR C AN IT DIRECT ANY OF ITA NO.1 AND 797/AHD/2011 5 ITS SUBORDINATE AUTHORITIES TO DO THE SAME. THUS, THE PROPOSITION TO INVOKE EXPLANATION TO SECTION 73 IS ITSELF ILLEGAL AND BEYOND JURISDI CTION. 10. IT WAS FURTHER ARGUED THAT IN ANY CASE, THE EXPLANATION TO SECTION 73 CREATES A DEEMING FICTION WHEREBY IF ANY PART OF BUSINESS OF A COMPANY, CONSISTS IN PURCHASE AND SALE OF SHARES, T HEN SUCH COMPANY SHALL BE DEEMED TO BE CARRYING IN A SPECULATION BUS INESS. HOWEVER, THE SAID EXPLANATION ALSO CARVES OUT CERTAIN EXCEPTIONS ACCORDING TO ON E WHICH, IF SUCH COMPANYS GROSS TOTAL INCOME CONSIST S MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS, INTEREST ON S ECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAIN AND INCOME FR OM OTHER SOURCES, THEN SUCH EXPLANATION AS TO DEEMING FICTION WILL NO T BE APPLICABLE. 11. HE SUBMITTED THAT IN THE ASSESSEES CASE, THOUG H THE ASSESSEE HAS SHOWN INTEREST INCOME AS PART OF BUSINESS IN COME, STILL THE INTEREST INCOME IS ALWAYS TO BE TAXED AS INCOME FR OM OTHER SOURCES AND NOT AS BUSINESS INCOME. HE PLACED RELIANCE ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SHIPPI NG CORPORATION LTD. VS. CIT, 240 ITR 24 (MAD). HE ARGUED THAT ONCE TH E INTEREST INCOME WAS TAXED AS INCOME FROM OTHER SOURCES, THE GROSS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES E XCEEDS INCOME FROM OPERATIONS, AS IS EVIDENT FROM THE FOLLOWING C HART. PARTICULARS AMOUNT (RS.) % INCOME FROM LOANS & ADVANCES: 1. HIRE PURCHASE CHARGES : RS.51,932/- 2. INTEREST RECEIVED : RS.4,31,853/- 3. DIVIDEND INCOME : RS.19,728/- RS.5,03,513/- 81.74% INCOME FROM ACTIVITIES OTHER THAN LOANS AND ADVANCES RS.1,12,498/- 18.26% TOTAL RS.6,16,011/- 100.00% HE, THEREFORE, SUBMITTED THAT THE ASSESSEES INCOME UNDER THE HEADS PRESCRIBED UNDER EXPLANATION TO SECTION 73 AGGREGATES TO RS.5,03,513/- ITA NO.1 AND 797/AHD/2011 6 WHICH IS SUBSTANTIALLY HIGHER THAN THE INCOME OF RS .1,12,498/- EARNED FROM ACTIVITIES OTHER THAN LOANS AND ADVANCES. 12. IT WAS, THEREFORE, HIS SUBMISSION THAT THE ASSE SSEE WAS COVERED BY THE EXCEPTION CARVED OUT UNDER EXPLANATION TO SECTION 73, AND HENCE, THE SAME IS NOT APPLICABLE TO THE ASSESSEE, AND ACCORDINGLY, THE ASSESSEES BUSINESS LOSS CANNOT BE TREATED AS SPECU LATION LOSS BY INVOKING EXPLANATION TO SECTION 73. IT WAS HIS FURTHER SUBMISSION THAT TRANSACTIONS OF PURCHASE AND SALE OF SHARES WOULD B E HELD AS SPECULATION BUSINESS ONLY IF A COMPANY IS HIT BY EX PLANATION TO SECTION 73. HE PLACED FURTHER RELIANCE ON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. CONCORD COMMERCIAL S P. LTD., 95 ITD 117 (MUM) (SB). HE SUBMITTED THAT AS SUBMITTED, EXPLANATION TO SECTION 73 IS NOT HIT IN ASSESSEES CASE, AND HENCE , AS PER THE ABOVE DECISION OF THE SPECIAL BENCH, TRANSACTIONS IN SHAR ES CANNOT BE HELD AS SPECULATION BUSINESS, AND THE CONSEQUENTIAL LOSS AL SO CANNOT BE DEEMED TO BE SPECULATIVE LOSS. HE, THEREFORE, PLEADED TH AT IMPUGNED DISALLOWANCE SHOULD BE DELETED. 13. ON THE OTHER HAND, THE DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSEE SUFFERED LOSS OF RS.5,38,05,710/- ON T HE TRANSACTIONS OF PURCHASE AND SALE OF SHARES. THE AO IN THE ORIGINAL ASSESSMENT MADE UNDER SECTION 144 ON 10.3.1999 DISALLOWED THE SAID LOSS ON THE GROUND OF NON-FURNISHING OF DETAILS BY THE ASSESSEE. 15. ON APPEAL THERE AGAINST, THE CIT(A) VIDE ITS OR DER DATED 22.5.2001 ALLOWED THE CLAIM OF THE ASSESSEE OF LOSS OF RS.5,38,05,710/- . ITA NO.1 AND 797/AHD/2011 7 16. ON FURTHER APPEAL TO THIS TRIBUNAL VIDE ITS ORD ER DATED 3.3.2006 IN ITA NOS.1849 AND 1899/AHD/2001 RESTORED THE MATTER BACK TO THE FILE OF AO FOR DE NOVO ASSESSMENT, AS IT WAS FOUND BY THE TRIBUNAL THAT T HE DETAILS OF THE TRANSACTIONS IN SHARES WERE FILED BY THE ASSESSEE BEFORE THE AO AFTER COMPLETION OF THE ASSESSMENT BY THE AO . 17. IN PURSUANCE TO THE ABOVE ORDER OF THE TRIBUNAL , THE AO PASSED FRESH ORDER ON 24.12.2007, WHICH IS UNDER PRESENT A PPEAL. 18. IN THIS ORDER, THE AO AGAIN DISALLOWED THE DEDU CTION OF LOSS OF RS.5,38,05,710/- ON THE GROUND THAT SUCH LOSS, WAS ARISING OUT OF TRANSACTIONS OF PURCHASE AND SALE IN SHARES, AND TH E ASSESSEE BEING A COMPANY IN VIEW OF EXPLANATION TO SECTION 73, SUCH LOSS WAS DEEMED AS SPECULATION LOSS WHICH CAN BE SET OFF AGAINST SPECU LATION PROFIT ONLY. THERE BEING NO SPECULATION PROFIT IN THE ASSESSMENT FOR THE YEAR, THE AO ALLOWED THE DEEMED SPECULATIVE LOSS OF RS.5,38,05,7 10/- TO BE CARRIED FORWARD TO THE SUBSEQUENT ASSESSMENT YEAR FOR BEING SET OFF AGAINST THE SPECULATION PROFIT OF SUBSEQUENT YEARS. 19. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE CIT(A) WHO CONFIRMED THE ABOVE ACTION OF THE AO. 20. BEING STILL AGGRIEVED, THE INSTANT APPEAL WAS P REFERRED BY THE ASSESSEE. 21. THE AR OF THE ASSESSEE AT THE OUTSET SUBMITTED THAT INVOKING OF PROVISIONS OF EXPLANATION TO SECTION 73 BY THE AO IN THE REMAND PROCEEDINGS WAS WITHOUT JURISDICTION, AS THE TRIBUN AL HAS RESTORED THE ISSUE TO THE FILE OF THE AO ONLY FOR VERIFYING THE DETAILS OF THE SHARE TRANSACTIONS. THE OTHER CONTENTIONS OF THE AR OF T HE ASSESSEE BEFORE US WAS THAT THE ASSESSEE BEING A COMPANY WHICH FALLS W ITHIN THE CATEGORY OF EXCEPTION PROVIDED IN EXPLANATION TO SECTION 73, THE LOSS ON PURCHASE ITA NO.1 AND 797/AHD/2011 8 AND SALES OF SHARES CANNOT BE DEEMED AS SPECULATION LOSS IN THE HANDS OF THE ASSESSEE-COMPANY. 22. WE FIND THAT THIS TRIBUNAL VIDE ITS ORDER DATED 3.3.2006 HAS REMANDED THE ISSUE OF LOSS OF SHARES BY OBSERVING A S UNDER: HOWEVER, KEEPING IN VIEW THE INTEREST OF JUSTICE, WE FIND THAT IT WOULD BE JUST AND FAIR TO RESTORE THE ENTIRE ASSESS MENT TO THE FILE OF THE AO TO FRAME IT DE NOVO JUST TO GIVE FAIR OPP ORTUNITY TO BOTH THE PARTIES. WE DIRECT ACCORDINGLY. 23. THUS, WE FIND THAT THE DIRECTIONS OF THE TRIBUN AL WERE NOT LIMITED TO SIMPLY VERIFYING THE DETAILS OF LOSS ON SHARE TR ANSACTIONS IN ORDER TO ASCERTAIN THE GENUINENESS THEREOF AS CONTENDED BY T HE AR OF THE ASSESSEE, RATHER, THE TRIBUNAL HAS DIRECTED THE AO TO REFRAME THE ASSESSMENT ON THIS ISSUE DE NOVO AS PER LAW. 24. THUS, IN OUR CONSIDERED VIEW, THE AO HAS NOT EX CEEDED ITS JURISDICTION WHICH WAS CONFERRED UPON HIM BY THE TR IBUNAL WHILE RESTORING THE ISSUE IN INVOKING THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. THEREFORE, THIS CONTENTION OF THE A SSESSEE IS REJECTED. 25. FURTHER, COMING TO THE OTHER CONTENTION OF THE ASSESSEE, WE FIND THAT EXPLANATION TO SECTION 73 READS AS UNDER: [EXPLANATION - WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN A COMPANY WHOSE GROSS TOTAL INC OME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPER TY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES, OR A COMPAN Y THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANK ING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PUR CHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, F OR THE ITA NO.1 AND 797/AHD/2011 9 PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUS INESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES.] 26. WE FIND THAT THE LOSS FROM SHARE TRANSACTIONS I S RS.5,38,05,710/- WHEREAS ALL OTHER INCOME OF THE ASSESSEE IS RS.6,16 ,011/- ONLY. THUS, NEITHER IT CAN BE HELD THAT THE ASSESSEES GROSS TO TAL INCOME CONSISTS OF MAINLY OF THE INCOME WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES NOR IT CAN BE HELD THAT PRINCIP AL BUSINESS OF THE ASSESSEE WAS GRANTING OF LOANS AND ADVANCES. NO MA TERIAL COULD BE BROUGHT BEFORE US TO SHOW THAT PRINCIPAL BUSINESS O F THE ASSESSEE WAS OF GRANTING OF LOANS AND ADVANCES. IN THE CIRCUMSTA NCES, IN OUR CONSIDERED VIEW, THE LOWER AUTHORITIES WERE JUSTIFI ED IN TREATING THE LOSS ARISING FROM DEALING IN SHARES BY THE ASSESSEE-COMP ANY AS LOSS FROM SPECULATIVE BUSINESS. THEREFORE, THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 27. IN THE ASSTT.YEAR 2005-06, THE GROUND NO.1 READ S AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE AO IN REOPENING THE ASSESSMENT U/S.147 OF THE ACT WHICH I S WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR O N THAT. THEREFORE, THE ASSESSMENT SO MADE REQUIRES TO BE QU ASHED. 28. AT THE TIME OF HEARING, THE AR OF THE ASSESSEE SUBMITTED THAT HE WAS NOT PRESSING THIS GROUND OF THE APPEAL, HENCE, THE SAME IS DISMISSED FOR THE WANT OF PROSECUTION. 29. THE GROUND NO.2 AND 3 OF APPEAL ARE UNDER: 2. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE AO IN TREATING CURRENT ASSESSMENT YEARS BUSINESS LOSS OF THE APPELLANT COMPANY AS SPECULATION LOSS AND TREATING BROUGHT FO RWARD BUSINESS LOSS PERTAINING TO A.YRS.1997-98 AS SPECUL ATION LOSS AND TREATING BROUGHT FORWARD BUSINESS LOSS PERTAINING T O A.YRS.1997- ITA NO.1 AND 797/AHD/2011 10 98 AS SPECULATION LOSS. HE ACCORDINGLY ERRED IN AL LOWING SET OFF OF BROUGHT FORWARD LOSSES OF RS.11,92,969/- ONLY. 3. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN INVOKING THE EXPLANATION TO SEC.73(4) OF TH I.T.ACT , 1961 AND NOT ALLOWING TO CARRY FORWARD BUSINESS LOSS OF RS.5,26, 12,741/- PERTAINING TO A.YS. 1997-98, TREATING THE SAME AS S PECULATION LOSS NOT ALLOWED TO BE CARRIED FORWARDED MORE THAN FOUR YEARS. 30. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO ASSESSED NON-SPECULATIVE BUSINESS INCOME OF THE YEAR OF RS.1,85,24,325/- AND SPECULATIVE BUSINESS INCOME OF RS.11,92,969/-. THE AO ALLOWED SET OFF OF BROUGHT FORWARD NON-SPECU LATIVE BUSINESS LOSS, AND DEPRECIATION OF RS.1,02,37,196/- AGAINST THE ABOVE INCOME OF THE YEAR. FURTHER, THE AO ALLOWED SET OFF OF BROUG HT FORWARD SPECULATIVE BUSINESS LOSS TO THE EXTENT OF RS.11,92,969/- OUT O F THE TOTAL LOSS OF RS.5,38,05,710/- RELATING TO THE ASSTT.YEAR 1997-98 ON THE GROUND THAT SPECULATIVE BUSINESS INCOME OF THE ASSESSEE WAS RS. 11,92,969/- ONLY. 31. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE CONTE NDED THAT SPECULATIVE BUSINESS INCOME OF RS.11,92,969/- OF TH E YEAR WAS INCOME ARISING FROM NON-DELIVERY BASED TRANSACTIONS IN SHA RES, AND THEREFORE, WAS SPECULATIVE BUSINESS INCOME IN VIEW OF SECTION 43(5) OF THE ACT. 32. ASSESSEE FURTHER CONTENDED THAT THE BUSINESS IN COME OF RS.1,85,24,325/- ALSO RELATED TO DEALING IN SHARES, WHICH WERE DELIVERY BASED, AND IN VIEW OF EXPLANATION TO SECTION 73, THE SAME OUGHT TO HAVE BEEN TREATED AS INCOME DERIVED FROM SPECULATIVE BUS INESS. HOWEVER, THE CIT(A) REJECTED THE ABOVE CONTENTIONS OF THE AS SESSEE ON THE GROUND THAT THE ASSESSEE ITSELF DISCLOSED RS.1,85,2 4,325/- AS NORMAL BUSINESS INCOME IN ITS RETURN OF INCOME, AND THEREF ORE, THE AO WAS CORRECT IN ACCEPTING IT AS NORMAL BUSINESS INCOME. 33. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSE SSEE BEING A COMPANY, AND AS IT DOES NOT FALL WITHIN THE EXCEPTI ONS AS PROVIDED IN ITA NO.1 AND 797/AHD/2011 11 EXPLANATION TO SECTION 73, THE INCOME OR LOSS ARISING FROM DEALING IN SHARES, EVEN WHEN SUCH DEALING IS DELIVERY BASED, I S TO BE TREATED AS INCOME OR LOSS FROM SPECULATIVE BUSINESS, IN VIEW O F PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. 34. WE HAVE TREATED THE LOSS ARISING FROM DEALING I N PURCHASE AND SALE OF SHARES BY THE ASSESSEE-COMPANY DURING THE A SSTT.YEAR 1997-98, AS THE LOSS FROM SPECULATIVE BUSINESS VIDE OUR ORDE R OF EVEN DATE ON THE SIMILAR ANALOGY THAT THE PROFIT DERIVED BY THE ASSE SSEE FROM DEALING IN SHARES DURING THE YEAR IS TO BE TREATED AS PROFIT D ERIVED FROM SPECULATION BUSINESS. 35. WE DO NOT APPROVE THE VIEW OF THE CIT(A) THAT S IMPLY BECAUSE THE ASSESSEE HAS MADE A MISTAKE IN DISCLOSING THE CORRE CT NATURE OF THE INCOME, THE AO EVEN WHEN FULL FACTS ARE AVAILABLE B EFORE HIM SHOULD NOT ASSESS THE INCOME AS PER ACTUAL NATURE OF INCOME A S PER LAW. AS WE HAVE HELD, PROFIT DERIVED BY THE ASSESSEE FROM DEAL INGS IN PURCHASE AND SALE OF SHARES IS TO BE TREATED AS INCOME DERIVED F ROM SPECULATIVE BUSINESS, IN VIEW OF EXPLANATION TO SECTION 73 OF THE ACT, AS A COROLLARY OF THE SAME, THE BROUGHT FORWARD LOSS FROM SPECULAT IVE BUSINESS, IS TO BE ALLOWED AS SET OFF AGAINST SUCH PROFIT FROM SPEC ULATIVE BUSINESS. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES AND DIRECT THE AO TO TREAT PROFIT DERIVED FROM DELIVERY BASED SHARE T RANSACTIONS OF THE YEAR ALSO, AS PROFIT DERIVED FROM SPECULATION BUSIN ESS AND ALLOW SET OFF OF BROUGHT FORWARD SPECULATIVE BUSINESS LOSS AS PER LAW. THUS, THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWE D. 36. THE GROUND NO.4 OF THE APPEAL READS AS UNDER: 4. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.9,28,020/- MADE BY THE AO ON ACC OUNT OF SERVICE TAX EXPENDITURE U/S.43B OF THE ACT. ITA NO.1 AND 797/AHD/2011 12 37. AT THE TIME OF HEARING, NO SUBMISSION WAS MADE ON THIS GROUND BY THE AR OF THE ASSESSEE, AND HENCE THE SAME IS DI SMISSED FOR WANT OF PROSECUTION. 38. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR T HE ASSTT.YEAR 1997- 98 IS DISMISSED, AND THAT OF THE ASSTT.YEAR 2005-06 , IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 17 TH APRIL, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 17/04/2015 / 0 -%$12 32*$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A)-III 5. $%& '' , / DR, ITAT, 6. &)* + / GUARD FILE. / ' / BY ORDER, 4/ !5 ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- : 10/13/16.4.2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/13/16.04.2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.4.2015 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER