Assessee's appeal dismissed, share trading loss treated as speculation loss under Explanation to Section 73.

The Tribunal dismissed the assessee's appeal, affirming the treatment of the share trading loss as speculation loss under Explanation to Section 73. The challenge to the AO's jurisdiction under Section 153A was also dismissed, as the intimation under Section 143(1) did not constitute a completed assessment. The Tribunal upheld the CIT(A)'s finding that the share trading loss was genuine, based on established identities of companies and transaction genuineness through proper documentation. Both the assessee and revenue appeals were dismissed in the Court order dated 02.03.2016.

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Issues Involved:
1. Treatment of share trading loss as deemed speculation loss.
2. Jurisdiction of AO under section 153A of the Income Tax Act, 1961.
3. Genuineness of the share trading loss.

Detailed Analysis:

Treatment of Share Trading Loss as Deemed Speculation Loss:
The primary issue raised by the assessee was the treatment of a share trading loss amounting to Rs. 1,34,38,700/- as deemed speculation loss. The assessee argued that the action of the AO and the confirmation by the CIT(A) were unreasonable and bad in law. The Revenue, on the other hand, contended that the assessee failed to prove the genuineness of the share transactions, thus the loss should be treated as speculative.

The AO invoked Explanation to Section 73 of the Income Tax Act, which deems any part of the business of a company involving the purchase and sale of shares as speculation business. Consequently, the AO disallowed the set-off of the loss against business income. The CIT(A) upheld this view, relying on the decision of the Hon'ble Calcutta High Court in RPG Industries Ltd. Vs CIT, which held that even if there is actual delivery of shares, the loss must be treated as speculation loss under Explanation to Section 73.

Jurisdiction of AO under Section 153A:
The assessee challenged the jurisdiction of the AO to make additions under Section 153A, arguing that no incriminating documents were found during the search regarding the share trading loss. The assessee cited the decision of the Hon'ble Delhi High Court in CIT vs Kabul Chawla, which held that in the absence of incriminating material, completed assessments could not be disturbed under Section 153A.

The Tribunal, however, noted that the return for AY 2007-08 was filed and an intimation under Section 143(1) was issued. Since the search was conducted before the expiry of the time limit for issuing a notice under Section 143(2), the intimation under Section 143(1) could not be equated to a completed assessment. Therefore, the AO had the jurisdiction to assess the total income afresh under Section 153A.

Genuineness of the Share Trading Loss:
The AO questioned the genuineness of the share trading loss, citing discrepancies in the purchase and sale transactions and the non-existence of the companies from which shares were purchased. However, the CIT(A) found the loss to be genuine, noting that the companies were assessed to tax, and the transactions were conducted through a registered share broker with proper documentation.

The Tribunal upheld the CIT(A)'s finding, emphasizing that the identity of the companies and the genuineness of the transactions were established through tax assessments, bank statements, demat accounts, and contract notes. Therefore, the loss was deemed genuine.

Conclusion:
- The Tribunal dismissed the assessee's appeal, affirming that the share trading loss was correctly treated as speculation loss under Explanation to Section 73.
- The Tribunal also dismissed the assessee's challenge to the AO's jurisdiction under Section 153A, ruling that the intimation under Section 143(1) did not constitute a completed assessment.
- The Tribunal upheld the CIT(A)'s finding that the share trading loss was genuine, dismissing the Revenue's appeal.

Order:
Both the appeal by the Assessee and the Revenue are dismissed. The order was pronounced in the Court on 02.03.2016.

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