TaxTMI 
TaxTMI 
2014 (12) TMI 552
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.... off of b/f speculation losses of Rs. 12,82,930/- against the income for the A. Y .2004-05 under reference, treating the income arising from purchase and sale of shares as speculation income as against the regular business (non speculation) income treated by the AO. 2. On the facts and in the circumstances of the case, Id. CIT (A) has erred in deleting the addition of Rs. 5 lacs made u/s 68 of the Income Tax Act, 1961 especially when the assessee did not discharge its onus to establish the identity & creditworthiness of the parties contributing share application money and genuineness of transaction, satisfactorily. 3. On the facts and in the circumstances of the case, Id. CIT (A) has erred in admitting fresh evidence such as Bank stat....
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....d on record, inter alia assessment order and impugned order. Ld. DR submitted that the AO rightly observed that the business of purchase and sale of shares is not a speculative business but the same is a regular business and the income from purchase and sale of shares excluding jobbing income was rightly treated as regular business income. The DR further contended that the set off of brought forward speculative losses against the income for the year under consideration was not allowable but the CIT(A) has grossly erred in directing the AO to allow the same treating the income arising from purchase and sale of shares as speculative income as against the non-speculative regular business income. 5. Replying to the above, ld. AR has drawn ou....
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.... of ONLY SALE/PURCHASE OF EQUITY SHARES, the same has to be treated as speculative business in view of the EXPLANATION TO SECTION 73, THE BROUGHT FORWARD SPECULATIVE LOSS has been set-off against current year's income. A photocopy of the relevant part of Section 73 of the income Tax Act, 1961 has been enclosed herewith for your ready reference." 7.4 The claim of the assessee was negatived on the ground that the current year income is to be treated as regular business income. Explanation to Section 73 reads as under: "Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital....
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....n speculation business to the extent to which the business consists of the purchase and sale of such shares. Accordingly, we are in agreement with the conclusion of the CIT(A) that the income or loss derived by the assessee company is from speculation business which was accepted by the AO in the earlier years and if there is no change of facts and circumstances in the subsequent year under consideration, then the set off of brought forward speculative losses cannot be denied for the assessee. The action of the AO was not sustainable which was rightly set aside by the CIT(A) directing the AO to allow set off of loss as claimed by the assessee. Hence, we are unable to see any valid reason to interfere with the impugned order on this issue and....
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....ts were also allotted shares by the assessee company, then addition u/s 68 of the Act is not sustainable. The AR vehemently contended that the AO has not brought out anything adverse on record to dispute or discard the facts, details and explanation submitted by the assessee, then without any further verification and examination by the AO, simply relying on surmises and conjectures, the addition u/s 68 of the Act is not sustainable. 10. On careful consideration of above submissions and contentions and vigilant perusal of the impugned order, we observe that the CIT(A) granted relief for the assessee by placing reliance on the decision of Hon'ble Supreme Court in the case of Lovely Exports (supra) and the decision of Hon'ble Jurisdictional....
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....and available legal position, the share capital to the extent of Rs. 5,00,000/- stands explained. Accordingly, ground no. 3 is allowed." 11. Coming to the factual matrix of the present case, we observe that the AO made impugned addition by observing that the assessee has not given detail whether the share application money was received by way of cheque or draft nor any copies of the income tax returns (for the relevant AY 2004-05) were filed in respect of share application money contributors to ascertain their creditworthiness. The AR during the arguments has drawn our attention towards paper book spread over 110 pages wherein it has been mentioned that the assessee filed copies of the confirmation, bank statements, income tax returns al....