TaxTMI 
TaxTMI 
2015 (3) TMI 925
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....s instead of treating the same as speculation loss. 2. On the facts and in the circumstances of the case, the ld. Commissioner of Income-tax(A)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. 3. It is therefore, prayed that the order of the ld. Commissioner of Incometax( A)-XIV, Ahmedabad may be set-aside and that of the Assessing Officer be restored. 4. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and assessment u/s 143(3) of the Income-tax Act (hereinafter referred to as "the Act") was framed vide order dated 30/12/2009, whereby the Assessing Officer disallowed the adjustments of business loss and made addition in respect of the transactions made with the related parties treating them as Sham transactions. The Assessing Officer also made disallowance u/s 14A of the Act. Against the aforesaid order of the Assessing Officer, the assessee filed an appeal before the ld. CIT(A) who, after considering the submissions of the assessee, partly allowed the appeal vide order dated 28.01.2011. While partly allowing the appeal, the ld. CIT(A) held that the Explanation to Section 73 will come into play only when the adj....
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....profit of other business as per the provisions of Section 70 of the Act. He also submitted that no material or evidence was brought on record by the Assessing Officer to show that the assesseecompany made loss in share trading activity in order to reduce the tax incidence. He submitted that ld. CIT(A) has rightly directed the Assessing Officer to treat the interest income of Rs. 64,98,590/- as business income and further directed the Assessing Officer to allow set-off of loss of Rs. 34,80,608/- in the business of share trading activity against such interest income. 8. We have heard the rival submissions, perused the orders of the lower authorities and material available on record. We find that the ld. CIT(A) has decided this issue as under:- "2.6. I have considered the facts of the case and submission of the appellant and perused the material available on record. Accordingly, I agree with the submissions made on behalf of the appellant that the AO could nto invoke the provisions of Section 73 and Explanation thereto without adjusting the losses and gains from various sources under the head "Business", as permitted by the provisions of Section 70 and 71 of the IT Act, 1961, and on....
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...., such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]" 9. Ld. Counsel for the assessee has demonstrated that one of the objects of the assessee-company is financing and major portion of the capital is deployed for the purpose of advancing loan. Even in the balance-sheet, the interest income is shown as Rs. 64,98,590/-. Therefore, we do not find any good reason to interfere into the order of the ld. CIT(A) which is hereby confirmed. This ground of appeal of the Revenue is rejected. In the result, the appeal of the Revenue is dismissed. Now we take up the assessee's appeal for AY 2007-08. ITA No. 853/Ahd/ 2011 (By Assessee) : Assessment Year : 2007-08 10. The assessee has raised following grounds in its appeal:- 1. The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the transaction entered with related parties as sham transaction in respect of loss incurred in share & securities, though the beneficiary of the shares had already paid adequate tax on the income earned on such transaction by them. 2. T....
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....under:- "4. Sham transaction It was observed from the details that the assessee had been involved in transactions of shares. It was also observed that the assessee had claimed to have transacted with related parties covered u/s. 40A(2)(b) and incurred losses on such transactions. The details of these transactions are as under: Sr. No. Name of relative Date of purchase Purchase price Date of Sale Sale price Loss incurred 1. Gunvant T. Shah (HUF) 31-8-06 3300000 30-8-06 2800000 500000 2. Chandrika K. Shah 23-8-06 3500000 23-8-06 2730000 770000 3. Ashok T. Shah (HUF) 21-8-06 3150000 18-8-06 2650000 500000 4. Kunal T. Shah (HUF) 25-8-06 3500000 24-8-06 3000000 500000 5. Nisha A. Shah 16-8-06 3200000 14-8-06 2700000 500000 6. Anilaben A. Shah 11-8-06 3100000 10-8-06 2600000 500000 7. Rekha G. Shah 29-8-06 3370000 28-8-06 2790000 580000 Total 23120000 19270000 3850000 All these transactions were executed between such parties "off market". Such transactions were not executed through stock exchange. Moreover, the assessee company had sold such shares to these persons at lower rate and purchased thereafter at higher rate. First of all no business profit or....
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....and were not executed through stock exchange. 3. Shares were not actually delivered between the assessee and the concerned persons. All the transactions were only paper transactions, i.e. no delivery was effected for sales/purchases of shares. 4. Bank pass book reveals that the assessee company had paid the difference (loss amount) on such transactions to these persons. No amount was received or paid by the assessee company on sales and purchases of such shares. This clearly indicates that no purchase and sales were made separately between the assessee and these persons. All such transactions appear as bogus and paper entries only. Such losses are appeared to be entered into create artificial losses only. 5. The assessee has entered into speculation activities to avail the artificial loss created by such alleged transactions which were set off against the interest income. 6. The gain arisen on such transactions have been shown by all these persons as income from other sources in their returns of income. Where purchase and sale of shares were done through cheques, which were not encashed, so that there was no movement of funds, the transactions being as between these persons and....