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TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 945
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....ining the taxable income at Rs. 9,71,753/-. The nature of business mentioned by the ld AO is 'Trading and Finance' and the same was also mentioned in the Tax Audit Report of the assessee. The ld CIT sought to revise the assessment framed u/s 143(3) of the Act by invoking revisionary jurisdiction u/s 263 of the Act for which a show cause notice was issued to the assessee as to why the loss incurred by it on purchase and sale of shares amounting to Rs. 1,07,87,500/- should not be treated as speculation loss by invoking the Explanation to section 73 of the Act. In response to this, the assessee replied that Explanation to Section 73 of the Act has got two exceptions. The Explanation has two exceptions. The 1st one is that if one's income mainly consists of (a) Interest on Securities, (b) Income from House property, (c) Capital Gains and (d)Income from other sources, in that case the provisions of this Explanation will not be invoked. The 2nd exception is in regard to principal business of the company. If the assessee is a banking company or the principal business of the company is granting of loans and advances, in that case this Explanation of deeming provisions will not be invoked. ....
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....IT having referred to Note No. 8 supra had not disputed the fact of purchase of sarees made by the assessee and disclosed thereon either in his show cause notice or in his revision order u/s 263 of the Act, though no specific mention was made by the assessee in that regard during the course of revision proceedings before the ld CIT. We find that the total purchases made by the assessee during the year and as confirmed by the ld CIT is Rs. 44,28,66,850/- , the break-up of the same is as below:- Purchase of shares - Rs. 5,62,45,000 Purchase of sarees - Rs. 38,66,21,850 Rs. 44,28,66,850 5.3. The ld DR argued that the fact of purchase of sarees to the extent of Rs. 38.66 crores was never disclosed by the assessee either before the ld AO or before the ld. CIT and the same is brought to the notice of this tribunal for the first time. Hence he argued that no view should be taken on the same. He argued that the aspect of principal business of the assessee was never enquired by the ld. AO while raising a query in March 2010 as could be seen from the order sheet entries. He stated that the ld. CIT had given a categorical finding in his or....
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....bunal, the revenue has come up in appeal. At the time of hearing, Mr. Saraf, learned advocate very fairly drew our attention to the judgment in the case of CIT vs. Darshan Securities (P) Ltd. reported in 341 ITR 556 wherein the following view was taken: "The ambit of sub-section (1) of section 73 is only to prohibit the setting off of a loss which has resulted from a speculation business, save and except against the profits and gains of another speculation business. In order to determine whether the exception that is carved out by the Explanation applies, the Legislature has first mandated a computation of the gross total income of the company. The words "consists mainly" are indicative of the fact that the Legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the Explanation. Consequently, in the present ca....
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....n the clear break up of closing stock of shares and closing stock of sarees. We also find that the ld CIT in his order itself in page 2 had stated that the closing stock of shares is only Rs. 5,17,00,000/-. Hence the very basis for his decision based on funds deployed in share business is more than that deployed in loans and advances gets defeated. 5.6. On both the counts of income criterion and funds deployment criterion, it could be safely concluded that the assessee's case squarely falls under the two exceptions provided in Explanation to Section 73 of the Act and hence the order passed by the ld AO in these circumstances cannot be termed as erroneous much less prejudicial to the interests of the revenue warranting revisionary jurisdiction u/s 263 of the Act. 5.7. Apart from this, we also find that the ld AO had made a specific enquiry with regard to the applicability of Explanation to Section 73 of the Act during the course of original assessment proceedings for which the necessary order sheet entries were placed on record in the paper book. We find from the said order sheet entry on 10.3.2010 and 24.3.2010, a specific query was raised by the ld AO on the applicability of....
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..... Therefore the losses arising out of share transaction should not be treated as speculation loss but should be treated as normal business loss as the principal income of the assessee during the aforesaid assessment year consist mainly of advancing loans and advances and earning interest income. The explanation of the assessee seems reasonable. Hence, the share trading loss is being treated as business loss." 5.8. In view of the aforesaid facts and circumstances and findings given thereon and respectfully following the judicial precedents relied upon hereinabove, we hold that the ld CIT had wrongly invoked revisionary jurisdiction u/s 263 of the Act as the order passed by the ld AO is neither erroneous nor prejudicial to the interest of the revenue which is the condition precedent for invoking revisionary jurisdiction u/s 263 of the Act. Hence we hereby quash the revision order passed u/s 263 of the Act by the ld CIT and allow the grounds of the assessee in this regard. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11.08.2016 ============= Document 1 OFFICE OF THE COMMISSIONER OF INCOME TAX: KOLKATA-1: KOLKATA. P-7, ....