TaxTMI 
TaxTMI 
2016 (10) TMI 990
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.... I T Act setting aside the assessment order and directing AO to pass a denovo assessment even though the show cause notice was issued only for 2 specific reasons, 2) For that on the facts and in the circumstances of the case. the CIT. Kolkata-l was grossly unjustified in law and on facts in holding the assessment order u/s. 143(3) dated 10.12.2010 was erroneous and prejudicial to the interest of the revenue even though the AO did not commit any error while passing the order u/s. 143(3). 3) For that on the facts and in the circumstances of the case, the CIT, Kolkata-I was grossly unjustified in law in holding that Explanation to Sec 73 of the IT Act was applicable to the appellant and therefore the loss incurred by the assessee in purchase & sale of shares was assessable as loss derived from "speculation business". 4) For that on the facts and in the circumstances of the case, the CI'T, Kolkata-I failed to appreciate that on the facts of the appellant's case Explanation to Sec 73 of the IT Act was not applicable and in that view of the matter the order of the AO was neither erroneous nor prejudicial to the interest of the revenue. 6) For that on the facts and in the ....
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....losing stock of share is of Rs. 20,31,84,422/- as evidenced from the balance sheet of the assessee. In view of above, the impugned order of ld.CIT u/s. 263 set aside the order of the AO with the direction to examine the books of account, documents, evidences and then to pass de-novo assessment order. 4. Aggrieved by the order of the ld.CIT, assessee is in appeal before us by raising the above mentioned grounds of appeal. 5. Before us the ld.AR for the assessee filed a paper book containing pages 1-16 and submitted that for applying the deeming provisions of Explanation to Sec.73, overall conduct of assessee needs to be examined. He submitted that the assessee in the preceding and succeeding assessment years has not made any purchase/sale of shares. The composite income of assessee was mainly consisted with interest on capital gains and dividend income. Thus, simply for the current year there was share transaction and loss was suffered by the assessee that will not change the character of business. Therefore, the loss claimed by the assessee from dealing of shares cannot be termed as speculation loss by invoking the deeming provisions of Sec. 73 of the Act. Finally, he prayed befo....
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....order passed by an Assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of revenue, if in the opinion of the Principal Commissioner or Commissioner - A. the order is passed without making inquiries or verification which should have been made. B. The order is passed allowing any relief without inquiring into the claim. 7. In the light of above, it was plain that at the time of the passing of the order u/s. 143(3) of the Act, that is on 10.12.2010, the said order was erroneous as well as prejudicial to the interests of revenue. As regards, the contention of the appellant that he could claim exemption from applicability of Section 73 by suggesting that he was a company that was not dealing in shares but was actually deriving its income from interest, Dividend and Short Term and Long Term Capital Gains, the appellant's contention are not tenable, mainly, on the following counts: * The appellant himself has mentioned in his Return of Income that he deals in Shares and Finance as evidenced by even the erroneous 143(3) Order where in nature of business it has been mentioned as "Dealing in Shares and Finance". * As per appellant'....
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.... The assessee has submitted his explanations to the Ld. CIT along with a chart showing comparative incomes from various sources over several years. It may be noted from a comparison of the chart produced before the Hon'ble Tribunal and that submitted before the Ld CIT that the assessee had deliberately omitted the mention of income earned through the trading in shares before the Ld CIT. The assessee had argued before the Ld CIT that the income from shares in the relevant year was minuscule in comparison with the rest of the income. This, we have seen, is not true at all. Even if the quantum involved in the sum of all incomes from various heads - taxable or not - is compared to the profit/loss from trading activity in shares, we find that the ratio is not very small - it comes to almost 17% as per the letter submitted by the assessee before the Ld CIT. This can hardly be considered a small percentage either in absolute or comparative terms. Further, the Ld CIT has passed impugned order u/s 263 on 16.3.2013. 9. This was a good two years before the amendment to explanation to Section 73 was introduced in which dealing in shares was also included for claiming exemption from the m....
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....neous, has been accepted by the appellant as being meritorious. 13. It may be mentioned that Section 263, while talking about orders that are "erroneous and prejudicial to the interests of revenue" does not differentiate between substantial mattes of revenue or smaller matters of revenue. In this case, it is submitted that if there are more than issues on which the Ld. CIT finds in his impugned order u/s 143(3) of the Act in error and in prejudice to the interest of revenue, and sets the order u/s 143(3) aside; and if hypothetically, the opinion so formed by the Ld. CIT fails on anyone of the counts, even then the order setting aside the order of the AO will continue to stand - especially, since the opinion has not been crystallized by the Ld. CIT and he has merely sent it back for re-examination. The fact, even if one of the issue on which the opinion was based, continues to stand, will allow the action of the Ld. CIT to be correct. 14. In this case, we find that the assessee has accepted the opinion voiced by the Ld CIT in his impugned order u/s 263 of the Act. In these circumstances, even if the said order would have failed on the first count, the order setting aside the order....
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....iew of the Explanation to Section 73 of the Act. Income here means the net income. In this connection we rely in the order of Hon'ble High Court of Calcutta in the case of CIT Vs. Middleton Investment & Trading Co. Ltd. in ITA 196 of 1999 where the issue was decided in favour of assessee after having the reliance in the case of CIT Vs. Darshan Securities (P) Ltd. reported in 341 ITR 556. The relevant extract is reproduced below:- "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 a....
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....ply to the aforesaid submission of Mr. Poddar. Speaking for ourselves we are inclined to accept the submission advanced by Mr. Poddar. Because both income and business activity, according to the legislative mandate, are distinguishing factors. Therefore income alone cannot be taken into account in deciding whether the assessee is entitled to make a departure from the mandate appearing in sub-section (1). In the case before us the activity of granting loans and advances is on a larger scale than the business of buying and selling shares. Both profit and loss are matters of chance in both the activities. Therefore profit alone was not made the distinguishing factor. Since business activity is also a distinct factor, we are inclined to think that the principal business of the company/assessee is granting loans and advances as would appear from the volume indicated in the chart above for a number of years." Thirdly the provisions to explanation to section 73 of the Act are not applicable to the assessee the principal business of which is the business of trading in shares. This amendment was incorporated in the Finance Act 2014, w.e.f. 1.4.2015 but its effect came retrospectively w.e.f....