AI Drafter 
TaxTMI 
TaxTMI 
2018 (3) TMI 886
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.... 143 (3) of the Act was completed on 26/03/1999 determining its income at Rs. 11. 66 lakhs. The matter travelled up to the Tribunal and vide its order dated 30/11/2006 it reminded the matter relating to loss and valuation of shares as well as loss on sale of shares back to the file of the AO for verifying the genuineness of the transaction. The Tribunal also directed the AO to allow valuation of closing stock of share as per cost/market price whichever was lower in so far as assessee was dealing in shares which formed part of its closing stock. It was further observed that profit/loss arising on sale and purchase of shares and securities held as stock in trade was to be computed and allowed as business profit/ loss whereas profit/loss on sa....
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....tion. After considering the assessment order and submissions of the assessee the FAA held that the AO had treated the loss of Rs. 2 00 85 200/-on sale/valuation of stock in trade as speculative loss by invoking the provisions of explanation to section 73 that the loss of Rs. 1. 12 crore was treated as capital loss that while computing capital loss the AO had not given effect to the provisions of indexation of cost of acquisition that the capital loss would increase to Rs. 1. 70 crore that the loss would not be entitled to be set off against other income of the current year that the loss would not be entitled to be set off against other income of the year under consideration that it would be carried forward in the subsequent years and would ....
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....tional ground that the FAA did not afford any opportunity to the AO to rebut the claim that the calculation of indexation was not made available to the AO that the AO had rightly invoked the provisions of explanation to section 73 of the Act that loss suffered by the assessee was to be assessed as speculative loss. The Authorised Represetative(AR)stated that the AO had not allowed benefit of indexation to the assessee while calculating the capital loss that it came to know about the said mistake only after it received the set aside assessment order that it had filed a rectification application u/s. 154 of the Act in that regard that the application was still pending before the AO that the FAA had rightly held that the assessee was covere....
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....ent being capital loss was not entitled to be set of against other income for the year under consideration that same was to be carried forward to be set off against capital gain of the subsequent years. Regarding the business loss he held that explanation to section 73 was attracted that as per deeming provision of the explanation the loss was to be treated as speculative loss that same was to be set off against speculative profits only. We find that in the appellate proceedings the FAA while deciding the additional ground raised by the assessee had held that the assessee was entitled to benefit of indexation. In our opinion raising an additional ground before the FAA is a legal right of an assessee. It is prerogative of the FAA to accep....
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....re as to how the claim made by it would be treated by the AO during the set aside proceedings. It was only after receiving the order it came to know that loss has been treated as capital loss. There was no chance for it to claim indexation. In these circumstances only remedy left was to raise an additional ground on the first opportunity available and it did so. In our opinion the FAA was fully empowered to admit the additional ground and to decide the same on merits without asking for comments/remand report of the AO. The Act provides that while calculating capital gains/losses indexation has to be allowed. The AO should have allowed benefit of indexation to the assessee the moment he held that transaction in question was capital loss. The....