TaxTMI 
TaxTMI 
2021 (3) TMI 1122
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....nbsp; Rs. Rs. Business income 27,233,117 Less: Brought forward business loss set off 27,233,117 NIL Long term capital gains /(loss) (8,037,863) Short term capital gains/(loss) (206) Gross Total Income /Total Income 8,038,069 3. Further AO observed that the positive business income which includes a loss from sale of shares held as stock-in-trade. The assessee's case was selected for scrutiny and AO held that loss incurred by the assessee from sale of shares held as stock-in-trade is a speculative loss as per the explanation to section 73 of the Act. AO observed that assessee has profit under the head 'business' and loss under the head 'capital gains'. Therefore, the main income of the assessee is from profit and gains of business and the explanation of section 73 of the Act is applicable in assessee's case. Accordingly, the assessment was completed assessing the total income at Rs. NIL (after adjusting the brought forward losses). AO reclassified the business loss from sale of shares held as stock-in-trade as speculation loss. 4. Aggrieved with the above order of AO, assessee preferred appeal bef....
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....ssee claimed the loss in share trading as normal business loss and nowhere it was disclosed or indicated in any manner that explanation to section 73 is applicable to the case of the assessee and, therefore, such loss is speculation loss. Even it was not disclosed anywhere that assessee has claimed this as normal business loss because it is debatable issue. It was not disclosed or indicated in any manner that the facts are that the major income of the assessee is from dealing in shares and securities of other companies, whereas, assessee disagrees with the application of explanation to section 73 in any manner, therefore, it is clear that assessee had not disclosed complete correct facts and the fact that explanation to section 73 is applicable was concealed and, therefore, the facts which were filed were incomplete facts on the basis of which loss from dealing in shares was claimed as normal business loss and, therefore, clearly condition of section 27l(l)(c) are fulfilled. Hence, penalty is leviable. In view of the facts that inaccurate particulars were filed and correct facts were concealed, the cases cited by the assessee are not applicable to the case of the assessee. ....
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....e will not fall under explanation to section 73 of the Act. He brought to our notice findings of AO and submitted that reclassification of the business loss to speculative loss has not made any difference to the carry forward of loss. Carry forward of business loss was replaced by carry forward of speculative loss. Therefore, it is only a reclassification of head of income for carry forward. He further brought to our notice penalty order in which the AO observed that assessee has furnished inaccurate particulars of income and concealed particulars of income by availing excess deduction not legally allowable to the assessee company. Thus, attracting the provision of section 271(1)(c) of the Act. He submitted that assessee has no benefit or taken any benefit as claimed by the AO. He further brought to our notice Explanation 4 (b) of section 271(1)(c) of the Act and submitted that there is no change in the taxable income of the assessee. Therefore, the AO cannot invoke the penalty u/s 271(1)(c) of the Act. For that proposition, he relied on the following case law:- i) CIT vrs. Aretic Investment Pvt. Ltd. (2010) 190 taxman 157 (Delhi) ii) CIT vrs. Navinchandra & Co. (....
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....rying on a speculation business within the meaning of the explanation, sub section (1) of Section 73 is applied in the first instance. This would in our view not be permissible as a matter of statutory interpretation, because the explanation is designed to define a situation where a company is deemed to carry on speculation business. It is only thereafter that sub section (1) of section 73 can apply. Applying the provisions of Section 73(1) to determine whether a company is carrying on speculation business would reverse the order of application. That would be impermissible, nor, is it contemplated by Parliament. For, 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 accept 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 t....