The DCIT, Baroda Circle-4(1),, Baroda v. M/s. Paramount Ltd.,, Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND N. S. SAINI AM) ITA NO.1760/AHD/2007 A. Y.: 2003-04 THE D. C. I. T. CIRCLE-4(1) BARODA 4 TH FLOOR AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA 390 007 VS M/S. PARAMOUNT LTD. RACE COURSE CIRCLE (WEST) BARODA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJA RAM SHAH DR RESPONDENT BY SHRI S. N. SOPARKAR AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III BARODA DATED 0 5-01-2007 FOR ASSESSMENT YEAR 2003-04. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD. 3. GROUND NO.1 OF THE APPEAL READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO TREAT THE PROFIT OF RS.54 91 643/- FROM PURCHAS E AND SALE OF SHARES AS ASSESSABLE UNDER THE HEAD CAPITA L GAIN DESPITE THE FACT THAT THE SAID PROFIT IS REGA RDED AS PROFIT FROM SPECULATION BUSINESS UNDER THE DEEMING PROVISIONS OF EXPLANATION UNDER SECTION 73 OF I.T. ACT 1961 APPLICABLE TO THE ASSESSEE. 4. THIS ISSUE RELATES TO TREATMENT OF CAPITAL GAINS OF RS.54 91 643/- AS SPECULATION PROFIT BY HAVING RECOURSE TO PROVISI ONS OF EXPLANATION TO 73 OF THE ACT. THE ASSESSEE HAS CLAIMED PROFIT ON S ALE OF INVESTMENT ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 2 AMOUNTING TO RS.54 91 643/-. THIS COMPRISE OF TWO C OMPONENTS VIZ SHORT TERM CAPITAL GAINS OF RS.15 34 523/- AND LONG TERM CAPITAL GAINS OF RS.29 26 296/- COMPUTING THE GAIN AFTER PROVIDING T HE INDEXATION. THE AO NOTED THAT THE ASSESSEE COMPANY DOES NOT FALL UN DER EITHER OF THE TWO CATEGORIES WHICH ARE EXCEPTION TO EXPLANATION TO SE CTION 73 OF THE IT ACT. I.E. (A) COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINL Y OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTERES T ON SECURITIES INCOME FROM HOUSE PROPERTY CAPITAL GAINS AND INCOME FROM OTHER SOURCES. (B) A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS TH E BUSINESS OF BANKING OR GRANTING OF LOANS AND ADVANCES. IT WAS FURTHER NOTED THAT THE COMPANY REGULARLY MAK ES INVESTMENT IN VARIOUS SCRIPTS LISTED IN THE STOCK EXCHANGE WITH A MOTIVE TO EARN PROFIT. IT WAS HENCE HELD THAT AS A RESULT OF THE TRANSACTI ONS OF PURCHASE AND SALE OF SCRIPTS THE ASSESSEE COMPANY HAD EARNED SP ECULATION PROFIT. THIS WAS ELIGIBLE TO BE ADJUSTED AGAINST SPECULATIVE LOS S. AFTER SET OFF OF THE SPECULATIVE LOSSES THE RESULTANT NET SPECULATION I NCOME OF RS.13 10 749/- WAS BROUGHT FORWARD TO TAX. 5. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT SECTION 73 OF THE IT ACT IS APPLICABLE ONLY IN CASE OF LOSS ARISING OUT OF SPECULATION BUSINESS. THE PROVISIONS OF THIS SECTION ARE NOT APPLICABLE IN THE CASE OF PROFIT. HENCE THE AO WAS NOT JUSTIFIED IN TREATING THE LON G TERM CAPITAL GAIN AS SPECULATIVE PROFIT. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL ON RECORD DIRECTED TO TRE AT THE ABOVE SUM AS CAPITAL GAIN CLAIMED BY THE ASSESSEE. THE FINDINGS OF THE LEARNED CIT(A) ARE REPRODUCED AS UNDER: ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 3 9.2 . I HAVE CONSIDERED THE SUBMISSION OF THE LD. A.R. AND THE FACTS OF THE CASE. THE HEADING OF SECTION 7 3 ITSELF REVEALS THE SCOPE OF THE PROVISIONS CONTAINED IN TH E SECTION. THE HEADING READS AS FOLLOWS: LOSS IN SPECULATION BUSINESS IT IS AMPLY CLEAR THAT THE SUBJECT MATTER OF THE SE CTION RELATES TO LOSS. NEITHER IN THE HEADING NOR IN THE SECTION ITSELF NOR IN THE EXPLANATION IS ANY REFERENCE TO BE FOUND TO THE TREATMENT OF PROFITS ARISING FROM SPECULATION BUSINESS. MOREO VER A DIRECT DECISION IS AVAILABLE ON THE ISSUE REGARDING SCOPE OF SECTION 73. THE ISSUE WAS CONSIDERED BY THE HYDERABAD BENCH OF THE ITAT IN THE CASE OF GODAVARI CAPITAL V. DCIT 273 IT R 10 (AT). IT WAS HELD THEREIN THAT: SECTION 73 OF THE INCOME-TAX ACT 1961 IS APPLICABLE ONLY IN CASES WHERE LOSSES ARE INCURRED IN SPECULATION BUSINESS. THE OBJECT OF THIS SECTION IS TO CURB THE DEVICE BEING RESTORED TO BY SOME BUSINESS HOUSES TO MANIPULATE AND REDUCE THE TAXABLE INCOME BY BOOKING SPECULATIVE LOSSES. THIS SECTION CANNOT BE INVOKED IN A CASE WHERE THERE IS A PROFIT FROM A SPECULATIVE TRANSACTION. 9.2.1 THE SPECIAL BENCH OF THE MUMBAI ITAT HAD AN OCCASION TO EXAMINE THE ISSUE IN ACIT V. CONCORD CO MMERCIALS 95 ITD 117. IT WAS HELD THEREIN THAT: 17. AN (SIC) SPECULATIVE TRANSACTION AND THE LOSS ARISING OUT OF AN (SIC) SPECULATIVE TRANSACTIO N HAVE BEEN HIGHLIGHTED IN THE SCHEME OF IT ACT 1961 MOR E PARTICULARLY IN THE CONTEXT OF COMPUTATION OF INCOM E UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR THE PURPOSE OF RESTRICTING THE SCO PE OF SETTING OFF AND CARRY FORWARD OF SUCH LOSS. THE LA W FOR THAT MATTER TREATS SPECULATIVE TRANSACTION CARRIED ON BY AN ASSESSEE AS A DISTINCT AND SEPARATE BUSINESS IF THE NATURE OF SUCH TRANSACTION IS SUCH THAT IT CONSTITU TES A BUSINESS. THIS IS PROVIDED UNDER EXPLANATION 2 TO SECTION 28 OF THE ACT. LIKEWISE THE DEFINITION OF T HE TERM SPECULATIVE TRANSACTIONS IS PROVIDED IN SECTION 43( 5) IN A SUBSTANTIVE MANNER. GENERALLY SPEAKING THE AMBIT A ND SCOPE OF SPECULATIVE TRANSACTION AND SPECULATION LO SS NEED TO BE CONFINED WITHIN THE LIMIT PROVIDED BY LA W CONTAINED IN THE ABOVE MENTIONED PREVISIONS. BUT ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 4 FURTHER TO TAKE CARE OF ANY DEVICE THAT MAY BE ATTEMPTED BY BUSINESS HOUSES CONTROLLING GROUP OF COMPANIES FOR THE PURPOSE OF REDUCING THE TAX INCID ENCE THE LAW HAS ANNEXED AN EXPLANATION TO SECTION 73 OF THE IT ACT 1961. THE SAID EXPLANATION IS A DEEMING PROVISION WHEREBY THE TRANSACTION OF A COMPANY DEAL ING IN PURCHASE AND SALE OF SHARES SHALL BE TREATED AS SPECULATIVE TRANSACTION SUBJECT TO TWO EXCEPTIONS. 9.2.2 THE ITAT MUMBAI BENCH IN HSBC SECURITIES & CAPITAL MARKETS PVT. LTD. V. JCIT (ITA NO.3386/MUM /2001 AY 1997-98) REFERRED TO THE DECISIONS IN AMAN PORTF OLIO PVT. LTD. V. DCIT 92 ITD 324 & CONCORD COMMERCIAL (SUPR A). IT FURTHER REFERRED TO THE CBDT CIRCULAR AND OBSERVED THAT THE CIRCULAR ISSUED BY THE CBDT HAS EXPLAINED THE PROVI SIONS OF EXPLANATION WHICH ASSUMES SIGNIFICANCE AS CONTEMPAR ANEA EXPOSITO. THE EXPLANATION APPLIES ONLY TO THOSE LOS S ARISING OUT OF TRANSACTIONS RESTORED TO BY BUSINESS HOUSES CONTROLLING GROUP OF COMPANIES. IN THE PRESENT CASE AS POINTED OUT BY THE LD. CHARTERED ACCOUNTANT THE TRANSACTIONS WERE NOT CARRIED OUT WITH ANY INTEREST OF CONTROLLING GROUP OF COMPA NIES AND THE ASSESSEE HAD NO INTEREST IN ANY OF THE SHARES TRANS ACTED THEREIN. IN SUCH CIRCUMSTANCES THE EXPLANATION TO SECTION 73 CANNOT BE INVOKED AGAINST THE ASSESSEE. 9.2.3 THE GUJARAT HIGH COURT IN CIT V. ASHOKBHAI B . SHAH 218 ITR 331 HAS HELD THAT THE LOSSES SUFFERED BY THE ASSESSEE WOULD NOT BE A LOSS IN THE NATURE OF SPECU LATION WHERE THE SHARES WERE SOLD OUT OF ITS STOCK IN HAND . 9.2.4 IN VIEW OF THE ABOVE I AM OF THE OPINION TH AT THE ACTION OF THE A.O. IN SEEKING TO ASSESS THE IMPUGNE D AMOUNT OF LONG TERM CAPITAL GAIN AS SPECULATION PROFIT WAS NOT WELL FOUNDED. THE A. O. IS DIRECTED TO TREAT THE SUM OF RS.54 91 643/- AS CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. 6. THE LEARNED DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE AO WAS SPECIFIC IN HOLDING THAT THE IN COME BEI NG CATEGORIZED BY THE ASSESSEE COMPANY AS IN COME FROM CAPITAL GAIN IS IN FACT A GAIN OF SPECULATION PROFIT. THE LEARNED DR FURTHER SUBMITTE D THAT FOR THIS PURPOSE THE BENEFIT OF INDEXATION IS NOT PROVIDED T O THE ASSESSEE. THE LEARNED DR SUBMITTED THAT THE AO WAS JUSTIFIED IN T REATING THE PROFIT ON ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 5 SALE OF INVESTMENT AS SPECULATION PROFIT BEING ELIG IBLE TO BE ADJUSTED ONLY AGAINST SPECULATIVE LOSS. 7. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND SUBMITTED THAT THE AO HAS CONFUSED THE ISSUE ENTIRELY. HE HAS REFE RRED TO EXPLANATION (2) TO SECTION 28 OF THE IT ACT WHICH READS AS UNDE R: EXPLANATION 2.WHERE SPECULATIVE TRANSACTIONS CARRIED ON BY AN ASSESSEE ARE OF SUCH A NATURE AS TO CONSTITUTE A BUSINESS THE BUSINESS (HEREINAFTER REFERRED TO AS SPECULATION BUSINESS) SHALL BE DEEMED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 73 OF THE IT ACT IS APPLICABLE ONLY IN CASE OF LOSS ARISING OUT OF SPECULATION BUSINESS. HOWEVER IN THE CASE OF THE ASSESSEE THERE WAS A PR OFIT. THEREFORE ABOVE PROVISIONS WOULD NOT APPLY. HE HAS ALSO REFERRED TO SECTION 74 OF THE IT ACT AND ALSO REFERRED TO PB-3 WHICH IS THE STATEME NT OF COMPUTATION FOR WORKING OF LONG TERM CAPITAL GAINS DURING THE YEAR IN WHICH THE ASSESSEE EARNED LONG TERM CAPITAL GAINS OF RS.29 26 296/-. T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE IS DECIDED BY ITAT AHMEDABAD BENCH IN THE CASE OF KRUTI MARKETING LTD . VS ACIT IN ITA NO.5248/AHD/1995 DATED 31-5-2001. COPY OF THE ORDER IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO R ELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS REWASHANKER A. KOTHARI 283 ITR 338 (GUJ). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. AS PER EXPLANATION 2 TO SECTIO N 28 OF THE IT ACT THE LAW FOR THAT MATTER TREATS SPECULATIVE TRANSACTION CARRIED ON BY AN ASSESSEE AS A DISTINCT AND SEPARATE BUSINESS IF THE NATURE OF SUCH TRANSACTION IS SUCH THAT IT CONSTITUTES A BUSINESS. ITAT AHMEDABAD ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 6 BENCH IN THE CASE OF KRUTI MARKETING LTD. (SUPRA) C ONSIDERING THE SAME QUESTION HELD THAT A PERUSAL OF SECTION 73 READ WITH AFORESAID EXPLANATION CLEARLY INDICATES THAT IN ORDER TO BRIN G A TRANSACTION WITHIN THE NET OF SECTION 73 THERE SHOULD NECESSAR ILY BE A BUSINESS OF SPECULATIVE TRANSACTIONS AND IT MUST BE CARRIED ON BY THE ASSESSEE. THE WORD BUSINESS AS DEFINED IN SECTION 2(13) INCLUDES ANY TRADE COMMERCE OR MANUFACTURING OR AN Y ADVENTURE OR CONCERN IN THE NATURE OF TRADE COMMERCE OR MANU FACTURE. THESE WORDS ARE OF WIDE IMPORT UNDERLYING AN IDEA BEING O F CONTINUOUS EXERCISE OF AN ACTIVITY. IT DENOTES CONTINUOUS AND SYSTEMATIC EXERCISE OF OCCUPATION OR PROFESSION WITH THE OBJEC T OF MAKING INCOME OR PROFIT. THE SAME REQUIREMENT OF CONTINUOU S EXERCISE OF AN ACTIVITY IS IMPLICIT IN THE WORDS CARRIED ON BY HIM. IN THE PRESENT CASE THERE IS NO MATERIAL OR EVIDENCE ON RE CORD THAT THE ASSESSEE COMPANY WAS CARRYING ON SPECULATION BUSINE SS OF DEALING ON SHARES/DEBENTURES OF OTHER COMPANIES. IT WAS FURTHER HELD THAT IN THE PRESENT CASE THERE IS NO SUCH FINDING THAT THE APPELLANT COMPANY WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES. THE SHARES IN QUESTION W ERE HELD AS INVESTMENTS. THE EXPLANATION TO SECTION 73 IS THERE FORE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS RE WASHANKER A. KOTHARI 283 ITR 338 (GUJ.) HELD THAT THE TRIBUNAL HAD TAKEN NOTE OF THE FACT THAT THERE WAS A LONG GAP BETWEEN THE DATE OF ACQUISITION OF THE SHARES AND THEIR SALE AND THAT SOME OF THE S HARES SOLED IN THE RELEVANT ACCOUNTING PERIOD WERE PURCHASED AT LE AST THREE YEARS AGO WHILE SOME OTHER SHARES WERE PURCHASED AS FAR BACK AS IN 1971 I.E. A PERIOD OF ABOUT 14 TO 15 YEARS. FURTHE RMORE IN THE REPLY TO THE SHOW-CAUSE NOTICE ISSUED THE ASSESSEE HAD CATEGORICALLY STATED THAT HE WAS A PARTNER IN A FIR M HAVING BUSINESS IN BUILDING MATERIALS HARDWARE ITEMS ETC . AND NEITHER ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 7 THE FIRM NOR THE ASSESSEE WERE CARRYING ON ANY BUSI NESS IN SHARES THAT THE ASSESSEE HAD BEEN DULY FILING WEALTHY-TAX RETURNS FROM THE ASSESSMENT YEAR 1957-58 AND THE SHAREHOLDING ON THE RESPECTIVE VALUATION DATES HAD DULY BEEN SHOWN AS WEALTH ON AC COUNT OF INVESTMENT. THESE FACTS HAD NOT BEEN DISPUTED BY TH E COMMISSIONER. THE TRIBUNAL HAD RIGHTLY COME TO THE CONCLUSION THAT THE ORDER MADE BY THE COMMISSIONER U/S 263 OF THE ACT WAS NOT SUSTAINABLE AND THAT ON THE FACTS THE INCOME WAS REQUIRED TO BE TAXED UNDER THE HEAD CAPITAL GAINS AND NOT AS INCOME FROM BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PA GE 3 OF THE PAPER BOOK IN WHICH DETAILS OF LONG TERM CAPITAL GA INS HAVE BEEN GIVEN TO SHOW THAT THERE IS A PROFIT OF RS.29 26 296/-. THE DETAILS OF YEAR OF INVESTMENT ARE ALSO FILED ALONG WITH THE AMOUNT INV ESTED INDEXED COST AND YEAR OF SALE. THERE IS A LONG DIFFERENCE BETWEE N THE YEAR OF INVESTMENT AND THE YEAR OF SALE. THE ABOVE FACTS WO ULD PROVE THAT THE ASSESSEE MADE INVESTMENT AND CLAIMED PROFIT ON SALE OF INVESTMENT AMOUNTING TO RS.54 91 643/- WHICH COMPRISE OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN. THE AO ALSO NOTED IN T HE ASSESSMENT ORDER THE NATURE OF BUSINESS OF THE ASSESSEE TO BE ENVIRO NMENT ENGINEERING AND CONSULTANCY. THERE WAS NO MATERIAL OR EVIDENCE PROV IDED ON RECORD THAT THE ASSESSEE COMPANY WAS CARRYING ON SPECULATION BU SINESS OF DEALING IN SHARES OF OTHER COMPANIES. IN THE ABSENCE OF ANY MA TERIAL ON RECORD THE FINDINGS OF THE AO ARE CLEARLY UNJUSTIFIED PARTICU LARLY WHEN THERE WAS NO LOSS IN SPECULATION BUSINESS. THE ASSESSEE HAS SHOW N PROFIT OF LONG TERM CAPITAL GAINS. CONSIDERING THE ABOVE DISCUSSIONS AN D IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT(A) WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH HIS ORDER. ACCORDINGLY THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. GROUND NO. 2 OF THE APPEAL READS AS UNDER: ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 8 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN DIRECTING NOT TO SET OFF SPECULATIVE LOSS OF RS.9 2 2 023/- AGAINST THE INCOME FROM PURCHASE AND SALE OF SHARES TREATED BY THE ASSESSING OFFICER AS SPECULATION BUSINESS AN D NOT AS INCOME UNDER THE HEAD CAPITAL GAIN TREATED BY THE ASSESSEE AND THEREBY TO ALLOW THE CARRY FORWARD OF THE SAID AMOUNT TO THE SUBSEQUENT YEARS DESPITE THE FACT THAT PURCHASE AND SALE OF SHARES BY THE ASSESSEE COMPANY CAN BE CONSIDERED AS SPECULATION BUSINESS UNDER THE DEEMING PROVISIONS O F EXPLANATION OF SECTION 73 OF I. T. ACT 1961 AND WA S RIGHTLY SET OFF AGAINST THE SPECULATION PROFIT OF RS.54 91 643/ - WHICH THE ASSESSEE HAD TREATED AS INCOME UNDER THE HEAD CAPI TAL GAIN. 10. BRIEF FACTS ARE THAT THE ASSESSEE DISCLOSED IN ITS COMPUTATION OF INCOME SPECULATIVE LOSS OF THE CURRENT YEAR AMOUNTI NG TO RS.9 22 023/- IN THE ABSENCE OF ANY SPECULATIVE PROFIT IN THE YEA R IT WAS CARRIED FORWARD TO THE SUBSEQUENT YEAR ALONG WITH BROUGHT F ORWARD SPECULATION LOSSES IN THE ASSESSMENT YEAR 2001-02 (RS.1 000 21/ -) AND FOR ASSESSMENT YEAR 2002-03 (RS.31 58 805/-). THUS AGGR EGATE CARRIED FORWARD SPECULATION LOSS WAS RS.41 80 849/-. THE AO NOTED THAT NO DETAIL IN RESPECT OF THE CLAIM WAS FILED. IN THE AB SENCE OF ANY COGENT REPLY AND IN THE ABSENCE OF ANY MATERIAL ON RECORD THE A SSESSEES CLAIM WAS REJECTED AND SPECULATIVE LOSS OF RS.9 22 023/- WAS NOT ALLOWED TO BE SET OFF AGAINST SPECULATION PROFIT FOR THE CURRENT YEAR AS DETERMINED BY THE AO. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT CONCLUSION OF THE AO TO THE FACT THAT DETAILS WERE NOT PROVIDED WITH REG ARD TO SPECULATIVE LOSS WAS FACTUALLY INCORRECT BECAUSE THE ISSUE WAS DISCU SSED IN DETAIL AND IT WAS SUBMITTED THAT LOSS WAS INCURRED. IT WAS ALSO E XPLAINED IN THAT IN TWO TRANSACTIONS CONDUCTED BY THE ASSESSEE ON KOTAX SECURITIES THE TRANSACTIONS WERE SETTLED WITHOUT DELIVERY. THUS T HIS WAS SPECULATIVE LOSS AND WAS DISCLOSED AS SUCH. THE LEARNED CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE AND DIRECTED THE AO TO CARRY FORWARD O F SPECULATIVE LOSS OF THE SAID AMOUNT TO THE SUBSEQUENT YEAR. ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 9 11. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT NO DETAIL WAS FILED BEFORE THE AO. THEREFORE THE A O DISALLOWED THE CLAIM OF THE ASSESSEE. THE LEARNED DR SUBMITTED THAT EVEN NO DETAIL WAS FILED BEFORE THE LEARNED CIT(A). IT WAS NOT EXPLAINED THA T THE DETAILS WERE DISCUSSED BEFORE THE AO WOULD SHOW THAT NO DETAIL W AS FILED AT ANY STAGE BEFORE EITHER OF THE AUTHORITIES. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARN ED CIT(A) AND SUBMITTED THAT IN CASE THE DETAIL WAS NOT FILED BEF ORE THE AO THE MATTER MAY BE REMANDED TO THE FILE OF THE AO FOR RECONSIDE RATION AND THE ASSESSEE WOULD FILE THE SAME BEFORE THE AO. 12. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. THE ASSESSEE CLAIMED LOSS ON SALE OF SECURITY TRANSACTIONS UNDER THE HEAD SPECULATIVE TRANSACTIONS. THE ASSESSEE WAS SPECIFICALLY ASKED T O SUBMIT THE DETAILS THEREOF. THE ASSESSEE DID NOT FILE ANY DETAILS BEFO RE THE AO AND EVEN NO COGENT REPLY WAS FILED. THE AO IN THE ABSENCE OF AN Y DETAILED REPLY ON THE ISSUE REJECTED THE CLAIM OF THE ASSESSEE FOR CARRYI NG FORWARD OF THE SPECULATIVE LOSS. THE SAME IS THE POSITION BEFORE T HE LEARNED CIT(A) BECAUSE NO DETAIL WAS FILED AS IS NOTED FROM THE IM PUGNED ORDER BECAUSE THE SUBMISSION OF THE ASSESSEE WAS THAT THE ISSUE W AS DISCUSSED AT THE ASSESSMENT STAGE. THE LEARNED CIT(A) IN THE IMP UGNED ORDER ALSO DID NOT DISCUSS IF ANY DETAILS WERE FILED BEFORE HIM TO EXPLAIN THE ISSUE. IN THE ABSENCE OF ANY DETAILS AND FACTUAL FINDINGS AND IN THE ABSENCE OF GIVING ANY OPPORTUNITY TO THE AO TO EXAMINE THE DET AILS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) IF ANY WE ARE O F THE VIEW THAT THE MATER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. THE AO HAS EVERY RIGHT BEING THE ASSESSING AUTHORITY TO EXAMINE THE ISSUE IN ACCORDANCE WITH LAW. SINCE NO DETAIL WAS FILED BEFORE THE AO A ND NO OPPORTUNITY WAS GIVEN BY THE LEARNED CIT(A) BEFORE ARRIVING AT ANY FINDING IN THE MATTER EITHER IN THE ABSENCE OF THE RECORD OR ON THE BASIS OF RECORD WE SET ASIDE ITA NO.1760/AHD/2007 M/S. PARAMOUNT LTD. 10 THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THI S ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE ISSUE IN ACCORDA NCE WITH LAW BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PRODUCE SUFFICIENT MATERIAL BEFORE THE AO TO DISPOSE OF THE ISSUE IN ACCORDANCE WITH LAW. WITH T HIS OBSERVATION THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STAT ISTICAL PURPOSES. 13. AS A RESULT THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED. ORDER PRONOUNCED ON -04-2010 (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23-04-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD