Jahanganj Cold Storage, Farrukhabad v. ACIT, Circle 2(1), Farrukhabad

ITA 366/AGR/2006 | 2003-2004
Pronouncement Date: 13-04-2010 | Result: Allowed

Appeal Details

RSA Number 36620314 RSA 2006
Assessee PAN AAAFJ8658F
Bench Agra
Appeal Number ITA 366/AGR/2006
Duration Of Justice 3 year(s) 4 month(s) 27 day(s)
Appellant Jahanganj Cold Storage, Farrukhabad
Respondent ACIT, Circle 2(1), Farrukhabad
Appeal Type Income Tax Appeal
Pronouncement Date 13-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 13-04-2010
Date Of Final Hearing 13-04-2010
Next Hearing Date 13-04-2010
Assessment Year 2003-2004
Appeal Filed On 16-11-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.366/AGR./2006 ASST. YEAR: 2003-04 JAHANGANJ COLD STORAGE VS. A.C.I.T. CIRCLE 2( 1) GHATIA GHAT ROAD FARRUKHABAD. FARRUKHABAD. (PAN : AAAFJ 8658 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAHIB P. SATSANGEE C.A. RESPONDENT BY: SHRI S.R. SAHU JR. D.R. ORDER PER P.K. BANSAL A.M.: IN THIS CASE THE DIFFERENCE AROSE BETWEEN THE MEMBE RS OF THE DIVISION BENCH HEARING THIS APPEAL. THEREFORE THE MATTER WAS REFERRED TO THE OPINION OF THE LD. THIRD MEMBER. THE LD. THIRD MEMBER HAS AGREED WITH THE VIEW TAKEN BY THE LD. JU DICIAL MEMBER. THEREFORE IN VIEW OF THE MAJORITY DECISION THE ASSESSEES APPEAL IS ALLOWED . 2. IN THE RESULT APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 13.04.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 13 TH APRIL 2010. PBN/* 2 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY 3 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER (AS THIRD MEMBER) ITA NO.366/AGR./2006 ASST. YEAR: 2003-04 JAHANGANJ COLD STORAGE VS. A.C.I.T. CIRCLE 2( 1) GHATIA GHAT ROAD FARRUKHABAD. FARRUKHABAD. (PAN : AAAFJ 8658 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAHIB P. SATSANGEE C.A. RESPONDENT BY: SHRI DEEPAK TIWARI SR. D.R. ORDER THIS APPEAL CAME BEFORE ME AS A THIRD MEMBER TO EXP RESS MY OPINION ON THE FOLLOWING QUESTIONS :- 1. LD. COMMISSIONER (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION MADE BY THE LD. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(1) FARRUKHABAD ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2. LD. COMMISSIONER (APPEALS) HAS ERRED IN LAW AND IN FACTS IN HOLDING THE TRANSACTION FOR PURCHASE AND SALE OF SHARES AS SPEC ULATIVE TRANSACTION INSTEAD OF INVESTMENT AND THEREFORE TREATING THE LOSS ON SHAR ES TRANSACTION AS SPECULATIVE LOSS INSTEAD OF SHORT TERM CAPITAL LOSS. 2. THE FACTS RELATING TO THE FIRST ISSUE ALTHOUGH H AS BEEN NARRATED BY BOTH THE LD. MEMBERS IN THEIR RESPECTIVE ORDERS BUT ARE NECESSARY TO BE ST ATED FOR THE DISPOSAL OF THE CONTROVERSY AT THE COST OF REPETITION. 3. THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF FOUR PARTNERS NAMELY S/SHRI SUBHASH CHANDRA JITENDRA KUMAR PRADEEP KUMAR AND ANIL KUM AR. THE FIRM DERIVES INCOME FROM 4 RUNNING OF A COLD STORAGE. THE ASSESSEE DURING THE YEAR SOLD THE COLD STORAGE UNIT IN THE MONTH OF DECEMBER 2002 AND JANUARY 2003. THIS COLD STORA GE UNIT WAS SET UP IN THE YEAR 1969. THE SALE DEED WAS EXECUTED ON 10.01.2003 FOR THE SALE O F BUILDING AND LAND OF THE COLD STORAGE. AS PER THE SALE DEED FOR THE PURPOSE OF STAMP DUTY TH E SALE VALUE OF LAND WAS TAKEN AT RS.13 88 669/- WHILE FOR THE BUILDING AT RS.1 03 63 331/-. THE ASSESSEE HAS SHOWN THE LONG TERM CAPITAL GAIN AT RS.1 45 199/- IN THE FOLLOWING MANNER:- SALE VALUE OF LAND AS PER SALE DEED ON WHICH STAMP DUTY HAS BEEN PAID RS.13 86 669/- LESS: INDEX COST RS.12 41 470/- VALUE AS ON 1.4.81 @ RS.20 PER SQ. METER 277733 X 447 = 1241470 GAIN RS.1 45 199/- 100 4. THE A.O. CALLED THE ASSESSEE TO JUSTIFY THE COMP UTATION OF THE CAPITAL GAIN. THE A.O. ALSO DEPUTED THE INSPECTOR FOR ASCERTAINING FAIR MARKET VALUE OF THE LAND AS ON 01.04.1981 TO THE OFFICE OF SUB-REGISTRAR FARRUKHABAD. THE INSPECTO R WORKED OUT THE INDEXED FAIR MARKET VALUE OF THE LAND AT RS.2 52 979/-. WHEN COUNTERED THE ASS ESSEE FILED THE DETAILED REPLY STATING THEREIN THAT THE RATES AS APPLIED ARE RELATING TO AGRICULTU RAL LAND. IT WAS ALSO POINTED OUT THAT COPY OF THE RATES WERE NOT ENCLOSED WITH NOTICE EVEN THOUGH THE NOTICE STATES THAT THE COPY IS ENCLOSED. THE ASSESSEE HAD SOLD THE COLD STORAGE BUILDING WITH LA ND. THE LAND IS USED FOR BUSINESS PURPOSES AND THEREFORE IT CANNOT BE EQUATED WITH THE AGRIC ULTURAL LAND. THE FAIR MARKET VALUE HAS BEEN WORKED OUT @ RS.4/- PER SQ. METER BY ADOPTING THE A GRICULTURAL LAND RATE PER ACRE WHICH IS NOT JUSTIFIED. THE ASSESSEE ALSO RELIED ON THE REVERSE VALUATION METHOD TO SUPPORT THE FAIR MARKET VALUE TAKEN BY HIM @ RS.20/- PER SQUARE METER. THE A.O. DID NOT AGREE WITH THE ASSESSEE AND COMPUTED THE CAPITAL GAIN AT RS.11 33 690/- BY TAKI NG THE FAIR MARKET VALUE OF THE LAND AS ON 01.04.1981 AT THE RATE OF RS.4/ PER SQARE METER AGA INST THE CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS.1 45 199/-. WHEN THE MATTER WENT BEFORE THE CIT (A) THE CIT(A) ALSO CONFIRMED THE ADDITION. 5 5. LD. J.M. TOOK THE VIEW THAT THE WORKING GIVEN BY THE ASSESSEE IS COMPARATIVELY CORRECT AS AGAINST THE FIGURE ADOPTED BY THE A.O. HE OBSERVED THAT THE A.O. HAS WORKED OUT THE CAPITAL GAIN ON THE PRESUMPTION THAT THE LAND IN QUESTION WAS AG RICULTURAL LAND. THE APPLICATION OF THE AGRICULTURAL RATES IS NOT CORRECT. THE INSPECTOR H AS ASCERTAINED THE RATES AS ON 01.04.1981 RELATING TO AGRICULTURAL LAND. THE ACTIVITIES OF THE ASSESS EE ARE COMMERCIAL ONE AND THE BUILDING OF COLD STORAGE IS WITHIN THE MUNICIPAL LIMIT. HE ALSO OBS ERVED THAT WHEN THERE ARE TWO POSSIBLE VIEW ONE FAVOURING THE ASSESSEE HAS TO BE ADOPTED. 6. THE LD. A.M. DID NOT AGREE WITH THE LD. J.M. AND THEREFORE WROTE SEPARATE ORDER AND RESTORED THE ISSUE TO THE FILE OF THE CIT(A) WITH T HE DIRECTION THAT THE CIT(A) SHALL EITHER DIRECTLY OR THROUGH THE A.O. CONFRONT THE ASSESSEE WITH ALL THE MATERIAL WITH THE REVENUE AND ON WHICH IT PLACES RELIANCE TO THE ASSESSEE. THE ASSESSEE SHALL MEET THE SAME WITH MATERIAL SO AS TO SHOW AS TO HOW THE ADOPTED RATE IS NOT AS COMPARABLE VIS --VIS THE ACTUAL (AND COMPARABLE) RATES WITH IT. 7. THE LD. A.R. BEFORE ME HAS VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS COMPUTED THE CAPITAL GAIN BY TAKING THE FAIR MARKET VALUE AS ON 01.04.1981 @ RS.20/- PER SQUARE METER WHILE THE A.O. HAS TAKEN THE FAIR MARKET VALUE @ RS.4.108 PER SQUARE METER. THE ASSESSEE HAS ESTIMATED THE VALUE KEEPING IN VIEW THE ACTUAL USE OF THE LAND WITH THE COMMERCIAL ONE. THE A.O DEPUTED THE INSPECTOR TO CONTACT THE SUB-REGIS TRAR FARRUKHABAD. THE INSPECTOR HAS COLLECTED THE RATES FOR THE AGRICULTURAL LAND PER A CRE AND ON THE BASIS OF THE AGRICULTURAL LAND PER SQUARE METER RATE WERE WORKED OUT AND THE SAME HAS BEEN ADOPTED IN THE CASE OF THE ASSESSEE. NO COMPARATIVE INSTANCE FOR THE PURCHASE AND SALE O F THE COMMERCIAL LAND WAS BROUGHT ON RECORD. THIS IS A FACT ON RECORD THAT THE LAND WHI CH WAS SOLD BY THE ASSESSEE IS BEING USED FOR 6 FACTORY PURPOSES AND NOT FOR AGRICULTURAL PURPOSES. THEREFORE THE RATE OF AGRICULTURAL LAND CANNOT BE APPLIED. EVEN OTHERWISE IT WAS POIN TED OUT THAT THERE IS A HUGE DIFFERENCE IN THE LAND RATES USED FOR COMMERCIAL PURPOSES AND USED FO R AGRICULTURAL PURPOSES. FIVE TIMES DIFFERENCE IN THE CASE OF THE ASSESSEE IS MUCH MORE REASONABLE. IT WAS ALSO CONTENDED THAT IF THE ASSESSEE HAS ADOPTED A PARTICULAR RATE THE ONUS IS ON THE A.O. TO PLACE ON RECORD THE RATE OF COMMERCIAL LAND WHICH CAN BE REGARDED TO BE COMPARA BLE WITH THE LAND OF THE ASSESSEE. THE AGRICULTURAL LAND CANNOT BE COMPARED WITH THE COMME RCIAL LAND. THUS IT WAS POINTED OUT THAT THE LAND RATE ADOPTED BY THE A.O. CANNOT BE THE BASIS F OR DETERMINING FAIR MARKET VALUE OF THE ASSESSEES LAND. IT WAS CONTENDED THAT THE LAND RA TE ADOPTED BY THE ASSESSEE @ RS.20/- PER SQUARE METER IS DULY SUPPORTED IF A REVERSE VALUATION METH OD IS ADOPTED. THUS THE LD. A.R. SUPPORTED THE ORDER OF THE LD. J.M. REFERRING TO THE ORDER O F THE LD. A.M. IT WAS POINTED OUT THAT THE ASSESSEE HAS THE BASIS FOR ESTIMATING THE FAIR MARK ET VALUE AT THE RATE OF RS.20/- PER SQUARE METER WHICH WAS DULY EXPLAINED TO BE FOR THE COMMERCIAL U SAGE OF THE LAND LOCATION OF THE LAND AND THE ENTERPRISE VALUE THEREON. THE ASSESSEE HAS SUPPORT ED THE VALUE AS ON 01.04.1981 BY REVERSE CALCULATION ON THE BASIS OF WHICH THE VALUE OF THE LAND COMES TO RS.22.37 PER SQUARE METER WHILE THE ASSESSEE HAS ESTIMATED FAIR MARKET OF THE LAND ONLY AT THE RATE OF RS.20/- PER SQARE METER. REFERRING TO PARA NO.4 OF THE ORDER OF THE LD. A.M. IT WAS POINTED OUT THAT THE LD. A.M. HAS ALSO ACCEPTED THE FACTUAL POSITION SUCH AS DEVELOPMENT O F THE AREA PROVISION OF AMENITIES LAND USE ETC. AFFECTS THE FAIR MARKET VALUE OF THE LAND. TH E A.O. HAS TAKEN THE INSTANCE ONLY OF THE AGRICULTURAL LAND WHICH WAS DULY CONFRONTED WITH TH E ASSESSEE. THEREFORE REMITTING THE MATTER BACK TO THE FILE OF THE CIT(A) FOR THE PURPOSE OF C ONFRONTING THE SAME MATERIAL TO THE ASSESSEE OR AO WILL NOT BE JUSTIFIED. 8. LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF THE A.O. AS WELL AS ON THE ORDER OF THE LD. A.M. 7 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ALONGWIT H ORDER OF THE LD. A.M. AND THE LD. J.M. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD SET UP THE FACTORY DURING THE PERIOD 1968 TO 1969. THE LAND WAS SOLD BY THE ASSESSEE DURING THE YEAR U NDER CONSIDERATION. THUS THE LAND AS ON DATE WHEN IT IS SOLD WAS NOT AN AGRICULTURAL LAND BUT WA S A LAND WHICH IS ACTUALLY USED FOR COMMERCIAL PURPOSES. THE ASSESSEE HAD ESTIMATED THE FAIR MARK ET VALUE OF THE LAND AS ON 01.04.1981 @ RS.20/- PER SQ. METER BUT THE A.O. DID NOT AGREE W ITH THE FAIR MARKET VALUE AS ESTIMATED BY THE ASSESSEE AND REJECTED THE SAME. NOW THE QUESTION A RISE THAT WHAT WAS THE EVIDENCE BEFORE THE A.O. FOR NOT ACCEPTING THE FAIR MARKET VALUE AS EST IMATED BY THE ASSESSEE. THE A.O. HAS ESTIMATED THE FAIR MARKET VALUE @ RS.4/- PER SQ. MT R. ON THE BASIS OF THE REPORT OF THE INSPECTOR WHOM HE HAS DEPUTED TO THE OFFICE OF THE SUB-REGIST RAR FOR ASCERTAINING THE PREVAILING FAIR MARKET VALUE OF THE LAND AS ON 01.04.1981. THIS IS APPARENT FROM THE RECORD THAT THE INSPECTOR HAS BROUGHT OUT THE RATE OF THE AGRICULTURAL AND NO T OF THE COMMERCIAL LAND. THE LAND RATES AS HAS BEEN BROUGHT ON RECORD FOR AGRICULTURAL LAND WERE P ER ACRE AND HAS BEEN WORKED OUT PER SQ. METER AND APPLIED FOR ASCERTAINING THE FAIR MARKET VALUE OF THE LAND OF THE ASSESSEE AS ON 01.04.1981. THE LAND RATE PREVAILING FOR THE AGRICULTURAL LAND CANNOT BE THE BASIS FOR ASCERTAINING THE FAIR MARKET VALUE OF THE LAND OF THE ASSESSEE AS ON 01.0 4.1981. A COMPARABLE INSTANCE HAS TO BE OF SIMILAR NATURE OF THE LAND SIMILAR TO THE TIME OF THE TRANSACTION SIMILAR TO THE SIZE OF THE LAND. THE INSTANCE TAKEN BY THE A.O. ALTHOUGH IS RELEVANT TO THE TIME BUT IS NOT RELEVANT TO THE NATURE OF THE LAND AND THE SIZE OF THE LAND AS HAS BEEN SOLD BY THE ASSESSEE. THIS IS A SETTLED LAW THAT APPARENT IS REAL. THE ONUS IS ON THE PERSON WHO AL LEGES APPARENT IS NOT REAL. THE ASSESSEE HAS ESTIMATED THE FAIR MARKET VALUE OF THE LAND AS ON 0 1.04.1981 @ RS.20/- PER SQ. METER. IF THE A.O. DID NOT AGREE WITH THE LAND RATE AS ESTIMATED BY TH E ASSESSEE IN MY OPINION THE ONUS IS ON THE A.O. TO BRING EVIDENCE ON RECORD IN RESPECT OF THE COMPARABLE LAND SO THAT THE LAND RATE ESTIMATED BY THE ASSESSEE CAN BE REJECTED. THE USE OF THE LA ND MAKES A LOT OF DIFFERENCE IN THE VALUE OF THE 8 LAND. IN THIS CASE THE A.O. HAS WORKED OUT THE FA IR MARKET VALUE ON THE BASIS OF THE INSTANCE IN HIS POSSESSION @ RS.4/- PER SQ. METER FOR THE AGRIC ULTURAL LAND. ESTIMATING THE FAIR MARKET VALUE @ RS.20/- PER SQ. METER IS ONLY FIVE TIMES THE LAND RATE WHAT HAS BEEN TAKEN FOR AN AGRICULTURAL LAND. WHILE IN FACT IF THE LAND PRICES OF THE CO MMERCIAL LAND BEING SOLD BY THE DEVELOPMENT AUTHORITIES ARE LOOKED INTO THE LAND RATE FOR THE COMMERCIAL LAND ARE MUCH HIGHER THAN THE AGRICULTURAL LAND. IN MY VIEW THE INSTANCE TAKEN BY THE A.O. CANNOT BE REGARDED TO BE THE COMPARABLE INSTANCE FOR THE PURPOSE OF ESTIMATING T HE FAIR MARKET VALUE OF THE LAND AND I AM ACCORDINGLY OF THE VIEW THAT IT WILL NOT SERVE ANY PURPOSE IF THE MATTER IS REMANDED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AS HAS BEEN DIREC TED BY THE LD. A.M. AS IN MY OPINION THE A.O. HAS ALREADY CONFRONTED THE ASSESSEE WITH THE MATERI AL COLLECTED BY HIM. REMITTING THE MATTER TO THE FILE OF THE CIT(A) WILL UNNECESSARY DELAY THE A DJUDICATION OF THE ISSUE. I THEREFORE AGREE WITH THE VIEW TAKEN BY THE LD. J.M. AND ACCORDINGLY ACCEPT THE FAIR MARKET VALUE OF THE LAND AS HAS BEEN ESTIMATED BY THE ASSESSEE @ RS.20/- PER SQ . METER AS ON 01.04.1981. THUS THE QUESTION NO.1 AS REFERRED TO ME IS ANSWERED IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE HAS BEEN ABLE TO PROVE THE LONG TERM CAPITAL GAIN ON THE SALE OF THE COLD STORAGE UNIT AND THIS ISSUE DOES NOT REQUIRE FURTHER INVESTIGATION THROUGH THE LD. CIT(A ). 10. THE FACTS RELATING TO THE SECOND ISSUE ARE THAT THE ASSESSEE HAS CLAIMED THE SHORT TERM CAPITAL LOSS AT RS.41 27 145/- ON THE PURCHASE AND SALE OF SHARES. THE A.O. DID NOT AGREE WITH THE CLAIM OF THE ASSESSEE AND TREATED THE TRANSACTION T O BE SPECULATIVE BY OBSERVING AS UNDER :- THE CONTRACT NOTE DO NOT CONTAIN DISTINCTIVE NUMBER OF SHARES AND ASSESSEE IS NOT HAVING DE-MAT ACCOUNT NUMBER. THE ASSESSEE HAS FURNISHED TRANSACTION STATEMENT IN THE NAME OF JITENDRA KUMAR WHICH NOT R ELATED TO FIRM. WHILE THE CONTRACT NOTE IS IN THE NAME OF JAHANGANJ COLD STOR AGE P.K. AGARWAL & CO. WHO HAS DONE PURCHASE AND SALE ON BEHALF OF THE FIRM SI TUATED CALCUTTA WHILE THE TRANSACTION STATEMENT CONTENTS THE NAME OF JITENDRA KUMAR 172/55 CIVIL LINES OLD WIMCO VILA BAREILLY. WHILE THE ASSESSEE FIRM IS SITUATED AT JAHANGANJ 9 FARRUKHABAD. IN VIEW OF THE ABOVE FACTS AND FIGURE S IT IS BECOME OBVIOUS THAT ASSESSEE HAS DONE SPECULATION BUSINESS IN SHAR ES AND THEREFORE THE LOSS SUSTAINED IN SHARE TRADING IS SPECULATION LOSS WHIC H TO BE ALLOWED FROM SPECULATION PROFIT. THE LOSS DEDUCTED FROM THE SHO RT TERM CAPITAL GAIN IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 11. WHEN THE MATTER WENT BEFORE THE CIT(A) THE CIT (A) CONFIRMED THE FINDING OF THE A.O. THE MATTER TRAVELED TO THE TRIBUNAL. THE LD. J.M. TOOK THE VIEW THAT THE ASSESSEE HAS SUFFERED LOSS OF RS.41 27 145/- AS SHORT TERM CAPITAL GAIN. HE WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 43(5) ARE NOT APPLICABLE AS THERE HAD BEEN ACTUAL DELIVERY IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAD A DE-MAT ACCOUNT IN THE NAME OF THE PA RTNER SHRI JIENDRA KUMAR WHICH WAS PERMISSIBLE AS PER CIRCULAR NO.NSDL/POLICY/2006/000 8 DATED 04.03.2006. THE COPY OF CONTRACT NOTE AND THE RELEVANT BILL AS WELL AS COPY OF THE A SSESSEES ACCOUNT IN THE LEDGER OF BROKER M/S. P.K. AGARWAL & CO. CLEARLY SHOWS THAT THE TRANSACTI ON HAS ACTUALLY BEEN TAKEN PLACE AND THE ASSESSEE HAS MADE THE PAYMENT THROUGH BANKING CHANN EL. 12. THE LD. J.M. HAS ALSO REFERRED TO THE DECISION OF CALCUTTA BENCH OF THIS TRIBUNAL IN THE CASE OF SMT. JAYASREE ROYCHOWDHURY VS. ACIT (2005) 92 ITD 400 (CAL) WHICH CLEARLY EXPLAINS HOW THE SHARES ARE TREATED AS TRANSFERRED AND WHAT IS THE MEANING OF ACTUAL DELIVERY. LD. A.M. DID NOT AGREE WITH THE LD. J.M. AND HAS OBSERVED TH AT COMBINED READING OF THE ORDERS OF THE A.O. AND THE CIT(A) DO NOT REVEAL ANY FINDING ON THE GEN UINENESS OF THE TRANSACTION. THIS IS SIGNIFICANT IF ONLY FOR THE REASON THAT THE A.O. H AS NOT ALLOWED THE CLAIM OF THE IMPUGNED LOSS WHILE THE ASSESSEE CLAIMS THAT ITS LOSS HAS BEEN CO NSIDERED AND ADMITTED BY THE REVENUE ALBEIT AS SPECULATIVE EVEN AS IT CHALLENGES THE STATED DETER MINATION. IT WAS ALSO OBSERVED THAT THERE WAS HARDLY ANY ENQUIRY INTO THE DELIVERY ASPECT AND MOS T OF THE QUESTIONS WERE DIRECTED ON THE GENUINENESS ASPECT OF THE TRANSACTION. THE A.O. HA S NOT ALLOWED THE LOSS YET NOT GIVEN ANY DEFINITE FINDING ON THE ALLOWABILITY OF THE CLAIM. 10 13. LD. A.R. BEFORE US SUPPORTED THE ORDER OF THE L D. J.M. HE POINTED OUT BY REFERRING TO THE ASSESSMENT ORDER THAT THE A.O. HAS REJECTED THE CLA IM OF THE ASSESSEE AS SHORT TERM CAPITAL LOSS BUT TREATED IT AS SPECULATIVE LOSS TO BE ALLOWED FR OM SPECULATION PROFIT. THE GENUINENESS OF THE TRANSACTION HAS NOT BEEN REJECTED BY THE A.O. RATHE R HE TREATED THE LOSS SUSTAINED IN SUCH TRADING AS SPECULATION LOSS. THE CIT(A) OBSERVED THAT THES E ENTRIES OF PURCHASE AND SALE ARE NOT IN THE CAPITAL ACCOUNT OF THE PARTNER SHRI JITENDRA KUMAR. CIT(A) FAILED TO APPRECIATE THAT THESE ENTRIES WERE IN THE SHARE ACCOUNT OF THE FIRM AS THEY BELON GED TO THE FIRM. THE ASSESSEE WAS IN APPEAL BEFORE THE TRIBUNAL AND THE ISSUE BEFORE THE TRIBUN AL RELATES TO TREATING THE LOSS ON SHARE TRANSACTION AS SPECULATIVE LOSS INSTEAD OF SHORT TE RM CAPITAL LOSS. WHETHER THE TRANSACTION ENTERED FOR THE PURCHASE AND SALE OF THE SHARES ARE GENUINE OR NOT WAS NOT THE ISSUE BEFORE THE TRIBUNAL. REFERRING TO SECTION 254(1) IT WAS POINTED OUT THA T THE JURISDICTIONS OF THE TRIBUNAL ARE LIMITED TO THE GROUND OF APPEAL BEFORE THEM. MY ATTENTION WAS DRAWN IN THIS REGARD TO GROUND NO.2 TAKEN BY THE ASSESSEE IN APPEAL BEFORE THE TRIBUNAL. IT WAS POINTED OUT THAT THE LD. A.M. HAS EXCEEDED THE JURISDICTION BY DEALING THE ISSUE RELATING TO T HE GENUINENESS OF THE TRANSACTION. HE HAS RESTORED THE ISSUE TO THE FILE OF THE CIT(A) FOR AS CERTAINING THE GENUINENESS OF THE TRANSACTION. REFERRING TO PAGE 6 OF THE PAPER BOOK IT WAS POINTE D OUT THAT THIS PAGE CONTAINS TRANSACTION STATEMENT FOR THE PURCHASE AND SALE OF THE SHARES E NTERED INTO BY THE ASSESSEE THROUGH ITS PARTNER SHRI JITENDRA KUMAR. REFERRING TO PAGE 7 TO 14 OF THE PAPER BOOK IT WAS POINTED OUT THAT THESE PAGES CONTAIN THE CONTRACT NOTE ISSUED BY P.K. AGAR WAL & CO. THROUGH WHICH THE ASSESSEE HAS PURCHASED AND SOLD THE SHARES. REFERRING TO PAPER BOOK-II PAGE 14 IT WAS POINTED OUT THAT AS PER THE CIRCULAR ISSUED BY NATIONAL SECURITIES DEPOSITO RY LIMITED IN CASE OF A PARTNERSHIP FIRM THE DE-MAT ACCOUNT HAS TO BE OPENED IN THE NAME OF THE PARTNER AND ACCORDINGLY THE ASSESSEE FIRM HAS THE DE-MAT ACCOUNT IN THE NAME OF THE PARTNER S HRI JINTENDRA KUMAR. THE DELIVERY OF THE SHARES HAS COME IN THE DE-MAT ACCOUNT AND THE DELIV ERY OF THE SHARES WHEN SOLD WERE GIVEN OUT 11 OF THE DE-MAT ACCOUNT. ATTENTION WAS DRAWN TO THE COPY OF THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF P.K. AGARWAL & CO. APPEARING AT PAGE 11 AN D POINTED OUT THAT THE PURCHASE AND SALE OF SHARES AS WELL AS THE PAYMENT MADE AND RECEIVED THR OUGH BANKING CHANNEL HAS DULY BEEN REFLECTED. ATTENTION WAS ALSO DRAWN TO PAGE NO.12 WHICH CONSISTS OF THE COPY OF THE BANK STATEMENT. IT WAS POINTED OUT THAT ALL THE BANKING TRANSACTIONS ARE DULY SHOWN IN THE BANK STATEMENT. REFERRING TO THE PROVISIONS OF SECTIO N 43(5) IT WAS POINTED OUT THAT THE SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS PERIODICALLY OR ULT IMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. I N THE CASE OF THE ASSESSEE THERE HAD BEEN ACTUAL DELIVERY. THE TRANSACTION ENTERED INTO FOR THE PURCHASE AND SALE OF THE SHARES WERE SETTLED ONLY THROUGH ACTUAL DELIVERY. THEREFORE THE QUEST ION OF SPECULATIVE TRANSACTION DOES NOT ARISE. 14. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. A.M. AND CONTENDED THAT THE GENUINENESS OF THE TRANSACTION ENTERED INTO BY THE ASSESSEE ARE REQUIRED TO BE LOOKED INTO AND FOR THAT PURPOSE THE MATTER BE RESTORED TO THE FILE OF THE A.O. 15. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD ALONGWITH ORDERS OF THE LD. J.M. AS WELL AS LD. A.M . AS THE QUESTION REFERRED TO ME WHICH ARISES OUT OF GROUND NO.2 TAKEN BY THE ASSESSEE BEFORE THE TRIBUNAL WHICH READS AS UNDER :- 2. LD. COMMISSIONER (APPEALS) HAS ERRED IN LAW AND IN FACTS IN HOLDING THE TRANSACTION FOR PURCHASE AND SALE OF SHARES AS SPEC ULATIVE TRANSACTION INSTEAD OF INVESTMENT AND THEREFORE TREATING THE LOSS ON SHARE S TRANSACTION AS SPECULATIVE LOSS INSTEAD OF SHORT TERM CAPITAL LOSS. 16. FROM THE SAID QUESTION IT IS APPARENT THAT THE QUESTION BEFORE ME DOES NOT RELATE TO THE GENUINENESS OF THE TRANSACTION. THE GROUND NO.2 F ROM WHICH THE QUESTION REFERRED TO EMANATES IS SIMILAR TO THE QUESTION REFERRED TO ME. I HAVE G ONE THROUGH THE ASSESSMENT ORDER AND NOTED THAT THE A.O. HAS ALSO NOT DOUBTED THE GENUINENESS OF THE TRANSACTION. THE A.O. AS IS APPARENT 12 FROM THE FINDING AS REPRODUCED HEREINABOVE HELD TH AT THE ASSESSEE HAS DONE SPECULATIVE BUSINESS IN SHARES AND ALLOWED THE SAID LOSS AS SPE CULATION LOSS NOT AS SHORT TERM CAPITAL LOSS. THE FINDING OF THE A.O. CLEARLY PROVES THAT THE GEN UINENESS OF THE TRANSACTIONS WAS NOT DOUBTED BY THE A.O. UNDER SECTION 254(1) OF THE I.T. ACT THIS TRIBUNAL HAS THE JURISDICTION AFTER GIVING BOTH THE PARTIES OPPORTUNITY OF BEING HEARD TO PAS S SUCH ORDER ON THE GROUNDS OF APPEAL THEREON AS HE THINKS FIT. THIS PROVISION DOES NOT EMPOWER THE TRIBUNAL TO GO BEYOND THE GROUND OF APPEAL OR THE ISSUE BEFORE IT. SINCE THE A.O. HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTION WE CANNOT RESTORE THIS ISSUE TO THE FILE OF THE CIT (A) FOR LOOKING INTO THE GENUINENESS OF THE TRANSACTION. RESTORING THE ISSUE TO THE FILE OF TH E CIT(A) FOR ASCERTAINING THE GENUINENESS OF THE TRANSACTION IN MY OPINION IS NOT WITHIN THE JURIS DICTION OF THIS TRIBUNAL AS IT WILL NOT EMANATE FROM THE GROUND OF APPEAL AND THE SAME WERE NOT BEF ORE US. I THEREFORE DO NOT AGREE WITH THE ORDER OF THE LD. A.M. ON THE BASIS OF THE EVIDENCE AS HAS BEEN BROUGHT ON RECORD AND AS HAS BEEN REFERRED TO BEFORE ME IT IS APPARENT THAT IT IS NO T A CASE WHERE THE PROVISIONS OF SECTION 43(5) CAN BE APPLIED. THE TRANSACTION FOR THE PURCHASE AND S ALE OF THE SHARES HAS BEEN SETTLED THROUGH DELIVERY OF THE SHARES THROUGH THE DE-MAT ACCOUNT O F THE ASSESSEE IN THE NAME OF THE PARTNER OF THE ASSESSEE ONE SHRI JITENDRA KUMAR. THE CONTENTI ON RAISED BY THE LD. A.R. HAS BEEN DEALT WITH BY THE LD. J.M. IN DETAIL UNDER PARA NOS.11 TO 15 O F HIS PROPOSED ORDER. THE DE-MAT ACCOUNT CAN BE OPENED BY THE FIRM IN THE NAME OF THE PARTNER AS PER CIRCULAR NO.NSDL/POLICY/2006/0008 DATED 04.03.2006 ISSUED BY THE NATIONAL SECURITIES DEPOSITORY LIMITED. A COPY OF THE CIRCULAR IS PLACED ON RECORD AND IS AVAILABLE AT PAGE 14 OF THE PAPER BOOK-II. THIS FACT HAS NOT BEEN DENIED BEFORE ME BY THE LD. D.R. THE TRANSACTION ENTERED INTO BY THE ASSESSEE FOR THE PURCHASE AND SALE OF THE SHARES WAS SETTLED THOROUGH ACTUAL DELIVERY THROUGH THE DE-MAT ACCOUNT. THE PAYMENT HAS DULY BEEN MADE BY THE ASSESSEE TO THE BROKER FOR TH E PURCHASE OF THE SHARES WHICH IS DULY REFLECTED IN THE COPY OF ASSESSEES ACCOUNT IN THE LEDGER OF P.K. AGARWAL & CO. AND ALSO IN THE BANK STATEMENT OF THE ASSESSEE. SIMILARLY THE PAY MENT RECEIVED BY THE ASSESSEE FOR THE SALE OF 13 THE SHARES IS ALSO DULY REFLECTED IN THE COPY OF TH E ACCOUNT OF THE ASSESSEE IN THE BOOKS OF P.K. AGARWAL & CO. AS WELL AS IN THE STATEMENT OF BANK A CCOUNT FILED BY THE ASSESSEE BEFORE THE TRIBUNAL WHICH I PERUSED. MY JURISDICTION AS A THI RD MEMBER IS LIMITED ONLY TO THE QUESTIONS REFERRED TO ME. ON THE BASIS OF THE QUESTIONS REFE RRED TO ME THE TRANSACTION OF THE PURCHASE AND SALE OF SHARES CANNOT BE REGARDED TO BE THE SPECULA TIVE TRANSACTION AND THEREFORE I AM OF THE OPINION THAT THE LOSS ON SHARE TRANSACTION CANNOT B E TREATED AS SPECULATIVE LOSS AND HAS TO BE TREATED AS SHORT TERM CAPITAL LOSS. THEREFORE I A GREE WITH THE VIEW TAKEN BY THE LD. J.M. 17. THE MATTER WILL NOW GO BEFORE THE REGULAR BENCH FOR DECIDING THE APPEAL IN ACCORDANCE WITH THE MAJORITY OPINION. SD/-. (P.K. BANSAL) ACCOUNTANT MEMBER PLACE: AGRA DATE: 30 TH DECEMBER 2009. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIS TANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY