DCIT 9(3)(1), MUMBAI vs. FIDUCIARY EUROMAX GLOBAL MARKETS LTD, MUMBAI

None appeared on behalf of the assessee even though the notice of hearing was sent by registered post on an earlier occasion. Hence we proceed to dispose of the appeal ex-parte, without the presence of the assessee.

We heard Ld D.R and perused the record. The facts relating to the issue are discussed in brief. The assessee company is engaged in the business of consultancy, dealing in shares & securities, debt instruments and commodity trading. The original assessment was completed u/s 143(3) of the Act

Subsequently the assessing officer re-opened the assessment by issuing notice u/s 148 of the Act. The assessing officer took the view that the assessee is having different kinds of business which, inter alia, includes trading in shares. The assessee had declared loss of Rs.2,10,30,870/- from trading in shares. The AO took the view that as per Explanation to section 73 of the Act, the loss from trading in shares should be assessed as Speculation loss. Since the AO did not assess the loss from trading in shares as speculation loss as per Explanation 73 of the Act in the original assessment proceedings, the AO re-opened the assessment.

The AO has stated in the assessment order that the assessee was given several opportunities, but there was no proper response from the assessee. Accordingly the AO completed the assessment to the best of his judgement by treating the loss from trading in shares as Speculation loss. In this process, the AO assessed income from purchase and sale of investments, income from consultancy & advisory fee, income from purchase and sale of securities as separate business activities.

Before Ld CIT(A), the assessee submitted that it had furnished all the details that were called for by the AO and accordingly contended that the AO was not justified in completing the assessment to the best of his judgement. It was also submitted that the assessing officer was not justified in treating each of the activities carried on by the assessee as separate business activities. It was contended that each of the activities carried on by the assessee are part of same business of dealing in shares, viz., offering consultancy services in share trading and share trading. It was further submitted that the assessee, in fact, did not incur loss from share trading and the loss has arisen due to valuation of closing stock. It was submitted that the assessee was consistently following the method of valuation of “Cost or market value whichever is less”. The 3 M/s. Fiduciary Euromax Global Markets Ltd.

The ld CIT(A) noticed from the financial statements of various years that the assessee has been consistently following same method of valuation of closing stock, i.e., cost or market value whichever is less. Accordingly, the ld CIT(A) called for a remand report from the assessing officer, but the AO chose not to submit the same. Hence the Ld CIT(A) concluded that the assessee has consistently followed the same method of valuation of its closing stock. Before Ld CIT(A), the assessee placed reliance on the decision rendered by Hon’ble Delhi High Court in the case of CIT Vs. Orient Instrument (P) Ltd and also in the decision rendered by Delhi bench of Tribunal in the case of Aman Portfolio P Ltd Vs. DCIT (92 ITD 324), wherein it was held that the loss arising on revaluation of closing stock of shares will not be covered by Explanation 73 of the Act. The Ld CIT(A), accordingly, held that the loss arising on valuation of shares cannot be termed as speculation loss in terms of Explanation to sec. 73 of the Act. The revenue is aggrieved by the said decision of Ld CIT(A) in accepting that the assessee has followed same method of valuation of stock consistently.

We have noticed that the revenue has challenged the decision rendered by Ld CIT(A) contending that the assessee has not followed consistent method of accounting and changed the method during this year. Hence the decision rendered by Ld CIT(A) on other issues has attained finality. However, we notice that the Ld CIT(A) has given a specific finding, by examining past financial statements of the assessee, that the assessee has been following same method of accounting for valuation of its closing stock. In fact, the Ld CIT(A) has called for a remand report from the assessing officer in this regard, but the assessing officer has chosen not to furnish a report. Under these set of facts, the Ld CIT(A) has proceeded to decide the issue on the basis of his own

In the result, the appeal filed by the revenue is dismissed. Order has been pronounced in the Court on 9.5.2018.