CAVIM REALTY P. LTD,MUMBAI vs. DCIT RG 3(1), MUMBAI

The present appeal has been preferred by the assessee against the order dated 30.04.2010 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2003-04.

The assessee is aggrieved by the action of the lower authorities in treating the loss incurred by the assessee in relation to the shares held as stock in trade as speculative loss as against business loss offered by the assessee. Apart from challenging the additions on merits, the assessee has also agitated the very reopening of the assessment.

The brief facts of the case are that the Assessing Officer (hereinafter referred to as the AO) reopened the assessment proceedings under section 147 of the Act observing that the assessee had suffered losses of Rs.9,85,975/- on account of shares held as stock in trade and that the assessee had adjusted this 2 M/s. Cavim Realty Pvt. Ltd. loss against the normal business income and had not treated the loss as speculative loss as per the provisions of explanation to section 73 of the Income Tax Act. The AO, thereafter, observed that the assessee had suo-moto disallowed and added loss in sale of shares of Rs.7,59,826/-. However, the other loss amounting to Rs.46,11,706/- had been claimed as normal business loss but the same was required to be treated as speculative loss. He, therefore, added the said amount of Rs.46,11,706/- into the income of the assessee but allowed the said loss to be carried forward as speculative loss.

The Ld. CIT(A) confirmed the above disallowance made by the AO. Being aggrieved by the above action of the lower authorities the assessee has come in appeal before us.

We have heard the rival contentions and have also gone through the records. At the outset, the Ld. A.R. of the assessee has brought our attention to the assessment order to show that the AO in the assessment order has mentioned that the return of income was filed on 31.10.02. It has also been mentioned that the return was processed under section 143(1) of the Act on 18.02.03. He has further brought our attention that in the reasons recorded for reopening of assessment, the AO has mentioned that the assessee had suffered loss in share transactions amounting to Rs.9,85,975/-. The Ld. A.R. thereafter has strongly contended that the dates mentioned in the assessment order shows that the AO referred to A.Y. 2002-03 and not to A.Y. 2003-04. The amount of the loss of Rs.9,85,975/- mentioned by the AO pertained to A.Y. 2002-03 and not A.Y. 2003-04. He has therefore contended that the AO had not applied his mind to the facts of the year under consideration for A.Y. 2003-04. The assessment for the year under consideration i.e. A.Y. 2003-04 has been reopened by the AO taking into consideration and referring to the facts and circumstances of A.Y. 2002-03 only. The Ld. A.R. has further invited our attention to the appellate order of the Ld. CIT(A) dated 13.05.10 in respect of A.Y. 2002-03, the assessment was reopened for that year also, but the Ld.

In the result, the appeal of the assessee is hereby allowed.