|DATE:||(Date of pronouncement)|
|DATE:||April 4, 2011 (Date of publication)|
|Click here to download the judgement (synergy_263_revision_scn.pdf)|
S. 263 Revision order, if for reason not stated In show-cause notice, is Invalid
The assessee, engaged in share trading, claimed set-off of trading losses against trading profits which was accepted by the AO u/s 143(3). The CIT issued a show-cause notice u/s 263 in which he claimed that the share trading losses were “speculation losses” u/s 73 and could not be set off against other income. Upon the assessee clarifying that under the Explanation to s. 73 the trading losses were eligible to be set-off against the trading profits, the CIT, without rejecting the claim, passed an order u/s 263 on the ground that the AO had not examined the issue. On appeal to the Tribunal, HELD quashing the s. 263 order:
(i) The reason given for the revision in the s. 263 order (that the AO has not verified the issue) is different from the reason set out in the show-cause notice (that speculation loss cannot be set-off against other income). If a ground of revision is not mentioned in the show-cause notice, it cannot be made the basis of the order for the reason that the assessee would have had no opportunity to meet the point (Maxpack Investments 13 SOT 67 (Del), G.K. Kabra 211 ITR 336 (AP) & Jagadhri Electric Supply 140 ITR 490 (P&H) followed);
(ii) On merits, the result of the Explanation to s. 73 is that the entire profits from trading in shares, even from delivery based transactions, is deemed to be speculation profits and so the assessee is entitled to set off the share trading losses from the share trading profits (Lokmat Newspapers 322 ITR 43 (Bom) followed).