Dattaji Jaywantrao Kale, Pune V. Income-tax Officer, Ward - 3(2), Pune

ITA 2848/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4924 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 05-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Corroborative evidences
• Section: 143(3); 142(1)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, AM . / ITA NO.2848/PUN/2017 / ASSESSMENT YEAR : 2014-15 DATTAJI JAYWANTRAO KALE, VIKAS COOP HOUSING SOCIETY, FINAL PLOT NO.4050410, OFF. SENAPATI BAPAT ROAD, SHIVAJI NAGAR, PUNE 411 016. PAN : ACDPK4650R. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 3(2), PUNE. . / RESPONDENT ASSESSEE BY : MS. DEEPA KHARE. REVENUE BY : SHRI RAJESH GAWALI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 13, PUNE DT.27 .09.2017 FOR THE ASSESSMENT YEAR 2014-15. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL WHO ELECTRONICALLY FILED HIS RETURN OF INCOME FOR A.Y. 2014-15 ON 27.03.2016 DECLARING TOTAL INCOM E OF RS.10,66,540/-. AO HAS NOTED THAT THE RETURN WAS FILED BEYOND THE PRESCRIBED PERIOD FOR FILING OF RETURN OF INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAM ED U/S / DATE OF HEARING : 29.01.2019 / DATE OF PRONOUNCEMENT: 14.02.2019 2 ITA NO.2848/PUN/2017 143(3) OF THE ACT VIDE ORDER DT.08.12.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.10,66,540/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DATED 27.09.2017 (IN APPEAL NO.PN/CIT(A)-13/ITO, WARD-3(2), PUNE/308/2016-17) DISMISSED THE APPEAL OF ASSESSEE. AGGRIE VED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL AND H AS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING SET OFF OF LOSS OF RS 71 , 12 , 869/- INCURRED IN THE BUSINESS OF TRADING IN DERIVATIVES FUTURES AGAINST OTHE R INCOME, CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND WAS DETERMINED BY LD AO BUT DISALLOWED ONLY ON THE GROUND THAT IT WAS NOT CLAIM ED IN THE OR I GINAL RETURN OF INCOME. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN ' HOLDING THE CLAIM OF THE LOSS AS SUSPICIOUS AND DOUBTFUL WHEN THE ENT IRE FACTS WERE AVAILABLE ON THE RECORD BEFO R E AO AND WAS DETERMINED BY HIM AFTER EXAMINATION AND VERIFICATION. 3. THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE SET OFF OF LOSS IN VIEW OF THE FACT THAT HE HAS ACCEPTED THE ALLOWABIL ITY OF LOSS AS PER THE PROVIS I ONS OF LAW . 4. THE APPELLANT MAY KINDLY BE PROVIDED OPPORTUNITY TO PRODUCE EVIDENCE IN SUPPORT OF ITS CLAIM . 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHER. 4. AO IN THE ORDER HAS NOTED THAT THE CASE WAS SELECT ED FOR LIMITED SCRUTINY UNDER CASS FOR THE REASON THAT THERE WAS LARGE VALUE SALE OF FUTURES IN THE RECOGNIZED STOCK EXCHANGE AP ART FROM LARGE VALUE COMMODITY EXCHANGE TRANSACTIONS BY THE ASSE SSEE BUT NO BUSINESS INCOME WAS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. ACCORDINGLY, NOTICE U/S 143(2), 142(1) OF THE ACT WAS ISSUED AND SERVED ON ASSESSEE. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, APART FROM VARIOUS OTHER DETAILS AND QUERIES ASSESSEE 3 ITA NO.2848/PUN/2017 WAS ALSO ASKED TO SUBMIT AS TO WHY HE DESPITE LARGE VALU E OF FUTURE (DERIVATIVES) TRANSACTIONS ENTERED BY ASSESSEE, NO BUSINES S INCOME WAS DECLARED BY THE ASSESSEE. ASSESSEE THEREAFTER SUB MITTED THE PROFIT AND LOSS ACCOUNT IN RESPECT OF DERIVATIVE TRANSACTIONS. AS PER THOSE DETAILS, ASSESSEE HAD EARNED DERIVATIVE PROFITS OF RS.1,44,96,595/- AND DERIVATIVE LOSS OF RS.2,00,53,550/- AND OTHER EXPENSES RELATING TO DERIVATIVE TRANSACTIONS OF RS.15,55,88 4/-. AO NOTED THAT SINCE THE TURNOVER OF THE ASSESSEE WAS MOR E THAN RS. 1 CRORE FOR THE YEAR UNDER CONSIDERATION, ASSESSEE WAS LIABLE TO GET AUDITED BEFORE THE TIME LIMIT. ASSESSEE HAD SUBMITTED AUDI T REPORT ON 18.11.2016 MANUALLY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE FILED REVISED COMPUTATION OF INCOME WHEREIN HE HAD SET OFF LOSSES FROM DERIVATIVES AGAINS T THE INCOME. IT WAS CONTENDED BY ASSESSEE THAT REVISED C OMPUTATION BE ACCEPTED AND SET-OFF OF LOSSES OF DERIVATIVES BE ALLOWED AGAINST THE OTHER INCOME. THE SUBMISSIONS OF THE ASSESSEE WAS N OT FOUND ACCEPTABLE TO THE AO AS HE WAS OF THE VIEW THAT IN ORDE R TO CLAIM LOSSES AND FURTHER THE SET-OFF OF CARRY FORWARD THE LOSSE S, THE ASSESSEE HAD TO CLAIM THE LOSSES IN THE RETURN OF INCOME FILED. HE NOTED THAT IN THE RETURN OF INCOME THERE WAS NO MENTION OF DERIVATIVE TRANSACTION AND THE LOSSES THEREIN. HE THEREFO RE HELD THAT THE DERIVATIVE LOSSES AS CLAIMED BY THE ASSESSEE IN THE REVISED COMPUTATION CANNOT BE CONSIDERED ON THE BASIS OF MERE REVISED COMPUTATION. HE FURTHER HELD THAT SET-OFF OR CARRY FORWA RD OF LOSSES ALSO CANNOT BE ALLOWED AS ASSESSEE NEITHER CLAIMED IT IN THE RETURN OF INCOME NOR FILED THE RETURN OF INCOME BEFORE THE PRESCRIBED PERIOD TO FILE THE RETURN OF INCOME. HE ACCO RDINGLY 4 ITA NO.2848/PUN/2017 TREATED THE REVISED COMPUTATION OF INCOME AS NONEST. HE THEREAFTER DETERMINED THE TOTAL INCOME AT RS.10,66,540/-, THE SAME T HAT WAS FILED BY THE ASSESSEE. AGGRIEVED BY NOT ALLOWING THE SET-O FF OF DERIVATIVE LOSSES AGAINST THE INOCME, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY OBSERVING AS UNDER : 2.4 AGAINST THE LEARNED AO'S DENIAL TO ALLOW THE S ET OFF OF LOSSES REALIZED FROM THE DERIVATIVE TRANSACTIONS WITH THE CURRENT YEAR'S INCOME, THE APPELLANT HAS ARGUED THAT THE PROVISION S OF SECTION 139(3) DO NOT PROHIBIT THE SET OFF OF LOSSES WITH T H E CURREN T YEAR ' S I NCOME. 2 . 5 I HAVE CONSIDERED THE FACTS AND ARGUMENTS OF THE APPE L LANT. I DO NOT AG R EE WI T H THE APPELLANT'S CONTENTIONS PRIMARILY BECAUSE OF THE TOTALLY OPAQUE NATURE O F TH E A P PEL L AN T ' S S U BMISSION ON FACT S . I HA V E NO D I SAGREEMENT WITH THE APPELLANT AT TH E A C ADEMIC L EVEL ON THE PROVISIONS OF THE LAW D I SCUSSED BY HIM . I AGREE WITH TH E APPE L LANT THAT THE SE T OFF OF LOSS WITH CURRENT YEAR'S I NCOME IS PERMITTED EVEN IN THE CASE OF THE BELATED RETURN OF LOSS. I A L SO AGREE WITH THE APPELLANT THAT THE LOSS CAN BE CLAIMED IN THE APPELLATE PROCEEDINGS, EVEN IF THE SAME I S NOT CLAIMED IN THE RETURN OF INCOME. HOWEVER, ACCORDING TO ME, NON-APPLICATION O F THIS LAW IS NOT THE ISSUE IN THE CASE OF THE APPELLANT FOR THE DENI AL OF THE SET OFF OF LOSSES. IT IS FUNDAMENTAL THAT SET O FF OF LOSSES IS NOT AUTOMATICALLY A L LOWED IN A LL THE CASES MERE L Y BECAUSE THE PR OVISIONS OF THE LAW PERMIT SET OFF OF LOSSES. THE APPLICATION OF LAW DE PENDS ON THE FACTS O F EACH CASE AND IN THIS CASE, THE FACTS RELATED TO TH E LOSS ARE NOT AT AL L DISCLOSED BY THE APPELLANT . 2. 6 FIRSTLY , IT IS THE APPELLANT WHO HAS C L AIMED THE SET O F F OF L OSSES THEREFORE, THE ONUS IS ON H I M TO SUBSTANTIATE H I S CLAIM BY PROVIDING THE NECESSARY F A CTS WITH SUPPORTING EVIDENCE. IN THIS CASE, THE APPELLANT DID NOT CLAIM THE LOSS IN H I S RETURN OF I NCOME BUT HAS CLAIMED IT DURING THE ASSESSMENT PROCEEDINGS . I N TH I S FAC TU A L BA C KGROUND , RA T HE R THAN EXPLAINING T HE REASO N FOR NOT CLAIMING THE LOSS I N THE RETURN OF I NCOME, THE APPE L LA N T HAS STATED I N HIS SUBMISSION BEFO R E ME THA T AS FAR AS MY PUTTING THE CLAIM OF SET OFF OF LOSS T HROUGH A LETTER IN THE COURSE OF HEARINGS U/S 1 4 3(2) IS CONCERNED, I MAY S TATE THAT I HAD CLARIFIED T HE FACTS AND CIRCUMSTAN CES, UND E R WHICH I DID NOT THINK IT APPROPRIATE TO DISCLOSE, W HILE FILING THE RETURN OF INCOME , THE LOSS SUFFERED BY M E IN DERIVATIVE BUSINESS AND TO CLAIM ITS SET OFF [WHICH WAS OTHERW ISE ALLOWABLE WITHOUT ANY HI T CH BY THE LD. ASSESSING O F FICER] I CONTEND THAT MY SAID STAND CONTINUES TO HOLD GOOD E VEN AT THIS STAGE ALSO. 2 . 7 NON-DISCLOS U RE OF THE REASONS FOR NO T CLAIMING THE LOSS IN HIS RETU RN OF I NCOME CREATES DOUBT AS TO WHETHER THE APPELLANT ' S CLAIM OF LOSS IS BONA FIDE OR NO T . FURTHE R , THE APPELLANT HAS NOT EVEN 5 ITA NO.2848/PUN/2017 MENTIONED THE AMOUNT OF THE LOSS CLAIMED BY HIM IN HIS ENTIRE WRITTEN SUBMISSION FILED BEFORE ME . THE APPELLANT HAS NOT EVEN FURNISHED HIS PROFIT AND LOSS ACCOUNT RELATED TO TH E DERIVATIVE TRANSACTIONS. THE APPELLANT SEEMS TO BE UNDER THE I MPRESSION THAT THE AUTHORITIES ARE BOUND TO ACCEPT WHATEVER IS STA TED BY HIM. 2.8 ACCORDING TO ME, WHEN THE LEARNED AO HAS NOT EX AMINED THE FACTS AND NATURE OF THE LOSS REALISED BY THE APPELL ANT, THE APPELLANT OUGHT TO HAVE FURNISHED ALL THE FACTS RELATED WITH THE LOSSES DURING THE APPELLATE PROCEEDINGS. DURING APPELLATE PROCEED INGS, THIS MATTER COULD HAVE BEEN REMANDED TO THE LEARNED AO FOR EXAM INATION, ON MY SATISFACTION OF THE PRIMA FACIE ALLOWABILITY OF THE APPELLANT'S CLAIM OF THE LOSS. THE LEARNED AO COULD HAVE EXAMIN ED THE FACTS OF THE APPELLANT'S CASE AND WOULD HAVE CONCLUDED AS TO WHETHER THE LOSS SUFFERED BY HIM WAS SPECULATIVE OR NOT. HOWEVER, AS STATED, THE APPELLANT RATHER THAN DISCUSSING THE FACTS, HAS ADV ANCED EXTENSIVE ARGUMENTS ON LAW, WHICH MAKES THE ENTIRE CLAIM OF T HE APPELLANT SUSPICIOUS AND CREATES DOUBTS AS TO WHETHER THE CLA IM IS BONAFIDE OR NOT. 2.9 WITH THE RESULT, I CONFIRM THE DECISION OF THE LEARNED AO TO DENY THE SET OFF OF LOSS REALISED FROM THE DERIVATIVE TR ANSACTIONS WITH THE CURRENT YEAR'S INCOME BEING THE UNSUBSTANTIATED CLA IM. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL. 5. BEFORE ME, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A). SHE FURTHER SUBMITTED THAT THOUGH LD.CI T(A) IN PRINCIPLE AGREES WITH THE CONTENTION OF THE ASSESSEE THA T SET-OFF OF LOSSES WITH THE CURRENT YEARS INCOME IS PERMITTED EVEN IN THE CASE OF BELATED RETURN OF LOSS BUT HOWEVER DID NOT ALLOW THE CLAIM OF SET OFF BECAUSE ACCORDING TO HIM ASSESSEE DID NOT SUBSTANT IATE HIS CLAIM BY PROVIDING THE NECESSARY FACTS WITH SUPPORTING EVI DENCES. SHE SUBMITTED THAT ASSESSEE HAS FURNISHED THE AUDITED PROFIT AND LOSS ACCOUNT WHICH IS ALSO PLACED IN PAPER BOOK AND IN SU CH A SITUATION, THE ASSESSEE SHOULD HAVE BEEN ALLOWED THE CLAIM OF SET OFF. SHE FURTHER SUBMITTED THAT ASSESSEE IS NOT ASKING FOR CARRY FORWARD OF LOSSES BUT IS ONLY SEEKING THE SETTING OF THE C LAIM OF LOSS ONLY TO THE EXTENT OF INCOME IN THE YEAR UNDER CONSIDER ATION. 6 ITA NO.2848/PUN/2017 LD.D.R. ON THE OTHER HAND, TOOK ME THROUGH THE FINDINGS OF LD.CIT(A) AND SUBMITTED THAT ASSESSEE HAD NOT FURNISHED T HE NECESSARY DETAILS WITH RESPECT TO LOSS AND HAS ALSO N OT FILED THE NECESSARY EVIDENCES BEFORE THE LOWER AUTHORITIES AND THE REFORE IN SUCH A SITUATION, THE LOWER AUTHORITIES WERE FULLY JUSTIFIE D IN DENYING THE CLAIM OF SET OFF OF LOSS. HE THUS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO NON- ALLOWABILITY OF THE CLAIM OF LOSS FROM DERIVATIVES WHICH WAS NOT CLAIMED IN THE RETURN OF INCOME BUT WAS CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE FACT THAT ASSESSEE CAN CLAIM SET- OFF OF LOSSES OF CURRENT YEAR INCOME EVEN IN RETURN OF BELA TED CASE IS ACCEPTED BY LD.CIT(A). HOWEVER, I FIND THAT LD.CIT(A) WHILE DISALLOWING THE CLAIM HAS NOTED THAT ASSESSEE HAS NOT FUR NISHED THE FACTS RELATING TO THE LOSSES DURING THE APPELLATE PRO CEEDINGS AND THAT AO HAD NOT EXAMINED THE FACTS AND NATURE OF LOSSES REALIZED BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS AND THERE IS NO FINDING ABOUT THE LOSSES BY LD.CIT(A). BEFORE ME ALSO, APART FROM FILING THE PROFIT AND LOSS ACCOUNT, NO DETAILS W ITH RESPECT TO INCURRING OF LOSS HAS BEEN FURNISHED BY THE AS SESSEE. I AM THEREFORE OF THE VIEW THAT THE ISSUE NEEDS TO BE RE- EXAMINED. I THEREFORE RESTORE THE ISSUE TO THE FILE OF AO FOR DETERMIN ING THE LOSS ON ACCOUNT OF DERIVATIVES AND DECIDE IN ACCORDANCE WITH T HE LAW. AO SHALL CONDUCT NECESSARY ENQUIRIES ON THE BASIS OF DOC UMENTS FILED BY THE ASSESSEE AND SHALL ALSO TAKE UP ANY INDEPENDE NT ENQUIRIES AS TO DEEM FIT AND PROPER AS PER LAW ON THE FAC TS OF THE 7 ITA NO.2848/PUN/2017 CASE. ASSESSEE IS ALSO DIRECTED TO PROMPTLY FURNISH ALL THE REQUIRED DETAILS LIKE WHEN THE ASSESSEE HAD ENTERED INTO THE TRAN SACTION OF PURCHASE / SALE, CONTRACT NOTED OF THE REGISTERED BROKE R, EVIDENCE OF PAYMENTS MADE / RECEIVED BY THE ASSESSEE ETC., IN CON NECTION WITH THE TRADING IN DERIVATIVES AND ALL THE OTHER REQUIRED DETAILS CALLED FOR BY AO SO AS TO ENABLE THE HIM TO DECIDE THE ISS UE. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORTU NITY OF HEARING TO THE ASSESSEE. IN VIEW OF MY DECISION TO RESTO RE THE ISSUE TO AO, I AM NOT ADJUDICATING ON MERITS THE GROUNDS OF TH E APPEAL RAISED BY THE ASSESSEE. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 14 TH DAY OF FEBRUARY, 2019. SD/- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 14 TH FEBRUARY, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-13, PUNE. PR. CIT-2, PUNE. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.