Madhuri Kotecha, Jalgaon V. Pr. Commissioner of Income-tax , Central -Nagpur, Nagpur

ITA 498/PUN/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8034 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 27-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N ASHOK BABU
• Assessee Lawyers: HARI KRISHAN
• Keywords: Business income; Principle of natural justice; Transactions in derivatives; Retrospective amendment; Speculation loss; Futures and options; Set aside
• Section: 143(3); 43(5); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.484 & 498/PUN/2019 / ASSESSMENT YEAR : 2007-08 MADHURI KOTECHA, 4, SIDDHARTH BUNGLOW, SAGAR SOCIETY, VARDHMAN NAGAR, JALGAON-425001. PAN : AHMPK6577H ....... / APPELLANT / V/S. ACIT, CENTRAL CIRCLE-2, NASHIK. / RESPONDENT ASSESSEE BY : SHRI HARIKRISHAN REVENUE BY : SHRI N. ASHOK BABU / DATE OF HEARING : 17.07.2019 / DATE OF PRONOUNCEMENT : 21.08.2019 / ORDER PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION BY THE ASSESSEE INVOLVING THE ASSESSMENT YEAR 2007-08. ITA NO.498/PUN/2019 REVISION ORDER U/S 263 OF THE ACT 2. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF PR. CIT (CENTRAL), NAGPUR DATED 10.03.2016. 3. THIS APPEAL PERTAINS TO REVISIONAL ORDER PASSED BY THE PR. CIT (CENTRAL), NAGPUR U/S 263 OF THE ACT. THIS APPEAL IS FILED BELATEDLY WITH DELAY OF 1039 DAYS . 2 ITA NOS.484 & 498/PUN/2019 4. BEFORE US, ON THIS APPEAL, LD. COUNSEL FOR THE ASSESSEE FILED A LETTER DATED 17.07.2019 WITHDRAWING THE APPEAL OF THE ASSESSEE ON WHICH LD. DR FOR THE REVENUE HAS NO OBJECTION. 5. AFTER HEARING BOTH THE SIDES, WITHOUT GOING INTO THE ISSUE OF CONDONATION, THE SAID APPEAL IS DISMISSED AS WITHDRAWN . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.498/PUN/2019 IS DISMISSED. ITA NO.484/PUN/2019 FRESH ASSESSMENT ORDER U/S 263 R.W.S. 143(3) OF THE ACT. 7. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)- 12, PUNE DATED 22.02.2019 U/S 143(3) R.W.S. 263 OF THE ACT. 8. THIS APPEAL IS FILED IN CONNECTION WITH THE FRESH ASSESSMENT MADE BY THE ASSESSING OFFICER GIVING EFFECT TO THE REVISIONAL ORDER OF THE PR. CIT (CENTRAL), NAGPUR MADE U/S 263 OF THE ACT. 9. IN THIS APPEAL, THE GROUNDS RAISED BY THE ASSESSEEE ARE AS UNDER :- 1. THE LEARNED CIT(A) ERRED IN HOLDING THAT HE HAD NO JURISDICTION TO DECIDE THE ISSUE ON MERITS SINCE THE LEARNED A.O. HAD MERELY FOLLOWED THE DIRECTIONS GIVEN BY THE LEARNED PR. CIT(C) IN THE ORDER PASSED U/S. 263. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IN THE ORDER U/S 263 PASSED BY THE LEARNED PR. CIT(C), SHE HAD MERELY SET ASIDE THE ASST. ORDER AND HAD DIRECTED THE A.O. TO PASS A FRESH ORDER AND THEREFORE, THE ASSESSEE WAS JUSTIFIED IN AGITATING THE DISALLOWANCE MADE BY THE LEARNED A.O. IN THE ORDER PASSED U/S 143(3) R.W.S. 263 AND ACCORDINGLY, THE LEARNED CIT(A) SHOULD HAVE DECIDED THE APPEAL ON MERITS. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE ORDER PASSED U/S 263 BY THE LEARNED PR. CIT(C), SHE HAD NOT GIVEN ANY DIRECTION TO THE LEARNED A.O. FOR MAKING ANY SPECIFIC ADDITION/ DISALLOWANCE AND ON 3 ITA NOS.484 & 498/PUN/2019 THE CONTRARY, THE ASST. ORDER WAS SET ASIDE WITH THE DIRECTION TO THE A.O. TO PASS A FRESH ORDER AND THEREFORE, THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING THE ISSUE ON MERITS. 4. THE ASSESSEE SUBMITS THAT THE DISALLOWANCE OF SET OFF OF LOSSES OF RS.94,26,738 INCURRED IN THE F & O TRADING ACTIVITY AGAINST THE REGULAR BUSINESS INCOME EARNED BY THE ASSESSEE WAS NOT JUSTIFIED AND THE LEARNED A.O. MAY BE DIRECTED TO ALLOW SET OFF OF THE LOSSES OF RS.94,26,738/- AGAINST THE REGULAR BUSINESS INCOME OF THE ASSESSEE. 5. THE ASSESSEE SUBMITS THAT THE LOSSES FROM F & O TRADING ACTIVITY WERE NOT SPECULATIVE LOSSES AND THE SAME WERE PART OF THE REGULAR BUSINESS LOSSES AND ACCORDINGLY, THE LOSSES FROM F & O TRADING ACTIVITY SHOULD HAVE BEEN SET OFF AGAINST THE REGULAR BUSINESS INCOME OF THE ASSESSEE. 6. THE LEARNED CIT(A) HAS ERRED BY DEFYING THE SQUARELY APPLICABLE JUDGEMENT OF JAIPUR ITAT WHICH HAVE BEEN RELIED UPON BY THE APPELLANT & THE LEARNED CIT(A) HAS ERRED BY NOT CONSIDERED THE SAID JUDGEMENT & ALSO NOT TAKING THE SAID JUDGEMENT ON RECORD & HAS THUS DEFIED PRINCIPLES OF NATURAL JUSTICE. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 10. TAKING US THROUGH THE ABOVE EXTRACTED GROUNDS, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GROUNDS NO.1, 2, AND 3 ARE NOT PRESSED . ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. 11. REFERRING TO THE GROUNDS NO.4, 5 AND 6, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MAIN ISSUE RAISED IN THESE GROUNDS RELATES TO THE LOSSES EARNED ON TRADING ACTIVITY OF THE FUTURES AND OPTIONS (F&O). FOR THE YEAR UNDER CONSIDERATION I.E. A.Y. 2007-08, THE SAID LOSSES CONSTITUTE REGULAR LOSSES OF THE BUSINESS AND NOT SPECULATIVE LOSSES . THEREFORE, THE SAID LOSSES ELIGIBLE FOR SET UP AGAINST THE REGULAR BUSINESS INCOME OF THE ASSESSEE. IN THIS REGARD, LD. AR RELIED ON THE VARIOUS DECISIONS INCLUDING THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF P. S. KAPUR VS. ACIT, 120 TTJ 0422 (JAIPUR-TRIB.). REFERRING TO THE CONTENTS OF PARA 12 OF THE SAID DECISION OF THE TRIBUNAL (SUPRA), LD. COUNSEL SUBMITTED THAT THE YEAR UNDER CONSIDERATION BY THE 4 ITA NOS.484 & 498/PUN/2019 TRIBUNAL IS THE ASSESSMENT YEAR 2004-05 AND THE LOSSES FROM SUCH FUTURES AND OPTIONS WERE CONSIDERED AS NORMAL BUSINESS LOSSES IN VIEW OF THE PROSPECTIVE AMENDMENT TO SECTION 43(5)(D) OF THE FINANCE ACT, 2005 W.E.F. 01.04.2006. 12. ON HEARING BOTH THE SIDES, WE FIND IT RELEVANT TO EXTRACT THE SAID PARA 12 OF THE AFORESAID DECISION OF THE TRIBUNAL (SUPRA) AND THE SAME ARE EXTRACTED HEREUNDER :- 12. WE FURTHER AGREE WITH THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE THAT AS PER PROVISIONS OF S. 73, SPECULATIVE LOSS CAN BE ADJUSTED ONLY AGAINST SPECULATIVE PROFIT. IF CL. (D) TO S. 43(5) IS CONSIDERED AS A PROSPECTIVE AMENDMENT AND TRANSACTION IN DERIVATIVES AS SPECULATIVE, THEN THE LOSSES IN DERIVATIVE PRIOR TO AMENDMENT WOULD BE TAKEN AS SPECULATIVE LOSS AND PROFIT AFTER AMENDMENT AS BUSINESS INCOME. THIS WOULD NEGATE THE ADJUSTMENT OF LOSS IN DERIVATIVE PRIOR TO ASST. YR. 2006-07 FROM THE PROFIT IN DERIVATIVE IN ASST. YR. 2006-07 AND SUBSEQUENTLY. THIS WOULD RESULT IN HARDSHIP AND DOUBLE JEOPARDY IN AS MUCH AS THE EARLIER LOSSES IN DERIVATIVE WOULD NOT BE AVAILABLE FOR SET OFF AGAINST THE SUBSEQUENT PROFIT IN DERIVATIVE. THIS POSITION CAN BE RECONCILED ONLY IF INSERTION OF CL. (D) TO S. 43(5) IS TAKEN TO BE CLARIFYING THE LAW AS IT ALWAYS EXISTS . HENCE, ON A HARMONIOUS INTERPRETATION OF LAW, THE DERIVATIVE TRANSACTION CANT BE CONSIDERED AS SPECULATIVE TRANSACTION . IN VIEW OF ABOVE IT IS CLEAR THAT THE TRANSACTIONS IN DERIVATIVE ARE NORMAL BUSINESS TRANSACTIONS. ACCORDINGLY THE LOSS SUFFERED IN TRADING IN DERIVATIVES CANT BE CONSIDERED AS SPECULATIVE LOSS. 13. WE FURTHER EXTRACT THE CONCLUSION OF THIS DECISION OF THE TRIBUNAL (SUPRA) AS UNDER :- CLAUSE (D) INSERTED IN PROVISO TO SUB-S. (5) OF S. 43 BY THE FINANCE ACT, 2005 W.E.F. 1ST APRIL, 2006 IS RETROSPECTIVE IN APPLICATION; LOSS CLAIMED BY THE ASSESSEE IN DERIVATIVE TRANSACTION IS ALLOWABLE AS A BUSINESS LOSS AS THE SAME IS NOT COVERED BY S. 43(5). 14. CONSIDERING THE ABOVE SETTLED LEGAL PROPOSITION OF LAW ON THIS ISSUE AND THE RETROSPECTIVE AMENDMENT OF CLAUSE (D) OF SECTION 43(5) OF THE ACT, 5 ITA NOS.484 & 498/PUN/2019 WE ARE OF THE OPINION THAT THE CIT(A) ERRED IN TREATING THE SAME AS SPECULATIVE LOSSES AND, THEREFORE, THE DECISION OF THE CIT(A) REQUIRES TO BE SET-ASIDE. THE SAID RETROSPECTIVE AMENDMENTS ALLOW THE IMPUGNED LOSSES AS THE BUSINESS LOSSES ONLY. ACCORDINGLY, THE RELEVANT GROUNDS NO.4, 5 AND 6 RAISED BY THE ASSESSEE ARE ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.484/PUN/2019 IS PARTLY ALLOWED. 16. TO SUM UP, THE APPEAL OF THE ASSESSEE IN ITA NO.498/PUN/2019 IS DISMISSED AND THE APPEAL OF THE ASSESSEE IN ITA NO.484/PUN/2019 IS PARTLY ALLOWED AS ABOVE. ORDER PRONOUNCED ON 21 ST DAY OF AUGUST, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 21 ST AUGUST, 2019. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-12, PUNE. 4. THE PR. CIT, CENTRAL, NAGPUR. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.