SHRI RAGHAV AGGARWAL, JAMMU V. INCOME TAX OFFICER WARD-1 (2), JAMMU

ITA 568/ASR/2019

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The case involves Raghav Aggarwal, the appellant, who contested the order of the Commissioner of Income Tax (Appeals)-2, Ludhiana, which upheld the Income Tax Officer's decision treating a committee loss of Rs. 7,50,000 as a speculative loss under section 43(5) of the Income Tax Act, 1961. The primary contention was whether the committee loss, which was directly transacted in the business and utilized for business purposes, should be considered a business loss eligible for set off against business income. The ITAT Amritsar Bench, referencing a similar case from the ITAT Delhi, remanded the issue back to the CIT(A) for verification of facts and proper adjudication.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115014 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 27-08-2019
• Other Referred Cases: Om Sweets P. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Speculation loss; Set aside
• Section: 271(1)(c); 143(3); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.568/Asr/2019 Assessment Year: 2014-15 Raghav Aggarwal, House No. 15, C/o Gandhi Nagar Jammu- 180004. [PAN: AQNPA9457E] (Appellant) Vs. Income Tax Officer, Ward-1(2), Jammu. (Respondent) Appellant by Sh. Joginder Singh, CA Respondent by Sh. Ravinder Mittal, Sr. DR Date of Hearing 22.02.2023 Date of Pronouncement 02.03.2023 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-2, Ludhiana,[in brevity the ‘CIT (A)’] order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity the Act] order I.T.A. No.568/Asr/2019 2 dated 02.07.2019 for A.Y. 2014-15.The impugned order was emanated from the order of the ld. Income Tax Officer, Ward-1(2), Jammu, (in brevity the AO) order passed u/s 143(3) of the Act date of order 28.12.2016. The assessee has taken the following ground: “1. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(A) 2Ludhiana has grossly erred in law and on facts of the case by upholding the addition of Committee loss amounting to Rs 7,50,000/- as speculation loss not treated as business expenditure.. 2. That the appellant craves to leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all of the above grounds are without prejudice to each other.” 2. Brief fact of the case is that the assessee has raised ground with the additional ground for jurisdictional of the ld. AO for completion of assessment under scrutiny. Therefore, during hearing the additional ground was withdrawn by the ld. Counsel himself. Only the ground no. 1 and 2 are for adjudication. The main issue is that the assessee has taken committee amount to Rs.22,50,000/- against the total committees value Rs.30 lac on loss of Rs.7,50,000/- and accordingly claimed business expenditure under the head loss on committee in the P & L a/c. I.T.A. No.568/Asr/2019 3 The ld. counsel has filed the relevant documents before both the assessing authority and appellate authority. The ld. AO adjudicated the issue that the committee was spread over more than two years so the loss cannot be allowed for one year accounts. Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the addition amount of Rs.7,50,000/- and treated as loss as a speculative loss u/s 43(5). Being aggrieved assessee filed an appeal before us. 3. The ld. counsel for the assessee filed a written submission which is kept in the record. The assessee placed that the assessee is accumulated the committee loss of Rs.7,50,000/- which was directly transacted in the business. The loss is eligible to set off with the business income. The account statement showing the committee loss is furnished herewith in APB page 3 to 7 and the financial statement for both the years are enclosed in APB 7 to 23. 3.1 The ld. counsel further argued that the assessee transacted the amount through banking channel, copy of confirmation from the party is enclosed in APB page 8. 3.2 The ld. counsel further relied on the order of the ITAT Delhi Bench in the case of Om Sweets P. Ltd. vs. DCIT, in ITA No.4139/Del/2017 & I.T.A. No.568/Asr/2019 4 378/Del2018A.Y. 2013-14 & 2014-15, order dated 28.09.2021. The relevant paragraph 7 & 8 are extracted as below:- “7. While respectfully following the same, we are of the considered opinion that if the purpose of assessee’s participation in the chit is for the purpose of raising funds, and if the assessee utilized the said funds for the purpose of business, then the difference in the subscription paid by the assessee and the prize amount received shall be treated as business income/loss. We, therefore, set aside the impugned order and remand the issue to the file of ld. Assessing Officer for the purpose of this fact verification. If the purpose of participation in the chit and utilization of funds is for the purpose of business, Ld. Assessing Officer will allow the difference between the subscription amount paid and the prize money received, if it is loss, as business loss. 8. In the result, both the appeals of the assessee are allowed for statistical purposes.” 4. The ld. Sr. DR relied on the order of the ld. AO. The relevant para 4 is extracted as below: “4. The assessee has claimed loss on committee amounting to Rs.7,50,000/- in the profit and loss account. Perusal of the details furnished by the assessee reveals that the assessee has received an amount of Rs. 22,50,000/- against the total committee value of Rs. 30,00,000/- thereby, suffering a loss of Rs. 7,50,000/-which has been booked in the P&L a/c. Since the committee is spread over two years, I.T.A. No.568/Asr/2019 5 as it has started in the current assessment year but it will be settled/completed in next assessment year i.e. in the A.Y 2015-16, the dividend/profit that will arise on the completion of the committee cannot be ascertained at this point of time because of which it is not possible to ascertain eth exact loss suffered by the assessee on said committee. The assessee was confronted on this issue but he could not furnish any plausible reply. Therefore, loss on Committee amounting to Rs. 7,50,000/- is disallowed and added to income of the assessee. The assessee can claim the actual loss on committee in the next assessment year when the loss could be ascertained after the completion of committee. Penalty proceedings u/s 271(1)(c) for furnishing of inaccurate particulars of its income are being initiated separately.” 5. We heard the rival submission and relied on the documents available in the record. From the documents supplied by the assessee it is very clear the committee loss of Rs.7,50,000/- was duly utilized for the business of the assessee. As the assessee is engaged in wholesale business of dry fruit and running the business under trade name M/s G.N. Trading company, Jammu. The ld. AO has determined it in a different manner and ld. CIT(A) treated the loss as speculative loss. We fully relied on the order of the coordinate bench of ITAT, Delhi in case of Om Sweets Pvt. Ltd. (supra), accordingly, the documents filed by the assessee during hearing should be liable for verification by the ld. CIT(A) in the light of the direction of the I.T.A. No.568/Asr/2019 6 ITAT, Delhi Bench. Accordingly, the matter is remitted back to the ld. CIT(A) for further adjudication. Needless to say the assessee should get a reasonable opportunity of hearing in the setting aside proceeding. 6. In the result, the appeal of the assessee bearing ITA No. 568/Asr/2019 is allowed for statistical purposes. Order pronounced in the open court on 02.03.2023 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE ) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order