The ACIT, Indore V. Shri Ashwin Patangia, Indore

ITA 591/IND/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47790 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 21-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: R P MANDOVRA
• Keywords: Business income; Additional evidence; Reasonable cause; Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER PAN NO. : ACAPP3544J I.T.A.NO. 591 /IND/200 9 A.Y. : 2005 - 06 ACIT, SHRI ASHWIN PATANGIA, 4(1), VS 185 , VINDHYACHAL NAGAR, INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : ACAPP3544J C.O.NO. 2/IND/2010 (ARISING OUT OF I.T.A.NO. 591 /IND/200 9 ) A.Y. : 2005 - 06 SHRI ASHWIN PATANGIA, ACIT, 185, VINDHYACHAL NAGAR, VS 4(1), INDORE. INDORE. CROSS OBJ ECTOR RESPONDENT DEPARTMENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR ASSESSEE BY : SHRI R.P.MANDOVRA, ADV. - : 2 : - 2 O R D E R PER R. C. SHARMA, A.M. APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A) - II,INDORE, DATED 30.09.2009 FOR THE ASSESSMENT YEAR 200 5 - 06 . I.T.A.NO. 591/IND/ 2009 : 2. FIRST GRIEVANCE OF THE ASSESSEE RELATES TO DELETION OF ADDITION OF RS. 30,000/ - ON ACCOUNT OF INTEREST OF HOUSING LOAN. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. W E FOUND FROM THE RECORD THAT UNDER THE HEAD INCOME FROM SELF - OCCUPIED HOUSE PROPERTY , THE ASSESSEE HAS CLAIMED NEGATIVE INCOME OF RS. 30,000/ - IN RESPECT OF INTEREST PAID ON THE HOUSING LOAN. HOWEVER, WHILE COMPUTING THE TOTAL INCOME, THE A O HAS TAKEN INCOME FROM HOUSE PROPERTY AT NIL INCOME. HOWEVER, WHILE COMPUTING THE INCOME OF BUSINESS HE HAS ADDED RS. 30,000/ - , WHICH WAS DELETED BY THE LD. CIT(A). WE DO NOT FIND ANYTHING WRONG IN THE ORDER OF CIT(A), IN SO FAR AS NOWHERE THE ASSESSEE HA S CLAIMED THE INTEREST ON HOU SING LOAN AGAINST THE BUSINESS INCOME, THEREFORE, THERE IS NO REASON - : 3 : - 3 FOR MAKING ANY DISALLOWANCE OR ADDITION UNDER THE HEAD INCOME FROM BUSINESS . THE NEGATIVE INCOME CLAIMED UNDER THE HEAD INCOME FROM SELF - OCCUPIED HOUSE PRO PERTY IS REQUIRED TO BE SET OFF AGAINST THE OTHER HEADS OF INCOME IN THE VERY SAME FINANCIAL YEAR AS PER PROVISIONS OF SECTION 7 1(4) . 4. IN THE RESULT, THE FIRST GROUND OF REVENUE S APPEAL STANDS DISMISSED. 5. NEXT GRIEVANCE OF THE REVENUE RELATES TO ALLOWING R ELIEF OF RS. 24,63,288/ - ON ACCOUNT OF SPECULATIVE LOSS. IN THE COURSE OF ASSESSMENT, THE AO FOUND THAT THE ASSESSEE WAS ALSO TRADING IN DERIVATIVES, WHICH IS ALSO KNOWN AS FUTURE AND OPTIONS INCURRED LOSS ON SUCH TRADING AT RS. 20.53 LAKHS BEFORE CONSIDER ING THE EXPENSES, THE AO ALSO FOUND THAT IN CONSOLIDATED TRADING, THE ASSESSEE HAS CLAIMED TOTAL EXPENSES AT RS. 6.97 LAKHS BY OBSERVING THAT MORE THAN 75 % TURNOVER O F THE ASSESSEE WAS FROM DERIVATIVE TRADING, THE AO INCREASED THE LOSS BY 75 % OF THE EXPE NSES AS CLAIMED IN TRADING ACCOUNT ALLOCATED TO SUCH TRADING ACTIVITIES. THUS, THE AO HAS TAKEN TOTAL LOSS OF RS. 25.76 LAKHS AND DISALLOWED SET OFF OF SUCH LOSS ON DERIVATIVES AGAINST THE PROFIT ON DELIVERY BASED TRANSACTION. - : 4 : - 4 IT WAS HELD B Y THE ASSESSING OFFICER THAT LOSS OF RS. 25.76 LAKHS WAS NOT ALLOWABLE IN TERMS OF SECTION 43(5 ) SINCE LOSS WAS INCURRED IN TRADING OF FUTURE AND OPTION. 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED THE CLAIM WITHOUT CONTROVERTING THE FINDING RECORDED BY THE ASSESSING OF FICER TO THE EFFECT THAT LOSS SO INCURRED WAS IN THE NATURE OF SPECULATIVE TRANSACTION, WHICH CANNOT BE SET - OFF AGAINST THE PROFIT EARNED IN DELIVERY BASE TRANSACTION U/S 73 OF THE INCOME - TAX ACT, 1961. EVEN THE LD. CIT(A) HAS JUST ACCEPTED THE ASSESSEE S CONTENTION WITHOUT RECORDING ANY POSITIVE FINDING TO THIS EFFECT. HOWEVER, EVEN THOUGH THE LD. CIT(A) HAS CALLED FOR REMAND REPORT BUT IT APPEARS THAT IN THE REMAND REPORT NO POSITIVE FINDING HAS BEEN GIVEN BY THE ASSESSING OFFICER AND EVEN HE HAS DECLINE D TO ACCEPT THE ADDITIONAL EVIDENCE PRODUCED BEFORE THE CIT(A) FOR THE FIRST TIME AND THERE WAS NO REASONABLE CAUSE FOR NOT PRODUCING THE SAME BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT. THERE IS NO BASIS FOR CIT(A) TO HOLD THAT ASSESSEE WAS HAVING I NCOME FROM DERIVATIVE TRANSACTION IN COMMODITY AND SQUARED UP TRANSACTION IN SHARES. SINCE NO REASONING HAS BEEN GIVEN FOR - : 5 : - 5 ALLOWING SET - OFF OF SPECULATIVE LOSS AGAINST THE NORMAL BUSINESS INCOME , WE SET - ASIDE THE ORDER OF CIT(A) AND RESTORE THE ENTIRE MATT ER BACK TO THE FILE OF AO FOR DECIDING AFRESH AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE BEFORE THE CIT(A) FOR THE FIRST TIME. THE ASSESSEE IS AT LIBERTY TO SUBMIT ANY OTHER DOCUMENT IN SUPPORT OF ITS CLAIM. WE DIRECT ACCORDINGLY. 7. NEXT GRIEVANCE OF THE REVENUE RELATES TO GIVING REBATE OF RS. 1,69,948/ - U/S 88E OF INCOME - TAX ACT, 1961. 8. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FROM THE RECORD, WE FOUND THAT THE AO HAS DECLINED THE ASSESSEE S CLAIM OF REBATE U/S 88E AMOUNTING TO RS. 1,6 9,948 IN RESPECT OF SECURITY TRANSACTION TAX. THE BASIC REASON FOR DE NIAL OF TAX PAID ON S PECULATIVE TRANSACTION WAS THAT THE ASSESSEE FAILED TO FILE TRADING AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD 1.10.2004 TO 31.3.2005, THEREFORE, THE AO COULD NOT ASC ERTAIN THE AMOUNT OF INCOME CHARGEABLE TO TAX DURING THE PERIOD 1.10.2004 TO 31.3.2005 AND THE INCOME TAX PAYABLE ON SUCH INCOME. 9. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE FURNISHED FULL DETAILS, WHICH WAS SENT BY - : 6 : - 6 THE LD. C IT(A) TO THE AO FOR SENDING HIS REMAND REPORT. THE LD. CIT(A) OBSERVED THAT VIDE LETTER DATED 6.12.07 THE ASSESSEE HAS EXPLAINED WITH FACTS AND FIGURE HIS CLAIM OF REBATE U/S 88E OF THE INCOME - TAX ACT. COPY OF THE SAID IS ENCLOSED HEREWITH ALONGWITH PERIOD WISE PROFIT/LOSS STATEMENT (ENCL. PAGE NO.20 & 22). WHATEVER INCOME RETURNED & ASSESSED UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION IS INCLUSIVE OF INCOME ARISING FROM TAXABLE SECURITY TRANSACTION AND AS SUCH THE ASSESSEE IS ENTITLED FOR REB ATE FROM THE AMOU N T OF INCOME TAX COMPUTED IN THE MANNER PROVIDED IN SUB SECTION (2) OF AN AMOUNT EQUAL TO THE SECURITY TRANSACTION TAX PAID BY HIM IN RESPECT OF TAXABLE SECURITIES TRANSACTION ENTERED INTO THE COURSE OF HIS BUSINESS DURING THAT PREVIOUS YE AR. THE WORD INCOME USED IN SECTION 88E HAS BEEN DEFINED IN SECTION 2(24) WHICH IS AN INCLUSIVE DEFINITION AND INCLUDES LOSSES I.E. NEGATIVE PROFIT. THIS POSITION HAS BEEN ELABORATELY DEALT WITH IN CIT VS. HARPRASAD & CO.(P) L TD, 99 ITR 118 ( S. C.). IT WAS HELD THAT WITH REFERENCE TO CHARGING PROVISIONS OF THE STATUTE THE EXPRESSION INCOME SHOULD BE UNDERSTOOD TO INCLUDE LOSSES. THE EXPRESSION PROFIT & GAINS REFERS TO POSITIVE INCOME - : 7 : - 7 WHEREAS LOSSES REPRESENT NEGATIVE PROFIT OR IN OTHER WORDS MINUS I NCOME. 10. WE FOUND THAT DURING APPELLATE PROCEEDINGS, THE ASSESSEE HAD GIVEN THE BROAD SUMMARY OF TRANSACTION BETWEEN THE TWO PERIODS I.E. 1.4.04 TO 30.9.04 AND 1.10.04 TO 31.3.05. ON PERUSAL OF THE SAME, IT EMERGES THAT THE ASSESSEE HAD EARNED A PROFIT OF RS. 8.65 LAKH IN CAPITAL MARKET DELIVERY BASED TRANSACTION AND RS. 5.44 LAKHS ON SQUARED UP TRANSACTION AND THE F & O TRANSACTION RESULTED IN TO LOSS . 11. WE FOUND THAT AFTER CONSIDERING REMAND REPORT, THE LD. CIT(A) HAS GIVEN A DETAILED FINDING WITH RESPE CT TO THE PROFIT EARNED DURING THE PERIOD 1.10.04 TO 31.3.05, WHICH HAS NOT BEEN CONTROVERTED BY THE LD. SENIOR D.R. DURING THE COURSE OF HEARING BEFORE US. THE WORD INCOME USED IN SECTION 88E CANNOT BE UNDERSTOOD IN A RESTRICTIVE SENSE OF POSITIVE INCOM E ONLY IN THE ABSENCE OF ANY INDICATION TO THAT EFFECT IN SUCH PROVISION. THE WORD INCOME AS DEFINED IN SECTION 2(24) UNLESS , THE CONTEXT OTHERWISE INDICATED, HAS TO BE NECE SSARILY INCLUDE NEGATIVE INCOME. FURTHER, THE PROVISIONS OF REBATE U/S 88E ARE OT HERWISE ALSO CLEAR THAT NO REFUND IS ADMISSIBLE TO - : 8 : - 8 THE ASSESSEE BEING IF TAX WORKED OUT OF TOTAL INCOME IS FOUND TO BE LESS THAN THE REBATE ADMISSIBLE U/S 88E. 12. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING ASSESSEE S CLAIM OF REBATE U/S 88E OF THE INCOME - TAX ACT, 1961. C.O.NO.2/IND/2010 : 13. IN THE CROSS OBJECTION, THE ASSESSEE IS AGGRIEVED FOR NOT ALLOWING CLAIM OF DEDUCTION IN RESPECT OF INTEREST OF RS. 30,000/ - ON HOUSING LOAN U/S 24(B) OF THE INCOME - TAX ACT, 1961. WE HAVE ALREADY DEALT WITH THIS ISSUE IN PARA 3 OF OUR ORDER, WHEREIN THE AO HAS BEEN DIRECTED TO ALLOW INTEREST INCOME AFTER VERIFYING THE SAME. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE WHEREAS CROSS OBJEC TION IS ALLOWED IN TERMS OF OUR OBSERVATIONS IN PARA 3 HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2011. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH APRIL, 2011 . CPU*