ACIT (OSD) 2(1), MUMBAI V. SAILESH LALIDHAR BHATIA, MUMBAI

ITA 5978/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55510 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 30-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transactions in derivatives; Speculation loss; Revised return
• Section: 43(5)

Judgement Text

1 SHRI SAILESH LALIDHAR BHATIA IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, AM & SHRI VIJAY PAL RAO, JM ITA NO. 5978/MUM/2010 (ASST YEAR 2007-08 ) THE DY COMMR OF INCOME TAX 2(1), MUMBAI VS SHRI SAILESH LALIDHAR BHATIA 2 ND FLOOR SHIPPING HOUSE 24/26 KUMTHA ST.BALLARD ESTATE MUMBAI 400 038 (APPELLANT) (RESPONDENT) PAN NO. AABPB3277F ASSESSEE BY SHRI K GOPAL REVENUE BY SH V V SHASTRI DT.OF HEARING 10 TH OCT 2011 DT OF PRONOUNCEMENT 14 TH OCT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28.5.2010 OF THE CIT(A) FOR THE AY 2007-08. 2 THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GR OUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) HAS ERRED IN HOLDING THAT SPECULATION LOSS AS DECLARED IN THE RETURN OF INCOME IS ASSESSABLE AS NORMAL BUSINESS LOSS IN SPI TE OF THE FACT THAT NO RETURN OF INCOME REVISING SUCH CLAIM WAS FILED BY THE ASSE SSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) HAS ERRED IN IGNORING THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF GOETZE INDIA LTD (284 ITR 283) WHILE HOLDING THAT S PECULATION LOSS AS DECLARED IN THE RETURN OF INCOME IS ASSESSABLE AS NORMAL BUSIN ESS LOSS IN SPITE OF THE FACT THAT NO RETURN OF INCOME REVISING SUCH CLAIM WAS FILED BY THE ASSESSEE. 2 SHRI SAILESH LALIDHAR BHATIA 3 IN THE RETURN OF INCOME, THE ASSESSEE DISCLOSED S PECULATION LOSS OF RS. 56,14,582/- AND CLAIMED CARRIED FORWARD OF T HE SAME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED THE REVI SED COMPUTATION OF INCOME CLAIMING LOSS OF F&O AS BUSINESS LOSS AND CLAIMED S ET OFF AGAINST OTHER SOURCES, HOUSE PROPERTY. THE ASSESSING OFFICER DID NOT ACCEPT THE REVISED CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT FILED THE REVI SED RETURN OF INCOME WITHIN THE PERIOD AND THEREFORE, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION OF THE HOHBLE SUPREME COURT IN THE CASE OF GOETZE INDIA L TD REPORTED IN 284 ITR 323 AND DISALLOWED THE SAME. 4 ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF TH E ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF CIT VS CICAGO PNEUMATICS L REPORTED IN 15 SOT 282. 4 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD DR HAS REL IED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD AR HAS SUPPORTED THE ORDER O F THE CIT(A) AND RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF CIT VS CIG AGO PNEUMATICS (SUPRA). THERE IS NO DISPUTE ABOUT THE FACTUAL MATRIX OF THE ISSUE TH AT THE LOSS DECLARED BY THE ASSESSEE IS REGARDING THE F&O TRANSACTION AND THERE FORE, PRIOR TO THE AMENDMENT OF SEC. 43(5), THE SAID LOSS WAS IN THE NATURE OF SPEC ULATION LOSS; HOWEVER, AFTER THE AMENDMENT, WHEREBY, CLAUSE (D) OF THE PROVISO TO SE C. 43(5) HAS BEEN INSERTED W.E.F 1.4 2006. AS A RESULT OF THIS AMENDMENT, THE TRANS ACTION IN DERIVATIVE CARRIED OUT IN THE RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED T O BE SPECULATIVE TRANSACTION. THUS, IT IS CLEAR THAT THE REVISED CLAIM OF THE ASS ESSEE IS BASED ON THE AMENDMENT OF PROVISIONS OF LAW AND NOT A FRESH OR A NEW CLAIM RA ISED BY THE ASSESSEE, WHICH WAS NOT IN THE RETURN OF THE INCOME. EVEN OTHERWISE, IT IS INCUMBENT ON THE ASSESSING 3 SHRI SAILESH LALIDHAR BHATIA OFFICER TO ASSESS THE INCOME AS PER PROVISIONS OF L AW AND IF THE ASSESSEE IS ENTITLED FOR ANY CLAIM OR BENEFIT AS PER THE PROVISIONS OF LAW T HEN, THE SAME CANNOT BE IGNORED OR DENIED MERELY ON THE GROUND THAT THE ASSESSEE HA S OMITTED TO CLAIM THE SAME IN THE RETURN OF INCOME. THE CIT(A) HAS DECIDED THE I SSUE IN PARA 4 AS UNDER: 4. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AU THORIZED REPRESENTATIVE AND I FIND THAT THE ASSESSING OFFICER HAS DISALLOWE D THE CLAIM OF THE APPELLANT ONLY ON THE GROUND THAT THE ASSESSEE HAS NOT REVISED THE RETURN OF INCOME SHOWING THE SPECULATION LOSS AS BUSINESS LOSS IN SP ITE OF THE FACT THAT CBDT NOTIFICATION DT 25.1.2006 WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER ACCORDING TO WHICH TRANSACTION IN DERIVATIVES ARE NOT TO BE TREATED AS SPECULATIVE TRANSACTION. THE ASSESSING OFFICER HAS REL IED ON THE DECISION OF M/S GOETZE INDIA LTD (284 ITR 323). HOWEVER, IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE THE CORRECT INCOME OF THE ASSESSE E. IN THE CASE OF CIT VS CICAGO PNEUMATICS (15 SOT 282), IT WAS HELD THAT TH E ASSESSING OFFICER IS UNDER OBLIGATION TO DETERMINE THE CORRECT INCOME OF TH E ASSESSEE WHERE THE CLAIM HAS BEEN MADE IN THE RETURN OF INCOME OR NOT EVEN IF THE ASSESSEE MAKES A CLAIM DURING THE ASSESSMENT PROCEEDINGS, THE SAME IS REQUIRED TO BE EXAMINED AND ALLOWED AS PER LAW. IN THIS CASE IT IS EVIDENT THAT CBDT HAS CLARIFIED THAT TRANSACTIONS IN DERIVATIVES ARE TO BE TREATED AS BUSINESS LOSS ONLY AND NOT SPECULATION LOSS. HENCE, THE ASSESSING OFFI CER IS DIRECTED TO ALLOW THE CLAIM OF THE APPELLANT AS BUSINESS LOSS. GROUND NOS 1.1 AND 1.2 ARE ALLOWED . 4.1 THUS, IT IS CLEAR THAT THE CIT(A) HAS ADJUDICAT ED THE ISSUE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF CICAGO PNEUMA TICS (SUPRA). THE TRIBUNAL IN THE CASE OF CICAGO PNEUMATICS (SUPRA) HAS HELD THAT; .ASSESSING OFFICER IS BOUND TO ASSESS THE CORRE CT INCOME AND FOR THIS PURPOSE, THE ASSESSING OFFICER MAY GRANT RELIEFS /REFUNDS SUO MOTU OR CAN DO SO ON BEING POINTED OUT BY THE ASSESSEE IN THE C OURSE OF ASSESSMENT PROCEEDINGS FOR WHICH ASSESSEE HAS NOT FILED REVISED RETURN, ALTHOUGH, AS PER LAW, THE ASSESSEE IS REQUIRED TO FILE THE REVISED RETU RN. HAVING STATED SO, IN OUR VIEW, THE LEARNED CIT(A), HAVING CO-TERMINUS POWERS WITH THE POWERS OF AO AND THE FACT THAT APPELLATE PROCEEDINGS ARE THE CONTI NUATION OF ORIGINAL PROCEEDINGS, SHOULD HAVE ENTERTAINED THE CLAIM OF AS SESSEE AND ALLOWED IF OTHER CONDITIONS OF THE PROVISIONS OF THE LAW WERE SAT ISFIED. IN THIS VIEW OF THE MATTER, WE ACCEPT BOTH THE GROUNDS OF THE ASSESSEE AND DIRECT THE LEARNED CIT(A) TO CONSIDER THE CLAIM OF THE ASSESSEE AT THE REVISED FIGURES ON MERITS AND DECIDE THE SAME ACCORDING TO THE PROVISIONS OF SS . 80HH AND 80-1 OF THE ACT AFTER HEARING THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEE STANDS ACCEPTED.. 4 SHRI SAILESH LALIDHAR BHATIA 5 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND A NY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) ACCORDINGLY, THE SAME IS UPHELD . 6 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED ON THE 14 TH , DAY OF OCT 2011. SD/ SD/- ( J SUDHAKAR REDDY ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 14 TH , OCT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI