DCIT CEN CIR 20, MUMBAI V. NADIR B AJANI, MUMBAI

ITA 923/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84353 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: AJAY R SINGH
• Keywords: Capital asset; Business income; Transactions in derivatives; Revised return
• Section: 143(3); 139(5)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI . , , , BEFORE SHRI D KARUNAKARA RAO , A M AND SHRI AMIT SHUKLA , J M ITA NO. 923 /MUM/201 2 : ASST.YEAR 200 8 - 200 9 THE ASSTT.COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 20 MUMBAI. / VS. SHRI NADIR B.AJANI EMPIRE FOOTWEAR, YORK HOUSE COLABA CAUSEWAY MUMBAI 400 039. PAN : ADDPA8662L. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI AKHILENDRA YADAV /RESPONDENT BY : SHRI AJAY R.SINGH / DATE OF HEARING : 24 .11.2014 / DATE OF PRONOUNCEMENT : 26.11.2014 / O R D E R PER AMIT SHUKLA (JM) : THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 23.11.2011 , PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 3 9 , MUMBAI, FOR THE QUANTUM PROCEEDINGS U/S 143(3) FOR THE ASSESSMENT YEAR 2008 - 200 9 , MAINLY ON THE FOL LOWING GROUNDS OF APPEAL . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO SET OFF THE LOSS FROM F&O TRANSACTIONS WITH THE INCOME FROM OTHER HEADS OF INCOME . 2. ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT CLAIMED THE SET OFF OF LOSS FROM F&O ITA NO. 923 /MUM/201 2 . SHRI NADIR B.AJANI 2 TRANSACTIONS WITH THE INCOME FROM OTHER HEADS OF INCOME BY FILING THE REVISED RETURN WITHIN THE S TIPULATED TIME LIMIT U/S 139(5) AND HENCE IN VIEW OF THE JUDGMENT OF HON.SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. V. CIT (284 ITR 323) THE SAID CLAIM CANNOT BE ALLOWED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND A PARTNER IN A PARTNERSHIP CONCERN, WHO IS HAVING BUSINESS INCOME AND INCOME FROM OTHER SOURCES. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS CLAIMED RS. 30,60,843 AS SHORT TERM CAPITAL LOSS FROM FUTURES & OPTIONS (F&O) TRANSACTIONS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE, AS TO W HY THE LOSS ON F&O TRANSACTION SHOULD NOT BE TAKEN AS BUSINESS LOSS IN TERMS OF PROVISIONS OF SECTION 43(5). IN RESPONSE TO THIS, THE ASSESSEE SUBMITTED THAT THE F&O CONTRACTS REPRESENT A PROPERTY OF VALUE CAPABLE OF BEI NG ACQUIRED, HELD AND TRANSFERRED , HAVING ALL IMPORTANT INGREDIENTS OF CAPITAL ASSETS. THEREFORE, ANY GAIN OR LOSS IS TO BE TREATED AS ASSESSABLE UNDER THE HEAD CAPITAL GAIN AND NOT AS BUSINESS INCOME . ALTERNATIVELY, THE ASSESSEE CLAIMED THAT, IF AT AL L, THE DEPARTMENT SEEKS TO TREAT F&O TRANSACTION AS BUSINESS INCOME, THEN LOSS SUFFERED BY THE ASSESSEE OF RS.30,60,843 MAY BE ALLOWED TO BE ADJUSTED AGAINST OTHER INCOME OF SAME YEAR U/S 71(1). THE LEARNED ASSESSING OFFICER REJECTED THE ASSESSEE S CONTEN TION AND HELD THAT IN VIEW OF THE AMENDMENT IN SECTION 43(5), F&O LOSS IS NOTHING BUT A TRADING LOSS, WHICH IS TO BE SHOWN UNDER THE HEAD BUSINESS OR PROFESSION . REGARDING THE ASSESSEE S ALTERNATIVE CLAIM , THE ASSESSING OFFICER HELD THAT THE ASSESSEE SHO ULD HAVE CLAIMED THE LOSS BY FILING A REVISED RETURN U/S 139(5), AND SUCH A CLAIM BEFORE THE A.O. WITHOUT THE REVISED RETURN CANNOT BE ENTERTAINED IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. V. CIT (284 ITR 323) . T HE ITA NO. 923 /MUM/201 2 . SHRI NADIR B.AJANI 3 LEARNED CIT(A), AFTER DETAILED DISCUSSION, RELYING UPON VARIOUS DECISIONS, WHICH HAS BEEN DISCUSSED FROM PAGES 5 TO 13, HELD THAT THE ASSESSEE S ALTERNATIVE CLAIM FOR SET OFF OF LOSS CAN BE ENTERTAINED BY THE A.O. A DETAIL DISCUSSION FOR ARRIVING AT THI S CONCLUSION HAS BEEN DISCUSSED FROM PAGES 14 TO 17 OF THE APPELLATE ORDER. 3. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE S INITIAL CLAIM WAS THAT THE LOSS IN F&O TRANSACTION IS A SHORT TERM CAPITAL LOSS AND NOT BUSINE SS LOSS. IT WAS ONLY WHEN THE A.O. POINTED OUT, THE ASSESSEE MADE AN ALTERNATIVE CLAIM FOR SET OFF OF F&O LOSSES U/S 71(1). SUCH A CLAIM CAN ONLY BE MADE THROUGH REVISED RETURN AND NOT OTHERWISE. THUS, HE STRONGLY RELIED UPON THE REASONING GIVEN BY THE A.O . ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT , THE ASSESSEE IS NOT MAKING ANY FRESH CLAIM, BUT IT IS A NATURAL OUTCOME , IF THE ASSESSING OFFICER TREATS F&O LOSSES AS BUSINESS LOSS, THEN HE IS REQUIRED TO GIVE FULL EFFECT AND TO G IVE SET OFF WITH THE INCOME FROM OTHER HEADS OF INCOME OF THE CURRENT YEAR AS PER THE PROVISIONS OF THE ACT. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ALSO ON PERUS AL OF THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND THE MATERIAL PLACED ON RECORD, WE FIND THAT THE ASSESSEE HAD CLAIMED THE LOSS FROM F&O TRANSACTIONS AS SHORT TERM CAPITAL LOSS. THIS HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT SUCH A LOSS IS TO BE TREATED AS BUSINESS LOSS, AS TRANSACTION IN F&O IS CONSIDERED AS BUSINESS ACTIVITY AS PER THE AMENDMENT IN SECTION 43(5). ONCE HE HAS HELD THAT THE ASSESSEE HAD INCURRED A LOSS IN F&O TRANSACTION, THEN WHILE COMPUTING THE INCOME, HE WAS RE QUIRED TO ACCEPT THE ASSESSEE S CLAIM THAT SUCH A LOSS SHOULD BE SET OFF ITA NO. 923 /MUM/201 2 . SHRI NADIR B.AJANI 4 WITH THE INCOME FROM OTHER HEADS OF INCOME OF THE CURRENT YEAR AS PER THE PROVISIONS OF THE ACT. IT IS THE DUTY OF THE ASSESSING OFFICER , WHILE COMPLETING THE ASSESSMENT, TO COMPUTE THE INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, AND IF WHILE COMPUTING THE INCOME THERE IS A LOSS, WHICH NEEDS TO BE SET OFF WITHIN THE STATUTORY PROVISIONS THEN THE SAME HAS TO BE GIVEN EFFECT TO. THE ASSESSEE S ONLY CLAIM BEFORE THE A.O. IS THAT SUCH A LOSS FROM F&O TRANSACTION SHOULD BE SET OFF AGAINST OTHER HEADS OF INCOME FOR THE SAME YEAR. EVEN OTHERWISE ALSO, THE LEARNED CIT(A) HAS DULY ACCEPTED THE ASSESSEE S CLAIM AND HAS DIRECTED THE A.O. TO SET OFF THE LOSS WITH OTHER INCOME FOR WHICH HE IS EMPOWERED TO DO SO, AS AN APPELLATE AUTHORITY. T HE HON BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. V. CIT (SUPRA) , HAS CLEARLY HELD THAT SUCH A POWER TO ENTERTAIN A CLAIM DOES NOT IMPINGE UPON THE POWER OF THE APPELLATE AUTHORITY. THUS, WE DO NO T FIND ANY REASON THAT THE ASSESSEE CANNOT BE ALLOWED TO CLAIM THE SET OFF OF LOSS FROM F&O TRANSACTION WITH OTHER HEADS OF INCOME , SIMPLY BECAUSE HE HAS NOT FILED THE REVISED RETURN U/S 139(5). ACCORDINGLY, THE GROUND RAISED BY THE DEPARTMENT STANDS DISMI SSED. 5 . IN THE RESULT, REVENUE S APPEAL IS DISMISSED . ORDER PRONOUNCED ON THIS 26 TH DAY OF NOVEMBER, 2014 . SD/ - SD/ - ( D.KARUNAKARA RAO ) ( AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 26 TH NOVEMBER , 2014 . DEVDAS* ITA NO. 923 /MUM/201 2 . SHRI NADIR B.AJANI 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT , MUMBAI. 4. / CIT(A) - 39 , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE.