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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
These two appeals by assessee are directed against the order of CIT(A) for the assessment years 2014-15 & 2015-16 both are dated 6.12.2022. The assessee has raised following grounds in assessment year 2014-15 in :
1. “The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities. facts and circumstances of the case.
Sri Bankapura Channabasappa Umapathi, Devangere
Page 2 of 8 2. The learned CIT[A] is not justified in upholding the assessment of income by the learned A.O., who had reiterated the income assessed in the original assessment dated 14/12/2016 and refused to accept the correct income reported by the appellant vide return of income filed on 23/03/2019 in response to the notice issued u/s 153A of the Act under the facts and in the circumstances of the appellant's case.
3. The learned CIT[A]ought to have appreciated that the income assessed in the original assessment was challenged in appeal by the appellant and that the Hon'ble ITAT has decided the appeal filed vide order in dated 05/11/2019 and had held that there was no case to take recourse to section 44AD of the Act under the facts and in circumstances of the appellant's case.
4. The learned CIT[A] ought to have deleted the addition of Rs. 8,29,105/-made u/s. 44AD of the Act and he ought to have further allowed the loss of Rs. 1,21,97,991/-claimed by the appellant towards shares, derivatives, futures & options to be set- off against the income instead of relying upon the determination of the income as per the original assessment order dated 14/12/2016, which has since been set-aide by the Hon'ble ITAT vide order in dated 05/11/2019 under the facts and in the circumstances of the appellant's case.
5. The learned CIT[A] ought to have appreciated that the original return of income was filed within the time allowed u/s 139[1] of the Act and hence, the loss of Rs. 1,21,97,991/- claimed by the appellant towards shares, derivatives, futures & options ought to have been allowed to be carried forward after set-off against the income under the facts and in the circumstances of the appellant's case.
6. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/ s4 234-A of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the Sri Bankapura Channabasappa Umapathi, Devangere
Page 3 of 8 appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
Similarly, the assessee has raised following grounds in assessment year 2015-16:
The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A] is not justified in upholding the assessment of income by the learned A.O., who had reiterated the income assessed in the original assessment dated 09/11/2017 and refused to accept the correct income reported by the appellant vide return of income filed on 23/03/2019 in response to the notice issued u/s 153A of the Act under the facts and in the circumstances of the appellant's case.
3. The learned CIT[A] ought to have allowed the set-off of brought forward loss of Rs. 89,02,037/- claimed by the appellant against the business income under the facts and in the circumstances of the appellant's case.
4. The learned CIT[A] ought to have appreciated that the original return of income for the assessment year 2014- 15 was filed within the time allowed u/s 139[1] of the Act and hence. the appellant was entitled to carry forward of the losses for the said assessment year, which ought to have been set-off against business income under the facts and in the circumstances of the appellant's case.
5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-A of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
Sri Bankapura Channabasappa Umapathi, Devangere
Page 4 of 8 6. For the above and other grounds that may be urged at the time of hearing of the appeal. your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
The crux of grounds in assessment year 2014-15 is that the starting point of computation of income in assessment orders passed u/s 153A of the Income-tax Act,1961 ['the Act' for short] is to be the income determined in assessment order passed u/s 143(3) of the Act.
Facts of the issue are that regular assessment was completed in the case of the assessee on 14.12.2016, u/s 143(3) of the Act determining, total income of Rs.21,68,655/-. Subsequently, a search action u/s.132 of the Act was initiated in the case of the assessee on 14.03.2018. Notice u/s.153A of the Act was issued by the AO to the assessee on 21.02.2019. In response to the said notice u/s.153A of the Act, the assessee filed Nil total income. Current year loss of Rs.1,07,58,401/- was also claimed in the return filed.
4.1 On verification of the details filed, AO observed that the assessee had claimed F&O loss of Rs.1,03,41,582/- which was set off against the concerned year's income from house property of Rs.6,09,224/- and income from other sources of Rs.8,30,321/-. After setting off the business losses against income from house property and other sources, the gross total income was shown as Nil and the balance business loss of Rs.89,02,037/- was carried forward to the subsequent assessment year. Further, as there was no income from capital gains and speculation profits for the current year, the short- term capital loss of Rs.18,15,348/- and speculation business loss of Rs.41,061/-, was also carried forward.
Sri Bankapura Channabasappa Umapathi, Devangere
Page 5 of 8 4.2 The AO noted that in the return of income filed originally on 27.11.2014, the assessee had not claimed any business loss or short- term capital loss. The claim made by the assessee in the return filed u/s.153A of the Act. The AO observed that the Hon’ble Supreme Court in the case of Sun Engineering reported in 198 ITR 297 held that reassessment proceedings are not for the benefit of the assessee. Relying on the Hon’ble Supreme Court decision supra, the AO rejected the assessee's claim of business loss of Rs.1,03,41,582/-, short term capital loss of Rs.18,15,348/- and speculation business loss of Rs.41,061/- in the return filed u/s.153A of the Act to be set off against the income of the year under consideration with the remaining loss being carried forward to the subsequent year. The ld. AO vide order dated 31.12.2019, the total income of the assessee was accordingly assessed at Rs.21,68,650/- as had been assessed in the earlier order u/s.143(3) dated, 14.12.2016. The assessee challenged this order before ld. CIT(A). The ld. CIT(A) has not agreed with this contention of the assessee and dismissed the appeal of the assessee. Against this assessee is in appeal before us.
We have heard both the parties and perused the materials available on record. In this case, the assessment order was passed u/s 143(3) of the Act on 14.12.2016, wherein income of the assessee has been determined at Rs.21,68,656/-. This was subject matter of appeal before ld. CIT(A), wherein the assessee challenged the assessment order raising various grounds. The ld. CIT(A) vide his order dated 4.10.2018 has dismissed the appeal of the assessee. Against this assessee carried the appeal before this Tribunal in and the Tribunal vide order dated 5.11.2019 has decided the issue as follows:
Sri Bankapura Channabasappa Umapathi, Devangere
Page 6 of 8 5. “I heard rival contentions and perused the record. The details of F & O transactions are given in page 3 of the assessment order. It is noticed that the assessee has made net loss in the F & O transactions. It is also an admitted fact that the assessee did not disclose the same in the return of income originally filed.
The AO has applied the provisions of sec.44AD in order to estimate the income. The provisions of sec.44AD prescribe a modality to estimate income on the basis of turnover. There should not be any dispute that the net result of F & O transactions itself constitutes income, i.e., either it may be profit or loss. Hence there is no necessity of determining income on estimate basis again. In my view, the AO has misguided himself by referring to the meaning of “turnover” explained in the context of sec.44AB of the Act, which has also been upheld by Ld CTI(A). In view of the foregoing discussions, the question of applying the provisions of sec.44AD would not arise in the facts of the case. Accordingly, the net result of F & O transactions is required to be taken into account by the AO for determining the total income of the assessee.
7. The next point that arises is in the instant case is that, if the net result of F & O transactions is taken for determining the total income, then the assessed income shall go below the returned income, since the net result of F & O transaction was loss. I have noticed earlier that the assessee has not disclosed the income/loss from F & O transactions in the return of income and the same was disclosed due to AIR report. Since I have set aside the methodology adopted by the AO for determining income from F & O transactions, I feel it proper to restore this issue to the file of AO. Accordingly I restore this issue to the file of AO. Accordingly, the order of Ld CIT(A) would stand modified.
In the result, the appeal of the assessee is treated as allowed.”
5.1 In view of the above order of the Tribunal, the AO is required to pass a consequential order in conformity with order of the Tribunal in dated 5.11.2019. Thereafter, the AO has to pass fresh order u/s 143(3) r.w.s. 153A of the Act in place of impugned assessment order dated 31.12.2019, which has been passed u/s 143(3) r.w.s. 153A of the Act. The starting point of computation of income in this order to be passed u/s 143(3) r.w.s.
Sri Bankapura Channabasappa Umapathi, Devangere
Page 7 of 8 153A of the Act is to be the income determined u/s 143(3) r.w.s. 254 of the Act. We direct accordingly. This appeal of the assessee is allowed.
ITA 54/Bang/2023 (AY 2015-16): 6. The grievance of the assessee in this appeal is that the AO has to consider the final outcome of the assessment order passed in assessment year 2014-15 while passing the assessment order for the assessment year 2016-17 u/s 143(3) r.w.s. 153A of the Act and accordingly, it was submitted that the AO has not considered the final outcome of the assessment order passed in assessment year 2014-15 while passing the order for AY 2015-16. In our opinion, there is a merit in the argument of ld. A.R. Accordingly, we direct the AO to consider the final outcome i.e. profit or loss determined in assessment year 2014-15 while passing the assessment order for assessment year 2015-16. Directed accordingly. The appeal of the assessee is also allowed.
In the result, both the appeals of the assessee are allowed.