AMIT AGARWAL,KOLKATA vs. ITO,WARD-9(3), KOLKATA., KOLKATA

This is an appeal preferred by the assessee against the order of Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [hereinafter referred to Ld. ‘CIT(A)’] dated 08.06.2023 for the Assessment Year (in short ‘AY’) 2015-16.

The assessee has raised the following grounds of appeal:

The issue raised in ground no. 1 is against confirmation of addition of Rs. 6,63,623/- by Ld. CIT(A) as made by the Assessing Officer (in short ld. 'AO') on account of purchase of forward transactions of Future/option through National Stock Exchange without considering the sale of future/option.

The facts in brief are that the AO during the course of assessment proceedings observed that the assessee made purchases through National Stock Exchange of future/option of Rs. 8,72,352/- and effected sale to the tune of Rs. 2,08,731/- thereby carrying forward the future & options to the next year to the tune of Rs. 6,63,623/-. The AO, on this basis, deducted the said amount from the purchases. Thereafter, the AO disallowed the same by observing that the assessee has not disclosed the said losses in the return of income and the same was not allowed to be carried forward thereby making addition of Rs. 6,63,623/- to the income of the assessee. Ld. CIT(A) simply affirmed the order of the AO.

After hearing the rival contentions and perusing the material on record, we find that the assessee has done some transactions of purchases and sales of future/option. The modus operandi of the future/option is such that whenever the purchases are made, the same are squared off by making the sales as is apparent from the contract notes filed by the assessee before us. We have also perused the profit and loss account filed by the assessee before us and find that the assessee has charged to the profit and loss I.T.A. No.: 821/KOL/2023 Assessment Year: 2015-16 Amit Agarwal. account, the loss from trading of shares amounting to Rs. 1,33,45,101/- which is in agreement with the contract notes filed by the assessee. However, while filing the return, we note that the assessee has not claimed this loss and therefore, there is no question of disallowance of loss or addition of loss when the same is not claimed in the computation of income. In our opinion, the AO has wrongly appreciated the facts of the case which is also in appellate proceedings by Ld. CIT(A). In view of the above facts, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Therefore, ground no. 1 raised by the assessee is allowed.

The issue raised by the assessee in ground no. 2 is against the confirmation of addition of Rs. 2,05,000/- by Ld. CIT(A) as made by the AO by disallowing the interest on unsecured loans.

The facts in brief are that the AO has disallowed the interest charged in the profit and loss account of Rs. 2,05,000/- without making any discussion for making the said disallowance which according to the AO is of personal in nature. Ld. CIT(A) simply affirmed this addition on the same ground that the loan was taken for the personal purposes without taking into account the contentions and submissions of the assessee and facts available on records.

After hearing the rival contentions and perusing the material on record including the balance sheet, profit and loss account, we find that the assessee has raised unsecured loan of Rs. 37,42,250/-. The total capital of the assessee as on 31.03.2015 I.T.A. No.: 821/KOL/2023 Assessment Year: 2015-16 Amit Agarwal. after adjustment of net profit earned during the year and withdrawal made by the assessee worked out to Rs. 59,42,826/-. These are only two major items on the liability side which are correspondingly matched by various assets on the asset side of the balance sheet. The observations of the AO that the interest paid on the unsecured loan is personal in nature is without any substantive finding whereas on the other hand the assessee has vehemently argued before us by referring to the balance sheet and profit and loss account that the said loan was in fact taken for the purpose of business and interest was incurred wholly and exclusively for the purpose of business of the assessee. We find merit in the contentions of the assessee that the loan is taken only for the purpose of business and not for any personal objectives. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition.