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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAVISH SOODSmt. Roma Harish Khatri,
ORDER PER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-40, Mumbai, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (for short “Act”), dated 28.11.2017. The assessee has assailed the impugned order on the following grounds of appeal before us :
“1.In the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) ought to have held that – 1.1. The Assessment Order passed by the Ld. Assessing Officer is illegal and bad-in-law as the same was passed ignoring the submission made during the course of the assessment proceedings by the appellant. 1.2. The Ld. Assessing Officer was wrong in passing the impugned assessment order disregarding the submission that the loss incurred by the appellant in trading in Futures and Options (F&O) was Business Loss and not short-term capital loss and further disregarding the statement showing revised computation of income for the year ended 31st March, 2015 together with Profit & Loss Account and Balance Sheet for the year ended 31st March, 2015.
2 Smt. Roma Harish Khatri Vs. The Income Tax Officer -29(3)(2)
The loss from trading in Futures and Options incurred by the appellant amounting to Rs.23,08,564/- was Business Loss and not loss under the head capital gain as determined by him and further the said amount of Rs.23,08,564/- was eligible for carry forward for being set off in future.
3. It is humbly prayed that the reliefs as prayed and such other and further reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice, should be granted. 4. The appellant craves leave to amend or alter any ground .or add a new ground, which may be necessary.” 2. Briefly stated, the assessee who is engaged in the business of trading in shares and securities had e-filed her return of income for A.Y 2015-16 on 20.08.2015, declaring a total income of Rs. 3,24,290/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
During the course of the assessment proceedings, it was observed by the A.O that the assessee had declared speculative income of Rs. 4,23,763/-; and income from other sources of Rs. 55,351/-. Further, it was observed by the A.O that the assessee in Col. 3(e) of her return of income had shown “Short Term Capital Loss” (STCL) of Rs. 26,92,873/-, which was allowed to be carried forward to the subsequent years. On a perusal of the computation of income it was observed by the A.O that though the assessee had claimed a derivative loss of Rs. 23,08,564/-, but she had not sought carry forward of the same in “Schedule CFL” of her return of income. Backed by his aforesaid observation the A.O declined to allow carry forward of the aforesaid derivative loss for being set-off against the business income of the assessee for the subsequent years. Also, it was observed by the A.O that the assessee had not taken into account the impugned business loss of Rs. 23,08,564/- for the purpose of arriving at her total returned income of Rs. 3,24,290/- for the year in question.
Aggrieved, the assessee assailed the assessment order before the CIT(A). It was submitted by the assessee that the A.O despite determining the derivative loss of Rs. 23,08,564/-, however, had not allowed the same to be 3 Smt. Roma Harish Khatri Vs. The Income Tax Officer -29(3)(2) carried forward as a business loss for being set off against her business profits of the subsequent years. It was submitted by the ld. A.R that the assessee had inadvertently mentioned the “business loss” of Rs. 26,92,873/- as STCL in her return of income for the year in question. It was submitted by the ld. A.R that now when the A.O had observed that the assessee had suffered a derivative loss of Rs. 23,08,564/-, therefore, he ought to have allowed carry forward of the same for being set off against her business profits for the subsequent years. However, the CIT(A) was not persuaded to subscribe to the aforesaid claim of the assessee. It was observed by the CIT(A) that the A.O had not given any finding that the assessee had incurred a business loss of Rs. 23,08,564/- during the year in question, but had only observed that there was a derivative loss to the said extent. It was observed by the CIT(A) that as the assessee had not claimed carry forward of any business loss and infact had claimed carry forward of STCL of Rs. 26,92,873/- , which was allowed by the A.O thus, no infirmity did emerge from the order passed by the A.O. Backed by his aforesaid observations the CIT(A) dismissed the appeal.
The assessee being aggrieved has assailed the order passed by the CIT(A) before us. It was submitted by the ld. A.R that both the lower authorities despite appreciating that the assessee had suffered a derivative loss had still declined her claim for carry forward of the same for being set off against her business income for the subsequent years. It was candidly admitted by the ld. A.R that the asssessee had inadvertently omitted to claim the derivative loss of Rs. 23,08,564/- and had wrongly raised a claim of STCL of Rs. 26,92,873/-. It was submitted by the ld. A.R that neither of the lower authorities had considered the underlying substance of the assessee’s claim and had summarily rejected the same.
Per contra, the ld. Departmental representative (for short “D.R”) relied on the orders of the lower authorities.
4 Smt. Roma Harish Khatri Vs. The Income Tax Officer -29(3)(2)
7 We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the assessee had raised a claim of STCL of Rs. 26,92,873/- in her return of income for the year in question, which as observed by us hereinabove was allowed by the A.O to be carry forward to the subsequent years. On the basis of a “Çhart” filed by the assessee before us, it is therein stated that her returned income was comprised of the following incomes :
Sr. No. Particulars Amount Amount 1. Income from Business and Profession : -Speculative Business Rs. 4,23,763/- 2. Income from Capital Gains : - Short Term Capital Loss Rs. 26, 92,873/- Less : loss carried forward (Rs. 26,82,973/-) 3. Income from other Sources : - Interest on fixed deposits Rs. 8,28,752/- Less : Interest on overdraft (Rs.7,74,423/-) Net Income Rs. 54,329/-
- Other Interest income from bank Rs. 1,022/- Rs. 55,351/- Less : Brought Forward losses to be set-off (-) Rs. 3,799/- (brought forward business loss) Gross Total Income Rs. 4,75,315/- It is the claim of the assessee that she had inadvertently claimed a STCL of Rs. 26,92,873/-, which in fact was a derivative loss. As per the assessee, on the basis of the correct claim her loss for the year under consideration would stand recasted as under:
Sr. No. Particulars Amount 1. Gross total income (as per original computation of income) Rs. 4,75,315/- 2. Less: Derivative loss (wrongly considered as STCL in the return of income) Rs. 26,92,873/- 3. Less: Expenses Rs. 94,760/- 4. Add: B/forward business loss claimed in original return of income now reversed Rs. 3,799/- Revised Business Loss Rs. 23,08,564/- Accordingly, it is the claim of the assessee that she had a “business loss” of Rs. 23,08,564/-, the carry forward of which for being set off against her business profits for the subsequent years was declined by the lower 5 Smt. Roma Harish Khatri Vs. The Income Tax Officer -29(3)(2) authorities, for the reason, that the same was wrongly claimed in the return of income as a STCL.
Admittedly, the assessee had raised a claim of STCL of Rs. 26,92,873/- in her return of income, which the A.O had allowed to be carried forward. As per the settled position of law laid down by the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC), the A.O is divested of his jurisdiction to entertain a claim for deduction otherwise than by way of filing of a revised return of income by the assessee. As such, we find no infirmity in the conduct of the A.O, who in our considered view had rightly declined to go by the revised claim of the assessee that the loss suffered by her was a derivative loss and not STCL as was disclosed in the return of income. However, we are unable to subscribe to the view taken by the CIT(A), who we find had summarily endorsed the observations of the A.O and not looked into the claim raised by the assessee in the backdrop of the underlying substance of the impugned transactions which had resulted to the loss in question. Be that as it may, the matter in all fairness in our considered view requires to be revisited by the A.O. Accordingly, we herein direct the A.O to re-adjudicate the aforesaid claim of the assessee. Needless to say, the A.O in the course of the set aside proceedings shall afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate her claim on the basis of fresh documentary evidences. In case the assessee is able to establish that she had suffered a derivative loss, then, the A.O shall allow the same to be carried forward as per the extant law.
Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the open court on 08/04/2021.