LATE CHUNILAL HINDUJ OSWAL, REPRESENTED BY LH YUGESH RAJESH OSWAL,KOLHAPUR vs. INCOME-TAX OFFICER, WARD - 1(2), KOLHAPUR

The assessee has raised the following grounds of appeal :- “1) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in dismissing the appeal holding that it was correctly assessed by A.O. as short term capital gain in share trading. It was pleaded before him that by mistake the same was declared as short term capital gain which fact should have been accepted especially when the assessee was no more to explain properly. The loss of Rs.4,86,192/- be treated as business loss only. 2) The appellant craves to leave, add/amend or alter any of the above grounds of appeal.” 2

The issue raised in the present appeal is arising from the share trading. The case of the assessee is that by mistake the assessee in the return of income had declared the income from share trading as ‘income from short term capital gain’. Though in-fact it was business income and loss arisen therefrom was to be treated as business loss and set-off against the business income earned by the assessee.

Briefly, in the facts of the case, the assessee is deceased and the case of the assessee is represented by his legal heir. For the year under consideration, the assessee had furnished the return of income declaring total income of Rs.2,19,207/- which was accompanied with the Trading, Profit & Loss Account and Balance Sheet, etc.. The assessee was a proprietor and was carrying on the business of manufacturing of Tarpaulin under the name and style ‘M/s The Kohinoor Tarpaulin Industries’. In the return of income, the assessee had shown loss of Rs.4,86,192/- on account of share trading. The said loss was set-off against income from business income. The Assessing Officer, during the course of scrutiny proceedings, intimated the assessee that the loss on account of short term capital asset was not to be set-off against the business income in view of section 70(2) of the Act. The assessee explained that his consultant had wrongly shown the share trading loss under the head “short term capital loss”. Basically, the share trading transactions were in the nature of trade activity which was non-speculative and should have been shown under the head “income from business”. In view of the ratio laid down by the Apex Court in Goetz (India) Ltd. vs. CIT vide Civil Appeal No.1761 of 2006, the Assessing Officer did not accept the plea of the assessee. The Hon’ble Apex Court in the said decision had held that the claim not made in the return could not be entertained by the Assessing Officer otherwise than by filing a revised return. The plea of the assessee was not accepted. The assessee 3

Aggrieved with the said decision of the CIT(A), the assessee is in appeal before the Tribunal.

On perusal of the record and after hearing the Authorized Representatives, I find since this is the case of the assessee who is deceased and represented by his legal heir, a lenient view may be taken in this case. For the year under consideration, the assessee had furnished the return of income declaring total income of Rs.2,19,207/- only. The case of the assessee was that against the business income earned from his proprietorship concern, he had adjusted the losses arising from share trading though by mistake it was shown as ‘short term capital loss’. Under section 70(2) of the Act, income arising from short term capital loss cannot be adjusted against the income earned from business. However, the plea of the assessee was that it was not the income from short term capital loss but it was the income from business. During the assessment proceedings, the assessee also pointed out that certain loss on account of speculative transactions, which was segregated by the Assessing Officer. In other words, the declaration made by the assessee in the return of income was not accepted in toto. Since in such circumstances, where the declaration made by the assessee has partly been revised by the Assessing Officer himself there is no merit in holding that other part of the explanation of the assessee cannot be accepted. In the totality of the facts and circumstances of the case and especially in view of the binding Circular of 4 CBDT on the Income Tax Authorities, it is incumbent upon the Assessing Officer to assess correct income in the hands of the assessee and not be guided by the declaration which has been wrongly made by the assessee in the return of income. Accordingly, I hold that the loss arising on trading of shares which was declared by the assessee is to be treated as ‘share trading loss’ and adjusted against the business income. Thus, the ground of appeal raised by the assessee is allowed.

In the result, the appeal of the assessee is allowed. Order pronounced on this 28th day of December, 2018. (SUSHMA CHOWLA) "याियक सद"य / JUDICIAL MEMBER पुणे / Pune; "दनांक Dated : 28th December, 2018. Sujeet आदेश क" "ितिलिप अ"ेिषत/Copy of the Order is forwarded to : 1. अपीलाथ" / The Appellant;

""यथ" / The Respondent; The CIT(A)-2, Kolhapur;

The CCIT, Pune; िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, पुणे, एक-सद"य 5. मामला / DR ‘SMC’, ITAT, Pune; गाड" फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स"यािपत "ित //// व"र" िनजी सिचव / Sr. Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune