POONAM BHOTIKA,KOLKATA vs. ITO, WARD 43(1), KOLKATA, KOLKATA

O R D E R

PER Waseem Ahmed, Accountant Member:

1. That the Commissioner of Income-tax,Kolkata-15 is not justified set aside the assessment order for the assessment year 2012-13 dated 02.03.2015 passed by the ITO Ward-43(1), Kolkata is found to be erroneous and prejudicial to the interest of revenue on the ground that the allowability of loss in future option as an admissible business expenditure remained to be seen by the AO during the assessment proceedings although prime facie evidence against its allowability was Poonam Bhotika Vs. ITO Wd-43(1), Kol. Page 2 there on record and AO has not made proper enquiry before completing assessment regarding this issue. By not checking the above issue and by not making adequate enquiry the Assessing Officer has not assessed the proper income and the order has become erroneous and prejudicial to the interest of the revenue hence set aside the order. 2. That any other grounds of appeal may kindly be allowed at the time of hearing.” Shri S.M. Surana, Ld. Advocate appeared on behalf of assessee and Shri G. Hangshing, Ld. Departmental Representative appeared on behalf of Revenue.

2. Briefly stated facts are that assessee in the present case is an individual and deriving her income from interest, director’s remuneration and dividend. The assessee for the year under consideration filed her return of income declaring at nil, which was processed u/s 143(1) of the Act. Subsequently the case was selected under scrutiny and accordingly the notice u/s 143(3)/142(1) of the Act was served upon the assessee. The assessment was completed u/s 143(3) of the Act vide order dated 02.03.2015 after making the disallowance u/s 14A of the Act. Finally, the assessment was framed at a total loss of ₹22,94,539/- only. 2.1 Subsequently, Ld. Pr. CIT observed that assessee has debited her profit and loss account for ₹22,16,317/- on account of loss in future and options. As per Ld. Pr. CIT the impugned loss was speculative in nature. Therefore, the same is not eligible for deduction other than the speculation income. Accordingly, Ld. Pr. CIT issued show-cause notice upon assessee dated 14.02.2017 for revising the order passed by the Assessing Officer u/s 143(3) of the Act. In compliance thereto, assessee submitted that the amount of loss was duly verified by the AO during assessment proceedings. The AO also verified the same from National Stock Exchange (for short NSC) by issuing notice u/s 133(6) of the Act. The NSC duly confirmed the said loss. Thus, the amount of loss was allowed by the AO after due verification and getting satisfied. Subsequent to the scrutiny assessment, the Audit Wing of Income Tax also raised the objection against the allowability of impugned loss. But the same was allowed by the Audit Wing of the Income Tax Department Poonam Bhotika Vs. ITO Wd-43(1), Kol. Page 3 after getting satisfied about the loss. Thus, the proceedings initiated in the audit objection were dropped. The assessee also submitted that as per the provisions of Section 43(5)(d) of the Act, the transactions in future & option if carried out in recognizing stock exchange cannot be treated as speculative transactions. Therefore, the impugned loss cannot be treated as speculative loss and thus eligible for set off against income. However, Ld. Pr. CIT disregarded the contention of assessee and held the order of AO as erroneous in so far as prejudicial to the interest of revenue by observing as under:- “I have carefully considered the issue with specific reference to the relevant assessment records and proposal u/s. 263 of the AO. The facts narrated above indicate that some aspects relating to allowability of loss in future option as an admissible business expenditure remained to be seen by the AO during the assessment proceeding although prima facie evidence against its allowability was there on record. The Assessing Officer has not made proper enquiry before completing assessment regarding this issue. By not checking the above issue and by not making adequate enquiry the Assessing Officer has not assessed the proper income and the order has become erroneous and prejudicial to the interest of the revenue. In view of the above, the order dated 02/03/2015 passed by ITO, Ward- 43(1), Kolkata is found to be erroneous and prejudicial to the interest of revenue and hence set aside on the above limited issue with the direction to pass fresh assessment order after examining the evidence and documents in respect of the above issue raised after giving opportunity to the assessee and in accordance with law.” Against the order of Ld. Pr. CIT the assessee is in appeal before us.

3. Ld. AR before us filed paper book which is running pages from 1 to 28 and reiterated the submissions that were made before Ld. Pr. CIT. He also submitted that Ld. Pr. CIT was not confident enough in holding the assessment order as erroneous which is causing prejudice to the interest of Revenue as he has given a finding that some aspects have not been seen by the AO during the assessment proceedings. Similarly, Ld. Pr. CIT has also observed in his impugned order that prima facie evidences for the allowability of impugned loss are available on record. Thus, Poonam Bhotika Vs. ITO Wd-43(1), Kol. Page 4 from the above it can be inferred that Ld. PR. CIT himself was not confident / sure about the error in the order of AO. In this regard, Ld. AR also submitted that the order cannot be held erroneous in so far as prejudicial to the interest of revenue, if two views are possible in respect of any transactions/issue. Ld. AR in support of assessee’s claim has relied on the order of the Co-ordinate Bench of this Tribunal in the case of Ritech Kumar Boyed vs. CIT in dated 15.01.2016 wherein the Tribunal has held as under:- “13. We have given a careful consideration to the rival submissions. It is seen from the order of the AO that the AO rejected the claim of the Assessee that the unrecorded sales were goods given to customers and the customers may approve or may return such goods. It is only on approval sales are recorded in the books of accounts. Therefore, there were no suppressed sales, whatsoever. This was rejected by the AO and he made an addition on account of gross profit on unrecorded sales It 17% of unrecorded sales. The crucial words in the order of assessment read as follows:- "Considering the facts and circumstances of the case the G.P. rate on undisclosed sale is calculated @ 17%. And the same is added back to the total income of the assessee. No further expenses are allowed as assessee has already debited huge expenses (Addition Rs.38,4701/- )"

Poonam Bhotika Vs. ITO Wd-43(1), Kol. Page 6 Ld. AR for the assessee further relied on the order of the co-ordinate Bench of this Tribunal in the case of M/s Damodar Developers P. Ltd. vs. CIT in for A.Y 2009-10 dated 16.12.2014, wherein the Tribunal has held:- “7. Now, we examine the present order of the ld. CIT on the anvil of aforesaid provisions and case law. In this case, the ld. CIT has observed that the assessee had made certain payments of rent, consultancy charges, professional charges and sales promotion charges. The ld. CIT has opined that this sum has to be disallowed u/s. 40(a)(ia) of the Act, as the assessee had not deducted the TDS thereon. Now, we find that the ld. CIT’s order is totally silent as to why the TDs was to be deducted on the aforesaid payments. There is no law that whenever above payments re made invariably the TDS has to be deducted. The TDs is deductible only if the conditions specified for deduction of TDS are exiting. Hence, the ld. CIT’s observation in the order that the Assessing Officer's order is erroneous and prejudicial to the interest of the revenue has no basis whatsoever. Further, we find that the observation of the ld. CIT that the Assessing Officer's order being erroneous and prejudicial to the interest of the revenue is emanating from the show cause notice. In the operative part of the order passed u/s. 263 of the Act the ld. CIT has held that he was of the view that the issue needs re-consideration, therefore, he was setting aside the issue for re-consideration. We find that the section 263 of the Act does not give any power whatsoever to the ld. CIT to remit the issue to the file of the AO without his finding that the order of the AO is erroneous insofar as it is prejudicial to the interest of the revenue. Accordingly, we re of the opinion that the ld. CIT’s order passed u/s. 263 of the Act is not sustainable s the ld. CIT has not given a finding that the order of the AO passed u/s. 143(3) of the Act is erroneous insofar as it is prejudicial to the interest of the revenue. The ld. CIT has simply set aside the matter and referred back to the table of the AO for re-consideration. In our view this is not at all permissible u/s. 263 of the Act. accordingly, we set aside the order passed by the ld. CIT u/s. 263 of the Act and decide the issue in favour of the assessee.” On the other hand, Ld. DR vehemently relied on the order of Ld. Pr. CIT.