NIRANJAN KUMAR HIRJEE,KOLKATA vs. ITO, WARD-33(7) , KOLKATA
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: Shri Rajesh Kumar, AM& Shri Pradip Kumar Choubey, JM]
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA [Before Shri Rajesh Kumar, AM& Shri Pradip Kumar Choubey, JM]
I.T.A. No. 145/Kol/2024 Assessment Year: 2022-23 Niranjan Kumar Hirjee Vs. DDIT, CPC, Bengaluru Ground floor, 13/4, Chowringhee Terrace, Elgin, Kolkata-700020. (PAN: AAQPH2486R) Appellant Respondent
Date of conclusion of Hearing 16.05.2024 Date of Pronouncement 28.05.2024 For the Assessee Ms. Swati Baid, FCA For the Respondent Shri Amuldeep Kaur, Addl. CIT, Sr. DR
ORDER Per Shri Rajesh Kumar, AM This appeal filed by the assessee is against the order of Ld. CIT(A) Addl./JCIT(A)- 12, Mumbai dated 15.01.2024 for AY 2022-23. 2. The only issue raised by the assessee in the various grounds of appeal is against the action of CIT(A) confirming the action of the Ld. DDIT, CPC in denying the setting off the brought forward short term capital loss to the extent of Rs.36,62,537/- instead of Rs.69,03,493/- as claimed by the assessee in the return of income thereby short allowing the said loss to the tune of Rs.32,40,950/-.
Brief facts are that the assessee filed his return of income on 07.11.2022 declaring total income of Rs.1,03,21,050/-. The assessee had the income from future and options, long and short term capital gains, interest income and share of profit from partnership concern. The assessee has brought forward short capital losses which were declared in the earlier returns of income and no adverse order disallowing or restricting the said losses were passed by the Ld. AO. During the year, the assessee claimed the set off of brought forward long term capital losses to the tune of Rs.69,03,493/- in the return of income filed for the assessment year in question. However, the AO while processing the return of income and passing intimation u/s. 143(1) of the Act dated 07.08.2023 restricted the set off to Rs.36,62,539/- without assigning any reason therefor and also without giving any opportunity of hearing to the assessee.
ITA No. 145/Kol/2024 Niranjan Kumar Hirjee, AY 2022-23 4. In the appellate proceeding, the appeal of the assessee was dismissed on the ground that the assessee did not file any response despite three opportunities granted to the assessee. Ld. CIT(A) also observed in the said order that three previous assessment years were examined and it was found that the returns were processed u/s. 143(1) and not scrutinized u/s. 143(3) and therefore, the long term capital losses which were accepted u/s. 143(1) were not subjected to scrutiny and thus dismissed the appeal of the assessee.
After hearing the rival contentions and perusing the material available on record including the intimation sent u/s. 143(1)(a) of the Act dated 07.08.2023, we observe that the assessee has claimed set off of brought forward losses of Rs.69,03,493/- in the in the return of income and the AO ,CPC while passing the order u/s. 143(1)(a) reduced the claim of the assessee to Rs.36,36,547/- thereby denying the credit of setting off of losses to the tune of Rs.32,40,950/- without assigning any reason therefor. In our opinion, the said order passed by the Ld. DDIT, CPC is not correct as this is against the very principle of natural justice and fair play as the claim of the assessee has been restricted without allowing any opportunity of hearing. Besides the reduction of claim on account of brought forward of short term capital loss is not an apparent and prima facie adjustment and the AO is under obligation to give reasons therefor. In our opinion, it is a debatable issue as apparent on the face of it and therefore cannot be disallowed. The case of the assessee is squarely covered by the decision of Co-ordinate Bench in the case of Manas Flour Mills Pvt. Ltd. vs. CPC, Bangalore in ITA No. 400/Kol/2021 for AY 2019-20 dated 16.05.2022. The operative part is extracted as under:-
“5. We have duly considered rival contentions and gone through the record carefully. A perusal of the record would reveal that the addition of Rs.5,51,909/- on account of two major expenditures relate to subscription of club memberships and these expenditures were incurred in the earlier year but amortized for a period of five years. Every year 1/5th was claimed. It was allowed by the Assessing Officer in the earlier year. It is 1/5th in this year also. Therefore, these could not be adjusted. It is further observed that in a prima facie adjustment, an item can be adjusted when it is not required to be established by arguments and a long drawn process of reasoning on points on which there may conceivably two opinions. The adjustment said to be made by the Assessing Officer relate to a debatable issue i.e., whether the expenses were incurred for obtaining the membership of the club or otherwise routine expenditure. Whether the expenditure could be termed as incurred for the purpose of business or not and such type of adjustment cannot be made u/s 143(1) of the Act. Therefore, this adjustment is set aside and the addition is deleted.” Similar ratio has been laid down by the coordinate bench in the case of ACIT Vs Ricky Chandra ITA No. 1025/Kol/2011 the operative part whereof is as under:-
ITA No. 145/Kol/2024 Niranjan Kumar Hirjee, AY 2022-23 “7.2. A bare perusal of Section read with Explanation reveals that the adjustments contemplated are very limited. Explanation (a) to Section 143(1) explains the meaning of an incorrect claim. The assessee had adjusted the loss relating to previous years aggregating to Rs. 33,96,510/-. All the information in this regard were available with the Assessing Officer. If he had any doubt in this regard, then he could have issued notice u/s 143(2) but while issuing intimation under Section 143(1) could not deny the adjustment of loss claimed by the assessee as the same does not come within the ambit of ‘an incorrect claim apparent from any information in the return.’ Therefore, the adjustment made by the Assessing Officer was without jurisdiction. 8. As we have held that the adjustment per se was bad in law therefore, the ground raised by Department challenging the action of Ld. CIT(A) in restoring the matter to Assessing Officer for verification in view of the amendment to Section 251(1)(a) with effect from 01.06.2001 becomes wholly academic and, therefore, the ground raised by Department is dismissed as infructuous. Further , since the Cross objection filed by the assessee is in support of Ld. CIT(A)’s order, the same is also dismissed as being infructuous.” Since the facts of the case before us are quite similar to the above decisions and therefore respectfully following the same, we are inclined to hold that denial of setting off of brought short term losses in the current assessment year in the order passed u/s 143(1)(a) of the Act is debatable issue and cannot be added in the said order. Considering these facts, the appellate order passed by the Ld. CIT(A) confirming the order passed u/s 143(1)(a) on the ground that returns were not subjected to scrutiny in the preceding three assessment years and thus, justifying the action of the AO is incorrect and cannot be sustained as being against the principle of natural justice. Therefore, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to allow the claim of brought forward short term capital losses of the assessee as claimed and consequently the appeal of the assessee is allowed. 6 In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 28th May, 2024 Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) Judicial Member Accountant Member Dated: 28th May, 2024 JD, Sr. PS Copy of the order forwarded to: 1. Appellant– 2. Respondent . 3. CIT(A) Addl./JCIT(A)-12, Mumbai 4. CIT, 5. DR, ITAT, Kolkata, True Copy By Order Assistant Registrar ITAT, Kolkata Bench, Kolkata
