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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: Shri Rajesh Kumar, AM& Shri Pradip Kumar Choubey, JM]
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.
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.
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 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 the operative part whereof is as under:-