M/S. CVM JEWELS PVT. LTD.,,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1(3),, AHMEDABAD

आदेश / O R D E R

PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is appeal by the assessee directed against the order of the Commissioner of Income Tax(Appeals)-II, Ahmedabad, dated 14/07/2014 for the Assessment Year (AY) 2009-10, on the following Grounds: i. The ld. CIT(A)-II, Ahmedabad has erred in law and on facts in rejecting the claim of the appellant for brought forward of losses. The same is prayed for allowance. ii. The ld. CIT(A)-II, Ahmedabad has erred in stating that appropriate remedy for the appellant is to file an application u/s.154 and in the issue of brought forward loss cannot be decided for the year under consideration.

ITA No. 2438/Ahd/2014 M/s. CVM Jewels Pvt. Ltd vs. ITO Asst.Year –2009-10 - 2 - 2. The relevant facts as culled out from the materials on record are as under:- In this case, the assessee company is engaged in the business of trading in gold & silver. During the year, the assessee has shown net profit before tax of Rs.1,81,97,293/- on turnover Rs.17,49,64,444/-.

2.2 A perusal of the computation of total income it was noticed the assessee has show business income of Rs.29,62,964/- and speculation income of Rs. 1,52,23,410/- and set off the same against brought forward speculation loss of Rs.1,35,17,336/- and business loss of Rs.46,69,038/- (to the extent of business income of Rs.29,62,964/- and remaining speculation income of Rs.17,06,074/-). However, a perusal of the past assessment records, it was notice that there was no brought forward losses (except speculation losses) as claimed by the assessee company. In view of the above facts, notice was sent to the assessee.

2.3 In response to the said notice assessee stated as under: “We had filed the return of income for A.Y.2008-09 wherein we had claimed a loss at detailed below: Speculation Loss (-) 13517336 Business Loss (-) 05863049 On perusal of the return of income for A.Y.2008-09 will show that the assessee has claimed brought forward loss of Rs.68,09,244/- (last entry on the computation page.). The brought forward business loss as claimed is accepted by the department in the past years and now there is no reason to disturb the same. Assessment for A.Y.2008-09 is made under section 143(3) on 01/02/2010 wherein returned income is accepted and thus aforesaid claim of carried forward loss is

ITA No. 2438/Ahd/2014 M/s. CVM Jewels Pvt. Ltd vs. ITO Asst.Year –2009-10 - 3 - assessed. Copy of computation of income for A.Y. 2008-09 and assessment order for A.Y.2008-09 is enclosed herewith.

The submission of the assessee vis-a-vis the facts of the case are considered. The assessee's submission is not based on the relevant records and facts. As per the past assessment orders, appeal effect orders and rectification orders for relevant assessment years; the position of brought forward losses are as under..... As such, the assessee is entitled for set off brought forward business losses and speculation losses against currant year income are as under:

A.Y. Business loss Speculation loss 2005-06 - - 2006-07 - Rs.1,01,09,123/- 2007-08 Rs.23,15,637/- - 2008-09 - Rs.34,08,113/- Total Rs.23,15,637/- Rs.1,35,17,236/-

The aforesaid business losses and speculation losses of earlier years are allowed to be set-off against respective income and remaining claims are disallowed.” 3. Against the said order assessee preferred fist statutory appeal before the ld.CIT(A) and ld. CIT(A) dismissed the appeal observing as under: “I have considered the appellant's submissions. The claim of the assessee that since the order for A.Y.2008-09 was passed u/s. 143(3) so even the figures of brought forwarded losses of prior years as adopted in that year should continue to be adopted, cannot be accepted because the losses of earlier years can always undergo changes based on proceedings in those years. Just because they are adopted as per the appellant's claim in the computation in later years, they do not become sacrosanct. The final determination of loss of any year is to be made in the proceedings of that years only. The present appeal has been filed for assessment order of A.Y.2010-11. The issue of such loss of earlier years, with regard to their quantum, cannot be decided in the proceedings of

ITA No. 2438/Ahd/2014 M/s. CVM Jewels Pvt. Ltd vs. ITO Asst.Year –2009-10 - 4 - current year. If the appellant has got any dispute with regard to quantum of any earlier year, the appropriate remedy for the appellant is to file an application u/s.154 before the Assessing Officer or even file appeals against the order passed u/s.154 by the Assessing Officer as per previsions of the Act. No relief can provided in the appellate proceedings of the current year in determining the quantum of losses of the earlier years. It is not a case where the Assessing Officer has disallowed the claim of set off of losses of any earlier year. The dispute is only with regard to quantum of losses to be determined in the earlier years. The same can be decided in the proceedings of those years and appeal was dismissed.” 4. We have gone through the relevant record and impugned order. Ld. CIT(A) decided the matter without calling. In this case, Ld. AO has reassessed business loss of Asst. Year 2008-09 also. Further on Page 3 of the remand report, the AO mentions that “during the course of assessment proceedings for the year under consideration assessee has furnished the copies of computation of total income and assessment order for A.Y.2007-08 to 2008-09 and copies of rectification orders for A.Y.2005-06 and 2006-07.” These are completely erroneous facts produced by the ld. AO as the rectification orders for 2005-06 and 2006- 07 were never served upon the appellant and as such the appellant could never furnish the same as alleged by the ld. AO. We strongly believe that the ld. AO had never framed any rectification orders for 2005-06 and 2006-07 because on specific request dated 09/11/2013 by the appellant for a copy of the rectification orders for AY 2005-06 to 2008-09, copy for A.Y. 2008-09 only was served. In absence of the valid evidence and proofs the claim put in by the appellant should be accepted. The effect of rectification order was to increase the liability of the appellant and the orders were thus prejudicial to the appellant. The ld.

ITA No. 2438/Ahd/2014 M/s. CVM Jewels Pvt. Ltd vs. ITO Asst.Year –2009-10 - 5 - AO should have given a notice as laid u/s.154(3). Ld. AO should have appreciated the facts of the case before passing unilateral rectification order and should have opportunity to the assessee of being heard in the matter. By not doing so, ld. AO has violated the principle of natural justice and provisions of section 154(3). In view of the above facts, the orders alleged to have been passed by the AO u/s.154 for A.Y.2005-06 to A.Y.2008-09 are void, bad & illegal.

Sd/- Sd/- एन.के. �ब�लैया महावीर �साद (लेखा सद�य) (�या�यक सद�य) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 13/11/2017

ITA No. 2438/Ahd/2014 M/s. CVM Jewels Pvt. Ltd vs. ITO Asst.Year –2009-10 - 6 -

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-II, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy 1. Date of dictation 01/11/2017 (dictation-pad 5 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …03/11/2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………