Manoj Valjibhai Bhayani Vs ITO (ITAT Surat)
ITAT Surat held that Assessing Officer is not entitled to admit or entertain additional claim during the assessment proceedings, however the appellate authority has such jurisdiction to admit such additional claim.
Facts-
Assessee is an individual and engaged in the diamond brokerage business in diamond market at Surat. The case of assessee was reopened for assessment year 2008-09 on the basis of information that assessee made a share transaction of Rs.21,09,876/- in Religare Securities Pvt. Limited.
AO was having reason to believe that income of assessee with regard to share transaction have not been reported by assessee while filing return of income initially u/s. 139(1) of the Act. On the basis of such belief, AO after recording reason issued notice u/s. 148 on 25.03.2013. AO recorded that in response to notice u/s. 148, no response was made by assessee. AO issued notice u/s. 133(6) to Religare Securities Pvt. Ltd. for calling information about share transaction. The show cause notice was also issued to the assessee to furnish details regarding share transaction and Assessing Officer recorded that assessee furnished reply along with copy of profit and loss account, balance-sheet, computation of income.
After going through the reply of the assessee, AO recorded that required details were not furnished by the assessee. The Assessing Officer treated the entire share transaction of Rs. 21,09,976/- as non- genuine and added to the income of assessee.
Aggrieved by the addition in the assessment, the assessee challenged the validity of reopening as well as addition in the assessment.
CIT(A) held that losses were not shown or claimed for set off in return of income or in return in response to notice under section 148. Hence, the claim of set off at this stage cannot be entertained thereby the Ld. CIT(A) restricted the addition to the extent of Rs.10,23,600/-. Further aggrieved the assessee has filed present appeal before the Tribunal.
Conclusion-
On the plea of assessee that assessee be allowed set off loss, the Ld. CIT(A) held that such claim cannot be entertained at this stage. In my view, though the Assessing Officer is not entitled to admit or entertain additional claim during the assessment proceedings, however the appellate authority has such jurisdiction to admit such additional claim as has been held by Hon’ble jurisdictional High Court in the case of CIT Vs. Mitesh Impex (2014) 367 ITR 85 (Guj). Thus, I admit the additional plea of set off of loss of current year against the income of assessee in the impugned year.
The Hon’ble jurisdictional High Court in the case of Shilpa Dyeing & Printing Mills (P.) Ltd., (supra) held that once the loss is determined, the same should be set off against the income determined under any other head of income including undisclosed income.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This appeal by assessee is directed against the order of ld. Commissioner of Income-tax (Appeals)-3, Surat [for short as to “Ld. CIT(A)”] dated 29.08.2018 for assessment year (AY) 2008-09, which in turn arises out an assessment order passed by Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (‘the Act’) vide order dated 28.03.2014. The assessee has raised the following grounds of appeal:-
“1. On the facts and circumstances of the case as well as law on the subject, the learned assessing officer has erred in reopening assessment by issuing notice u/s 148 of the I.T Act, 1961.
2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in partly confirming the action of assessing officer in making addition u/s 69 of the I.T. Act by sustaining addition to the extent of Rs.10,23,600/- as against addition of Rs.21,09,967/- made by ld. assessing officer.
3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in not allowing set off of Loss of Rs.11,38,332/- incurred by assessee during the year under consideration in derivatives & cash delivery segments against the above addition of Rs.10,23,600/-sustained by learned Commissioner of Income Tax (Appeals).
4. It is therefore prayed that above addition made by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted.”
2. Brief facts of the case that assessee is an individual and engaged in the diamond brokerage business in diamond market at Surat. The case of assessee was reopened for assessment year 2008-09 on the basis of information that assessee made a share transaction of Rs.21,09,876/- in Religare Securities Pvt. Limited. On the basis of such information, the Assessing Officer was having reason to believe that income of assessee with regard to share transaction have not been reported by assessee while filing return of income initially under section 139(1) of the Act. On the basis of such belief, the Assessing Officer after recording reason issued notice under section 148 on 25.03.2013. The Assessing Officer recorded that in response to notice under section 148, no response was made by assessee. The Assessing Officer issued notice under section 133(6) to Religare Securities Pvt. Ltd. for calling information about share transaction. The show cause notice was also issued to the assessee to furnish details regarding share transaction and Assessing Officer recorded that assessee furnished reply along with copy of profit and loss account, balance-sheet, computation of income. During the assessment, the assessee was asked to furnish the information regarding share transaction. The assessee in his reply dated 22.03.2014 submitted that during the relevant period he sold certain machinery and jewellery to different persons to make trading in F&O in Religare Securities Pvt. Ltd. in such trading he used to deposits 10 to 15% of margin as securities amounts and purchased various script of different dates. On each and every time, the assessee was unable to cash so as per Security Exchange Board of India’s guidelines he entered into agreement with Religare Securities Pvt. Ltd. The assessee furnished account statement and copy of all transactions in stock market script-wise details and profit and loss. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer held that assessee failed to furnish copy of transaction with Religare Securities Pvt. Ltd., after taking such view, the assessee was asked to furnish D-mat account for the period 01.04.2006 to 31.03.2007 and 01.04.2007 to 31.03.2008 with Edelweiss Finance Advisory Ltd. The Assessing Officer recorded that required details were not furnished by the assessee. The Assessing Officer treated the entire share transaction of Rs. 21,09,976/- as non-genuine and added to the income of assessee.
3. Aggrieved by the addition in the assessment, the assessee challenged the validity of reopening as well as addition in the assessment. The assessee filed written submission in detail. The written submission of assessee recorded in para-6 of the assessment order. In his submission, the assessee stated that information and transaction details were called for about six years back, which is a long period and in the meantime, the script bills were misplaced by assessee, when the information was called by Assessing Officer. The assessee made application to Religare Securities Pvt. Ltd., for providing the details of his share transaction. Such fact was brought to the notice of Assessing Officer vide letter / application dated 20.03.2014, when such details were received and the assessee intended to file before the Assessing Officer, he has passed assessment order under section 143(3). The assessee filed such details along with plea of additional evidence under Rule 46A. The assessee submitted that Assessing Officer added the entire share transaction. On furnishing such details, the Ld. CIT(A) forwarded such details to Assessing Officer for examination and furnishing his remand report. The Assessing Officer furnished his remand report dated 09.10.2015. In the remand report, the Assessing Officer reported that assessee made share transaction in derivatives segment as well as delivery of share. The assessee has shown loss of derivatives segment of Rs.9,69,451/- and in cash (delivery) segments of Rs.1,68,881/-. On verification of statement from 01.08.2007 to 31.03.2008 of Religare Securities Pvt. Ltd, the assessee made aggregate payment of Rs.11,43,400/-. The details on which of checked and different were narrated by Assessing Officer. The Assessing Officer further reported that in the statement from 01.08.2007 to 31.03.2008, the assessee has received several amounts, details of which were compiled by Assessing Officer and reported that assessee received Rs.2,99,400/-. The Assessing Officer further reported that on verification of bank statement, in the RBS bank account No.1171189, the assessee made cash deposits of Rs.4.37 lakh and in other bank account, in RBS bank account No.1302145 the assessee made cash deposits of Rs.2,80,500/-. Thus assessee had deposited total cash of Rs.7,17,500/-.
4. Against remand report, assessee furnished his reply / rejoinder, the contents of which is recorded by Ld. CIT(A) in para-7.2 of his order, wherein the assessee stated that peak investment during the period is only Rs.10,23,600/-. On profit or loss account transaction in share market from the details furnished by Assessing Officer, the assessee stated that as per remand report of Assessing Officer final result of profit and loss account are drawn as under:
