Case Law Details
Varadagovind Parthasarthy Iyer Vs ITO (ITAT Mumbai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Mumbai recently addressed the issue of penalty under Section 271B of the Income Tax Act, 1961. The case, “Varadagovind Parthasarthy Iyer vs. ITO,” pertained to the assessment year 2015-16 and involved an assessee engaged in trading, financing, realty, and commodities businesses. The penalty under scrutiny was Rs. 1,50,000, imposed for not getting the accounts audited, as required under Section 44AB.
1. Background of the Case : The case revolves around the penalty proceedings initiated against the assessee under Section 271B of the Income Tax Act for the assessment year 2015-16. The penalty in question amounts to Rs. 1,50,000.
2. Nature of Assessee’s Business: The assessee in this case is involved in a multifaceted business, including trading, financing, real estate, and commodities. It’s essential to understand the diverse nature of the assessee’s activities, as this plays a role in the penalty imposed.
3. Tax Treatment of Losse: The primary contention in the case was the treatment of short-term capital losses. The assessee had declared a short-term capital loss of Rs. 34,94,555 from trading in futures and options, as well as losses from trading in shares and derivatives. However, the Assessing Officer (AO) categorized these losses as business losses, not short-term capital losses, on the grounds that trading in futures and options did not constitute a sale of assets.
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