Loss from a Business Activity cannot be disallowed for mere non mention of that Activity in Form 3CD

We have heard rival submission and perused the material on record. It is not disputed that the assessee had started the business of trading in shares from A.Y. 2007-08. For A.Y. 2007-08, assessee had earned profit of Rs.7,73,143/- which has been declared as “business income”and had accordingly taxed at maximum margin rate of tax i.e. at 30%. When the department had accepted the stand of the assessee in the immediately preceding assessment year namely A.Y. 2008-09 (i.e. assessee had disclosed profits on trading of shares as business income) the department cannot take an inconsistent stand in the current assessment year for identical item of income.

The CIT(A) in the impugned order had categorically found that the profits on sale of shares amounting to Rs.7,73,143/- declared as business income in the A.Y. 2008-09 and the shares of which the assessee has suffered a loss of Rs.51,28,109/- in the assessment year under consideration were purchased from the same broker and almost at the same time. It was also held by the CIT(A) that the business activities for the A.Ys. 2008-09 and 2009-10 with reference to trading in shares were identical.  This finding of the CIT(A) has not been dispelled by the Revenue by placing on record any material/documents.

Before concluding, it is to be mentioned that the ld. D.R. submitted that as per tax audit report in Form 3CD report, assessee has not mentioned trading in shares as part of his business activities. Mere non mentioning of all business carried on by the assessee in Form 3CD may not lead the A.O., forming an opinion that the dealing in shares was not amounting to business activity. The A.O. has to deal with substance of the activities carried on by the assessee and may not be unduly influence by the procedural technicalities. If this omission of non mentioning of business activity in tax audit report is to be taken as a grave, then the A.O. cannot have contrary view by holding “loss from shares”as non business income, while continuing to tax income from “trading fabric’as business income when both the activities were not mentioned in Form 3CD report. For the aforesaid reasons, we see no merits in the contentions raised by the Revenue. Therefore, we uphold the order of the CIT(A) as correct and in accordance with law and no interference is called for. It is ordered accordingly. In the result, the appeal of the Revenue is dismissed.