Case Number: ITA 939/DEL/2021
Appellant: Vijay Kumar Aggarwal, New Delhi
Respondent: Pr. CIT, Ghaziabad
Assessment Year: 2015-16
Result: 2015-16
Case Filed on: 2021-08-04
Order Type: Final Tribunal Order
Date of Order: 2021-12-13
Pronounced on: 2021-12-13
Tribunal: IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘F’, NEW DELHI
Before: SHRI AMIT SHUKLA, JUDICIAL MEMBER and DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
Introduction
This appeal by the assessee, Vijay Kumar Aggarwal, pertains to the assessment year 2015-16 and is directed against the order of the Principal Commissioner of Income Tax (Pr. CIT), Ghaziabad, which set aside the assessment order passed under section 143(3) of the Income Tax Act, 1961. The core issue revolves around the classification of a loss of Rs. 93,23,384 incurred from day trading of shares, which the Pr. CIT deemed to be speculative and hence not allowable for set-off against regular business income.
Background
The appellant, Vijay Kumar Aggarwal, represented by Shri Akhilesh Kumar, Advocate, and Shri R.K. Govil, Advocate, filed his return of income for the AY 2015-16 declaring a total income of Rs. 59,80,000. The case was selected for limited scrutiny, focusing on specific issues such as interest expenses, stock valuation, and securities transactions. The assessment was completed under section 143(3) on 25.09.2017.
Revisionary Proceedings
Pr. CIT initiated revisionary proceedings under section 263 of the Act, issuing a show-cause notice on 20.03.2021. The primary contention was that the loss from day trading should be treated as speculative. The Pr. CIT argued that the Assessing Officer (AO) had not adequately examined whether the transactions were speculative or non-speculative.
Assessee’s Arguments
The assessee contended that the loss from day trading had been consistently treated as business loss in previous years and that the AO had duly examined all transactions during the assessment proceedings. Additionally, it was argued that even if the loss were to be classified as speculative, it would not impact the taxable income due to the availability of substantial brought forward losses from earlier years.
Tribunal’s Observations
The Tribunal noted that the AO had conducted a thorough examination of the transactions during the assessment proceedings. The loss was claimed as business loss based on the nature of transactions involving day trading and Futures & Options (F&O).
The Tribunal further observed that the Pr. CIT’s order to classify the loss as speculative was based on an audit objection, which is not a sufficient ground for invoking section 263, especially when the AO had applied his mind and made a decision based on facts and law.
Key Findings
The Tribunal found that:
Conclusion
The Tribunal concluded that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. Therefore, the conditions for invoking section 263 were not satisfied.
Order
The Tribunal set aside the order passed by the Pr. CIT under section 263 and restored the assessment order passed under section 143(3).
Final Judgment
Order pronounced in the open court on 13.12.2021.
Signed:
[DR. B.R.R. KUMAR]
ACCOUNTANT MEMBER
Signed:
[AMIT SHUKLA]
JUDICIAL MEMBER
Dated: 13.12.2021
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
Relevant Legal Provisions and Precedents
The Income Tax Act, 1961, under section 263, empowers the Pr. CIT to revise any order of the AO if it is erroneous and prejudicial to the interests of the revenue. In this case, the Tribunal referred to the landmark decision in Malabar Industrial Co. Ltd. (243 ITR 83) where it was held that both conditions must be satisfied simultaneously for the invocation of section 263.
The Tribunal also relied on the judgment of the Hon’ble Delhi High Court in CIT vs. NTPC Ltd. (2017) 88 taxman.com 561 (SC), which reiterated that consistent treatment of similar transactions in previous years should be maintained unless there is a substantial reason to deviate.
Impact of the Judgment
This judgment underscores the importance of maintaining consistency in the treatment of transactions and highlights the limitations of the Pr. CIT’s revisionary powers under section 263. It emphasizes that mere audit objections or changes in classification without a substantial impact on taxable income do not justify the invocation of section 263.
Key Takeaways
This case illustrates the necessity for the Pr. CIT to exercise revisionary powers judiciously and based on substantial grounds. It also reinforces the principle of consistency in tax assessments and the need for a thorough examination by the AO during the initial assessment proceedings. The Tribunal’s decision provides clarity on the conditions under which section 263 can be invoked and serves as a significant precedent for similar cases.
Vijay Kumar Aggarwal vs Pr. CIT, Ghaziabad: Dispute Over Speculative Loss for AY 2015-16
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