2014 (6) TMI 1071 - AT - Income Tax

Set off of business loss earned from F O trading activity - Denial of benefit of loss or deduction merely on the ground that the assessee has not claimed the same in the return of income - HELD THAT - As in an assessment, AO is to compute total income of the assessee as per the provisions of the Income Tax Act. If any loss actually suffered by the assessee or any deduction which is legally allowable to the assessee and in relation to which all the details are available before the AO at the time of the assessment, then such loss or deduction is to be allowed by the AO and in fact the AO is duty bound to compute the total income of the assessee as per provisions of law and it cannot be appreciated that the AO will not allow the benefit of loss or deduction to the assessee merely on the ground that the assessee has not claimed the same in the return of income. Our above view finds support from an old circular of CBDT bearing no. No. 14(XL-35) of 1955, dated 11-4-1955 wherein it was opined that Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him As in view of the decision of the Hon ble Supreme Court in D.P. Sandu Bros. Chembur (P) Ltd 2005 (1) TMI 13 - SUPREME COURT the amount which has been deemed as income u/s. 69 is assessable as income from other sources and because of the same, it forms part of the total income of the assessee. It is not in dispute that genuine business loss can be set off against the income which is assessable under the head income from other sources . We, therefore, do not find any error in the order of the Commissioner of Income Tax (Appeals). It is confirmed. The ground of appeal of Revenue is dismissed.

Summary

Issues Involved:
1. Allowance of set off of business loss from Futures & Options (F&O) trading activity.
2. Unexplained deposits in an undisclosed bank account.
3. Applicability of the decision in the case of Fakir Mohamad Haji Hasan vs. CIT.

Issue-wise Analysis:

1. Allowance of Set Off of Business Loss from F&O Trading Activity:
The Revenue contended that the Commissioner of Income Tax (Appeals) erred in allowing the set off of business loss of Rs. 16,20,185 earned from F&O trading activity as it was neither shown nor claimed in the return of income filed by the assessee. The Assessing Officer (AO) noted that the assessee did not disclose transactions in shares in the return of income and hence did not claim any loss from such transactions originally. However, the Commissioner of Income Tax (Appeals) allowed the set off, reasoning that once an unaccounted bank account is scrutinized, it is open for all incomes, claims, and losses. The Commissioner cited the decision in Dy. CIT vs. Asian Paints Ltd., emphasizing that the AO cannot ignore any loss or claim revealed during assessment proceedings.

2. Unexplained Deposits in an Undisclosed Bank Account:
The AO found that the assessee had an undisclosed bank account with deposits amounting to Rs. 25,84,514. The assessee explained that these included salary income, dalali income, and amounts related to F&O trading. However, the AO concluded that the source of deposits totaling Rs. 10,78,209 remained unexplained and added this amount to the income under sections 69/69A of the Act. The Commissioner of Income Tax (Appeals) upheld this addition, noting that the fresh evidence submitted by the assessee was not fit for consideration.

3. Applicability of the Decision in Fakir Mohamad Haji Hasan vs. CIT:
The Revenue argued that the decision in Fakir Mohamad Haji Hasan vs. CIT was applicable, which the Commissioner of Income Tax (Appeals) seemingly overlooked. However, the Commissioner allowed the set off of the business loss, stating that the AO had the authority to make additions based on documents available but also had to consider any losses or claims revealed through the same documents.

Tribunal's Analysis:
The Tribunal noted that the genuineness of the business loss of Rs. 16,20,185 from F&O trading was not in dispute and that details of such loss were brought to the AO's notice during assessment. The Tribunal emphasized that the AO is duty-bound to compute the total income as per the law, including allowing any legitimate losses or deductions, even if not claimed in the return. The Tribunal referred to the CBDT Circular No. 14(XL-35) of 1955, which mandates tax officers to assist taxpayers in claiming due reliefs. The Tribunal also cited the Supreme Court's decision in CIT vs. D.P. Sandu Bros. Chembur (P) Ltd., which held that deemed income under section 69 is assessable as income from other sources and that genuine business losses can be set off against such income.

Conclusion:
The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to allow the set off of the business loss against the income, confirming that the AO should compute the total income as per the provisions of the Income Tax Act, including allowing legitimate losses or deductions. The appeal of the Revenue was dismissed.

Final Order:
The appeal of the Revenue is dismissed. The order was pronounced in the Court on Friday, the 20th of June, 2014, at Ahmedabad.