2014 (3) TMI 359 - AT - Income Tax

Jurisdiction of the AO Order passed u/s 153A of the Act Held that - The jurisdiction of the AO in the assessment proceedings pursuant to a search is to assess the total income for each of the assessment years falling within the period of six years immediately preceding the assessment year relevant to the previous year in which the search is conducted or the requisition is made - Relying upon CIT vs. Anil Kumar Bhatia 2012 (8) TMI 368 - DELHI HIGH COURT - there are no fetters on the power of the AO to assess any income that in his view forms part of the total income of the assessee for the relevant year/s, and would thus include the income as well, including as to its nature/character. Treatment of the loss - Derivative trading treated as a speculative loss Held that - There was conflict of judicial opinion, but for the reason that the A.O. has admittedly not altered either the nature or the quantum of addition as made in the regular assessment, since sustained in appeals - the assessment does not in law abate, and the AO has merely adopted the same in the section 153A assessment, the same ought to be reflected therein as such - an addition in the section 153A assessment is thus inconsistent with the law in the facts of the case thus, the contention of the assessee is accepted and the AO is directed to modify the order Decided Partly in favour of Assessee.

Summary

Issues:
1. Treatment of loss from derivative trading as speculative loss.

Detailed Analysis:
The judgment involves an appeal by the Assessee against the Order of the Commissioner of Income Tax (Appeals) dismissing the appeal contesting the assessment for the assessment year 2005-06. The main issue raised in the appeal is the treatment of the loss sustained from derivative trading as a speculative loss. The Assessee's counsel conceded that the matter had been decided against the Assessee in previous cases. The Assessee raised two additional grounds challenging the jurisdiction of the Assessing Officer (A.O.) to treat the loss as speculative and objected to the A.O.'s adjustment without material found in search.

The first additional ground raised by the Assessee challenged the A.O.'s jurisdiction to treat the loss as speculative, arguing that it had already been considered in regular proceedings under section 143(3). The second additional ground objected to the A.O.'s adjustment, stating that no material was found in search, and the A.O. had not altered the nature or quantum of the addition made in the regular assessment. The Assessee contended that the A.O. should have computed the income from the assessment already made under section 143(3).

The Tribunal admitted the Assessee's additional grounds as they raised legal issues with relevant facts on record. The Tribunal rejected the first additional ground, stating that the A.O. had the power to assess any income forming part of the total income of the Assessee for the relevant year. However, the Tribunal found merit in the Assessee's second objection, directing the A.O. to modify the order to reflect the income as already assessed in the regular assessment.

The Tribunal concluded that the Assessee's principal ground challenging the assessment of income as speculative failed based on previous decisions. The second ground related to proceedings in succeeding years and was deemed not maintainable in the present appeal. Consequently, the Assessee's appeal was partly allowed based on the terms discussed in the judgment.