2014 (10) TMI 36 - HC - Income Tax

Loss on trading of Future & Options - Whether Tribunal is right in allowing the loss on trading of Future & Options incurred in the course of its business as brought on record by the AO which were based on close analysis of the seized material suggesting that there was a collusion by the assessee with connected/interested parties so as to create an artificial loss Held that - The AO discussed the entire issue with regard to the Commodity Future Trading and at the end, the AO disallowed the loss on trading of F&O - there was absence of any reasons while disallowing such loss CIT(A) and Tribunal both of them was of the view that there was no reason for rejection of claim for loss of F&O transaction and that was not justifiable in absence of any reasons has justified the reversal of disallowance on the part of the CIT(A) - it is not necessary to ingeminate at this stage Decided against revenue.

Summary

Issues:
1. Challenge to the order of the Income-tax Appellate Tribunal regarding the allowance of trading loss on Future & Options (F&O).
2. Absence of reasons for disallowing the loss on trading of F&O.
3. Justifiability of the deletion of disallowance by the Commissioner (Appeals).
4. Whether the matter should have been remanded to the concerned authority instead of reversing the disallowance.
5. Genuine nature of the trading loss claimed by the assessee in F&O transactions.
6. Similarity in facts with another appeal related to Commodity Future Trading.

Analysis:
1. The High Court addressed the challenge to the Tribunal's order regarding the allowance of trading loss on F&O. The Revenue questioned the decision to allow a loss of Rs. 14,03,442 incurred by the Assessee in the course of business, alleging collusion to create an artificial loss. The Court noted the absence of reasons for disallowing the loss on F&O trading.

2. The Commissioner (Appeals) found no justifiable reason for rejecting the claim for the loss on F&O transactions and deleted the disallowance. The Tribunal upheld this decision, emphasizing the absence of reasons justifying the reversal of the disallowance by the Commissioner (Appeals).

3. The Court considered the argument that if no reasons were provided by the authorities, the matter should have been remanded instead of reversing the disallowance. However, it observed that the assessee's claim of a genuine trading loss in F&O, amounting to Rs. 14,03,442, was based on factual grounds. The Court also highlighted a similar appeal related to Commodity Future Trading, where the claim was upheld based on detailed reasons.

4. Ultimately, the Court found no substantial question of law to interfere with the decision. Given the similarity in nature between the current appeal and the previously dismissed appeal, the Court concluded that there was no basis for intervention. Consequently, the Tax Appeal was dismissed, affirming the allowance of the trading loss on F&O transactions by the Commissioner (Appeals) and the Tribunal.