2022 (12) TMI 396 - AT - Income Tax

Set off loss against addition of undisclosed income - losses in share transaction in derivative segment and in cash delivery segment - CIT(A) upheld the addition to the extent of peak investment - CIT(A) held that such claim cannot be entertained at this stage - HELD THAT - Though the Assessing Officer is not entitled to admit or entertain additional claim during the assessment proceedings, however the appellate authority has such jurisdiction to admit such additional claim as has been held by Hon'ble jurisdictional High Court in the case of CIT Vs. Mitesh Impex 2014 (4) TMI 484 - GUJARAT HIGH COURT Thus,admit the additional plea of set off of loss of current year against the income of assessee in the impugned year. So far as merit is concerned, the Hon'ble jurisdictional High Court in the case of Shilpa Dyeing Printing Mills (P.) Ltd. 2015 (7) TMI 691 - GUJARAT HIGH COURT held that once the loss is determined, the same should be set off against the income determined under any other head of income including undisclosed income. Similar views taken by Division Bench of Hon'ble Delhi Tribunal in the case of Rajendra Kumar Anand 2022 (5) TMI 1488 - ITAT DLEHI wherein it was held that when Assessing Officer made addition of certain amount to income of assessee from undisclosed sources taxable under section 69 claim of set off loss is to be allowed. We direct the Assessing Officer to verify the facts and allow the set off loss suffered by assessee against addition of undisclosed income. Thus, the Ground raised by assessee is allowed in above terms.

Summary

Issues involved:
Validity of reopening assessment, partial confirmation of addition under section 69 of the Income Tax Act, disallowance of set off of losses incurred by the assessee in derivatives and cash delivery segments.

Validity of Reopening Assessment:
The appeal by the assessee challenged the reopening of the assessment for the assessment year 2008-09 under section 148 of the Income Tax Act. The Assessing Officer reopened the case based on information regarding a share transaction by the assessee in Religare Securities Pvt. Limited. The assessee contended that the reopening was invalid, but the Tribunal did not delve into this issue as it was not pressed by the assessee.

Partial Confirmation of Addition under Section 69:
The Assessing Officer treated the entire share transaction amount as non-genuine and added it to the assessee's income. The assessee contended that the losses incurred in the share transactions should be set off against the addition. The CIT(A) partially upheld the addition to the extent of the peak investment made by the assessee. The Tribunal allowed the set off of losses against the undisclosed income, citing legal precedents that support such claims. The Tribunal directed the Assessing Officer to verify the facts and allow the set off of losses suffered by the assessee against the addition of undisclosed income.

Disallowance of Set Off of Losses:
The assessee argued that the losses incurred during the year in derivatives and cash delivery segments should be set off against the addition made by the Assessing Officer. The CIT(A) did not allow the set off, stating that the claim was not made earlier and cannot be entertained at that stage. However, the Tribunal admitted the additional claim of set off of loss of the current year against the income of the assessee. The Tribunal relied on legal precedents to support its decision and directed the Assessing Officer to allow the set off of losses against the undisclosed income.

In conclusion, the Tribunal partly allowed the appeal of the assessee, directing the Assessing Officer to verify and allow the set off of losses suffered by the assessee against the addition of undisclosed income. The Tribunal dismissed the other grounds raised by the assessee as they became infructuous or were not pressed.