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TMI Blog2021 (11) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... loss on all in value of investments which are held as stock and trade by the bank constitute and admissible deduction. The the action of the Assessing Officer, which has been upheld by the learned CIT(A) in a very mechanical manner without application of mind, cannot meet our judicial approval. We reverse the stand of the authorities below, and direct the Assessing Officer to delete the impugned disallowance - Decided in favour of assessee. - ITA No. 6990/Mum/2019 - - - Dated:- 18-10-2021 - Pramod Kumar, Vice President And Pavan Kumar Gadale, Member (J) For the Appellant : Ravi Sawana For the Respondents : S.N. Kabra ORDER Per Pramod Kumar, VP 1. By way of this appeal, the assessee-appellant has challenged correctness of the order dated 21.08.2019 passed by the learned CIT(A) in the matter of assessment under section 143 r.w.s. 263 of the Income Tax Act, 1961 for the assessment year 2010-11. 2. Grievances raised by the assessee as set out in the memorandum of appeal are as follows:- Being aggrieved by the order of the learned Commissioner of Income-tax (Appeals) - 3, Mumbai, dated 21.08.2019, the Appellant prays to prefer the present appeal on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and non-examination of the quantification of loss arising from the valuation of the securities rendered the original assessment proceedings erroneous and prejudicial to the interest of the revenue. It was this backdrop that the present assessment proceedings were resorted to. During the course of the resultant assessment proceedings the Assessing Officer noted elaborate submissions made by the assessee with respect to the details furnish in the brief categories and the claim as to why the loss of valuation in respect of the securities held as AFS HFT that is available for sale and held for trading are to be allowed as deduction in the computation of business income. The Assessing Officer, however, proceeded to brush aside all these legal submissions and factual aspects and made the same addition of ₹ 4,02,87,000/- again by observing as follows:- As it is merely a provision and notional loss to the assessee it is not allowable expenditure u/s. 37. The section 37 of the I.T. Act, 1961, any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid down or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized or not the same is to be allowed as the deduction while anticipated profits are not be taken in to account for this purpose. Whether the loss is crystallized or not as long as it can be reasonably anticipated, on the basis of the situation as it prevails at the year end, which is what is reflected by the fall in value of stock indicates, the same is taken in account for computation of business loss. In the case of United Commercial Bank vs CIT 240 ITR 355, Hon'ble Supreme Court has taken notes of this foundational legal position and held that loss on all in value of investments which are held as stock and trade by the bank constitute and admissible deduction. We may in this regard reproduce the following observation made by the lordships while dealing with this question. 22. Hence, for the purpose of income tax whichever method is adopted by the assessee a true picture of the profits and gains, that is to say, the real income is to be disclosed. For determining the real income, the entries in a balance sheet required to be maintained in the statutory form, may not be decisive or conclusive. In such cases, it is open to the Income Tax Officer as well as the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome has really accrued or arisen to the assessee must be judged in the light of the reality of the situation; and (6) Under Section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the Income Tax Officer, the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the Income-Tax Officer may determine. 24. In the present case, the High Court has disallowed the claim of the appellant after holding thus: (a) The entries made by the assessee in its books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss; (b) The method of accounting namely at cost or market value whichever is lower followed by the appellant for valuing its stock-in-trade (Investment) for income tax purpose is the correct and the permissible method in law. If this method is not followed in writing and preparing accounts consistently, the assessee cannot claim a notional method of stock valuation only for computation of income by the Tax authorities without following the same method in writing and preparing acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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