Mumbai v. Commissioner Of Income Tax-18

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1777 OF 2015 Anup Lakhmichand Anand, Mumbai ….Petitioner. Vs. Commissioner of Income Tax-18 & Ors. ....Respondents. --------- Mr. Sameer Dalal for petitioner.Mr. Akhileshwar Sharma for Respondents-Revenue. --------- CORAM : K.R. SHRIRAM & N.R.BORKAR, JJ. DATE : 29[th] APRIL, 2022. P.C.: 1.Petitioner is impugning order dated 29.9.2014 passed by respondentu/s 264 of the Income Tax Act, 1961. 2.During the year under consideration, i.e. assessment year 2008-09petitioner had shown income from business capital gain and other sources.Petitioner filed his return of income on 30.9.2008 declaring income of Rs.35,14,220/-. Thereafter, on 22.9.2009, petitioner filed revised return ofincome declaring nil income after adjusting/setting off loss arising from Chitra Sonawane 2214-wp-1777-2015.odt derivative transactions against capital gain and other sources. As theincome earned and approved on derivative transactions, according topetitioner, are to be treated as business income/loss in terms of Section43(5) (d) of the Act as against speculative income/loss. It is petitioner’scase that the loss incurred on derivative transactions is eligible for set ofagainst income offered by the assessee under other heads of income duringthe year. 3.Petitioner’s case was selected for scrutiny assessment and duringassessment proceeding, second respondent called upon petitioner to filesecurity transaction tax (STT) Certificate for the transactions entered intoby petitioner during the year. Petitioner submitted the same on or about13.12.2010. Second respondent once again called upon petitioner toprovide details of speculative income/loss. By letter dated 29.12.2010,issued through petitioner’s representative, petitioner submitted that loss onderivative transactions was speculative loss and offered the same asspeculative loss and modified computation of income accordingly.According to petitioner, it is an inadvertent error. Petitioner further statedthat he was unable to verify the claim with Form No.10-DB issued by theStock Exchange wherein, loss of Rs.78,19,292 was specifically shown underloss account of derivative transactions which in terms of provision of Chitra Sonawane Section 43(5)(d) was not a speculative loss. Thereafter, assessment orderdated 30.12.2010 was passed assessing petitioner’s income atRs.40,88,390/-. 4.In the assessment year 2009-10 petitioner declared loss ofRs.1,10,75,868/-. Petitioner’s case was selected for scrutiny assessment.During assessment year 2009-10, petitioner had filed loss ofRs.1,30,35,823/- on account of derivative transactions and this loss wasoffered as normal business loss. While compiling the details of derivativeloss for assessment year 2009-10 petitioner realized that similar loss onaccount of derivative transactions amounting to 78,19,292/- incurred inassessment year 2008-09 was inadvertently accepted by petitioner asspeculation instead of normal business loss. Petitioner, thereafter, filedrevision petition u/s 264 of the Act before first respondent on 15.2.2012for assessment year 2008-09. This petition was dismissed on the groundsof delay. Petitioner filed writ petition in this Court and this court waspleased to set aside the order and send it for denovo consideration. Incompliance with order of this Court, respondent no.1 issued notice forhearing of revision petition. Petitioner was represented and submissionswere made. Petitioner also filed copies of Form No. 10-DB issued by StockExchange. Petitioner states that the said Form no.10-DB indicates that the Chitra Sonawane fact that loss of 78,19,292/- was loss on account of future and option (F &O) activity carried out by petitioner. Respondent no.1 by order dated29.9.2014 dismissed revision petition by stating that additions which arevoluntarily agreed can not be the subject matter of revision. 5.It is this order that is impugned in this petition. Chitra Sonawane fact that loss of 78,19,292/- was loss on account of future and option (F &O) activity carried out by petitioner. Respondent no.1 by order dated29.9.2014 dismissed revision petition by stating that additions which arevoluntarily agreed can not be the subject matter of revision. 5.It is this order that is impugned in this petition. 6.We have considered the petition with documents annexed thereto,affidavit-in-reply. Also heard Mr. Dalal and Mr. Sharma. 7.As noted earlier, it is petitioner’s case that when he realized hismistake treating F & O loss as speculative loss he filed the revision petitionbefore respondent no.1 requesting him to assess his income as per law.Respondent No.1, in our view, has not considered Form 10-DB filed by thepetitioner. Respondent no.1 has also not decided whether proviso (d) tosection 43 (5) of the Act would cover transaction in respect of treating anyderivatives carried out in a recognized Stock Exchange and if so, why it cannot be treated as speculative transaction and whether loss and gain in suchtransaction to be dealt as normal business loss or gain. We should keep inmind that assessee should pay only such amount of tax as legally payableunder the provisions of Income Tax Act. Mistakes happen and we also see Chitra Sonawane that assessee has taken different stand earlier. But the fact that is requiredto be seen is whether transaction in respect of trading in any derivativescarried out in the recognized Stock Exchange can be treated as speculativetransaction and loss or gain in such transaction is normal business loss orgain. Courts have held that even if, return as submitted by the assessee isaccepted by the Assessing Officer, and if thereafter, the assessee comes toknow about the mistakes committed, that he was not liable for moretaxation or had paid more tax, he can definitely approach revenueauthority and in such event, it is open to the revisional authority to exerciseits jurisdiction u/s 264 of the Act. Once assessee is able to satisfy aboutmistake due to which there was over assessment, the Commissioner hadpower to correct the same u/s 264(1) of the Act. In such situation, wewould expect the Commissioner to apply his mind to the question anddecide the matter. Simply saying, additions which are voluntarily agreed,can not be the subject matter of revision, would be little harsh on assessee.Therefore, we hereby set aside order dated 29.09.2014 impugned in thispetition and remand the matter to the Commissioner of Income Tax fordenovo consideration of petitioner’s application u/s 264 of the Act. Wewould expect the Commissioner to consider all the documents beingsubmitted by petitioner and the submissions of petitioner and decide forhimself whether loss as claimed would be speculative loss or non Chitra Sonawane speculative loss, not withstanding the stand taken by petitioner in theoriginal return of income or in the revised return filed. It will have to bean independent view of the Commissioner. Revision should be disposed by the Commissioner of Income Tax by15.07.2022. 8.Before passing any order, the Commissioner shall give personalhearing, notice whereof shall be issued at least seven working days inadvance. If the Commissioner is going to rely on any order or judgment ofany court or Tribunal, a list thereof shall also be provided to petitioneralong with the notice of personal hearing, so that petitioner will be able todeal with it or distinguish the same during the personal hearing. 9.Petition disposed accordingly. (N.R. BORKAR, J.) (K.R.SHRIRAM, J.) Chitra Sonawane Chitra Sonawane