Calcutta H.C : the AO did not make proper enquiry and that, while computing the income of the assessee, he first set off the profit from the speculation business against the carried forward speculation loss

High Court Of Calcutta

CIT vs. Pradeep Kumar Todi

Section 263

Asst. Year 2003-04

Subhro Kamal Mukherjee & Kalidas Mukherjee, JJ.

IT Appeal No. 33 of 2009

1st April, 2000

Counsel Appeared :

M.P. Agarwal & S.S. Sarkar, for the Appellant

JUDGMENT

By the court :

This is an appeal under s. 260A of the IT Act, 1961 (“said Act” in short) against an order dt. 5th Sept., 2008 passed by Tribunal (“said Tribunal” in short) pertaining to the asst. yr. 2003-04. On or about 1st Dec., 2003, the assessee submitted his return showing nil income. The AO issued notices under s. 131 of the said Act to the brokers through whom the transactions took place. The said brokers appeared before the AO and submitted necessary details. It appears from the records that the assessee, also, produced true copy of his demat account. The AO held as many as nine hearings before passing his order of assessment on 21st Nov., 2005 under s. 143(1) of the said Act.

The CIT, by order dt. 28th Feb., 2008, exercised his power of revision holding that the aforesaid order of assessment dt. 21st Nov., 2005 passed by the AO was erroneous insofar as it is prejudicial to the interest of the Revenue, inter alia, on the grounds that the AO did not make proper enquiry and that, while computing the income of the assessee, he first set off the profit from the speculation business against the carried forward speculation loss. The assessee preferred an appeal before the said Tribunal.

The said Tribunal by order dt. 5th Sept., 2008 allowed the appeal and quashed the order passed by the CIT under s. 263 of the said Act and restored the assessment order dt. 21st Nov., 2005. The Members of the said Tribunal found that from the combined reading of the assessment order along with the order sheet entries it was evident that the AO made necessary enquiries before accepting the claim of the assessee with regard to the speculation profits. The Members of the said Tribunal, also, found that the AO rightly, while computing the income of the assessee, first set off the profit from speculation against the carried forward speculation loss in view of the Circular No. 23D (XXXIX-4) of 1960 dt. 12th Sept., 1960 issued by the CBDT. See—Taxmann’s direct taxes circulars Vol. 1, 11th Edition. The relevant part of the circular runs as follows : “Point (v) : Speculation loss, if any, carried forward from the earlier years or the speculation loss, if any, in a year should first be adjusted against speculation profits of the particular year before allowing any other loss to be adjusted against those profits. Board’s decision : The suggestion is acceptable. For the purpose of set off under s. 10 and s. 24(1), the speculation loss of any year should first be set off against the speculation profits of that year and the remaining amount of speculation profits, if any, should then be utilised for setting off of any loss of that year from other sources. For the purposes of s. 24(2), the ITO may allow the assessee— (i) either to first set off the speculation losses carried forward from an earlier year against the speculation profits of the current year and then to set off the current year’s losses from other sources against the remaining part, if any, of the current year’s speculation profits; (ii) or to first set off the current year’s losses from non-speculation business and other sources against the current year’s speculation profits and then to set off the carried forward speculation losses of the earlier year against the remaining part, if any, of the current year’s speculation profits, whichever is advantageous to the assessee.” (p. 1651)

The said Tribunal also relied upon the decision of this Court in the case of CIT vs. New India Investment Corporation Ltd. (1993) 111 CTR (Cal) 133 : (1994) 205 ITR 618 (Cal).

In New India Investment Corpn. Ltd. ‘s case (supra) a Division Bench of this Court holds that any loss computed in respect of speculation business carried on by an assessee will not be set off except against profits and gains, if any, of another speculation business. Further, where any loss, computed in respect of speculation business for an assessment year is not wholly set off in the above manner in the said year, the excess shall be allowed to be carried forward to the following assessment year and set off against the speculation profits, if any, in that year, and so on.

It is true that the power of revision under s. 263 of the said Act is of wide amplitude, but such power is certainly not an arbitrary or unchartered one. It is not meant for a roving enquiry. Before exercising such power, the CIT has to be satisfied that the order of the AO is erroneous and it is prejudicial to the interest of the Revenue.

In this case, the AO, while making the assessments, acts in a quasi-judicial capacity and, therefore, discipline of such function demands that he should follow the binding decision rendered by the superior Court including the jurisdictional High Court. Therefore, the assessment made, in accordance with the guidelines prescribed under the aforementioned circular dt. 12th Sept., 1960 issued by the CBDT and upon reliance on the decision in the case of New India Investment Corpn. Ltd. (supra), cannot be called erroneous and, therefore, cannot be revised. Sec. 260A(3) of the said Act contemplates interference by the High Court if the case involves a substantial question of law. Supreme Court of India in the case of State Bank of India vs. S.N. Goyal (2008) 8 SCC 92, holds that where there is a clear and settled enunciation on a question of law, by the Supreme Court of India or by the High Court concerned, it cannot be said that the case involves a substantial question of law. Thus, as the Tribunal below has followed and rightly applied the clear enunciation of law, the appeal is summarily dismissed as this appeal, in our view, does not give rise to a substantial question of law.

In view of the dismissal of this appeal, the connected application, also, stands dismissed.

[Citation : 325 ITR 96]

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