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II. Direct Taxes Case Laws:
1. Shri Fazal Sarang Vs. DCIT, I.T.A. No. 1456/Mum/2012, Date of Pronouncement: 04.01.2017, ITAT - Mumbai
Issue:
Whether
the order passed u/s 143(3) r.w.s. 153A is Void if the Learned
Assessing Officer erred in assuming jurisdiction u/s 153A of the Income
Tax Act, 1961 ?
Held: Yes
Brief Facts:
The Ld. Assessing officer has issued the notice u/s 153A of the act
and initiated the assessment proceeding on the factually erroneous basis
i.e. that a search and seizure action under section 132 of the Act was
also carried out on the assessee, when search operations were carried
out in the case of Hicons and Pranay group of cases. While the correct
factual position is that no search under section 132 of the Act was
carried out on the assessee’s premises, but only a survey action under
section 133A of the Act was carried out at the assessee’s premises on
same day. On this assumption ld. Assessing officer has passed the
assessment order u/s 143(3) r.w.s 153A of the Act and mentioned the same
in the assessment order.
Held:
The Hon’ble ITAT held that in absence of any warrant of authorization
to search the assessee’s premises u/s 132 of the Act, the AO has no
jurisdiction to issue the notice u/s 153A of the Act, thereby rendering
it invalid and consequently the assessment order passed u/s 143(3) r.w.s
153A of the Act is also held to be void ab initio and accordingly
cancelled.
Therefore, the appeal of the assessee is allowed.
(Please click here for judgment)
2. DCIT Vs. J.M. Financial Services Ltd., I.T.A. No. 3660/M/2014, Date of Pronouncement: 28.12.2016, ITAT - Mumbai
Issue:
Whether where assessee is involved in arbitrage activities, the
transactions of shares in cash segment and future segment cannot be
segregated to calculate profit and loss from each segment separately?
Held_Yes
Brief Facts:
The assessee had carried out cash future arbitrage and earned a
profit from the said activity. The activity of buying and selling of
shares in cash segment and future segment was a composite activity
carried out by the assessee and the transactions are so managed that if
there is loss in one segment, there is profit in the other segment, such
that the assessee gets profits only. However, AO has contended that the
transactions which are not specifically excluded under the provisions
of section 43 of the Act, those transactions result into speculative
profit or loss which cannot be adjusted or set off from the profit and
loss of normal business transactions. Therefore, AO treated the loss of
cash segment of Rs.25,96,01,368/- as speculation loss and made addition
on account of deemed speculation loss contending that assessee has set
off speculation loss with non-speculative income. Being aggrieved by
that, assessee preferred an appeal before CIT(A). CIT(A) deleted the
addition by saying that the assessee is involved in arbitrage activities
i.e. non-speculative transactions (specifically excluded under the
provisions of section 43 of the Act under clause (c)). Therefore, the
profit or loss against both the segments can be adjusted or set off
against each other. Against the order of CIT(A), the revenue has filed
an appeal to ITAT.
Held:
The Hon’ble ITAT upheld the order of CIT(A) holding that the
peculiarity of the business of the assessee is such that the
transactions carried out by the assessee in cash segment and in future
segment cannot be segregated and it survives on the ultimate resultant
figure arrived at after setting off/ adjusting of the profit and loss
from each segment. It cannot be said that the transactions in each
segment done by the assessee are independent of each other. It is
further held that certain exceptions have been carved out under section
43(5) vide which certain transactions in derivative named as ‘eligible
transactions,’ done on a recognized stock exchange, subject to
fulfillment of certain requirements, are deemed to be non-speculative
for the benefit of the assessee so that the assessee may be able to set
off and adjust his profit and losses from derivatives in commodities
against the normal business losses. However, these exclusions given to
the assessee cannot be allowed to be so interpreted to the disadvantage
of an assessee so as to give it a different meaning and thereby denying
the assessee the set off of otherwise eligible business loss from one
segment as against the other segment, especially when the activity done
by the assessee is a composite activity and profit and loss in one
segment not only depends but the very transaction is done taking into
consideration not ‘expected’ but certain future profit or loss in other
segment.
Therefore, the appeal of the revenue is dismissed.
(Please click here for judgment)
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