2022 (11) TMI 1056 - AT - Income Tax
Rectification of mistake u/s 154 - Addition made on account of set off of speculation loss against business income - HELD THAT:- The assessee’s claim of the set-off of the impugned loss against business income in assessment as correctly allowed by the AO upon verification, accepted by the ld. CIT(A), was, on examination, found to be de hors both the facts of the case and the law in the matter. There had been, after the initial inquiry, which was again a general inquiry in respect of ‘large expenses’, no further verification or even finding by the AO in assessment, who had failed to take note of s. 43(5) of the Act, much less examine the satisfaction of the requirements thereof.
Section 43(5) being clearly attracted on the basis of facts borne out by the record, i.e., commodity derivative trading, which is, by definition, speculative, unless, of course, it is qua eligible transactions, defined thereunder and, further, carried through the members of a recognised association, on which commodity transaction tax has been charged. There is in fact no claim of satisfaction of these attributes, or even reference to s. 43(5).
The set off of the impugned loss against the assessee’s other income without reference to s. 43(5) is clearly a mistake apparent from record which includes a mistake of law as well. The AO thus had the necessary jurisdiction for rectification in respect of the adjustment of the said loss, and the notice dated 14/12/2016 u/s 154, discussed in detailed at para 3.5 of this order, is, thus, a valid notice in the eyes of law.
AO, however, rather than ascertaining in the rectification proceedings if the impugned transactions did indeed satisfy the requirement/s of s.43(5) r/w clause (e) of proviso thereto, i.e., defining speculative transaction, issued a finding without any verification and indeed de hors the material on record, stating the impugned loss as on unlisted shares and speculative. Her order therefore, cannot, be approved, and the mistake that imbued the assessment order accordingly continues to obtain. The same ought to have been corrected by the ld. CIT(A), enjoying coterminous powers, in appeal.
Both the rectification order, as well as the appellate order holding original assessment as not mistaken, i.e., without impugning the notice for rectification, found valid, its merit apart, cannot have our approval and, thus, be upheld. Both the orders are accordingly set aside, and the matter restored to the file of the AO for causing an adjudication in accordance with law.
Lest it may be argued that the matter cannot be in rectification proceedings remitted back with clear directions, reference may be made to the decision in T.S. Rajam v. CED [1967 (9) TMI 139 - MADRAS HIGH COURT] which is in respect of estate duty, with cognate provision. The whole premise of rectification proceedings, it needs to be appreciated, and as even explained therein, is toward causing justice, for which reference may also be profitably made to L.Hirday Narain [1970 (7) TMI 2 - SUPREME COURT] - The facts of this case, as indeed some others, are striking and illustrative, to which reference may therefore be made, though are not being recounted here so as not to burden this order further (viz. Karamchand Premchand (P.) Ltd [1992 (12) TMI 42 - SUPREME COURT] AND T.S. Rajam (supra)).
Revenue’s appeal is allowed for statistical purpose and the assessee’s CO is partly allowed for statistical purposes.