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ITO 11 (2) (2) , Mumbai Versus Dr. Dhruman Desai

2016 (4) TMI 246 - ITAT MUMBAI

Entitled to set off and carry forward of losses incurred in the derivative transactions - assessee did not furnish return of income u/s 139(3) - Held that:- We have noticed that the assessee has omitted to disclose the loss arising on F & O transactions in the original return of income filed u/s 139(1) of the Act. Upon discovery of such omission, it was incumbent upon the assessee to file a revised return of income within the time limit prescribed u/s 139(5) of the Act. The effect of filing of r .....

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e have noticed earlier that the assessee was entitled to furnish a revised return of income on or before 31.03.2011, which the assessee has failed to do. There should not be any doubt that the assessee could not have filed any revised return of income after 31.3.2011, meaning thereby, the assessee has lost his right to file revised return of income for the year under consideration. Having lost the right so, in our view, the assessee could not have made good the same by filing revised computation .....

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bed for filing revised return of income u/s 139(5) of the Act and we have held that the assessee is not entitled to make good his omission to file revised return of income by filing the revised computation of income, since the said action of the assessee would defeat the statutory mandate of the provisions of sec. 139(5) r.w.s. 139(3) of the Act. Accordingly, we are of the view that the assessing officer was justified in ignoring the loss occurred in F & O transactions and declared in the revise .....

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year 2009-10. 2. The revenue is aggrieved by the decision of Ld CIT(A) in holding that the assessee is entitled to set off and carry forward of losses incurred in the derivative transactions, even though the assessee did not furnish return of income u/s 139(3) of the Act. 3. The facts relating to the issue are stated in brief. The assessee is a consultant cardiologist and filed his return of income on 30-09-2009 for the year under consideration declaring a total income of ₹ 9,06,310/-. It .....

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assessee claimed loss of ₹ 1.49 crores from F & O transactions as his business loss and accordingly declared NIL income. The assessee submitted that the F & O transactions have been funded by the capital gains arising on sale shares received as gift from his father. Further the assessee also claimed that the loss, to the extent not set off by the income of the current year should be carried forward. 5. The assessing officer placed reliance on the decision rendered by Hon ble Suprem .....

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s amounts to filing of return within stipulated time. He further held that the mistake in not making the claim in the return of income does not debar the assessee to claim the same in assessment proceedings. He further referred to the Circular No.14 (XL-35) dated 11/04/1995, wherein it is stated that the department must not take advantage of ignorance of the assessee as to his rights. The Ld CIT(A) also placed reliance on the decision rendered by the Hon ble Bombay High Court in the case of CIT .....

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rward. 7. The revenue is aggrieved by the said decision of Ld CIT(A). 8. We heard the parties and perused the record. At this juncture, we would like to refer to the relevant provisions of the Act. Section 139(1) provides for filing of return of income within the due date prescribed in that section. Section 139(3) relates to the return of loss and the same reads as under:- 139(3) If any person who has sustained a loss in any previous year under the head profits and gains of business or professio .....

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shall apply as if it were a return under sub-section (1). Section 139(5) provides for filing of revised return of income and the same reads as under:- 139(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of ass .....

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wever, the Act provides a time limit for filing such revised returns, i.e., before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. Consequently, if the assessee fails to revise the return of income within the time limit prescribed u/s 139(5) of the Act, he is not entitled to revise his return of income at all. 9. In the instant case, the assessment year involved is AY 2009-10. One year from the end of the year expi .....

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upon the assessee to file a revised return of income within the time limit prescribed u/s 139(5) of the Act. The effect of filing of revised return of income is that it shall substitute the original return of income and accordingly, the AO shall proceed to assess the total income on the basis of revised return of income. 11. In the instant case, as noticed earlier, the assessee has not filed any revised return of income upon discovering his omission to disclose the loss incurred in F & O tra .....

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consideration. Having lost the right so, in our view, the assessee could not have made good the same by filing revised computation of income and thus claim carry forward of loss. The said action of the assessee, in our view, defeats the statutory mandate prescribed in sec. 139(5) read with section 139(3) of the Act. 12. We notice from the assessment order that the assessing officer has considered the revised computation of income and assessed the income declared therein, but refused to consider .....

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gly, we are of the view that the assessing officer was justified in ignoring the loss occurred in F & O transactions and declared in the revised computation of income, since the said claim has been made beyond the time limit prescribed u/s 139(5) of the Act. 13. We have noticed earlier that the Ld CIT(A) has expressed that the view that the revised computation of income filed during the assessment proceedings amounts to filing of return within stipulated time. We notice that the Ld CIT(A) ha .....

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(5) of the Act. The above said observations of the Ld CIT(A) defeats the provisions of sec. 139(5) of the Act. Hence, we are unable to agree with his view for the detailed reasons discussed in the preceding paragraphs. Accordingly, we are of the view that the assessing officer was justified in not entertaining the claim of loss and thus, not allowing set off of the same against professional income/other income of the year under consideration. In view of the above, we are of the view that the Ld .....

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unabsorbed loss does not arise at all. In this regard, it is pertinent to refer to the provisions of sec. 80 of the Act, which reads as under:- 80 Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139 shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or su .....

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of income and since the assessing officer has not entertained the loss declared in the F & O transaction, the question of allowing carry forward of loss does not arise. Further, the provisions of sec. 80 also shall prohibit carry forward of loss, since it has not been determined by the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on the issue of carry forward of loss also. 14. Before us, the assessee placed reliance on the decision rendered by Hon ble Karnataka High Co .....

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n ble Delhi High Court declared loss from certain transactions and during the course of assessment proceedings, it sought to enhance the loss. The AO rejected the claim, but the Tribunal allowed the claim. The AO, while giving effect to the order of the Tribunal, has held that the assessee shall not be entitled to carry forward the loss, since the loss was determined by him u/s 254 of the Act while filing return of income. Hence the controversy before the Hon ble Delhi High Court was (i) whether .....

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