TMI Blog2022 (4) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... biguous leaving no scope for more than one interpretation. The provisions of section 74(1)(b) and 74(1)(c) of the I.T. Act clearly provide that loss relating to any long term capital asset shall be set off against income relating to any other long term capital asset, assessable for that assessment year and if the loss cannot be wholly so set off, then the amount of loss not so set off shall be carried forward to the following assessment year and so on. However, we note that current year`s long term capital gain earned by the assessee was exempt under section 10(38) of the Act. Therefore, the long term capital gain, which is exempted under section 10(38) of the Act, would not enter in the computation of total income of the assessee, therefore, assessee cannot set off its current year and previous year`s long term capital loss against such long term capital gain, which is exempted under section 10(38) of the Act, therefore, the stand taken by the ld PCIT is wrong. Assessing officer, having examined the assessee`s claim has not allowed the assessee`s current year and previous year`s long term capital loss against such long term capital gain, which is exempted under section 10(38) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions trading income, capital gains and income from other sources. The assessee filed his return of income for the year under consideration on 17.07.2013, declaring income of ₹ 20,69,100/-. Subsequently scrutiny assessment for the year under consideration was finalized by assessing officer u/s 143(3), dated 04.03.2016 wherein assessee s return of income was accepted. 3.Later, Learned Principal Commissioner of Income Tax [ PCIT for short], has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On verification of record, it was noticed by ld PCIT that assessee has claimed carry forward of long term capital loss of ₹ 10,39,439/- of assessment year 2013-14 along with previous year brought forward loss of ₹ 16,11,359/- relevant to assessment years 2011-12 and 2012-13, aggregating to ₹ 26,50,798/-respectively. On verification of computation of income shows that assessee has also earned long term capital gain of ₹ 35,49,832/-, on sale of units /shares of Kotak Bank, during the financial year 2012-13 relevant to assessment year 2013-14. The long term capital gain has however been claimed by the assessee as exempt u/s 10(38) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted loss would become eligible to be carried forward. 2. Please note that w.e.f. 01.10.2004, provisions of section 10(38), exempting LTCG from eligible shares and Mutual funds came into force. Before such amendment, LTCG was taxable at concessional rate. Hence the provisions of section 74 were applicable erstwhile accordingly. 3. Without prejudice to above, as the exempt income u/s 10(38) are not taxable anyway, proposed action of extinguishing carried forward losses against it for A.Y 2013-14 is not only irrational but also unjust and unconstitutional. 4. Without prejudice to above, all income tax recognized pan india income tax e-filing software do not set off previous carried forward losses against exempt LTCG. They are carried forward and set off against taxable LTCG only. Without prejudice to above, I would like to inform you that Ld.AO had rightly and consciously allowed carried forward losses in course of scrutiny assessment proceedings for A.Y. 2013-14 after making due inquiries and verifying previous carried forward losses. I am greatly disappointed by the initiative to disturb well settled law and procedures. 5. However, the Ld. PCIT rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished more details before the Assessing Officer, vide letter dated 02.01.2016 (paper book page-12) in respect of shares purchased and details of the DEMAT account for which assessee claimed exempted long term capital gain. The assessee, during the assessment stage, further submitted vide letter dated 25.01.2016, the contract note in respect of future/option trading. This way, Ld. AR submits that assessee has submitted the entire details and documentary evidences during the assessment proceedings and assessing officer examined these documentary evidences and that is why, the assessing officer took the view that against the exempted long term capital gain under section 10(38), no set off of carried forward long term capital loss of current year and previous years are available. Therefore, the order passed by AO is neither erroneous nor prejudicial to the interest of the Revenue. 8. On the other hand, Shri H.P.Meena, Ld. CIT-DR for the Revenue submitted that assessee is supposed to set off of the previous year`s carry forward long term capital loss and current year`s long term capital loss against the long term capital gain, since the assessee has not done such set off, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew taken by the assessing officer is sustainable in law. For that reliance can be placed on the judgment of the Hon ble Apex Court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the PCIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examine ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
