Commissioner of Income Tax vs Pradeep Kumar Todi

This is an appeal u/s 260A of the Income Tax Act, 1961 ["said Act" in short] against an order dated 5-9-2008 passed by Income Tax Appellate Tribunal ["said Tribunal" in short] pertaining to the assessment year 2003-04.

On or about 1-12-2003, the assessee submitted his return showing nil income. The Assessing Officer issued notices u/s 131 of the said Act to the brokers through whom the transactions took place. The said brokers appeared before the Assessing Officer and submitted necessary details. It appears from the records that the assessee, also, produced true copy of his demat account. The Assessing Officer held as many as nine hearings before passing his order of assessment on 21-11-2005 u/s 143(1) of the said Act.

The Commissioner of Income Tax, by order dated 28-2-2008, exercised his power of revision holding that the aforesaid order of assessment dated 21-11-2005 passed by the Assessing Officer was erroneous insofar as it is prejudicial to the interest of the revenue, inter alia, on the grounds that the Assessing Officer 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 dated 5-9-2008 allowed the appeal and quashed the order passed by the Commissioner of Income Tax u/s 263 of the said Act and restored the assessment order dated 21-11-2005. 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 Assessing Officer 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 Assessing Officer 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(XXXTX-4) of 1960 dated 12-9-1960 issued by the Central Board of Direct Taxes. See - Taxman''s Direct Taxes Circulars Vol. 1, 11 Edn. 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 u/s 10 and Section 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 Section 24(2), the Income Tax Officer may allow the assessee:

(j) 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 Commissioner of Income Tax Vs. New India Investment Corporation Ltd., .

In New India Investment Corporation 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 u/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 Commissioner of Income Tax has to be satisfied that the order of the Assessing Officer is erroneous and it is prejudicial to the interest of the revenue.

In this case, the Assessing Officer, 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 courts including by the jurisdictional High Court. Therefore, the assessment made, in accordance with the guidelines prescribed under the aforementioned circular dated 12-9-1960 issued by the Central Board of Direct Taxes and upon reliance on the decision in the case of New India Investment Corporation Ltd. {supra), cannot be called erroneous and, therefore, cannot be revised.

Section 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 and Others Vs. S.N. Goyal, , 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.