COMMISSIONER OF INCOME TAX vs PRAYASHVIN B. PATEL

By the Court:

The CIT, Gujarat, (Central) preferred an application before Tribunal u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act), inter alia, requesting the Tribunal to make a reference to this Court on the following question of law :

"Whether the Tribunal is right in law and on facts in setting aside the order passed by the CIT u/s 263 of the Act wherein he had directed the assessing officer to disallow the claim of business loss of Rs. 1,31,893 since no business activity was carried out by the assessee in the present year ?

The Tribunal rejected the application filed at the instance of the CIT. Hence,

the present application.

Mr. Naik learned advocate submitted that the order is perverse and the Tribunal ought to have given details in its order. It appears that the assessing officer allowed the claim made by the assessee. However, the CIT, Gujarat, Central, issued

notice to the respondent u/s 263 of the said Act on or about 7th Jan., 1991, to show cause as to why the order made u/s 143(3) of the said Act by the assessing officer should not be revised. The assessee requested to drop the proceedings u/s 263 of the said Act. However, the CIT was of the view that in order to allow deduction of a business loss, there should have been a computation under the head ''business''. In the case of the assessee, there was no such computation of income or loss under the lead ''business'' as observed by the CIT. It is further observed that the P&L a/c. also shows that the assessee has not done any business activity during the year under consideration. Thus, it appears that the CIT was of the view that as there was no business activity, the loss cannot be claimed by the assessee.

The assessee preferred an appeal against the order passed by the CIT. The Tribunal pointed out in para 2 of its order that the CIT noted that the assessee had not carried out any business activity during the course of the year. In para 3 of the order, the Tribunal also pointed out that the CIT had allowed the interest paid by the assessee against the loan and expenditure considering this as a business expenditure/business loss, in the past.

On behalf of the assessee it was contended that there was such computation of profit and loss under the head ''business'' and that merely the assessee did not earn any income on "business" during the year, the Revenue cannot prevent the assessee from claiming the loss.

The Tribunal on perusal of the record observed that the assessee was dealing in shares since 1978 and since assessment year 1984-85 onwards, he was doing certain consultancy and commission business. The Tribunal further observed that the assessee also derived agricultural income.

The loan to purchase the car was taken in assessment year 1984-85 and the assessee was very much in business of consultancy and commission during the year under appeal. The Tribunal also observed that the assessee had past and subsequent assessment records to show that the assessee was carrying on consultancy and commission business. Therefore, the CIT while exercising powers u/s 263 of the Act ought not to have disturbed the assessment order made u/s 143(3) of the Act.

Mr. Naik, learned advocate for the applicant, contended that no details are mentioned either in the order of CIT or in the order of the Tribunal and therefore, he was required to say that the order is perverse. The assessee has placed before us the copy of the statement in details produced before the assessing officer. It is clear that the Tribunal perused the record and after considering the same, passed the impugned order.

It is not necessary that for every year the assessee must have earned the income from the business of profession. It may happen that for a particular year for one or the other reason there may not be any income but it does not mean that he is not required to spend the amount for carrying on the activities. It is not necessary that for every year there must be income so as to say that person is carrying on the activities.

In view of what we have stated hereinabove, the Tribunal considering the facts placed on record has rejected the application. No question of law is raised. Finding cannot be said to be perverse. Rules is discharged. No order as to costs.