TaxTMI 
TaxTMI 
2022 (4) TMI 687
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....due course of scrutiny Asst. proceedings. (4) Ld. CIT-1, has overlooked, the well accepted income computation custom and procedure and further failed to understand that all income tax recognized software do not set off carried forward capital loss against exempt income. (5) The appellant prays to quash the order u/s 263 passed by the CIT-1,Surat by allowing legitimate claim of carry forward of losses." 2. Brief facts of the issue in dispute are stated as under. The assessee is an individual and derives income from house property, investment, future / options 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 Rs. 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 capit....
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.... of source is exempt by virtue of a particular "provision" for benefit of assessee, than it does not enter taxable portion of source. Provisions of Section 74(b) are applicable only against taxable portion of LTCG. It cannot be interpreted against spirit of law. Even if we take a so-called twisted vide that set off loss is to be taken against exempt income, than why set off is not taken historically against other exempt incomes like interest from tax free bonds, dividend from shares etc., further in such case 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 p....
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....furnish the shares purchased and sold during the year and to file DEMAT account, of the assessee, vide point No.9 of the show cause notice. In response to show cause notice, assessee has submitted its reply, vide letter dated 15.01.2016, wherein the assessee has furnished the details as asked by the Assessing Officer in respect of exempt capital gains and investments in shares and securities and trading income in future/options. The Ld.AR further submits that assessee also furnished 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 lon....
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....d 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. 10. Therefore, we are of the view that 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) of the Act. Hence, view 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 i....