IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA No. 815/CHD/2016 Assessment Year: 2008-09 Mrs. Kamlesh Goyal, Vs DCIT, Prop. M/s R.K. Alloys, Circle VII, 55-A, Kitchlu Nagar, Ludhiana. Ludhiana. PAN: ACAPG4696C (Appellant) (Respondent) Appellant by : Shri Atul Mandhar Respondent by : Shri S.K.Mittal,DR Date of Hearing : 30.08.2016 Date of Pronouncement : 14.09.2016 ORDER This appeal by assessee has been directed against order of ld. CIT(Appeals)-3, Ludhiana dated 21.03.2016 for assessment year 2008-09 on following grounds : 1. That order of Lrd. Commissioner of Income Tax (Appeals) - 3, Ludhiana is defective both in law and facts of case. 2. That Lrd. Commissioner of Income Tax (Appeals) has been unjustified in not adjudicating on all issues raised during Appellate Proceedings and in not passing speaking order. 3. That Lrd. Commissioner of Income Tax (Appeals) has been unjustified in failing to appreciate that Losses in Trading in derivatives i.e. Commodity Trading is not Speculation Loss and is infact Business Loss. 4. That Lrd. Commissioner of Income Tax (Appeals) has been unjustified in disallowing setoff of loss on account of trading in 2 derivatives against total income comprising of business income and income from other sources. 5. That Lrd. Commissioner of Income Tax (Appeals) has been unjustified in failing to appreciate that Assessee had duly claimed loss from commodity trading in Income Tax Return filed. 6. That Lrd. Commissioner of Income Tax (Appeals) has been unjustified in not adjudicating on derivative Loss as reduced by extent of Rs. 20,69,946/- by Lrd. Assessing Officer. 2. Briefly facts of case are that assessee filed return of income declaring income of Rs. 10,75,180/-. assessee is deriving income from manufacturing and trading of non-ferrous metals such as zinc, nickel, lead, tin, copper etc. and trading of commodities. Assessing Officer taken up matter for scrutiny assessment and considered issue of loss in speculation business . assessee has claimed loss of Rs. 66,51,760/- on commodity transaction. assessee filed reply before Assessing Officer. Assessing Officer observed that loss claimed by assessee would be contingent in nature and cannot be allowed and after discussing issue held that loss of Rs. 20,69,946/- i.e. Rs. 66,51,760/- (-) Rs. 45,81,814/- was disallowed and loss from speculation business to be carried forward in sum of Rs. 45,81,814/-. Assessing Officer also noted in assessment order about speculation business and directed that loss from speculation business to be carried forward to Rs. 45,81,814/-. 3. assessee filed appeal before ld. CIT(Appeals) and raised four grounds of appeal which are reproduced in 3 impugned order. On first ground, assessee stated that there is no application of mind while making addition. On second ground, assessee challenged order of Assessing Officer in initiating penalty proceedings. On ground No. 3, assessee challenged order of Assessing Officer in brushing aside earlier arguments advanced before him. On 4th ground, assessee seeks leave to add, alter or amend any ground of appeal. ld. CIT(Appeals), thus, noted that ground No. 1, 3 and 4 are general in nature and ground No. 2 is regarding launching of penalty proceedings which are separate and distinct proceedings. These grounds of appeal of assessee are, accordingly, dismissed. It may be noted here that in all grounds of appeal raised before ld. CIT(Appeals), assessee did not challenge order of Assessing Officer in considering loss in speculation business in sum of Rs. 66,51,760/- on commodity transactions. assessee also did not challenge disallowance of speculation loss of Rs. 20,69,946/- before ld. CIT(Appeals). Therefore, findings of Assessing Officer on loss in speculation business was practically not challenged before ld. CIT(Appeals). 4. assessee during appellate proceedings, raised following additional ground of appeal : T h t i n t h e f c t s n d c i r c u ms t n c e s o f t h e c s e loss on account of trading in derivatives i.e. commodity f uture should be treated as business 4 loss and should be set-off against gross total i n c o me c o m p r i s i n g o f b u s i n e s s i n c o me n d i n c o m e from other sources . 4(i). It was further stated that assessee had incurred total loss of Rs. 66,51,760/- during assessment year under appeal on account of trading in derivatives i.e. commodity futures. In return of income filed, this loss was not set off as per provisions of Section 70-71 against total income of Rs. 11,75,682/- comprising of business income and 'income from other sources' but was carried forward as speculation loss. business loss in derivatives was also not set off in any of next assessment years against business income or 'income from other sources'. assessee also filed written submissions which have been considered by ld. CIT(Appeals). ld. CIT(Appeals), however, did not allow additional ground of appeal and dismissed same. Resultantly, appeal of assessee was also dismissed. findings of ld. CIT(Appeals) in para 5, 6 and 7 of impugned order are reproduced as under : 5. brief facts of case are that assessee filed return of income declaring total income of Rs.10,75,180/- for assessment year 2008-09. assessee is deriving income from manufacturing & trading on non-ferrous metals such as zinc, nickel, lead, tin, copper etc and trading of commodities. In return of income assessee has claimed speculation loss of Rs.66,51,760/-. assessing officer has allowed carry forward of speculation loss of Rs.45,81,814/-. 6. I have carefully considered submissions of appellant 5 and facts of case on record. Vide additional ground of appeal, appellant has requested for set-off of loss on account of trading in derivatives i.e commodity futures against Gross Total Income of Rs.11,75,682/- filed by her. It is noticeable that claim for adjustment of this loss against Gross Total Income was neither made in Return of Income filed nor was made during assessment proceedings before assessing officer. Only vide additional ground of appeal, appellant has raised ground that loss on account of trading in derivatives i.e commodity futures should be treated as business loss and should be set-off against Gross Total Income comprising of Business income and income from other sources, by taking additional ground of appeal Without actually examining whether claim of appellant that speculation loss claimed in return amounting to Rs.66,51,760 was actually loss on account of trading in derivatives i.e commodity futures and allegedly it was business loss it is held that claim for set- off of this loss as per provisions of sec 70 and 71 of IT. Act, 1961 against Business Income and Income from other sources, as claimed for first time during appeal proceedings cannot be entertained. When speculation loss (as claimed in return of income and C/F to next year) is considered as business loss (on account of trading in derivatives i.e commodity futures) business income of appellant will be business loss of Rs. 54,76,078/- ( 66,51,760- 11,75,682/-) and this amount of loss will be carried forward to next year. In this regard reference is made to sec 139 (3) of I T act 1961 "If any person who has sustained loss in any previous year under head 'profits and gains of business or profession' or under head 'capital gains' and claims that loss or any part thereof should be carried forward under sub-sec. (1) of sec. 72, or sub-sec. (2) of sec. 73, or sub-sec. (1) or sub-sec. (3) of sec. 74, or sub-sec. (3) of sec. 74A, he may furnish, within time allowed under sub sec. (1), return of loss in prescribed form and verified in prescribed manner and containing such other particulars as may be prescribed, all provisions of this Act shall apply as if it were return under sub-sec. (1)." 6 In view of provisions of Income Tax Act 1961, appellant was required to file return of Income as per sec 139(3) of I.T.Act 1961 and claim business loss and carry forward same, but appellant has not made claim by filing return of income rather issue is raised for first time during appeal proceedings. reference is made to case of Karnataka Forest development Corp. Ltd. Vs. CIT wherein It was held that loses not claimed in original Return, cannot be claimed by filing revised return. IN ITAT BANGALORE BENCH 'A' Karnataka Forest Development Corp. Ltd. V/s. Commissioner of Income-tax I T APPEAL NO. 81 (BANG.) OF 2011 [ASSESSMENT YEAR 2004-05] MARCH 30, 2012. "Therefore, when it filed return u/s 139(1) of Income-tax Act, it have taken this loss into consideration and should have filed return under section 139(3) of Income-tax Act. Having filed original return of income u/s 139(1), assessee cannot later on file revised return of income claiming loss on ground that it was discovered subsequently. This argument of assessee is not acceptable for reasons stated above. In view of same, we are in complete agreement with findings of CIT(A) that when assessee is claiming loss for relevant assessment year and also claiming loss to be carried forward of loss of 2003-04 and 2004-05 respectively, then assessee was required to file return u/s 139(3) of Income-tax Act, therefore, revised return filed u/s 139(5) cannot be accepted and has to be treated as null and void. In view of same, we uphold findings of CIT(A) and assessee's appeal is accordingly dismissed." In case of assessee loss has been neither claimed in original return nor in revised return. Only by way of additional ground of appeal, assessee has raised claim for first time during appeal as additional ground of appeal, therefore claim of set- off of loss against Gross Total Income is not allowed. In view of above additional ground of appeal taken by appellant is dismissed. 7. In result, appeal of appellant is dismissed. 7 5. I have heard ld. Representatives of both parties. ld. counsel for assessee initially submitted that ld. CIT(Appeals) did not pass any speaking order. When ld. counsel for assessee was directed to explain as to which specific order has not been passed, ld. counsel for assessee was unable to point out any error in order of ld. CIT(Appeals). ld. counsel for assessee also submitted that ground No. 6 with regard to reducing speculative loss in sum of Rs. 20,69,946/- was not raised before ld. CIT(Appeals). He has, therefore, submitted that he would not be pressing ground No. 6. Ultimately ld. counsel for assessee submitted that he would restrict his arguments to issue of additional ground of appeal raised before ld. CIT(Appeals) and would restrict his arguments on ground Nos. 3 and 4 above. In view of above and fact that assessee has not raised any specific ground of appeal before ld. CIT(Appeals), therefore, there is no infirmity in order of ld. CIT(Appeals) in dismissing ground Nos. 1 to 4 filed before him. Ground Nos. 1, 2, 5 and 6 now raised before Tribunal are also not pressed, therefore, these grounds are dismissed. 6. ld. counsel for assessee submitted that loss in trading in derivatives i.e. commodity trading is not speculative loss and in-fact business loss. Even if this ground was not raised before Assessing Officer and no claim is made in return of income and no return 8 under section 139(3) have been filed by assessee, appellate authorities have power to adjudicate upon this issue. In support of his contention, he has relied upon following decisions : i) CIT Vs Ramco International 221 CTR 491 (P&H) ii) National Thermal Power Co. Ltd. Vs CIT 229 ITR 383 (S.C) iii) CIT Vs Jai Parabolic Springs Ltd. 306 ITR 42 (Del) iv) CIT Vs Pruthvi Brokers & Share Holders (P) Ltd. 349 ITR 336 6(i) On other hand, ld. DR relied upon orders of authorities below and submitted that no error have been pointed out in order of ld. CIT(Appeals) in dismissing additional ground of appeal. 7. I have considered rival submissions. Assessing Officer in assessment order considered loss in speculation business in sum of Rs. 66,51,760/- on commodity transactions. assessee in reply before Assessing Officer did not plead it to be business loss or set off against business income or 'income from other sources'. Assessing Officer after considering explanation of assessee, disallowed speculation loss in sum of Rs. 20,69,946/- and loss from speculation business was carried forward in sum of Rs. 45,81,814/-. assessee did not raise any ground of 9 appeal before ld. CIT(Appeals) challenging disallowance of speculative loss of Rs. 20,69,946/- in any of ground of appeal. assessee also did not challenge order of Assessing Officer in considering amount of Rs. 45,81,814/- to be speculative business loss to be carried forward. Section 43(5) provides definition of speculative transaction m e n s t r n s c t i o n i n wh i c h c o n t r c t f o r t h e p u r c h s e o r s l e o f n y c o m mo d i t y i n c l u d i n g s t o c k s n d s h r e s , i s p e r i o d i c l l y o r u l t i m t e l y s e t t l e d o t h e r wi s e t h n b y t h e c t u l d e l i v e r y o r t r n s f e r o f th e c o m mo d i t y o r s c r i p s . assessee did not produce any evidence before authorities below if any transaction was conducted or settled by actual delivery or transfer of commodity or scrips. Since issue of speculative loss was not challenged before Assessing Officer as well as before ld. CIT(Appeals) and no ground of appeal have been raised before Tribunal, therefore, finding of fact has reached finality that loss suffered by assessee was on account of speculative business. All grounds were vague and general before ld. CIT(Appeals) and argumentative in nature which were correctly dismissed by ld. CIT(Appeals). 8. ld. CIT(Appeals) noted in his findings that in return of income, assessee has claimed speculative loss of Rs. 66,51,760/- and Assessing Officer has allowed carry forward of speculative loss of Rs. 45,81,814/-. 10 This finding of fact has not been rebutted by assessee through any evidence or material on record. assessee in additional ground of appeal has tried to change whole complexion of issue by claiming speculative loss to be business loss to be set off against business income. Since no appeal was filed against disallowance of speculative loss of Rs. 20,69,946/- therefore, whole of transaction shall have to be considered as speculative loss. ld. CIT(Appeals) referred to provisions of Section 139(3) of Income Tax Act in case assessee claimed business loss, then under section 139(3), return of loss shall have to be furnished in specified manner within time allowed under section 139(1) of Income Tax Act which was also not done by assessee in this case. 9. ld. CIT(Appeals) relied upon order of ITAT, Bangalore Bench in case of Karnataka Forest Development Corp. Ltd. V CIT (supra) which is totally against assessee and no case laws have been cited by assessee against this proposition decided by Bangalore Bench. Since in case of assessee, loss has been neither claimed in original return nor in revised return, therefore, additional ground raised for first time before ld. CIT(Appeals) was correctly dismissed by ld. CIT(Appeals). case laws relied upon by ld. counsel for assessee on proposition that appellate authority have power to allow deduction 11 even if not claimed in original return of income, would not support argument of assessee because ld. CIT(Appeals) was having enough material before him to disprove claim of assessee. 10. In view of above discussion, I am not inclined to interfere with order of ld. CIT(Appeals) in dismissing additional ground of appeal filed before him which have been challenged now before Tribunal on ground Nos. 3 and 4 above. No infirmity have been pointed out in order of ld. CIT(Appeals), therefore, ground Nos. 3 and 4 of appeal of assessee are dismissed. 11. In result, appeal of assessee is dismissed. Order pronounced in Open Court. Sd/- (BHAVNESH SAINI) JUDICIAL MEMBER Dated 14 t h Sept.,2016. Poonam Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT,DR Assistant Registrar, I TAT Chandigarh Kamlesh Goyal v. DCIT, CircleVII, Ludhiana