COMMISSIONER OF INCOME-TAX VS PRAYASVIN B. PATEL
2001 P T D 3180
[240 I T R 931]
[Gujarat High Court (India)]
Before B. C. Patel and P. B. Majmudar, JJ
COMMISSIONER OF INCOME‑TAX
Versus
PRAYASHVIN B. PATEL
Income‑tax Application No.22 of 1999, decided on 04/10/1999.
Income‑tax‑‑‑
‑‑‑‑Reference‑‑‑Business‑‑‑Business loss‑‑‑Not necessary that every year assessee must carry on business activity and earn income‑‑‑Past and subsequent records of assessee revealing that assessee was running consultancy and commission business‑‑‑Tribunal justified in holding that assessee was entitled to claim loss under head "Business loss"‑‑‑No question of law arose‑‑‑Indian Income Tax Act, 1961, Ss.143(3), 256(2) & 263.
The assessee claimed the business loss of Rs.1,31,893. The Assessing Officer allowed the claim made by the assessee. However, the Commissioner of Income‑tax issued notice to the assessee under section 263 of the Income Tax Act, 1961, to revise the order of the Assessing Officer under section 143(3) and held 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 head "Business" and the profit and loss account also showed that the assessee had not done any business activity during the year, and therefore, the loss could not be claimed by the assessee. The assessee preferred an appeal against the order of the Commissioner. The Tribunal held that the assessee had past and subsequent assessment records to show that the assessee was carrying on consultancy and commission business and it treated the amount as business loss. On an application to direct reference:
Held, dismissing the application, that it was not necessary that for every year the assessee must have earned income from the business or profession and for a particular year for one or the other reason there may not be any income but it did not mean that he was not required to spend the amount for carrying on the activities. The Tribunal had found that the assessee was dealing in shares since 1978 and from the assessment year 1984 85 onwards he was doing certain consultancy and commission business and also derived agricultural income. The loan to purchase the car was taken in the assessment year 1984‑85 and, therefore, the Tribunal was right in law in allowing the loss as business loss. No question of law arose.
B.B. Naik for Manish R. Bhatt for the Commissioner.
R.K. Patel for the Assessee.
JUDGMENT
The Commissioner of Income‑tax, Gujarat (Central), preferred an application before the Income‑tax Appellate Tribunal under section 256(2) 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 Appellate Tribunal is right in law and on facts in setting aside the order passed by the Commissioner of Income‑tax under section 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 Commissioner of Income‑tax. 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 Commissioner of Income‑tax, Gujarat, Central; issued notice to the respondent under section 263 of the said Act on or about January 7, 1991, to show cause as to why the order made under section 143(3) of the said Act by the Assessing Officer should not be revised. The assessee requested to drop the proceedings under section 263 of the said Act. However, the Commissioner of Income‑tax 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 head "Business" as observed by the. Commissioner. It is further observed that the profit and loss account also shows that the assessee has not done any business activity during the year under consideration. Thus, it appears that the Commissioner of Income‑tax 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 Commissioner of Income‑tax. The Tribunal pointed out in para. 2 of its order that the Commissioner of Income‑tax 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 Commissioners of Income tax 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 because 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 the 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 the assessment year 1984‑85 and the assessee was very much in the 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 Commissioner of Income‑tax while exercising powers under section 263 of the Act ought not to have disturbed the assessment order made under section 143(3) of the Act.
Mr. Naik, learned Advocate for the applicant, contended that no details are mentioned either in the order of the Commissioner of Income‑tax 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 detail 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 income from the business or 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 the 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 arises. The finding cannot be said to be perverse. Rule is discharged. No order as to costs.
Copy of this order may be kept in the other matter.
M.B.A./400/FCRule discharged.