IN THE ITAT MUMBAI
BENCH ‘B’
Mafatlal Securities Ltd.
v.
Joint Commissioner of Income-tax,
R.K. Gupta, Judicial
Member
V.K. Gupta,
Accountant Member
IT Appeal
No. 1127 (Mum.) of 2001
[Assessment year
1996-97]
August 10, 2007
Section 254 of the Income-tax Act, 1961 -
Appellate Tribunal - Powers of - Assessment year 1996-97 - Whether though
Tribunal is not akin to a Court but functions discharged by it are similar to a
Court, and, hence, in addition to its expressed statutory powers it has got
inherent power to pass such orders as may be necessary for ends of justice -
Held, yes - Whether Tribunal has inherent power to refix
case for hearing to prevent miscarriage of justice or to grant substantial
justice, and only condition which is required to be satisfied is that aggrieved
party must be given an opportunity of hearing - Held, yes
Section 73 of the Income-tax Act, 1961 -
Losses - In speculation business - Assessment year 1996-97 - Whether business
loss being negative profit cannot be ignored in determining applicability of
exception clause of Explanation to section 73 - Held, yes
Facts
The assessee company
was engaged in the business of investment and trading in shares and securities.
The assessee filed return showing dividend income,
capital gains and business loss. The assessee also
claimed set off of its business loss from other heads of income. The Assessing
Officer treated share trading loss as speculation loss and by invoking Explanation
to section 73 rejected the assessee’s claim. The
Assessing Officer also rejected the assessee’s
contention that the income chargeable to tax would not include negative income
and, hence, business loss under the head ‘income from business or profession’
had to be ignored for the purpose of determining the gross total income as
provided in the first exception of the Explanation to section 73 and
held that assessee’s case was not covered under the
exception provided in Explanation to section 73. The Commissioner
(Appeals) upheld the finding of the Assessing Officer. Aggrieved by the said
order, the assessee filed the appeal before the
Tribunal wherein the case was originally fixed for hearing on 7-8-2006.
However, during the course of further study of the files, the Bench thought
that certain observations in the order of the Special Bench in the case of Concord
Commercial [2005] 95 ITD 117 (Mum.) (SB) were relevant and also the
decision of the Tribunal in the case of Yucca Finvest
(P.) Ltd. v. Dy. CIT [2006] 101 ITD
403 (Mum.) were also relevant, hence, the case was refixed for fresh hearing and was accordingly, heard on
11-6-2007. The assessee took a preliminary objection
against such approach of Tribunal and contended that Tribunal has no power to refix the case for hearing.
Held
INHERENT POWERS OF TRIBUNAL
The Tribunal has inherent power to refix the cases to prevent miscarriage of justice or to
grant substantial justice. The only condition which is required to be satisfied
is that the aggrieved party must be given an opportunity of hearing which had
been done in the instant case, hence, there was
nothing wrong in the procedure adopted by the Tribunal. [
Many times ex parte orders are passed on merits.
However, when an application is being made by the aggrieved party for
re-hearing the appeal after giving an opportunity to the assessee,
such ex parte order is re-called though there
is no express provision exist in this regard because the source of such power
exist under section 254(1) itself. In the situation, when the Tribunal is clear
in its mind that the provisions of section 254(1) were not complied in true
spirit in passing the ex parte order it can
recall such order for disposal afresh after giving an opportunity of hearing to
both the parties and in such cases it does not amount to review of its earlier
order because the purpose of setting aside an ex parte
order is to consider the whole matter afresh by affording an opportunity of
being heard. Similarly, the Tribunal before passing a written order can re-fix
the case suo motu
for clarifications so as to apprise the issue afresh in the light of other
facts or material. There is nothing wrong in it because principles of natural
justice are equally applicable to judicial authorities as these are applicable
to the parties to the disputes. [
Though the Tribunal is not akin to a Court but
the functions discharged by it are similar to a Court, and, hence, in addition to
its expressed statutory powers it has got inherent power to pass such orders as
may be necessary for the ends of justice. In the instant acse
by re-fixing the case, the Tribunal had exercised itself inherent powers and by
giving an opportunity to the assessee it had also
complied that principles of natural justice. Hence, action of the Tribunal was
in accordance with law. Accordingly, the preliminary objection raised by the assessee in this regard was to be rejected. [
APPLICABILITY OF EXCEPTION CLAUSE OF
EXPLANATION TO SECTION 73
The Special Bench of the
Tribunal in
Similarly, in Yucca Finvest (P.) Ltd. (supra) the Tribunal has held
that the word ‘chargeable’ used in Explanation to section 73 would refer
to chargeability to tax under the Act. This would only mean that loss may not
be charged to tax directly in the current year. But by adjustment against other
business income in that year or in following years, it reduces the other income
on which tax is levied. Hence, negative income, i.e., loss is as equally
chargeable to tax as positive income. [
Thus, taking into
consideration all relevant facts of the instant case and the decisions of Yucca Finvest (P.) Ltd. (supra) and Concord
Commercial (P.) Ltd. (supra) it was to be held that the loss
in trading of shares was a speculation loss. and
merely because it was a negative income, i.e., loss, could not be
ignored in determining the applicability of exception clause of Explanation
to section 73. [
Case Review
Asstt. CIT v.
Cases referred to
CIT v. Sun Distributors & Mining Co. Ltd.
[1993] 68 Taxman 223 (
Nitesh Shah for the Appellant. Chet Ram for the
Respondent.
nn