INCOME TAX ACT, 1961

Section 145

Accounting method - Computations of profit - Estimation of income of trading transaction in derivatives under section 44AD - Non accepting the returned loss

During the course of assessment proceedings, AO noticed that assessee had transacted large value sale of futures in a recognized stock exchange reported in Securities Transaction Tax Return. On verification of documents, AO noted that assessee had submitted trading transaction statement for Rs. 30,00,098. However, Tax audit report and relevant books of account have not been submitted before him. According to AO, as per section 44AD, a sum equal to 8% of total turnover shall be considered as income from business and profession and, therefore, he estimated the turnover @ 8% of Rs. 30,00,098 and added Rs. 2,40,008 to the income of assessee. Held: When AO without disputing the amount of equity loss had stated in the said gain/loss statement issued by share broker, then amount of loss from other share transaction cannot be disallowed or disbelieved. On estimation of profit @ 8% by AO, it is of the view that this action was baseless, meaningless and was not supported by any documents or corroborative evidence. Therefore, such kind of estimation could not be held as sustainable and thus, demolish the same.

REFERRED : ITO v. Felex Enterprises (P.) Ltd. [ITA No. 5129/DEL/ 2012, dt. 20-9-2013] Growmore Exports Ltd. v. Assistant CIT (2000) 78 ITD 95 (Mum)

FAVOUR : in assessee's favour

A.Y. : 2016-17

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