In a recent ruling,the High Court of Delhi upheld the settlement of a disputed derivatives trading loss under the Direct Tax Vivad Se Vishwas ( DTVSV ) Act,2020, limiting the settlement to the specific dispute over the loss.
Rosewood Buildwell Private Limited,petitioner-assessee, a real estate company, filed its income tax return for the year 2008-09, which was selected for scrutiny. The Assessing Officer (AO) passed an order on 10.03.2014, adding ₹4,05,51,837 to the declared income of ₹12,34,270.
This included ₹5,39,500 disallowed for stamp duty on property sales, as the stamp papers were bought by the buyer; ₹50,12,337 rejected as a loss from commodity trading due to a lack of confirmation from National Commodity & Derivatives Exchange Ltd.(NCDEX); and ₹3,50,00,000 added as unexplained income under Section 68, as the assessee failed to prove the identity and creditworthiness of the entities subscribing to its share capital. The assessee appealed the order to the Commissioner of Income Tax(Appeals) [CIT(A)].
Transform GST Compliance with Expert Drafting Skills – Click here to Register
The CIT(A) removed the ₹5,39,500 addition for stamp duty because the sale deed showed the petitioner-assessee was responsible for the payment, and a bank statement confirmed it. The CIT(A) upheld the rejection of the ₹50,12,337 loss from derivatives trading, dismissing the assessee’s appeal.
However, the CIT(A) agreed that the assessee proved the identity and creditworthiness of the shareholders, so the ₹3,50,00,000 addition was removed. The assessee then appealed [ITA No.5958/Del/2014] against the rejection of the trading loss.
The ITAT reviewed the Assessee’s challenge to the ₹50,12,337 addition and noted that while the Assessee provided relevant documents, the transactions were not confirmed by the broker (M/s Tushar Commodities Pvt. Ltd.). Enquiries from NCDEX showed the broker had not traded during the relevant period, raising doubts. The ITAT remanded the matter to the AO for further enquiry, with a direction for the Assessee to cooperate.
Transform GST Compliance with Expert Drafting Skills – Click here to Register
The assessee filed a declaration under the DTVSV 2020, on 08.03.2021, to settle the dispute over the ₹50,12,337 loss in derivatives trading. The CIT(A) issued a certificate on 23.04.2021, which the assessee challenged due to modifications made to the declaration.
The Division Bench comprising Vibhu Bakhru(Justice) and Swarana Kanta Sharma(Justice) court ruled that the petitioner was entitled to use the DTVSV Act to settle its disputed tax liability for AY 2011-12. The only issue was whether the settlement could be limited to the specific dispute over a loss from trading in derivatives, which was the subject of the petitioner’s appeal decided by the ITAT in December 2019.
It clarified that the DTVSV Act allows taxpayers to resolve disputes related to specific appeals, not necessarily the entire assessment year. The court also noted that the definition of “disputed tax” covered the amount of tax in dispute in the pending appeal, and that filing a declaration would result in the withdrawal of related appeals.
Transform GST Compliance with Expert Drafting Skills – Click here to Register
The court further emphasized that the assessee’s declaration only concerned the appeal regarding the derivatives loss and not other disputes, even though the Revenue had filed a separate appeal on a different issue. As a result, the court directed the respondents to issue a modified certificate under the DTVSV Act in line with the petitioner’s declaration.
In short,the petition was allowed in favour of the assessee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
