F&O loss not shown in ITR : What are the penalty and fines
This query is : Resolved
23 September 2016
I have not shown f&o loss and share loss in my ITR 1 as I do not want to Set off or carry forward. is this illegal or subject to penalty or fine??
moreover in itr there is no scope for entering minus figure
23 September 2016
you need to argue the case in a very skillful manner and convince the Assessing Officer that there is NO any loss to revenue and hence no penalty should be levied....
23 September 2016
obviously there is no loss to the revenue because I have not claimed any loss.
but I wanted to know if loss is not disclosed in ITR is it an offence moreover if I do not wish to carry forward it or setoff
23 September 2016
can i say that ITR does not allow us to put negative figure in return
23 September 2016
Yes. It is offence. Because you DID NOT disclose the facts in ITR
So i said, if handled tactfully and skillfully, the penalty can be set aside.
So i said, if handled tactfully and skillfully, the penalty can be set aside.
23 September 2016
what if the ITO does not agree to my explanation, what are fines leviable?
23 September 2016
let it be... go to CIT... CIT will agree....dont worry
23 September 2016
but still what are the fines and on what basis it is calculated
23 September 2016
when an Assessing Officer wants to go ahead...what he normally does is he adds some best judgement income to your existing return....and accordingly the penalty is levied .
Another good judgement in favour of Income Tax department is that income/loss can rank pari passu while levying penalty..... so one has to be practical than mathematical...
For a detailed amount please go through the link
http://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx
Another good judgement in favour of Income Tax department is that income/loss can rank pari passu while levying penalty..... so one has to be practical than mathematical...
For a detailed amount please go through the link
http://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx
23 September 2016
is my contention that in ITR negative figure is not accepted is it valid contention?
23 September 2016
No.....that is WRONG......
we need to select the type of ITR as applicable in your case. Since you had FNO income (Please note LOSS is regarded as negative income) you should NOT have used ITR 1.
we need to select the type of ITR as applicable in your case. Since you had FNO income (Please note LOSS is regarded as negative income) you should NOT have used ITR 1.
23 September 2016
sir so can you please tell me an estimate amount of PENALTY if possible to calculate
23 September 2016
you can calculate it by yourself....that is why I gave that URL.... Did you go through the URL?
23 September 2016
in the URL there is no specific section mentioned or anything. how do i search
23 September 2016
go through section 271
23 September 2016
Sir I read section 271 and found it very useful.
I wanted to know that I have filed return showing positive earning. I did not show my f&o loss in return. If loss is taken into consideration it will result in lnto loss and I think then penalty won't be levied as my it is loss.
Kindly advise
23 September 2016
Mr. Rohit, As Joglekar Sir explained, you need to show every income(income include loss as well) in ITR even if the same is exempt as per the Law enshrined in Income Tax Act, 1961. First of all it is better to revise your ITR and show the loss, let it set off with other income if there is any which is allowed to be set off. Now coming to your issue, you will be inviting scrutiny of your case by not showing because details regarding your F&O transactions will be available with your Assessing Officer as AIR transactions are being reported against your PAN.
Now, suppose if your in scrutiny proceedings , you argue that there is no loss to revenue , the department may insist on the source of the transactions done in F&O. Be luck on your side , you or your authorized representative is able to convince the A.O. and only addition is made , there will be no tax effect. Now please bear in mind penalty and assessment proceedings are separate & distinct in nature and A.O. might levy penalty u/s 271(1)(c) i.e. concealment of income @ 100% to 300% of the amount of tax evaded (normally it is 100% only). As Joglekar Sir referred , it will depend as to how you handle the penalty proceedings , he may accept your contention and drop the penalty or he may levy it. If it is the second case, you have to file an appeal before CIT(A).
And as regard to your contention that ITR doesn't allow the negative figures due to which you were not able to show the loss of F&O will not hold any water either before the A.O. or before the CIT(A).
Now, suppose if your in scrutiny proceedings , you argue that there is no loss to revenue , the department may insist on the source of the transactions done in F&O. Be luck on your side , you or your authorized representative is able to convince the A.O. and only addition is made , there will be no tax effect. Now please bear in mind penalty and assessment proceedings are separate & distinct in nature and A.O. might levy penalty u/s 271(1)(c) i.e. concealment of income @ 100% to 300% of the amount of tax evaded (normally it is 100% only). As Joglekar Sir referred , it will depend as to how you handle the penalty proceedings , he may accept your contention and drop the penalty or he may levy it. If it is the second case, you have to file an appeal before CIT(A).
And as regard to your contention that ITR doesn't allow the negative figures due to which you were not able to show the loss of F&O will not hold any water either before the A.O. or before the CIT(A).
24 September 2016
Sir I have loss so how can it be called concealment of income
24 September 2016
https://www.caclubindia.com/articles/section-271-1-c-of-the-income-tax-act-1961-11534.asp
This is what I am referring to. I have disclosed profit in itr and not shown loss. If that is taken into account my income will be in loss. So penalty won't be levied. Please elaborate. Urgent
24 September 2016
In such a situation we would earlier take help of the decision of the Jurisdictional High Court( Mine is Punjab & Haryana) in the case of CIT vs. Prithipal Singh & Co reported at 183 ITR 69 wherein it was held that were the assessed income as well as the returned income was a loss, penalty for concealment could not be
levied. This decision was approved by the Supreme Court and was reported at 249 ITR 670.
Amendment was made through the Finance Act 2003 in the Explanation 4 of section
271(1)(c) with effect from 1/4/2003 but it was held by the Supreme Court in the case of CIT
vs. Gold Coin Health Food reported at 304 ITR 308 that the amendment was clarificatory in
nature and would be applicable retrospectively. The contention being raised earlier that the
assessed income was a loss and penalty was not leviable was thus made redundant for all
pending proceedings.
The ITAT Pune Bench in its order dated 22/3/2013 in the case of Amruta Organics Pvt. Ltd. held that the penalty for concealment for the assessment year 2007-08 was not justified as the disallowance on account of depreciation was only a wrong claim and also because the company was incurring losses since 2002, there would be
no evasion of tax. The judgment has opened a new window to argue in terms of tax not being
evaded in cases where there are regular losses despite amendment to Explanation 4 which has
been held to be retrospective in nature. The period for which losses have been incurred by the
assessee can be a lesser period also and it depends as to how this aspect is projected in the
penalty proceedings.
Please understand it all depends on the A.O. Not showing something in return wilfully tantamount to concealment.
No doubt you will get relief in appeal but still, A.O. has full power to levy the same.
levied. This decision was approved by the Supreme Court and was reported at 249 ITR 670.
Amendment was made through the Finance Act 2003 in the Explanation 4 of section
271(1)(c) with effect from 1/4/2003 but it was held by the Supreme Court in the case of CIT
vs. Gold Coin Health Food reported at 304 ITR 308 that the amendment was clarificatory in
nature and would be applicable retrospectively. The contention being raised earlier that the
assessed income was a loss and penalty was not leviable was thus made redundant for all
pending proceedings.
The ITAT Pune Bench in its order dated 22/3/2013 in the case of Amruta Organics Pvt. Ltd. held that the penalty for concealment for the assessment year 2007-08 was not justified as the disallowance on account of depreciation was only a wrong claim and also because the company was incurring losses since 2002, there would be
no evasion of tax. The judgment has opened a new window to argue in terms of tax not being
evaded in cases where there are regular losses despite amendment to Explanation 4 which has
been held to be retrospective in nature. The period for which losses have been incurred by the
assessee can be a lesser period also and it depends as to how this aspect is projected in the
penalty proceedings.
Please understand it all depends on the A.O. Not showing something in return wilfully tantamount to concealment.
No doubt you will get relief in appeal but still, A.O. has full power to levy the same.
24 September 2016
if it is sure that I will get relief in appeal then why will AO levy penalty
24 September 2016
kindly tell me how will AO calculate penalty if I have disclosed profit of 2 lacs in ITR and undisclosed loss of 10 lacs
24 September 2016
AO is a revenue authority working for the benefit of assessee and not an appellate authority. May be AO will understand and leave penalty also. Joglekar Sir also referred to that. As regards to computation I have already explained that above and that too in detail. I m not getting why are you insisting on this when you can revise the return and show the loss. Why are you insisting on furnishing inaccurate particulars of income in return and that too deliberately. Why are you exposing yourself to a revenue authority to issue you a notice when you can show the true particulars of income?
Please bear in mind it is the responsibility of every person to show true, correct and accurate particulars in return of income. You are just stretching an issue out of nowhere and even to widest extent of my imagination i am unable to believe why are you asking this query when you are fully aware about the fact that you have to mandatorily show the same in return of income.
Please bear in mind it is the responsibility of every person to show true, correct and accurate particulars in return of income. You are just stretching an issue out of nowhere and even to widest extent of my imagination i am unable to believe why are you asking this query when you are fully aware about the fact that you have to mandatorily show the same in return of income.
24 September 2016
**working for the benefit of revenue
25 September 2016
stay cool..... keep ICE on your head and SUGAR at the tip of your tongue......
i dont know at what point of EGO, your case is..... but from the style of your questions, it seems that the AO is trying to catch you on wrong foot. Is it?
Handle the same in a level headed manner. Please give ample written submissions about your innocence as well as non fradulent intentions in not disclosing the LOSS......Dont forget to take acknowledgement on that
i dont know at what point of EGO, your case is..... but from the style of your questions, it seems that the AO is trying to catch you on wrong foot. Is it?
Handle the same in a level headed manner. Please give ample written submissions about your innocence as well as non fradulent intentions in not disclosing the LOSS......Dont forget to take acknowledgement on that
26 September 2016
sir what points should i write to AO in order to show my genuineness ie no wrong intention behind not disclosing loss
27 September 2016
Few of the points are as follows.
01. I have fully co operated the Assesing Officer in giving information
02. No intention of hiding any information
03. Since I never wanted to carry forward the loss, which in itself has proved to be a life time lesson for me, I did not show it in the return
04. Never before this, I have ever done hiding the information. for 05. This is my first and last instance of doing so...
06. Please note that I have made a loss......it is a financial loss to me and my family..I know how I have tried to meet the two ends....In addition to this, though lawfully correct, but practically difficult to bear the professional charges for accounts, audit and tax filing.
07. By doing so , I have taken every care not to evade any of the revenue of my Govt. On the contrary, I have taken every care to co operate the income tax department in disclosing the information. (......the repetition is an inevitable facet of such types of letters, please note)
08. I respectfully submit that the lapse of principle attained by me by not showing LOSS in the return of income was unintentional. It did not result in any loss of revenue to my Govt. Being the first of its kind in my life, I pray to set it aside and allow me to have the opportunity for adhering to income tax principles in a better way in days to come.
These are just few points... you can go on adding your own in line with the TONE of the letter
01. I have fully co operated the Assesing Officer in giving information
02. No intention of hiding any information
03. Since I never wanted to carry forward the loss, which in itself has proved to be a life time lesson for me, I did not show it in the return
04. Never before this, I have ever done hiding the information. for 05. This is my first and last instance of doing so...
06. Please note that I have made a loss......it is a financial loss to me and my family..I know how I have tried to meet the two ends....In addition to this, though lawfully correct, but practically difficult to bear the professional charges for accounts, audit and tax filing.
07. By doing so , I have taken every care not to evade any of the revenue of my Govt. On the contrary, I have taken every care to co operate the income tax department in disclosing the information. (......the repetition is an inevitable facet of such types of letters, please note)
08. I respectfully submit that the lapse of principle attained by me by not showing LOSS in the return of income was unintentional. It did not result in any loss of revenue to my Govt. Being the first of its kind in my life, I pray to set it aside and allow me to have the opportunity for adhering to income tax principles in a better way in days to come.
These are just few points... you can go on adding your own in line with the TONE of the letter
27 September 2016
can i add a point that as my Gross total income is below taxable limit ; the same is reflected in the ITR; so i am not bound to file my ITR, which i still did.
27 September 2016
No....please dont mention the point of filing of return....but you can very well mention the fact that my Gross total income was below taxable limit. e.g.you can write
Please also note that my Gross total income for the said year is below taxable limit....(See the point is if , although true, we start telling the inference of any provision to Assessing officer, s/he gets offended unnecessarily.....so just write the facts...inferences if any be drawn at a later stage...ok?)
Please also note that my Gross total income for the said year is below taxable limit....(See the point is if , although true, we start telling the inference of any provision to Assessing officer, s/he gets offended unnecessarily.....so just write the facts...inferences if any be drawn at a later stage...ok?)
27 September 2016
i think writing as per what you say could be helpful as ... once my income is below GTA it shows that my income is less and not taxable and moreover no question of loss setoff arises
27 September 2016
Penalty will be levied only on non reporting on income. No penalty can be levied on non reporting of loss. The assessee is left with the option of reporting of loss or not to carry forward the loss.
27 September 2016
yes... you can go ahead. All the best. You are most welcome
27 September 2016
@seetharam sir the other experts are saying that penalty can be levied but you are telling a contradicting information
28 September 2016
Penalty can only be levied for not declaring income and not paying tax. For incurring loss no tax payable hence no penalty can be levied.
28 September 2016
but other experts mentioned that even though its a loss still it has to reported in ITR otherwise penalty Leviable
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29 September 2016
Take it from me no penalty will be leviable, wait for processing of return. If any query is raised, reply it as only loss incurred on share trading hence not reported in the return.
30 September 2016
should i file revised return?
previously i had filed ITR 2A but now in revised i will have to file ITR 4?
previously i had filed ITR 2A but now in revised i will have to file ITR 4?
30 September 2016
File revised return in ITR 4.
01 October 2016
Tax audit applicable if your income is above basic exemption limit.
01 October 2016
return filed for income below GTI; loss not shown;so will tax audit be applicable
01 October 2016
but tax audit applicability depends upon turnover and not profit/loss
01 October 2016
Tax audit applicable when reporting less than 8% profit on turnover but having income exceeding basic exemption limit.
You can go with earlier filed return.
You can go with earlier filed return.
01 October 2016
sir that is u/s 44AD
but I think my turn over in F&O might cross 1 cross so under 44AB am I liable for tax audit
02 October 2016
If the turnover cross 1 crore then tax audit applicable. Turnover for F&O has to be calculated rightly take the help of CA nearby.
03 October 2016
FNO turnover to be calculated taking into account the net result of every position; without considering if it is loss
03 October 2016
@ amol sir if it is loss on a particular day will it be included in the turnover
03 October 2016
MOD value as is called in mathematics.
e.g.
FNO take the trade value net of brokerage, stt, stamp etc
01. State Bank. Sale 786520, Purchase 788562.... difference 2042 is taken as turnover
02. Bank of baroda Sale 540256 Purchase 539402...difference 854 is taken as turnover
03. crompton greaves Sale 807894 Purchase 810348...difference 2454 is taken as turnover
....... calculate this way the total turnover...if it exceeds 1 crore, then tax audit is applicable.
e.g.
FNO take the trade value net of brokerage, stt, stamp etc
01. State Bank. Sale 786520, Purchase 788562.... difference 2042 is taken as turnover
02. Bank of baroda Sale 540256 Purchase 539402...difference 854 is taken as turnover
03. crompton greaves Sale 807894 Purchase 810348...difference 2454 is taken as turnover
....... calculate this way the total turnover...if it exceeds 1 crore, then tax audit is applicable.
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