Loss from profession - provisions reg.

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An individual, aged 52, who recently started as an accounting/finance consultant after being jobless, filed an ITR3 claiming a loss from their new profession. They received a notice proposing to adjust this loss to NIL. The discussion explores the IT provisions regarding losses from profession and whether the department's adjustment is correct. Advice is given on how to respond, including the option not to carry forward the loss.

Ramana Kumar

Ramana Kumar (Querist)

03 March 2020 I am aged 52 years, regularly filing IT returns with major source of income as salary income. Jobless for past 18 months, I have ventured as a accounting/finance consultant during previous year 2018-19. Accordingly for AY 2019-20, I have filed ITR3 claiming income from profession Rs 3k and expenses for Rs 60k (communication, travelling, and conveyance expenses, for which no reimbursements or income received) resulting in a loss from profession. This is the first year i have income from profession, and I have claimed the loss with intention to claim the expenses from future incomes. I have now received notice u/s 141(1)(a) proposing to adjust the loss of Rs 57k to NIL, .
Can you please educate me on the provisions of IT for Loss from Profession and is the department right in doing the proposed adjustment. Also let me know my required course of action... Thanks & Regards

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

03 March 2020 You may disagree with the department.
Department may require explanation for expenses or income or can raise new issues.
Practically, it may result into a kind of harassment .... like .... the case may be transferred to an AO or otherwise.
You should agree with the department in the given situation.

Ramana Kumar

Ramana Kumar (Querist)

03 March 2020 Thank you Sir,
Should I submit a revised return restricting my expenses to 3k, and net income from profession to NIL , matching with the proposed adjusted computation. I would like to mention in the submission form 'Partially agree' instead of 'Agree' and put up a brief note on the grounds of submitting original return. .. pl let me know your opinion. .. Also what section should I mention in submission of revised return...u/s 139(5) or any other section ??

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

04 March 2020 No need to file a revised return and further no need to restrict the expenses up to 3000.
Simply you may submit that you do not wish to carry forward the loss though eligible.

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